Berkshire Hathaway Annual Letter to Shareholders 2008 - The latest Berkshire Letter
NEW YORK (Reuters) - Berkshire Hathaway (BRKa.N) (BRKb.N), Warren Buffett's insurance and investment company, barely broke even in the fourth quarter because of losses on derivatives contracts tied to the stock market, which caused its net worth to tumble $10.9 billion (7.64 billion pounds).
Buffett also offered a gloomy outlook for the economy, saying in his annual letter to Berkshire shareholders: "The economy will be in shambles throughout 2009 -- and for that matter, probably well beyond."
Quarterly net income for Omaha, Nebraska-based Berkshire sank 96 percent to $117 million, or $76 per Class A share, from $2.95 billion, or $1,904, a year earlier, based on company filings. Revenue fell 12 percent to $24.59 billion.
Results were battered by $4.61 billion of pretax losses on about 251 derivative contracts largely tied to the longer-term performance of four stock market indexes and the creditworthiness of higher-risk "junk" bonds. The losses were twice what Berkshire suffered in the prior nine months.
A deteriorating economy and tight credit led to steep declines in stock prices and an increase in junk bond defaults, resulting in losses for Berkshire. While the losses exist on paper, accounting rules require Berkshire to report them with earnings.
Berkshire's net worth fell to $109.27 billion at year end from $120.16 billion at the end of September, and $120.73 billion at the end of 2007.
For all of 2008, profit at Berkshire fell 62 percent to $4.99 billion, or $3,224 per share, from $13.21 billion, or $8,548. Earnings were the lowest since 2002. Revenue fell 9 percent to $107.8 billion.
Berkshire Class A shares closed Friday at $78,600 on the New York Stock Exchange. They have fallen 44 percent since the end of February 2008, while the Standard & Poor's 500 .SPX has dropped 45 percent.
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