Wesco Financial Corporation reported improved results (pdf) for the second quarter of 2010 with net income rising to $31.3 million compared with $12.9 million for the second quarter of 2009. The improved performance is primarily attributed to the stronger underwriting results of Wesco’s insurance business along with the impact of cost cutting measures at the company’s CORT furniture rental unit. While CORT posted net income of $6.7 million for the quarter compared to $1.5 million for the second quarter of 2009, sales were slightly lower although management states that “core rental revenues” have shown recent improvements. The Precision Steel subsidiary posted a 43 percent improvement in sales which generated a $183,000 net profit for the quarter compared to a $285,000 loss a year earlier. Wesco Financial is a publicly traded 80 percent owned subsidiary of Berkshire Hathaway (click here for a summary of Berkshire’s Q2 results.)
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Berkshire Hathaway posted sharply higher operating profits (pdf) for the second quarter of 2010 thanks to strength in the insurance operations and major improvements in the company’s diverse collection of economically sensitive subsidiaries. However, quarterly net earnings declined to $1.97 billion from $3.3 billion in the prior year period primarily due to losses in the derivatives portfolio caused by broad declines in market indices in the second quarter. Book value per share declined to $86,661 per Class A share, down 3 percent for the quarter due to unrealized losses in Berkshire’s large portfolio of publicly traded stocks.
In this rather lengthy article, we will analyze Berkshire’s business performance in detail after a brief section on the distortion in Berkshire’s “headline earnings number” caused by the derivatives portfolio. We also present a detailed trend analysis, including spreadsheets and graphs, of Berkshire’s results for the past ten quarters which reveals the progress of the business since the depths of the recession in early to mid 2009. [more]