2014: How much did Berkshire pay for the Nebraska Furniture Mart?

AUDIENCE MEMBER: Good morning. My name is Jonathan Fye (PH) and I’m from Denton, Texas, just up the road from the new Nebraska Furniture Mart that’s going to be located in The Colony.

My question relates to your original acquisition of that business from the Blumkin family in 1983.

Based on the data you provided in this year’s annual report, it appears you were able to purchase this business for roughly 85 percent of book value, or roughly two times earnings.

Can you comment on the factors or the environment in Omaha that enabled you to purchase this wonderful business for such a wonderful price?

WARREN BUFFETT: Well, I wish we had bought it that cheap, Jonathan, but no — we paid at the time, as I remember, probably 11 or 12 times after-tax earnings. It was not a discount from book value.

I’m not sure where those numbers come. Well, we bought 80 percent of the company. It was bought on the basis, as I remember, of 100 —of $60 million of purchase price.

So we —actually there was a second transaction involved in it. But 60 million was 100 percent value. We ended up with 80 percent.

The 60 million would’ve been more than book at the time. Not way more, but more than book.

And it would’ve been a multiple of 11 or 12 times earnings, as I remember. The sales were about 100 million. Pre-tax margins were in the 7 percent range.

So, it was about 7 million pre-tax. And, you know, 4 ½, probably, after-tax. That’s ballpark.

So, it was not a bargain purchase. It was a great business. It was a wonderful opportunity to join as fine a family as I’ve ever met.

But it was — and incidentally, there was another company, I believe, from Germany, that was trying to buy it at the time.

And believe it or not, Erskine Bowles, of Simpson-Bowles, was representing them, my friend Erskine — I didn’t know this at the time.

And then I went out on my birthday, August 30th, 1983. And had that contract, which is in the annual report.

And I gave it to Mrs. B. And — and she didn’t read, but Louie, her son, told her what was in it.

And I never asked her for an audit. I just asked her if she owed any money. And I asked her if she owned the building. And she said yes. And we made the deal. But it was not a bargain purchase.

Now, if you want to talk about bargain purchases, we should talk about going out to the Nebraska Furniture Mart. (Laughter)

So far, in the three — we —in the days of this annual meeting, our sales, which were a record 40 million for the week last year, are up about — I think they’re up about 7 percent now. And last year, of course, it was a record.

And on Tuesday, which was the first day, we did 7.8 million.

And Berkshire owns the largest home furnishing store in Sacramento, California. We own the largest one in Boise, Idaho. We own the largest one in Salt Lake City. We own the largest one in Las Vegas. Largest one in Reno.

Our sales at the Furniture Mart on Tuesday were larger than the monthly sales of any one of those stores I’ve just named, being the largest ones in places like Sacramento. So it is a remarkable organization. (Applause)

And the good news is there’s still time for you to avail yourself of those prices. (Laughter)

I would like to put in a plug for the Dallas store, where — I was down there a week ago. And it’s a plot of land like you wouldn’t believe. It’s a store like you wouldn’t believe. It is 1,800,000 square feet under one roof. Over 40 acres.

It will do more volume, I predict, than any other home furnishing store in the world. And I wouldn’t be surprised if I could add to that by a factor of at least two.

It’s a remarkable store. And I toured around it. And we’re, you know, we’re putting in streets. We’re — site preparation, utilities, racking, all these things. This wonderful woman, Michelle, who showed me around.

And the Blumkins later told me that she had started — worked for Nebraska Furniture Mart as a cashier, and she is in charge of this, you know, many hundreds of millions of dollar project. It’s really — it’s the good thing about America.

And at the end of the tour, she’d had this number two person working — walking around with us, who — she was explaining some things to us, too. And I learned at the end of the tour that number two was Michelle’s husband. (Laughter)

Interesting pillow talk, you know? “How many cubic yards did you move today, honey,” you know? (Laughter)