Frank Rooney

You’ve all read of the events that led to my appointment. My decision to take the job carried with it an implicit but important message: Berkshire’s operating managers are so outstanding that I knew I could materially reduce the time I was spending at the company and yet remain confident that its economic progress would not skip a beat. The Blumkins, the Friedman family, Mike Goldberg, the Heldmans, Chuck Huggins, Stan Lipsey, Ralph Schey and Frank Rooney (CEO of H.H. Brown, our latest acquisition, which I will describe later) are all masters of their operations and need no help from me. My job is merely to treat them right and to allocate the capital they generate. Neither function is impeded by my work at Salomon. Along the way, Frances Heffernan, one of Ray’s daughters, married Frank Rooney, who was sternly advised by Mr. Heffernan before the wedding that he had better forget any ideas he might have about working for his father-in-law. That was one of Mr. Heffernan’s few mistakes: Frank went on to become CEO of Melville Shoe (now Melville Corp.). During his 23 years as boss, from 1964 through 1986, Melville’s earnings averaged more than 20% on equity and its stock (adjusted for splits) rose from $16 to $960. And a few years after Frank retired, Mr. Heffernan, who had fallen ill, asked him to run Brown.

What we did last year was build on our 1991 purchase of H. H. Brown, a superbly-run manufacturer of work shoes, boots and other footwear. Brown has been a real winner: Though we had high hopes to begin with, these expectations have been considerably exceeded thanks to Frank Rooney, Jim Issler and the talented managers who work with them. Because of our confidence in Frank’s team, we next acquired Lowell Shoe, at the end of 1992. Lowell was a long-established manufacturer of women’s and nurses’ shoes, but its business needed some fixing. Again, results have surpassed our expectations. So we promptly jumped at the chance last year to acquire Dexter Shoe of Dexter, Maine, which manufactures popular-priced men’s and women’s shoes. Dexter, I can assure you, needs no fixing: It is one of the best-managed companies Charlie and I have seen in our business lifetimes. Frank Rooney did double duty last year. In addition to leading H. H. Brown to record profits—35% above the 1992 high—he also was key to our merger with Dexter.

I think I can see him — John. Don Wurster from National Indemnity. Rod Eldred from the Homestate Companies. Brad Kinstler from Cypress, our worker’s comp company. Ajit Jain, the big ticket writer in the East. And Mike Goldberg, who runs our real estate finance group and also generally oversees the insurance group. Mike. Gary Heldman from Fechheimers. Chuck Huggins from See’s, the candy man. Stan Lipsey from the Buffalo News. Chuck’s been with us, incidentally, twenty-odd years. Stan’s been working with me for well over 25 years. Frank Rooney and Jim Issler from H.H. Brown. Dave Hillstrom from Precision Steel. Ralph Schey from Scott Fetzer. Peter Lunder, who is with our newest acquisition, Dexter Shoe. And Harold Alfond, his partner, couldn’t be with us because his wife is ill. And finally, the manager that’s been with Charlie and me the longest, Harry Bottle from K&W. Harry, you here? There’s Harry. Harry saved our bacon back in 19 — what? WARREN BUFFETT: Well, I think our feelings for the shoe industry are very clear from what’s been happening the last few years. We think it’s a great business to be in as long as you’re in with Frank Rooney and Jim Issler and Peter Lunder and Harold Alfond. Otherwise, it hasn’t been too good. The — we have a couple of extraordinary shoe operations, but they’re not extraordinary because we get our leather from different steers or anything of the sort. It’s — we have two companies, really three now that Lowell’s been brought in, too, but that have truly extraordinary records. I think those same managements would have been enormous successes in any business they’d gone into. But, they have gone into the — they are in the shoe business and the companies earn unusual returns on equity. They earn unusual returns on sale. They’ve got terrific trade reputations. And I think that to the extent we can find ways to expand in the shoe business while employing those managements, we’ll be very excited about doing so.