The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [546]
15. 1970 Annual Statement for Reinsurance Corporation of Nebraska, Berkshire Hathaway, Diversified, and Blue Chip, Forms 10-K and annual reports to shareholders.
16. Interview with Verne McKenzie.
17. Interview with Rhoda and Bernie Sarnat.
18. Interview with Charlie Munger.
19. Through chunks of stock large enough to almost certainly block an unfriendly takeover.
20. Blue Chip sales peaked in 1970 at $132 million.
21. A&P’s discounting program, Where Economy Originates, prompted other supermarket chains to adopt discounting in 1972. “The Green Stamp Sings the Blues,” Forbes, September 1, 1973.
22. From the files of Berkshire Hathaway.
23. Interview with Bill Ramsey. The sale occurred because Laurence A. See, son of Mary See and a founder of the firm, had died, and Charles See, his brother and executor of his estate, mentioned to an attorney acquaintance while on vacation in Hawaii that he might want to sell. The attorney told Bob Flaherty, who worked for Scudder, Stevens, and Clark, and Flaherty talked to Ramsey, who was also a client of the firm.
24. From Margaret Moos Pick, See’s Famous Old Time Candies, A Sweet Story. San Francisco: Chronicle Books, 2005.
25. Interview with Ed Anderson.
26. Buffett and Munger paid 11.4x trailing twelve months earnings for See’s (i.e., a price equal to over eleven years’ worth of the company’s earnings—at the past twelve months’ earnings rate). This was a remarkably high price/earnings ratio for Buffett, who rarely paid more than ten times earnings. Paying more than book value was also unprecedented. Susie told at least one friend that he “bought it for her,” because of her chocolate obsession, which sounds like something he might have said as an endearment.
27. Since 1960.
28. Letter from John W. Watling to Harry W. Moore, December 3, 1971. Buffett was particularly involved in tax aspects of the deal. He wrote a detailed memorandum outlining a proposed structure for the company’s trademarks in order to obtain a tax basis equal to the effective purchase price without incurring the tax costs that a sale would entail under tax law at the time, such as depreciation recapture and investment tax-credit recapture. Price Waterhouse, the accountants for See’s, apparently were pleased that Buffett had done their job and wrote a memo concurring with his proposal and explaining how it would be executed (letter from Price Waterhouse & Co. to William F. Ramsey, January 18, 1972).
29. This account is an amalgamation of interviews with Munger and remarks at the Berkshire Hathaway 2003 annual meeting. Warren Buffett and Charlie Munger, “What Makes the Investment Game Great Is You Don’t Have to Be Right on Everything,” Outstanding Investor Digest, Vol. XVIII, Nos. 3 and 4, Year End 2003 Edition.
30. Interviews with Ed Anderson and Chris Browne. Buffett’s reasoning in situations like this and Berkshire was that he needed the stock to get control. However, his allies could have kept their stock and voted with him. Indeed, in his younger days when he had less capital, Buffett had arranged such voting blocks.
31. Warren Buffett letter to Chuck Huggins, December 28, 1971.
32. During the early 1970s, the price of sugar increased sixfold. Although most news stories focused on the price of meat, sugar and cocoa were the commodities that experienced the most wrenching price increases.
33. At the time a cult product that people carried home on airplanes after encounters on vacation in Colorado.
34. Narrative is based on correspondence among Warren Buffett, Stanley Krum, and Chuck Huggins, 1972. In a letter dated later in 1972, Buffett the teetotaler also says, “Maybe grapes from one little eighty-acre vineyard in France are really the best in the whole world, but I have always had a suspicion that about 99% of it is in the telling and about 1% is in the drinking.”
35. This is the lament of a number of the managers.
36. Warren Buffett letter to Chuck Huggins, September 25, 1972.
37. Interviews with Tom Newman, Raquel Newman.