Edgar Filing: BERKSHIRE HATHAWAY INC

a6706198.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-14905

BERKSHIRE HATHAWAY INC.

(Exact name of registrant as specified in its charter)

Delaware	47-0813844
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

3555 Farnam Street, Omaha, Nebraska 68131

(Address of principal executive office)

(Zip Code)

(402) 346-1400

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

Number of shares of common stock outstanding as of April 29, 2011:

Class A — 941,481

Class B — 1,061,009,224

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information

Item 1.	Financial Statements
	Consolidated Balance Sheets— March 31, 2011 and December 31, 2010		2
	Consolidated Statements of Earnings— First Quarter 2011 and 2010		3
	Consolidated Statements of Cash Flows— First Quarter 2011 and 2010		4
	Consolidated Statements of Changes in Shareholders’ Equity— First Quarter 2011 and 2010		5
	Consolidated Statements of Comprehensive Income— First Quarter 2011 and 2010		5
	Notes to Consolidated Financial Statements		6-19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20-33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		33

Part II – Other Information

Item 1.	Legal Proceedings		34
Item 1A.	Risk Factors		34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3.	Defaults Upon Senior Securities		34
Item 4.	(Removed and Reserved)		34
Item 5.	Other Information		34
Item 6.	Exhibits		35

Signature			35

Part I Financial Information

Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	March 31,		December 31,
	2011		2010
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents	$	38,401	$	34,767
Investments:
Fixed maturity securities		33,968		33,803
Equity securities		61,865		59,819
Other		18,943		19,333
Receivables		19,577		20,917
Inventories		7,564		7,101
Property, plant and equipment		15,686		15,741
Goodwill		27,948		27,891
Other		13,790		13,529
		237,742		232,901

Railroad, Utilities and Energy:
Cash and cash equivalents		2,157		2,557
Property, plant and equipment		78,087		77,385
Goodwill		20,101		20,084
Other		13,310		13,579
		113,655		113,605

Finance and Financial Products:
Cash and cash equivalents		620		903
Investments in fixed maturity securities		1,057		1,080
Other investments		3,552		3,676
Loans and finance receivables		14,926		15,226
Goodwill		1,031		1,031
Other		3,913		3,807
		25,099		25,723
	$	376,496	$	372,229

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses	$	62,391	$	60,075
Unearned premiums		9,701		7,997
Life, annuity and health insurance benefits		8,726		8,565
Accounts payable, accruals and other liabilities		16,317		15,826
Notes payable and other borrowings		10,375		12,471
		107,510		104,934

Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		12,059		12,367
Notes payable and other borrowings		31,761		31,626
		43,820		43,993

Finance and Financial Products:
Accounts payable, accruals and other liabilities		1,206		1,168
Derivative contract liabilities		8,087		8,371
Notes payable and other borrowings		14,410		14,477
		23,703		24,016
Income taxes, principally deferred		37,198		36,352
Total liabilities		212,231		209,295

Shareholders’ equity:
Common stock		8		8
Capital in excess of par value		37,578		37,533
Accumulated other comprehensive income		21,764		20,583
Retained earnings		100,705		99,194
Berkshire Hathaway shareholders’ equity		160,055		157,318
Noncontrolling interests		4,210		5,616
Total shareholders’ equity		164,265		162,934
	$	376,496	$	372,229

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)

	First Quarter
	2011			2010
	(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned	$	7,482		$	7,426
Sales and service revenues		16,772			15,531
Interest, dividend and other investment income		1,277			1,295
Investment gains/losses		86			1,315
Other-than-temporary impairment losses on investments		(506	)		—
		25,111			25,567

Railroad, Utilities and Energy:
Operating revenues		7,377			5,010
Other		36			40
		7,413			5,050

Finance and Financial Products:
Interest, dividend and other investment income		398			401
Investment gains/losses		13			3
Derivative gains/losses		271			411
Other		514			605
		1,196			1,420
		33,720			32,037

Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		6,018			4,186
Life, annuity and health insurance benefits		1,015			1,492
Insurance underwriting expenses		1,725			1,403
Cost of sales and services		13,859			12,906
Selling, general and administrative expenses		2,035			1,839
Interest expense		67			67
		24,719			21,893

Railroad, Utilities and Energy:
Cost of sales and operating expenses		5,572			3,832
Interest expense		425			347
		5,997			4,179

Finance and Financial Products:
Interest expense		166			179
Other		604			688
		770			867
		31,486			26,939

Earnings before income taxes		2,234			5,098
Income tax expense		629			1,336
Earnings from equity method investment		—			50
Net earnings		1,605			3,812
Less: Earnings attributable to noncontrolling interests		94			179
Net earnings attributable to Berkshire Hathaway	$	1,511		$	3,633
Average common shares outstanding *		1,648,411			1,599,167
Net earnings per share attributable to Berkshire Hathaway shareholders *	$	917		$	2,272

Average shares outstanding include average Class A common shares and average Class B common shares determined on an equivalent Class A common stock basis. Net earnings per common share attributable to Berkshire Hathaway shown above represents net earnings per equivalent Class A common share. Net earnings per Class B common share is equal to one-fifteen-hundredth (1/1,500) of such amount.

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

	First Quarter
	2011			2010
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	1,605		$	3,812
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses and other-than-temporary impairment losses		407			(1,318	)
Depreciation		1,135			915
Other		121			98
Changes in operating assets and liabilities before business acquisitions:
Losses and loss adjustment expenses		1,814			153
Deferred charges reinsurance assumed		50			117
Unearned premiums		1,669			1,274
Receivables and originated loans		(2,737	)		(3,013	)
Derivative contract assets and liabilities		(281	)		(632	)
Income taxes		182			583
Other assets and liabilities		(463	)		1,324
Net cash flows from operating activities		3,502			3,313

Cash flows from investing activities:
Purchases of fixed maturity securities		(1,452	)		(1,951	)
Purchases of equity securities		(834	)		(1,644	)
Sales of fixed maturity securities		867			1,109
Redemptions and maturities of fixed maturity securities		1,665			1,031
Sales of equity securities		9			2,283
Redemptions of other investments		3,845			—
Purchases of loans and finance receivables		(1,037	)		(82	)
Principal collections on loans and finance receivables		1,289			174
Acquisitions of businesses, net of cash acquired		(131	)		(14,911	)
Purchases of property, plant and equipment		(1,482	)		(1,170	)
Other		122			(210	)
Net cash flows from investing activities		2,861			(15,371	)

Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		37			8,036
Proceeds from borrowings of railroad, utilities and energy businesses		191			—
Proceeds from borrowings of finance businesses		1,525			1,037
Repayments of borrowings of insurance and other businesses		(2,143	)		(90	)
Repayments of borrowings of railroad, utilities and energy businesses		(276	)		(54	)
Repayments of borrowings of finance businesses		(1,590	)		(1,588	)
Change in short term borrowings, net		210			(62	)
Acquisitions of noncontrolling interests and other		(1,513	)		(85	)
Net cash flows from financing activities		(3,559	)		7,194
Effects of foreign currency exchange rate changes		147			(24	)
Increase (decrease) in cash and cash equivalents		2,951			(4,888	)
Cash and cash equivalents at beginning of year *		38,227			30,558
Cash and cash equivalents at end of first quarter *	$	41,178		$	25,670

* Cash and cash equivalents are comprised of the following:
Beginning of year—
Insurance and Other	$	34,767		$	28,223
Railroad, Utilities and Energy		2,557			429
Finance and Financial Products		903			1,906
	$	38,227		$	30,558

End of first quarter—
Insurance and Other	$	38,401		$	22,720
Railroad, Utilities and Energy		2,157			1,756
Finance and Financial Products		620			1,194
	$	41,178		$	25,670

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(dollars in millions)

	Berkshire Hathaway shareholders’ equity
	Common stock and capital in excess of par value			Accumulated other comprehensive income			Retained earnings		Total			Non- controlling interests
Balance at December 31, 2009	$	27,082		$	17,793		$	86,227	$	131,102		$	4,683
Net earnings		—			—			3,633		3,633			179
Other comprehensive income, net		—			1,513			—		1,513			20
Issuance of common stock and other transactions		10,974			—			—		10,974			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(14	)		1			—		(13	)		(167	)
Balance at March 31, 2010	$	38,042		$	19,307		$	89,860	$	147,209		$	4,715

Balance at December 31, 2010	$	37,541		$	20,583		$	99,194	$	157,318		$	5,616
Net earnings		—			—			1,511		1,511			94
Other comprehensive income, net		—			1,185			—		1,185			5
Issuance of common stock and other transactions		58			—			—		58			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(13	)		(4	)		—		(17	)		(1,505	)
Balance at March 31, 2011	$	37,586		$	21,764		$	100,705	$	160,055		$	4,210

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in millions)

	First Quarter
	2011			2010
Comprehensive income attributable to Berkshire Hathaway:
Net earnings	$	1,511		$	3,633

Other comprehensive income:
Net change in unrealized appreciation of investments		652			3,130
Applicable income taxes		(217	)		(1,110	)
Reclassification of investment appreciation in earnings		433			(335	)
Applicable income taxes		(152	)		117
Foreign currency translation		439			(435	)
Applicable income taxes		(13	)		—
Prior service cost and actuarial gains/losses of defined benefit plans		(4	)		51
Applicable income taxes		—			(13	)
Other, net		47			108
Other comprehensive income, net		1,185			1,513
Comprehensive income attributable to Berkshire Hathaway	$	2,696		$	5,146
Comprehensive income of noncontrolling interests	$	99		$	199

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

Note 1. General

The accompanying unaudited Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc. (“Berkshire” or “Company”) consolidated with the accounts of all its subsidiaries and affiliates in which Berkshire holds controlling financial interests as of the financial statement date. In these notes the terms “us,” “we,” or “our” refer to Berkshire and its consolidated subsidiaries. Reference is made to Berkshire’s most recently issued Annual Report on Form 10-K (“Annual Report”) that included information necessary or useful to understanding Berkshire’s businesses and financial statement presentations. Our significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in the Annual Report. Certain immaterial amounts in 2010 have been reclassified to conform with the current year presentation. Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with accounting principles generally accepted in the United States (“GAAP”).

For a number of reasons, our results for interim periods are not normally indicative of results to be expected for the year. The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be relatively more significant to results of interim periods than to results for a full year. Variations in the amounts and timing of investment gains/losses can cause significant variations in periodic net earnings. Investment gains/losses are recorded when investments are sold or are other-than-temporarily impaired. In addition, changes in the fair value of derivative assets/liabilities associated with derivative contracts that do not qualify for hedge accounting treatment can cause significant variations in periodic net earnings.

Note 2. New accounting pronouncements

In October 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-26, “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts.” ASU 2010-26 modifies the types of costs incurred by insurance entities that are deferred in the acquiring or renewing of insurance contracts. ASU 2010-26 requires that only direct incremental costs related to successful efforts are capitalized. Capitalized costs may include certain advertising costs which are allowed to be capitalized if the primary purpose of the advertising is to elicit sales to customers proven to have responded directly to the advertising and the probable future revenues generated from the advertising are proven to be in excess of expected future costs to be incurred in realizing those revenues. ASU 2010-26 is effective for fiscal years and interim periods beginning after December 15, 2011 and may be applied on a prospective or retrospective basis. We are evaluating the effect that the adoption of ASU 2010-26 will have on our Consolidated Financial Statements.

In December 2010, the FASB issued ASU 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, Step 2 of the goodwill impairment test is required if it is more likely than not that a goodwill impairment exists, after considering whether there are any adverse qualitative factors indicating that an impairment may exist. ASU 2010-28 is effective prospectively for fiscal years and interim periods beginning after December 15, 2011. We do not anticipate the adoption of ASU 2010-28 will have a material impact on our Consolidated Financial Statements.

Note 3. Significant business acquisitions

Our long-held acquisition strategy is to purchase businesses with consistent earning power, good returns on equity and able and honest management at sensible prices.

On February 12, 2010, we acquired all of the outstanding common stock of the Burlington Northern Santa Fe Corporation that we did not already own (about 264.5 million shares or 77.5%) for aggregate consideration of $26.5 billion that consisted of cash of approximately $15.9 billion with the remainder in Berkshire common stock (80,931 Class A shares and 20,976,621 Class B shares). Approximately 50% of the cash component was funded with existing cash balances and the remaining 50% was funded with proceeds from debt issued by Berkshire. The acquisition was completed through the merger of a wholly-owned merger subsidiary (a Delaware limited liability company) and Burlington Northern Santa Fe Corporation. The merger subsidiary was the surviving entity and was renamed Burlington Northern Santa Fe, LLC (“BNSF”). BNSF is based in Fort Worth, Texas, and through BNSF Railway Company operates one of the largest railroad systems in North America with approximately 32,000 route miles (including 23,000 route miles of track owned by BNSF) of track in 28 states and two Canadian provinces.

Notes To Consolidated Financial Statements (Continued)

Note 3. Significant business acquisitions (Continued)

Prior to February 12, 2010, we owned 76.8 million shares of BNSF (22.5% of the outstanding shares), which were acquired between August 2006 and January 2009. We accounted for those shares pursuant to the equity method and as of February 12, 2010, our investment had a carrying value of $6.6 billion. We are accounting for the acquisition of BNSF pursuant to the acquisition method under Accounting Standards Codification Section 805 Business Combinations (“ASC 805”). Upon completion of the acquisition of the remaining BNSF shares, we were required under ASC 805 to re-measure our previously owned investment in BNSF at fair value as of the acquisition date. In the first quarter of 2010, we recognized a one-time holding gain of approximately $1 billion for the difference between the fair value of the BNSF shares and our carrying value under the equity method. BNSF’s financial statements are included in our Consolidated Financial Statements beginning as of February 13, 2010.

In the first quarter of 2011, we acquired 16.5% of the outstanding common stock of Marmon Holdings, Inc. (“Marmon”) for approximately $1.5 billion in cash, thus increasing our ownership to 80.2%. We have owned a controlling interest in Marmon since 2008. We increased our interests in the underlying assets and liabilities of Marmon; however, under current GAAP, the excess of the purchase price over the carrying value of the noncontrolling interests acquired is not allocable to assets or liabilities. Accordingly, we recorded a charge of approximately $600 million to capital in excess of par value in our consolidated shareholders’ equity on December 31, 2010 in connection with this transaction.

On March 13, 2011, Berkshire and The Lubrizol Corporation (“Lubrizol”) entered into a merger agreement, whereby Berkshire will acquire all of the outstanding shares of Lubrizol common stock for cash of $135 per share. The aggregate merger consideration is expected to be approximately $9.0 billion. The acquisition is subject to the approval of Lubrizol shareholders and is also subject to various regulatory approvals and other customary closing conditions. The acquisition is currently expected to close in the third quarter of 2011.

Lubrizol is an innovative specialty chemical company that produces and supplies technologies to customers in the global transportation, industrial and consumer markets. These technologies include lubricant additives for engine oils, other transportation-related fluids and industrial lubricants, as well as fuel additives for gasoline and diesel fuel. In addition, Lubrizol makes ingredients and additives for personal care products and pharmaceuticals; specialty materials, including plastics technology; and performance coatings in the form of specialty resins and additives. Lubrizol’s industry-leading technologies in additives, ingredients and compounds enhance the quality, performance and value of customers’ products, while reducing their environmental impact. For the year ended December 31, 2010, Lubrizol reported consolidated revenues of $5.4 billion and net earnings of $732 million.

Note 4. Investments in fixed maturity securities

Investments in securities with fixed maturities as of March 31, 2011 and December 31, 2010 are summarized below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
March 31, 2011
U.S. Treasury, U.S. government corporations and agencies	$	2,110	$	38	$	(2	)	$	2,146
States, municipalities and political subdivisions		3,220		217		—			3,437
Foreign governments		12,201		196		(70	)		12,327
Corporate bonds		11,688		2,473		(41	)		14,120
Mortgage-backed securities		2,702		303		(10	)		2,995
	$	31,921	$	3,227	$	(123	)	$	35,025
Insurance and other	$	30,963	$	3,128	$	(123	)	$	33,968
Finance and financial products		958		99		—			1,057
	$	31,921	$	3,227	$	(123	)	$	35,025

December 31, 2010
U.S. Treasury, U.S. government corporations and agencies	$	2,151	$	48	$	(2	)	$	2,197
States, municipalities and political subdivisions		3,356		225		—			3,581
Foreign governments		11,721		242		(51	)		11,912
Corporate bonds		11,773		2,304		(23	)		14,054
Mortgage-backed securities		2,838		312		(11	)		3,139
	$	31,839	$	3,131	$	(87	)	$	34,883
Insurance and other	$	30,862	$	3,028	$	(87	)	$	33,803
Finance and financial products		977		103		—			1,080
	$	31,839	$	3,131	$	(87	)	$	34,883

Notes To Consolidated Financial Statements (Continued)

Note 4. Investments in fixed maturity securities (Continued)

As of March 31, 2011, the fair value of investments that have been in a continuous unrealized loss position for more than 12 months was $389 million and the unrealized loss was approximately $22 million. As of December 31, 2010, investments that were in a continuous unrealized loss position for more than 12 months had unrealized losses of $24 million.

The amortized cost and estimated fair value of securities with fixed maturities at March 31, 2011 are summarized below by contractual maturity dates. Actual maturities will differ from contractual maturities because issuers of certain of the securities retain early call or prepayment rights. Amounts are in millions.

	Due in one year or less		Due after one year through five years		Due after five years through ten years		Due after ten years		Mortgage-backed securities		Total
Amortized cost	$	7,273	$	14,632	$	4,497	$	2,817	$	2,702	$	31,921
Fair value		7,396		15,985		5,240		3,409		2,995		35,025

Note 5. Investments in equity securities

Investments in equity securities as of March 31, 2011 and December 31, 2010 are summarized below (in millions).

	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
March 31, 2011
American Express Company	$	1,287	$	5,566	$	—		$	6,853
The Coca-Cola Company		1,299		11,969		—			13,268
The Procter & Gamble Company		4,321		138		—			4,459
Wells Fargo & Company		7,678		3,704		—			11,382
Other		21,344		6,087		(154	)		27,277
	$	35,929	$	27,464	$	(154	)	$	63,239

Insurance and other	$	35,261	$	26,758	$	(154	)	$	61,865
Railroad, utilities and energy *		232		630		—			862
Finance and financial products *		436		76		—			512
	$	35,929	$	27,464	$	(154	)	$	63,239

December 31, 2010
American Express Company	$	1,287	$	5,220	$	—		$	6,507
The Coca-Cola Company		1,299		11,855		—			13,154
The Procter & Gamble Company		4,321		336		—			4,657
Wells Fargo & Company		8,015		3,521		(413	)		11,123
Other		20,622		5,709		(259	)		26,072
	$	35,544	$	26,641	$	(672	)	$	61,513

Insurance and other	$	34,875	$	25,616	$	(672	)	$	59,819
Railroad, utilities and energy *		232		950		—			1,182
Finance and financial products *		437		75		—			512
	$	35,544	$	26,641	$	(672	)	$	61,513

*	Included in Other assets.

As of March 31, 2011, there were no unrealized losses on equity investments that were in a continuous loss position for more than twelve months and for which other-than-temporary impairment losses were not recorded. As of December 31, 2010 such unrealized losses were $531 million.

Notes To Consolidated Financial Statements (Continued)

Note 5. Investments in equity securities (Continued)

During the first quarter of 2011, we recorded other-than-temporary impairment (“OTTI”) losses in earnings of $506 million related to certain equity securities. The charge to earnings was offset by a reduction in unrealized losses recorded in other comprehensive income resulting in no impact on our consolidated shareholders’ equity. Included in the OTTI losses was $337 million related to 103.6 million shares of our Wells Fargo & Company investment. These shares had an aggregate original cost of $3,621 million. We also hold an additional 255.4 million shares of Wells Fargo which were acquired at an aggregate cost of $4,394 million. These shares had an unrealized gain of $3,704 million as of March 31, 2011. Due to the length of time that certain of our Wells Fargo shares were in a continuous unrealized loss position and because we account for gains and losses on a specific identification basis, accounting regulations required us to record the unrealized losses in earnings. However, the unrealized gains are not reflected in earnings but are instead recorded directly in shareholders’ equity as a component of accumulated other comprehensive income.

Note 6. Other Investments

Other investments include fixed maturity and equity securities of The Goldman Sachs Group, Inc. (“GS”), General Electric Company (“GE”), Wm. Wrigley Jr. Company (“Wrigley”) and The Dow Chemical Company (“Dow”). A summary of other investments follows (in millions).

	Cost		Unrealized Gains		Fair Value		Carrying Value
March 31, 2011
Other fixed maturity and equity securities:
Insurance and other	$	15,506	$	4,512	$	20,018	$	18,943
Finance and financial products		2,742		823		3,565		3,552
	$	18,248	$	5,335	$	23,583	$	22,495

December 31, 2010
Other fixed maturity and equity securities:
Insurance and other	$	15,700	$	4,758	$	20,458	$	19,333
Finance and financial products		2,742		947		3,689		3,676
	$	18,442	$	5,705	$	24,147	$	23,009

In 2008, we acquired 50,000 shares of 10% Cumulative Perpetual Preferred Stock of GS (“GS Preferred”) and warrants to purchase 43,478,260 shares of common stock of GS (“GS Warrants”) for a combined cost of $5 billion. Under its terms, the GS Preferred is redeemable at any time by GS at a price of $110,000 per share ($5.5 billion in aggregate). In March 2011, GS notified us that it would redeem our GS Preferred investment in its entirety and on April 18, 2011, we received the redemption proceeds of $5.5 billion. The GS Warrants remain outstanding and expire in 2013 and can be exercised for an aggregate cost of $5 billion ($115/share). In 2008, we also acquired 30,000 shares of 10% Cumulative Perpetual Preferred Stock of GE (“GE Preferred”) and warrants to purchase 134,831,460 shares of common stock of GE (“GE Warrants”) for a combined cost of $3 billion. The GE Preferred may be redeemed by GE beginning in October 2011 at a price of $110,000 per share ($3.3 billion in aggregate). The GE Warrants expire in 2013 and can be exercised for an additional aggregate cost of $3 billion ($22.25/share).

In 2008, we acquired $4.4 billion par amount of 11.45% Wrigley subordinated notes due in 2018 and $2.1 billion of 5% Wrigley preferred stock. In 2009, we also acquired $1.0 billion par amount of Wrigley senior notes due in 2013 and 2014. We currently own $800 million of the Wrigley senior notes. The Wrigley subordinated and senior notes are classified as held-to-maturity and we carry these investments at cost, adjusted for foreign currency exchange rate changes that apply to certain of the senior notes. We carry the Wrigley preferred stock at fair value classified as available-for-sale.

In 2009, we acquired 3,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock of Dow (“Dow Preferred”) for a cost of $3 billion. Under certain conditions, we can convert each share of the Dow Preferred into 24.201 shares (equivalent to a conversion price of $41.32 per share) of Dow common stock. Beginning in April 2014, if Dow’s common stock price exceeds $53.72 per share for any 20 trading days in a consecutive 30-day window, Dow, at its option, at any time, in whole or in part, may convert the Dow Preferred into Dow common stock at the then applicable conversion rate. The Dow Preferred is entitled to dividends at a rate of 8.5% per annum.

Notes To Consolidated Financial Statements (Continued)

Note 7. Investment gains/losses

Investment gains/losses are summarized below (in millions).

	First Quarter
	2011			2010
Fixed maturity securities —
Gross gains from sales and other disposals	$	82		$	298
Gross losses from sales and other disposals		—			(3	)
Equity securities —
Gross gains from sales and other disposals		1			212
Gross losses from sales and other disposals		(10	)		(172	)
Other		26			983	*
	$	99		$	1,318

Net investment gains/losses are reflected in the Consolidated Statements of Earnings as follows.

Insurance and other	$	86	$	1,315	*
Finance and financial products		13		3
	$	99	$	1,318

*	Includes a one-time holding gain of $979 million related to the BNSF acquisition. See Note 3.

Note 8. Receivables

Receivables of insurance and other businesses are comprised of the following (in millions).

	March 31,			December 31,
	2011			2010
Insurance premiums receivable	$	7,726		$	6,342
Reinsurance recoverable on unpaid losses		2,960			2,735
Trade and other receivables		9,279			12,223
Allowances for uncollectible accounts		(388	)		(383	)
	$	19,577		$	20,917

As of December 31, 2010, trade and other receivables included approximately CHF 3.7 billion ($3.9 billion) related to the redemption of the Swiss Re convertible capital instrument. This receivable was collected on January 10, 2011.

Loans and finance receivables of finance and financial products businesses are comprised of the following (in millions).

	March 31,			December 31,
	2011			2010
Consumer installment loans and finance receivables	$	13,860		$	14,042
Commercial loans and finance receivables		1,440			1,557
Allowances for uncollectible loans		(374	)		(373	)
	$	14,926		$	15,226

Allowances for uncollectible loans primarily relate to consumer installment loans. Provisions for consumer loan losses were $82 million in the first quarter of 2011 and $88 million for the first quarter of 2010. Loan charge-offs, net of recoveries, were $81 million in the first quarter of 2011 and $84 million for the first quarter of 2010. Consumer loan amounts are net of acquisition discounts of $567 million at March 31, 2011 and $580 million at December 31, 2010. At March 31, 2011, approximately 96% of consumer installment loan balances were evaluated collectively for impairment whereas about 91% of commercial loan balances were evaluated individually for impairment.

As a part of the evaluation process, credit quality indicators are reviewed and loans are designated as performing or non-performing. At March 31, 2011, approximately 98% of consumer installment and commercial loan balances were determined to be performing and approximately 94% of those balances were current as to payment status.

Notes To Consolidated Financial Statements (Continued)

Note 9. Inventories

Inventories are comprised of the following (in millions).

	March 31,		December 31,
	2011		2010
Raw materials	$	1,168	$	1,066
Work in process and other		629		509
Finished manufactured goods		2,320		2,180
Goods acquired for resale		3,447		3,346
	$	7,564	$	7,101

Note 10. Goodwill and other intangible assets

A reconciliation of the change in the carrying value of goodwill is as follows (in millions).

	March 31,		December 31,
	2011		2010
Balance at beginning of year	$	49,006	$	33,972
Acquisition of BNSF		—		14,803
Other		74		231
Balance at end of year	$	49,080	$	49,006

Intangible assets other than goodwill are included in other assets and are summarized as follows (in millions).

	March 31, 2011				December 31, 2010
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other	$	6,977	$	1,927	$	6,944	$	1,816
Railroad, utilities and energy		2,082		384		2,082		306
	$	9,059	$	2,311	$	9,026	$	2,122

Trademarks and trade names	$	2,030	$	178	$	2,027	$	166
Patents and technology		2,942		1,111		2,922		1,013
Customer relationships		2,673		659		2,676		612
Other		1,414		363		1,401		331
	$	9,059	$	2,311	$	9,026	$	2,122

Amortization expense was $183 million for the first three months of 2011 and $159 million for the first three months of 2010. Intangible assets with indefinite lives as of March 31, 2011 and December 31, 2010 were $1,635 million.

Notes To Consolidated Financial Statements (Continued)

Note 11. Property, plant and equipment

Property, plant and equipment of our insurance and other businesses is comprised of the following (in millions).

	Ranges of estimated useful life	March 31, 2011			December 31, 2010
Land	—	$	750		$	744
Buildings and improvements	3 – 40 years		4,709			4,661
Machinery and equipment	3 – 25 years		11,647			11,573
Furniture, fixtures and other	3 – 20 years		2,061			1,932
Assets held for lease	12 –30 years		5,776			5,832
			24,943			24,742
Accumulated depreciation			(9,257	)		(9,001	)
		$	15,686		$	15,741

Depreciation expense of insurance and other businesses for the first quarter of 2011 and 2010 was $426 million and $380 million, respectively.

Property, plant and equipment of our railroad, utilities and energy businesses is comprised of the following (in millions).

	Ranges of estimated useful life	March 31, 2011			December 31, 2010
Railroad:
Land	—	$	5,900		$	5,901
Track structure and other roadway	5 – 100 years		35,775			35,463
Locomotives, freight cars and other equipment	5 – 37 years		4,400			4,329
Construction in progress	—		638			453
Utilities and energy:
Utility generation, distribution and transmission system	5 – 85 years		38,031			37,643
Interstate pipeline assets	3 – 67 years		5,933			5,906
Independent power plants and other assets	3 – 30 years		1,103			1,097
Construction in progress	—		1,630			1,456
			93,410			92,248
Accumulated depreciation			(15,323	)		(14,863	)
		$	78,087		$	77,385

The utility generation, distribution and transmission system and interstate pipeline assets are the regulated assets of public utility and natural gas pipeline subsidiaries. Depreciation expense of the railroad, utilities and energy businesses for the first quarter of 2011 and 2010 was $696 million and $483 million, respectively. Depreciation expense of the railroad business (BNSF) in the first quarter of 2010 includes expenses from February 13, 2010 through March 31, 2010.

Notes To Consolidated Financial Statements (Continued)

Note 12. Derivative contracts

Derivative contracts are used primarily by our finance and financial products businesses and our railroad, utilities and energy businesses. As of March 31, 2011 and December 31, 2010, substantially all of the derivative contracts of our finance and financial products businesses are not designated as hedges for financial reporting purposes. These contracts were initially entered into with the expectation that the premiums received would exceed the amounts ultimately paid to counterparties. Changes in the fair values of such contracts are reported in earnings as derivative gains/losses. A summary of derivative contracts of our finance and financial products businesses follows (in millions).

	March 31, 2011									December 31, 2010
	Assets (3)			Liabilities			Notional Value			Assets (3)			Liabilities			Notional Value
Equity index put options	$	—		$	6,489		$	34,489	(1)	$	—		$	6,712		$	33,891	(1)
Credit default obligations:
High yield indexes		—			114			4,893	(2)		—			159			4,893	(2)
States/municipalities		—			1,165			16,042	(2)		—			1,164			16,042	(2)
Individual corporate		93			—			3,565	(2)		84			—			3,565	(2)
Other		350			355						341			375
Counterparty netting		(75	)		(36	)					(82	)		(39	)
	$	368		$	8,087					$	343		$	8,371

(1)	Represents the aggregate undiscounted amount payable at the contract expiration dates assuming that the value of each index is zero at the contract expiration date.

(2)	Represents the maximum undiscounted future value of losses payable under the contracts. The number of losses required to exhaust contract limits under substantially all of the contracts is dependent on the loss recovery rate related to the specific obligor at the time of a default.

(3)	Included in Other assets of finance and financial products businesses.

A summary of derivative gains/losses of our finance and financial products businesses included in the Consolidated Statements of Earnings are as follows (in millions).

	First Quarter
	2011			2010
Equity index put options	$	223		$	178
Credit default obligations		70			208
Other		(22	)		25
	$	271		$	411

The equity index put option contracts are European style options written on four major equity indexes. Future payments, if any, under these contracts will be required if the underlying index value is below the strike price at the contract expiration dates which occur between June 2018 and January 2026. We received the premiums on these contracts in full at the contract inception dates and therefore we have no counterparty credit risk. We entered into no new contracts in 2010 or 2011.

At March 31, 2011, the aggregate intrinsic value (the undiscounted liability assuming the contracts are settled on their future expiration dates based on the March 31, 2011 index values and foreign currency exchange rates) was approximately $3.7 billion. However, these contracts may not be unilaterally terminated or fully settled before the expiration dates and therefore the ultimate amount of cash basis gains or losses on these contracts may not be determined for many years. The remaining weighted average life of all contracts was approximately 9.75 years at March 31, 2011.

Our credit default contracts pertain to various indexes of non-investment grade (or “high yield”) corporate issuers, state/municipal debt issuers and other individual corporate issuers. These contracts cover the loss in value of specified debt obligations of the issuers arising from default events, which are usually from their failure to make payments or bankruptcy. Loss amounts are subject to aggregate contract limits. We entered into no new contracts in 2010 or 2011.

Notes To Consolidated Financial Statements (Continued)

Note 12. Derivative contracts (Continued)

The high yield index contracts are comprised of specified North American corporate issuers (usually 100 in number at inception) whose obligations are rated below investment grade. High yield contracts remaining in-force at March 31, 2011 expire no later than 2013. State and municipality contracts are comprised of over 500 state and municipality issuers and had a weighted average contract life at March 31, 2011 of approximately 9.9 years. Potential obligations related to approximately 50% of the notional value of the state and municipality contracts cannot be settled before the maturity dates of the underlying obligations, which range from 2019 to 2054.

Premiums on the high yield index and state/municipality contracts are received in full at the inception dates of the contracts and, as a result, we have no counterparty credit risk. Our payment obligations under certain of these contracts are on a first loss basis. Losses under other contracts are subject to aggregate deductibles that must be satisfied before we have any payment obligations.

Individual corporate credit default contracts primarily relate to issuers of investment grade obligations. In most instances, premiums are due from counterparties on a quarterly basis over the terms of the contracts. As of March 31, 2011, all of the remaining contracts in-force will expire in 2013.

With limited exceptions, our equity index put option and credit default contracts contain no collateral posting requirements with respect to changes in either the fair value or intrinsic value of the contracts and/or a downgrade of Berkshire’s credit ratings. As of March 31, 2011, our collateral posting requirement under contracts with collateral provisions was $20 million compared to $31 million at December 31, 2010. As of March 31, 2011, had Berkshire’s credit ratings (currently AA+ from Standard & Poor’s and Aa2 from Moody’s) been downgraded below either A- by Standard & Poor’s or A3 by Moody’s an additional $1.1 billion would have been required to be posted as collateral.

Our railroad and regulated utility subsidiaries are exposed to variations in the market prices in the purchases and sales of natural gas and electricity and in the purchase of fuel. Derivative instruments, including forward purchases and sales, futures, swaps and options, are used to manage these price risks. Unrealized gains and losses under the contracts of our regulated utilities that are probable of recovery through rates are recorded as a regulatory net asset or liability. Unrealized gains or losses on contracts accounted for as cash flow or fair value hedges are recorded in accumulated other comprehensive income or in net earnings, as appropriate. Derivative contract assets included in other assets of railroad, utilities and energy businesses were $252 million and $231 million as of March 31, 2011 and December 31, 2010, respectively. Derivative contract liabilities included in accounts payable, accruals and other liabilities of railroad, utilities and energy businesses were $572 million as of March 31, 2011 and $621 million as of December 31, 2010.

Notes To Consolidated Financial Statements (Continued)

Note 13. Supplemental cash flow information

A summary of supplemental cash flow information for the first quarter of 2011 and 2010 is presented in the following table (in millions).

	First Quarter
	2011		2010
Cash paid during the period for:
Income taxes	$	231	$	310
Interest of insurance and other businesses		79		38
Interest of railroad, utilities and energy businesses		482		374
Interest of finance and financial products businesses		174		194

Non-cash investing and financing activities:
Liabilities assumed in connection with acquisition of BNSF		—		30,968
Common stock issued in connection with acquisition of BNSF		—		10,577

Note 14. Notes payable and other borrowings

Notes payable and other borrowings are summarized below (in millions). The average interest rates shown in the following tables are the weighted average interest rates on outstanding debt as of March 31, 2011. Maturity date ranges are based on borrowings as of March 31, 2011.

	Average Interest Rate			March 31, 2011		December 31, 2010
Insurance and other:
Issued by Berkshire parent company due 2012-2047		1.9	%	$	6,287	$	8,360
Short-term subsidiary borrowings		0.4	%		1,680		1,682
Other subsidiary borrowings due 2011-2036		5.2	%		2,408		2,429
				$	10,375	$	12,471

In connection with the BNSF acquisition, the Berkshire parent company issued $8.0 billion aggregate par amount of senior unsecured notes, including $2.0 billion par amount of floating rate notes that matured in February 2011.

	Average Interest Rate			March 31, 2011		December 31, 2010
Railroad, utilities and energy:
Issued by MidAmerican Energy Holdings Company (“MidAmerican”) and its subsidiaries:
MidAmerican senior unsecured debt due 2012-2037		6.1	%	$	5,371	$	5,371
Subsidiary and other debt due 2011-2039		5.7	%		14,511		14,275
Issued by BNSF due 2011-2097		6.1	%		11,879		11,980
				$	31,761	$	31,626

MidAmerican subsidiary debt represents amounts issued pursuant to separate financing agreements. All or substantially all of the assets of certain MidAmerican subsidiaries are or may be pledged or encumbered to support or otherwise secure the debt. These borrowing arrangements generally contain various covenants including, but not limited to, leverage ratios, interest coverage ratios and debt service coverage ratios. BNSF’s borrowings are primarily unsecured. As of March 31, 2011, BNSF and MidAmerican and its subsidiaries were in compliance with all applicable covenants. Berkshire does not guarantee any debt or other borrowings of BNSF, MidAmerican or their subsidiaries.

	Average Interest Rate			March 31, 2011		December 31, 2010
Finance and financial products:
Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2012-2040		4.3	%	$	11,528	$	11,535
Issued by other subsidiaries due 2011-2036		5.0	%		2,882		2,942
				$	14,410	$	14,477

Notes To Consolidated Financial Statements (Continued)

Note 14. Notes payable and other borrowings (Continued)

BHFC is a 100% owned finance subsidiary of Berkshire, which has fully and unconditionally guaranteed its securities. In January 2011, BHFC issued an additional $1.5 billion par amount of notes and repaid $1.5 billion of maturing notes. The new notes are unsecured and are comprised of $750 million par amount of 4.25% senior notes due in 2021, $375 million par amount of 1.5% senior notes due in 2014 and $375 million par amount of floating rate senior notes due in 2014.

Our subsidiaries have approximately $5.3 billion of available unused lines of credit and commercial paper capacity in the aggregate at March 31, 2011, to support our short-term borrowing programs and provide additional liquidity. Generally, Berkshire’s guarantee of a subsidiary’s debt obligation is an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all present and future payment obligations.

Note 15. Fair value measurements

The estimated fair values of our financial instruments are shown in the following table (in millions). The carrying values of cash and cash equivalents, accounts receivable and accounts payable, accruals and other liabilities are deemed to be reasonable estimates of their fair values.

	Carrying Value				Fair Value
	March 31, 2011		December 31, 2010		March 31, 2011		December 31, 2010
Investments in fixed maturity securities	$	35,025	$	34,883	$	35,025	$	34,883
Investments in equity securities		63,239		61,513		63,239		61,513
Other investments		22,495		23,009		23,583		24,147
Loans and finance receivables		14,926		15,226		14,165		14,453
Derivative contract assets (1)		620		574		620		574
Notes payable and other borrowings:
Insurance and other		10,375		12,471		10,573		12,705
Railroad, utilities and energy		31,761		31,626		33,609		33,932
Finance and financial products		14,410		14,477		15,107		15,191
Derivative contract liabilities:
Railroad, utilities and energy (2)		572		621		572		621
Finance and financial products		8,087		8,371		8,087		8,371

(1)	Included in Other assets

(2)	Included in Accounts payable, accruals and other liabilities

Fair values for substantially all of our financial instruments were measured using market or income approaches. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized in an actual current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.

The hierarchy for measuring fair value consists of Levels 1 through 3.

Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets. Substantially all of our equity investments are traded on an exchange in active markets and fair values are based on the closing prices as of the balance sheet date.

Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Fair values for our investments in fixed maturity securities are primarily based on price evaluations which incorporate market prices for identical instruments in inactive markets and market data available for instruments with similar characteristics. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit rating, estimated duration, and yields for other instruments of the issuer or entities in the same industry sector.

Notes To Consolidated Financial Statements (Continued)

Note 15. Fair value measurements (Continued)

Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities. Measurements of non-exchange traded derivative contracts and certain other investments carried at fair value are based primarily on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants. We value equity index put option contracts based on the Black-Scholes option valuation model which we believe is widely used by market participants. Inputs to this model include current index price, expected volatility, dividend and interest rates and contract duration. Credit default contracts are primarily valued based on indications of bid or offer data as of the balance sheet date. These contracts are not exchange traded and certain of the terms of our contracts are not standard in derivatives markets. For example, we are not required to post collateral under most of our contracts. For these reasons, we classified these contracts as Level 3.

Financial assets and liabilities measured and carried at fair value on a recurring basis in our financial statements are summarized, according to the hierarchy previously described, as follows (in millions).

	Total Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
March 31, 2011
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	2,146	$	563	$	1,580		$	3
States, municipalities and political subdivisions		3,437		—		3,436			1
Foreign governments		12,327		5,073		7,140			114
Corporate bonds		14,120		—		13,471			649
Mortgage-backed securities		2,995		—		2,995			—
Investments in equity securities		63,239		63,108		87			44
Other investments		17,270		—		5,500			11,770

Net derivative contract (assets)/liabilities:
Railroad, utilities and energy		320		—		(21	)		341
Finance and financial products:
Equity index put options		6,489		—		—			6,489
Credit default obligations		1,186		—		—			1,186
Other		44		—		116			(72	)

December 31, 2010
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	2,197	$	535	$	1,658		$	4