Edgar Filing: BERKSHIRE HATHAWAY INC

a50050868.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 September 30, 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 October 28, 2011:

Class A — 939,280

Class B — 1,067,219,118

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information

Item 1.	Financial Statements
	Consolidated Balance Sheets— September 30, 2011 and December 31, 2010	2
	Consolidated Statements of Earnings— Third Quarter and First Nine Months 2011 and 2010	3
	Consolidated Statements of Cash Flows— First Nine Months 2011 and 2010	4
	Consolidated Statements of Changes in Shareholders’ Equity— First Nine Months 2011 and 2010	5
	Consolidated Statements of Comprehensive Income— Third Quarter and First Nine Months 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 and Issuer Repurchases of Equity Securities	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	(Removed and Reserved)	34
Item 5.	Other Information	34-35
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)

	September 30,			December 31,
	2011			2010
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents	$	30,587		$	34,767
Investments:
Fixed maturity securities		33,031			33,803
Equity securities		67,225			59,819
Other		16,633			19,333
Receivables		19,834			20,917
Inventories		9,265			7,101
Property, plant and equipment		17,804			15,741
Goodwill		32,215			27,891
Other		18,062			13,529
		244,656			232,901

Railroad, Utilities and Energy:
Cash and cash equivalents		2,965			2,557
Property, plant and equipment		80,642			77,385
Goodwill		20,064			20,084
Other		12,347			13,579
		116,018			113,605

Finance and Financial Products:
Cash and cash equivalents		1,224			903
Investments in fixed maturity securities		1,017			1,080
Other investments		3,886			3,676
Loans and finance receivables		14,003			15,226
Goodwill		1,031			1,031
Other		3,659			3,807
		24,820			25,723
	$	385,494		$	372,229

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses	$	63,812		$	60,075
Unearned premiums		9,609			7,997
Life, annuity and health insurance benefits		8,896			8,565
Accounts payable, accruals and other liabilities		17,916			15,826
Notes payable and other borrowings		13,748			12,471
		113,981			104,934

Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		12,196			12,367
Notes payable and other borrowings		32,644			31,626
		44,840			43,993

Finance and Financial Products:
Accounts payable, accruals and other liabilities		1,123			1,168
Derivative contract liabilities		10,421			8,371
Notes payable and other borrowings		14,092			14,477
		25,636			24,016
Income taxes, principally deferred		37,156			36,352
Total liabilities		221,613			209,295

Shareholders’ equity:
Common stock		8			8
Capital in excess of par value		37,786			37,533
Accumulated other comprehensive income		15,781			20,583
Retained earnings		106,400			99,194
Treasury stock, at cost		(18	)		—
Berkshire Hathaway shareholders’ equity		159,957			157,318
Noncontrolling interests		3,924			5,616
Total shareholders’ equity		163,881			162,934
	$	385,494		$	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)

	Third Quarter						First Nine Months
	2011			2010			2011			2010
	(Unaudited)						(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned	$	7,645		$	9,054		$	24,076		$	23,344
Sales and service revenues		18,573			17,408			53,681			50,149
Interest, dividend and other investment income		1,051			1,239			3,754			4,048
Investment gains/losses		100			473			1,314			2,169
Other-than-temporary impairment losses on investments		(8	)		(15	)		(514	)		(15	)
		27,361			28,159			82,311			79,695

Railroad, Utilities and Energy:
Operating revenues		7,781			7,155			22,594			18,889
Other		47			60			115			142
		7,828			7,215			22,709			19,031

Finance and Financial Products:
Interest, dividend and other investment income		384			395			1,141			1,197
Investment gains/losses		—			—			174			5
Derivative gains/losses		(2,443	)		(146	)		(2,356	)		(1,911	)
Other		609			651			1,754			2,003
		(1,450	)		900			713			1,294
		33,739			36,274			105,733			100,020

Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		3,827			6,254			16,107			14,357
Life, annuity and health insurance benefits		1,041			861			3,032			3,240
Insurance underwriting expenses		1,082			1,634			4,527			4,381
Cost of sales and services		15,281			14,439			44,095			41,537
Selling, general and administrative expenses		2,105			1,896			6,262			5,650
Interest expense		79			71			216			206
		23,415			25,155			74,239			69,371

Railroad, Utilities and Energy:
Cost of sales and operating expenses		5,675			5,251			16,898			14,143
Interest expense		428			421			1,280			1,162
		6,103			5,672			18,178			15,305

Finance and Financial Products:
Interest expense		162			176			493			530
Other		696			737			1,961			2,244
		858			913			2,454			2,774
		30,376			31,740			94,871			87,450
Earnings before income taxes		3,363			4,534			10,862			12,570
Income tax expense		953			1,415			3,307			3,599
Earnings from equity method investment		—			—			—			50
Net earnings		2,410			3,119			7,555			9,021
Less: Earnings attributable to noncontrolling interests		132			130			349			431
Net earnings attributable to Berkshire Hathaway	$	2,278		$	2,989		$	7,206		$	8,590
Average common shares outstanding *		1,651,290			1,647,593			1,649,585			1,631,489
Net earnings per share attributable to Berkshire Hathaway shareholders *	$	1,380		$	1,814		$	4,368		$	5,265

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 Nine Months
	2011			2010
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	7,555		$	9,021
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses and other-than-temporary impairment losses		(974	)		(2,159	)
Depreciation		3,418			3,109
Other		374			203
Changes in operating assets and liabilities before business acquisitions:
Losses and loss adjustment expenses		3,478			1,974
Deferred charges reinsurance assumed		(525	)		150
Unearned premiums		1,599			1,168
Receivables and originated loans		(1,847	)		(3,295	)
Derivative contract assets and liabilities		2,222			1,732
Income taxes		1,024			757
Other assets		(1,427	)		(1,102	)
Other liabilities		1,085			2,273
Net cash flows from operating activities		15,982			13,831

Cash flows from investing activities:
Purchases of fixed maturity securities		(6,122	)		(7,039	)
Purchases of equity securities		(11,351	)		(3,893	)
Purchases of other investments		(5,000	)		—
Sales of fixed maturity securities		1,612			3,646
Redemptions and maturities of fixed maturity securities		5,419			4,882
Sales of equity securities		885			4,532
Redemptions of other investments		9,345			—
Purchases of loans and finance receivables		(1,615	)		(2,063	)
Principal collections on loans and finance receivables		2,683			2,255
Acquisitions of businesses, net of cash acquired		(7,984	)		(15,376	)
Purchases of property, plant and equipment		(5,673	)		(4,291	)
Other		15			(803	)
Net cash flows from investing activities		(17,786	)		(18,150	)

Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		2,063			8,164
Proceeds from borrowings of railroad, utilities and energy businesses		2,290			1,731
Proceeds from borrowings of finance businesses		1,528			1,039
Repayments of borrowings of insurance and other businesses		(2,272	)		(380	)
Repayments of borrowings of railroad, utilities and energy businesses		(1,158	)		(382	)
Repayments of borrowings of finance businesses		(1,847	)		(1,823	)
Change in short term borrowings, net		(552	)		(59	)
Acquisitions of noncontrolling interests and other		(1,810	)		(49	)
Net cash flows from financing activities		(1,758	)		8,241
Effects of foreign currency exchange rate changes		111			(19	)
Increase (decrease) in cash and cash equivalents		(3,451	)		3,903
Cash and cash equivalents at beginning of year *		38,227			30,558
Cash and cash equivalents at end of first nine months *	$	34,776		$	34,461

* 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 nine months—
Insurance and Other	$	30,587		$	30,772
Railroad, Utilities and Energy		2,965			2,646
Finance and Financial Products		1,224			1,043
	$	34,776		$	34,461

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		Treasury stock			Total			Non- controlling interests
Balance at December 31, 2009	$	27,082		$	17,793		$	86,227	$	—		$	131,102		$	4,683
Net earnings		—			—			8,590		—			8,590			431
Other comprehensive income, net		—			(1,070	)		—		—			(1,070	)		(17	)
Issuance of common stock and other transactions		11,067			—			—		—			11,067			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(18	)		—			—		—			(18	)		(171	)

Balance at September 30, 2010	$	38,131		$	16,723		$	94,817	$	—		$	149,671		$	4,926

Balance at December 31, 2010	$	37,541		$	20,583		$	99,194	$	—		$	157,318		$	5,616
Net earnings		—			—			7,206		—			7,206			349
Other comprehensive income, net		—			(4,878	)		—		—			(4,878	)		(110	)
Issuance of common stock and other transactions		392			—			—		(18	)		374			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(139	)		76			—		—			(63	)		(1,931	)
Balance at September 30, 2011	$	37,794		$	15,781		$	106,400	$	(18	)	$	159,957		$	3,924

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in millions)

	Third Quarter						First Nine Months
	2011			2010			2011			2010
Comprehensive income attributable to Berkshire Hathaway:
Net earnings	$	2,278		$	2,989		$	7,206		$	8,590

Other comprehensive income:
Net change in unrealized appreciation of investments		(7,318	)		5,422			(6,720	)		(480	)
Applicable income taxes		2,575			(1,901	)		2,398			168
Reclassification of investment appreciation in earnings		(57	)		(441	)		(977	)		(1,152	)
Applicable income taxes		20			154			342			403
Foreign currency translation		(610	)		726			34			(175	)
Applicable income taxes		29			(30	)		(6	)		(6	)
Prior service cost and actuarial gains/losses of defined benefit plans		34			(22	)		45			41
Applicable income taxes		(14	)		1			(18	)		(13	)
Other, net		16			(35	)		24			144
Other comprehensive income, net		(5,325	)		3,874			(4,878	)		(1,070	)
Comprehensive income attributable to Berkshire Hathaway	$	(3,047	)	$	6,863		$	2,328		$	7,520
Comprehensive income of noncontrolling interests	$	2		$	170		$	239		$	414

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 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 to 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 amount and timing of investment gains/losses can cause significant variations in periodic net earnings. Investment gains/losses are recorded when investments are disposed or are other-than-temporarily impaired. In addition, changes in the fair value of derivative assets/liabilities associated with derivative contracts that are not accounted for as hedging instruments 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 may be 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 who could be shown to have responded directly to the advertising and the probable future revenues generated from the advertising are in excess of expected future costs to be incurred in realizing those revenues. ASU 2010-26 is effective for Berkshire beginning January 1, 2012 and may be applied on a prospective or retrospective basis.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 attempts to improve the comparability of fair value measurements disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments in ASU 2011-04 clarify the intent of the application of existing fair value measurement and disclosure requirements, as well as change certain measurement requirements and disclosures. ASU 2011-04 is effective for Berkshire beginning January 1, 2012 and will be applied on a prospective basis.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 changes the way other comprehensive income (“OCI”) is presented within the financial statements. Financial statements will be required to reflect net income, OCI and total comprehensive income in one continuous statement or in two separate but consecutive statements. Components of OCI may no longer be presented solely in the statement of changes in shareholders’ equity. Reclassification between OCI and net earnings will be presented on the face of the financial statements. ASU 2011-05 is effective for Berkshire beginning January 1, 2012.

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment.” ASU 2011-08 allows an entity to first assess qualitative factors in determining whether it is necessary to perform the two-step quantitative goodwill impairment test. Only if an entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount based on qualitative factors, would it be required to then perform the first step of the two-step quantitative goodwill impairment test. ASU 2011-08 is effective for Berkshire beginning January 1, 2012, with early adoption permitted.

In September 2011, the FASB issued ASU 2011-09, “Disclosures about and Employer’s Participation in a Multiemployer Plan.” ASU 2011-09 requires additional disclosures for multiemployer pension plans and multiemployer other postretirement benefit plans. ASU 2011-09 is effective for Berkshire beginning January 1, 2012, with early adoption permitted.

We do not believe that the adoption of these new pronouncements will have a material effect on our Consolidated Financial Statements.

Notes To Consolidated Financial Statements (Continued)

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% of the outstanding shares) 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 with the remainder funded by 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 its wholly owned subsidiary, 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.

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 approximately $6.6 billion. Upon completion of the acquisition of the remaining BNSF shares, we re-measured 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 representing the difference between the fair value of the BNSF shares that we acquired prior to February 12, 2010 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.

On March 13, 2011, Berkshire and The Lubrizol Corporation (“Lubrizol”) entered into a merger agreement, whereby Berkshire would acquire all of the outstanding shares of Lubrizol common stock for cash of $135 per share (approximately $8.7 billion in the aggregate). The merger was completed on September 16, 2011. Lubrizol, based in Cleveland, Ohio, 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 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.

A preliminary allocation of the purchase price to Lubrizol’s assets and liabilities is summarized below (in millions):

Assets:			Liabilities, noncontrolling interests and net assets acquired:
Cash and cash equivalents	$	893	Accounts payable and other liabilities	$	1,684
Inventory		1,598	Notes payable and other borrowings		1,607
Property, plant and equipment		2,303	Income taxes, principally deferred		1,669
Intangible assets		3,710	Noncontrolling interests		78
Goodwill		4,210			5,038
Other		1,028	Net assets acquired		8,704
	$	13,742		$	13,742

Lubrizol’s financial statements are included in our Consolidated Financial Statements beginning as of September 16, 2011. The following table sets forth certain unaudited pro forma consolidated earnings data for the nine months ended September 30, 2011 and 2010, as if the acquisition was consummated on the same terms at the beginning of 2010. Amounts are in millions, except earnings per share.

	First Nine Months
	2011		2010
Total revenues	$	110,205	$	104,115
Net earnings attributable to Berkshire Hathaway shareholders		7,608		8,818
Earnings per equivalent Class A common share attributable to Berkshire Hathaway shareholders		4,612		5,405

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. We recorded a charge of approximately $600 million to capital in excess of par value in our consolidated shareholders’ equity as of December 31, 2010 to reflect this difference as such amount was fixed and determinable at that date.

In June 2011, we acquired the noncontrolling interests in Wesco Financial Corporation (“Wesco”) for aggregate consideration of $543 million consisting of cash of approximately $298 million and 3.25 million shares of Berkshire Class B common stock. Wesco is now an indirect wholly owned subsidiary of Berkshire.

Notes To Consolidated Financial Statements (Continued)

Note 4. Investments in fixed maturity securities

Investments in securities with fixed maturities as of September 30, 2011 and December 31, 2010 are summarized by type below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2011
U.S. Treasury, U.S. government corporations and agencies	$	2,245	$	47	$	—		$	2,292
States, municipalities and political subdivisions		2,938		216		—			3,154
Foreign governments		12,972		286		(62	)		13,196
Corporate bonds		11,142		1,804		(345	)		12,601
Mortgage-backed securities		2,464		357		(16	)		2,805
	$	31,761	$	2,710	$	(423	)	$	34,048

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

Investments in fixed maturity securities are reflected in the Consolidated Balance Sheets as follows (in millions).

	September 30,		December 31,
	2011		2010
Insurance and other	$	33,031	$	33,803
Finance and financial products		1,017		1,080
	$	34,048	$	34,883

As of September 30, 2011, fixed maturity investments that were in a continuous unrealized loss position for more than 12 months had unrealized losses of $16 million. As of December 31, 2010, fixed maturity 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 September 30, 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	$	8,466	$	13,848	$	4,503	$	2,480	$	2,464	$	31,761
Fair value		8,591		14,672		4,946		3,034		2,805		34,048

Note 5. Investments in equity securities

Investments in equity securities as of September 30, 2011 and December 31, 2010 are summarized based on the primary industry of the investee in the table below (in millions).

	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2011
Banks, insurance and finance	$	15,985	$	8,370	$	(2,308	)	$	22,047
Consumer products		12,564		12,986		(18	)		25,532
Commercial, industrial and other		17,411		3,290		(218	)		20,483
	$	45,960	$	24,646	$	(2,544	)	$	68,062

December 31, 2010
Banks, insurance and finance	$	15,519	$	9,549	$	(454	)	$	24,614
Consumer products		13,551		12,410		(212	)		25,749
Commercial, industrial and other		6,474		4,682		(6	)		11,150
	$	35,544	$	26,641	$	(672	)	$	61,513

Notes To Consolidated Financial Statements (Continued)

Note 5. Investments in equity securities (Continued)

Investments in equity securities are reflected in the Consolidated Balance Sheets as follows (in millions).

	September 30,		December 31,
	2011		2010
Insurance and other	$	67,225	$	59,819
Railroad, utilities and energy *		381		1,182
Finance and financial products *		456		512
	$	68,062	$	61,513

*	Included in Other assets.

As of September 30, 2011, there were no equity security investments that were in a continuous unrealized loss position for more than twelve months where other-than-temporary impairment (“OTTI”) losses were not recorded. As of December 31, 2010 such unrealized losses were $531 million.

In the first quarter of 2011, we recorded OTTI losses of $506 million related to certain of our investments in equity securities. The OTTI losses recorded in earnings were offset by a reduction in unrealized losses recorded in other comprehensive income resulting in no impact on our consolidated shareholders’ equity. The OTTI losses included $337 million with respect to 103.6 million shares of our investment in Wells Fargo & Company common stock. These shares had an aggregate original cost of $3,621 million. We also held 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 were not reflected in earnings but were 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”), The Dow Chemical Company (“Dow”) and Bank of America Corporation (“BAC”). A summary of other investments follows (in millions).

	Cost		Net Unrealized Gains		Fair Value		Carrying Value
September 30, 2011
Other fixed maturity and equity securities:
Insurance and other	$	15,817	$	1,841	$	17,658	$	16,633
Finance and financial products		3,198		699		3,897		3,886
	$	19,015	$	2,540	$	21,555	$	20,519

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 was redeemable at any time by GS at a price of $110,000 per share ($5.5 billion in aggregate). On April 18, 2011, GS fully redeemed our GS Preferred investment and we received aggregate redemption proceeds of $5.5 billion. The GS Warrants remain outstanding and expire in 2013. The GS Warrants are exercisable 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. Under its terms, the GE Preferred was redeemable by GE beginning in October 2011 at a price of $110,000 per share ($3.3 billion in aggregate). On October 17, 2011, GE fully redeemed our GE Preferred investment and we received aggregate redemption proceeds of $3.3 billion. The GE Warrants remain outstanding and expire in 2013. The GE Warrants are exercisable for an aggregate cost of $3 billion ($22.25/share).

Notes To Consolidated Financial Statements (Continued)

Note 6. Other investments (Continued)

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 and a joint venture in which we have a 50% economic interest owns $200 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.

On September 1, 2011, we acquired 50,000 shares of 6% Cumulative Perpetual Preferred Stock of BAC (“BAC Preferred”) and warrants to purchase 700,000,000 shares of common stock of BAC (“BAC Warrants”) for a combined cost of $5 billion. Under its terms, the BAC Preferred is redeemable at any time by BAC at a price of $105,000 per share ($5.25 billion in aggregate). The BAC Warrants expire in 2021 and are exercisable for an additional aggregate cost of $5 billion ($7.142857/share).

Note 7. Investment gains/losses

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

	Third Quarter						First Nine Months
	2011			2010			2011			2010
Fixed maturity securities —
Gross gains from sales and other disposals	$	31		$	19		$	207		$	587
Gross losses from sales and other disposals		(1	)		(9	)		(5	)		(12	)
Equity securities and other investments —
Gross gains from sales and other disposals		40			522			1,308			857
Gross losses from sales and other disposals		(5	)		(76	)		(19	)		(265	)
Other		35			17			(3	)		1,007
	$	100		$	473		$	1,488		$	2,174

Investment gains from equity securities and other investments in the first nine months of 2011 included $1.25 billion with respect to the redemption of our GS Preferred investment. For the first nine months of 2010, other gains included a one-time holding gain of $979 million related to our BNSF acquisition in February.

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

Insurance and other	$	100	$	473	$	1,314	$	2,169
Finance and financial products		—		—		174		5
	$	100	$	473	$	1,488	$	2,174

Note 8. Receivables

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

	September 30,			December 31,
	2011			2010
Insurance premiums receivable	$	7,158		$	6,342
Reinsurance recoverable on unpaid losses		2,917			2,735
Trade and other receivables		10,136			12,223
Allowances for uncollectible accounts		(377	)		(383	)
	$	19,834		$	20,917

As of December 31, 2010, trade and other receivables included approximately $3.9 billion related to the redemption of an investment. The redemption proceeds were received on January 10, 2011.

Notes To Consolidated Financial Statements (Continued)

Note 8. Receivables (Continued)

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

	September 30,			December 31,
	2011			2010
Consumer installment loans and finance receivables	$	13,564		$	14,042
Commercial loans and finance receivables		828			1,557
Allowances for uncollectible loans		(389	)		(373	)
	$	14,003		$	15,226

Allowances for uncollectible loans primarily relate to consumer installment loans. Provisions for consumer loan losses were $255 million in the first nine months of 2011 and $266 million for the first nine months of 2010. Loan charge-offs, net of recoveries, were $239 million in the first nine months of 2011 and $265 million for the first nine months of 2010. Consumer loan amounts are net of unamortized acquisition discounts of $545 million at September 30, 2011 and $580 million at December 31, 2010. At September 30, 2011, approximately 96% of consumer installment loan balances were evaluated collectively for impairment whereas about 84% 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 September 30, 2011, approximately 98% of consumer installment and commercial loan balances were determined to be performing and approximately 93% of those balances were current as to payment status.

Note 9. Inventories

Inventories are comprised of the following (in millions).

	September 30,		December 31,
	2011		2010
Raw materials	$	1,609	$	1,066
Work in process and other		974		509
Finished manufactured goods		3,316		2,180
Goods acquired for resale		3,366		3,346
	$	9,265	$	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).

	September 30,			December 31,
	2011			2010
Balance at beginning of year	$	49,006		$	33,972
Acquisition of businesses		4,325			15,069
Other		(21	)		(35	)
Balance at end of period	$	53,310		$	49,006

Intangible assets other than goodwill are included in other assets in the Consolidated Balance Sheets and are summarized by type as follows (in millions).

	September 30, 2011				December 31, 2010
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other	$	10,699	$	2,126	$	6,944	$	1,816
Railroad, utilities and energy		2,089		549		2,082		306
	$	12,788	$	2,675	$	9,026	$	2,122

Trademarks and trade names	$	2,566	$	205	$	2,027	$	166
Patents and technology		4,971		1,323		2,922		1,013
Customer relationships		3,831		753		2,676		612
Other		1,420		394		1,401		331
	$	12,788	$	2,675	$	9,026	$	2,122

Notes To Consolidated Financial Statements (Continued)

Note 10. Goodwill and other intangible assets (Continued)

Amortization expense was $565 million for the first nine months of 2011 and $521 million for the first nine months of 2010. Intangible assets with indefinite lives as of September 30, 2011 and December 31, 2010 were $2,040 million and $1,635 million, respectively.

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	September 30, 2011			December 31, 2010
Land	—	$	872		$	744
Buildings and improvements	3 – 40 years		5,263			4,661
Machinery and equipment	3 – 25 years		13,110			11,573
Furniture, fixtures and other	3 – 20 years		2,412			1,932
Assets held for lease	12 –30 years		5,886			5,832
			27,543			24,742
Accumulated depreciation			(9,739	)		(9,001	)
		$	17,804		$	15,741

Depreciation expense of insurance and other businesses for the first nine months of 2011 and 2010 was $1,191 million and $1,145 million, respectively.

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

	Ranges of estimated useful life	September 30, 2011			December 31, 2010
Railroad:
Land	—	$	5,925		$	5,901
Track structure and other roadway	5 – 100 years		36,301			35,463
Locomotives, freight cars and other equipment	5 – 37 years		5,134			4,329
Construction in progress	—		856			453
Utilities and energy:
Utility generation, distribution and transmission system	5 – 85 years		38,907			37,643
Interstate pipeline assets	3 – 67 years		5,962			5,906
Independent power plants and other assets	3 – 30 years		1,102			1,097
Construction in progress	—		2,145			1,456
			96,332			92,248
Accumulated depreciation			(15,690	)		(14,863	)
		$	80,642		$	77,385

Depreciation expense of the railroad and the utilities and energy businesses for the first nine months of 2011 was $2,093 million. Depreciation expense for the first nine months of 2010 was $1,810 million, which includes depreciation expense of BNSF from February 13, 2010 through September 30, 2010.

Notes To Consolidated Financial Statements (Continued)

Note 12. Derivative contracts

Derivative contracts are used primarily by our finance and financial products, railroad and utilities and energy businesses. As of September 30, 2011 and December 31, 2010, substantially all of the derivative contracts of our finance and financial products businesses were 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).

	September 30, 2011									December 31, 2010
	Assets (3)			Liabilities			Notional Value			Assets (3)			Liabilities			Notional Value
Equity index put options	$	—		$	8,849		$	34,378	(1)	$	—		$	6,712		$	33,891	(1)
Credit default contracts:
High yield indexes		—			247			4,841	(2)		—			159			4,893	(2)
States/municipalities		—			1,091			16,042	(2)		—			1,164			16,042	(2)
Individual corporate		52			38			3,565	(2)		84			—			3,565	(2)
Other		240			237						341			375
Counterparty netting		(93	)		(41	)					(82	)		(39	)
	$	199		$	10,421					$	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 is as follows (in millions).

	Third Quarter						First Nine Months
	2011			2010			2011			2010
Equity index put options	$	(2,089	)	$	(700	)	$	(2,137	)	$	(2,319	)
Credit default contracts		(247	)		519			(35	)		407
Other		(107	)		35			(184	)		1
	$	(2,443	)	$	(146	)	$	(2,356	)	$	(1,911	)

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 September 30, 2011, the aggregate intrinsic value (the undiscounted liability assuming the contracts are settled on their future expiration dates based on the September 30, 2011 index values and foreign currency exchange rates) was approximately $6.7 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 9.25 years at September 30, 2011.

Our credit default contracts pertain to various indexes of non-investment grade (or “high yield”) corporate issuers, as well as investment grade state/municipal and individual corporate debt 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 September 30, 2011 expire in 2012 and 2013. State and municipality contracts are comprised of over 500 state and municipality issuers and had a weighted average contract life at September 30, 2011 of approximately 9.5 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 were 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 September 30, 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 September 30, 2011, our collateral posting requirement under contracts with collateral provisions was $443 million compared to $31 million at December 31, 2010. If Berkshire’s credit ratings (currently AA+ from Standard & Poor’s and Aa2 from Moody’s) are downgraded below either A- by Standard & Poor’s or A3 by Moody’s, additional collateral of up to $1.1 billion could be required to be posted.

Our regulated utility subsidiaries and our railroad are exposed to variations in the market prices in the purchases and sales of natural gas and electricity and in the purchases 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 $79 million and $231 million as of September 30, 2011 and December 31, 2010, respectively. Derivative contract liabilities included in accounts payable, accruals and other liabilities of railroad, utilities and energy businesses were $492 million as of September 30, 2011 and $621 million as of December 31, 2010.

Note 13. Supplemental cash flow information

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

	First Nine Months
	2011		2010
Cash paid during the period for:
Income taxes	$	1,352	$	3,030
Interest:
Insurance and other businesses		173		146
Railroad, utilities and energy businesses		1,390		1,255
Finance and financial products businesses		475		543

Non-cash investing and financing activities:
Liabilities assumed in connection with acquisitions		4,991		31,160
Common stock issued in connection with acquisition of BNSF		—		10,577
Common stock issued in connection with acquisition of noncontrolling interests in Wesco Financial Corporation		245		—

Notes To Consolidated Financial Statements (Continued)

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 September 30, 2011. Maturity date ranges are based on borrowings as of September 30, 2011.

	Average Interest Rate			September 30, 2011		December 31, 2010
Insurance and other:
Issued by Berkshire parent company due 2012-2047		1.9	%	$	8,287	$	8,360
Short-term subsidiary borrowings		0.2	%		1,525		1,682
Other subsidiary borrowings due 2011-2036		5.9	%		3,936		2,429
				$	13,748	$	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. In August 2011, the Berkshire parent company issued $2.0 billion of debentures consisting of $750 million of 2.2% senior notes due in 2016, $500 million of 3.75% senior notes due in 2021 and $750 million of floating rate senior notes due in 2014. Other subsidiary borrowings as of September 30, 2011 included $1,607 million in pre-acquisition debt issued by Lubrizol.

	Average Interest Rate			September 30, 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	%	$	5,363	$	5,371
Subsidiary and other debt due 2011-2039		5.6	%		14,509		14,275
Issued by BNSF due 2011-2097		5.9	%		12,772		11,980
				$	32,644	$	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 in