Edgar Filing: BERKSHIRE HATHAWAY INC

a50358310.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 June 30, 2012
OR

¨	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 July 26, 2012:

Class A — 927,848

Class B — 1,086,380,702

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information

Item 1.	Financial Statements
	Consolidated Balance Sheets— June 30, 2012 and December 31, 2011	2
	Consolidated Statements of Earnings— Second Quarter and First Six Months 2012 and 2011	3
	Consolidated Statements of Comprehensive Income— Second Quarter and First Six Months 2012 and 2011	4
	Consolidated Statements of Changes in Shareholders’ Equity— First Six Months 2012 and 2011	4
	Consolidated Statements of Cash Flows— First Six Months 2012 and 2011	5
	Notes to Consolidated Financial Statements	6-20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21-36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

Part II – Other Information

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	38
Item 6.	Exhibits	38

Signature		38

Part I Financial Information

Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	June 30,			December 31,
	2012			2011
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents	$	36,812		$	33,513
Investments:
Fixed maturity securities		30,512			31,222
Equity securities		85,270			76,063
Other		14,297			13,111
Receivables		21,192			19,012
Inventories		9,525			8,975
Property, plant and equipment		18,388			18,177
Goodwill		32,037			32,125
Other		17,799			18,121
		265,832			250,319

Railroad, Utilities and Energy:
Cash and cash equivalents		2,598			2,246
Property, plant and equipment		84,443			82,214
Goodwill		20,076			20,056
Other		13,329			12,861
		120,446			117,377

Finance and Financial Products:
Cash and cash equivalents		1,251			1,540
Investments in fixed maturity securities		923			966
Other investments		4,388			3,810
Loans and finance receivables		13,664			13,934
Goodwill		1,032			1,032
Other		3,820			3,669
		25,078			24,951
	$	411,356		$	392,647

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses	$	63,049		$	63,819
Unearned premiums		10,603			8,910
Life, annuity and health insurance benefits		10,158			9,924
Accounts payable, accruals and other liabilities		17,750			18,466
Notes payable and other borrowings		13,531			13,768
		115,091			114,887

Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		12,877			13,016
Notes payable and other borrowings		34,148			32,580
		47,025			45,596

Finance and Financial Products:
Accounts payable, accruals and other liabilities		1,214			1,224
Derivative contract liabilities		10,137			10,139
Notes payable and other borrowings		13,453			14,036
		24,804			25,399
Income taxes, principally deferred		42,721			37,804
Total liabilities		229,641			223,686

Shareholders’ equity:
Common stock		8			8
Capital in excess of par value		37,856			37,807
Accumulated other comprehensive income		23,781			17,654
Retained earnings		115,801			109,448
Treasury stock, at cost		(67	)		(67	)
Berkshire Hathaway shareholders’ equity		177,379			164,850
Noncontrolling interests		4,336			4,111
Total shareholders’ equity		181,715			168,961
	$	411,356		$	392,647

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)

	Second Quarter						First Six Months
	2012			2011			2012			2011
	(Unaudited)						(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned	$	8,428		$	8,949		$	16,493		$	16,431
Sales and service revenues		20,814			18,336			40,078			35,108
Interest, dividend and other investment income		1,420			1,426			2,487			2,703
Investment gains/losses		102			1,128			332			1,214
Other-than-temporary impairment losses on investments		—			—			(337	)		(506	)
		30,764			29,839			59,053			54,950

Railroad, Utilities and Energy:
Operating revenues		7,769			7,436			15,618			14,813
Other		41			32			88			68
		7,810			7,468			15,706			14,881

Finance and Financial Products:
Interest, dividend and other investment income		372			359			747			757
Investment gains/losses		23			161			24			174
Derivative gains/losses		(1,068	)		(184	)		(66	)		87
Other		645			631			1,229			1,145
		(28	)		967			1,934			2,163
		38,546			38,274			76,693			71,994

Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		4,586			6,262			9,357			12,280
Life, annuity and health insurance benefits		1,351			976			2,443			1,991
Insurance underwriting expenses		1,534			1,720			3,651			3,445
Cost of sales and services		16,821			14,955			32,417			28,814
Selling, general and administrative expenses		2,476			2,122			4,904			4,157
Interest expense		106			70			209			137
		26,874			26,105			52,981			50,824

Railroad, Utilities and Energy:
Cost of sales and operating expenses		5,767			5,651			11,637			11,223
Interest expense		439			427			867			852
		6,206			6,078			12,504			12,075

Finance and Financial Products:
Interest expense		151			165			311			331
Other		700			661			1,351			1,265
		851			826			1,662			1,596
		33,931			33,009			67,147			64,495
Earnings before income taxes		4,615			5,265			9,546			7,499
Income tax expense		1,384			1,725			2,949			2,354
Net earnings		3,231			3,540			6,597			5,145
Less: Earnings attributable to noncontrolling interests		123			123			244			217
Net earnings attributable to Berkshire Hathaway	$	3,108		$	3,417		$	6,353		$	4,928
Average common shares outstanding *		1,651,511			1,649,052			1,651,228			1,648,732
Net earnings per share attributable to Berkshire Hathaway shareholders *	$	1,882		$	2,072		$	3,847		$	2,989

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 COMPREHENSIVE INCOME

(Unaudited)

(dollars in millions)

	Second Quarter						First Six Months
	2012			2011			2012			2011
Comprehensive income attributable to Berkshire Hathaway:
Net earnings	$	3,108		$	3,417		$	6,353		$	4,928

Other comprehensive income:
Net change in unrealized appreciation of investments		(1,788	)		(54	)		9,854			598
Applicable income taxes		584			40			(3,467	)		(177	)
Reclassification of investment appreciation in earnings		(107	)		(1,353	)		25			(920	)
Applicable income taxes		37			474			(9	)		322
Foreign currency translation		(537	)		205			(318	)		644
Applicable income taxes		6			(22	)		7			(35	)
Prior service cost and actuarial gains/losses of defined benefit plans		37			15			49			11
Applicable income taxes		(10	)		(4	)		(16	)		(4	)
Other, net		42			(39	)		2			8
Other comprehensive income, net		(1,736	)		(738	)		6,127			447
Comprehensive income attributable to Berkshire Hathaway	$	1,372		$	2,679		$	12,480		$	5,375
Comprehensive income of noncontrolling interests	$	82		$	138		$	223		$	237

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, 2010	$	37,541		$	20,583	$	99,194	$	—		$	157,318		$	5,616
Net earnings		—			—		4,928		—			4,928			217
Other comprehensive income, net		—			447		—		—			447			20
Issuance of common stock and other transactions		377			—		—		—			377			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(139	)		76		—		—			(63	)		(2,076	)
Balance at June 30, 2011	$	37,779		$	21,106	$	104,122	$	—		$	163,007		$	3,777


Balance at December 31, 2011	$	37,815		$	17,654	$	109,448	$	(67	)	$	164,850		$	4,111
Net earnings		—			—		6,353		—			6,353			244
Other comprehensive income, net		—			6,127		—		—			6,127			(21	)
Issuance of common stock and other transactions		51			—		—		—			51			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(2	)		—		—		—			(2	)		2
Balance at June 30, 2012	$	37,864		$	23,781	$	115,801	$	(67	)	$	177,379		$	4,336

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in millions)

	First Six Months
	2012			2011
Cash flows from operating activities:
Net earnings	$	6,597		$	5,145
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses and other-than-temporary impairment losses		(19	)		(882	)
Depreciation		2,518			2,276
Other		428			149
Changes in operating assets and liabilities before business acquisitions:
Losses and loss adjustment expenses		(539	)		4,332
Deferred charges reinsurance assumed		176			(645	)
Unearned premiums		1,722			1,580
Receivables and originated loans		(1,565	)		(1,981	)
Derivative contract assets and liabilities		36			(294	)
Income taxes		647			599
Other assets		(973	)		(1,607	)
Other liabilities		481			1,311
Net cash flows from operating activities		9,509			9,983

Cash flows from investing activities:
Purchases of fixed maturity securities		(4,605	)		(4,227	)
Purchases of equity securities		(5,277	)		(4,453	)
Sales of fixed maturity securities		1,403			1,355
Redemptions and maturities of fixed maturity securities		3,268			3,518
Sales of equity securities		3,828			209
Redemptions of other investments		—			9,345
Purchases of loans and finance receivables		(471	)		(1,511	)
Principal collections on loans and finance receivables		425			2,494
Acquisitions of businesses, net of cash acquired		(469	)		(172	)
Purchases of property, plant and equipment		(4,579	)		(3,444	)
Other		(336	)		79
Net cash flows from investing activities		(6,813	)		3,193

Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		1,761			51
Proceeds from borrowings of railroad, utilities and energy businesses		2,849			1,540
Proceeds from borrowings of finance businesses		1,586			1,527
Repayments of borrowings of insurance and other businesses		(1,915	)		(2,237	)
Repayments of borrowings of railroad, utilities and energy businesses		(524	)		(618	)
Repayments of borrowings of finance businesses		(2,167	)		(1,676	)
Change in short term borrowings, net		(912	)		(524	)
Acquisitions of noncontrolling interests and other		(19	)		(1,769	)
Net cash flows from financing activities		659			(3,706	)
Effects of foreign currency exchange rate changes		7			194
Increase in cash and cash equivalents		3,362			9,664
Cash and cash equivalents at beginning of year *		37,299			38,227
Cash and cash equivalents at end of first six months *	$	40,661		$	47,891


* Cash and cash equivalents are comprised of the following:
Beginning of year—
Insurance and Other	$	33,513		$	34,767
Railroad, Utilities and Energy		2,246			2,557
Finance and Financial Products		1,540			903
	$	37,299		$	38,227

End of first six months—
Insurance and Other	$	36,812		$	43,193
Railroad, Utilities and Energy		2,598			2,804
Finance and Financial Products		1,251			1,894
	$	40,661		$	47,891

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

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 2011 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

As of January 1, 2012, we adopted FASB Accounting Standards Update (“ASU”) 2010-26, “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts.” ASU 2010-26 specifies that only direct incremental costs associated with successful efforts in acquiring or renewing of insurance contracts should be capitalized and amortized over the policy term. All other costs are required to be expensed as incurred. Capitalized costs include certain advertising costs 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 are in excess of expected future costs to be incurred in realizing those revenues. Berkshire adopted ASU 2010-26 on a prospective basis. The impact of the adoption of this new standard primarily relates to certain advertising costs of GEICO, which were capitalized prior to the adoption of ASU 2010-26, but are no longer eligible to be capitalized. The adoption of this new standard did not have a material effect on our Consolidated Financial Statements.

As of January 1, 2012, we also adopted ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” As a result of adopting ASU 2011-04, we have expanded our fair value disclosures.

In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 enhances disclosures surrounding offsetting (netting) assets and liabilities. The standard applies to financial instruments and derivatives and requires companies to disclose both gross and net information about financial instruments and derivatives eligible for offset in financial statements and financial instruments and derivatives subject to master netting arrangements. ASU 2011-11 is effective for fiscal years beginning on or after January 1, 2013 and is required to be applied retrospectively. In July 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment.” ASU 2012-02 allows an entity to first assess qualitative factors in determining whether events and circumstances indicate that it is more-likely-than not that an indefinite-lived intangible asset is impaired. If an entity determines that it is not more-likely-than not that the indefinite-lived intangible asset is impaired, then the entity is not required to perform a quantitative impairment test. ASU 2012-02 is effective for fiscal years beginning after September 15, 2012. We are currently evaluating the effects these new standards will have on our Consolidated Financial Statements.

Note 3. Significant business acquisitions

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

Notes To Consolidated Financial Statements (Continued)

Note 3. Significant business acquisitions (Continued)

On September 16, 2011, Berkshire completed the acquisition of The Lubrizol Corporation (“Lubrizol”). The acquisition was pursuant to a merger agreement, under which Berkshire acquired all of the outstanding shares of Lubrizol common stock for cash of $135 per share (approximately $8.7 billion in the aggregate). 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 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; and performance coatings. Lubrizol’s industry-leading technologies in additives, ingredients and compounds enhance the quality, performance and value of customers’ products, while reducing their environmental impact. We accounted for the Lubrizol acquisition pursuant to the acquisition method. The valuation of the identifiable assets and liabilities and the resulting excess amount recorded as goodwill as of the acquisition date was completed as of December 31, 2011. Lubrizol’s financial results are included in our Consolidated Financial Statements beginning as of September 16, 2011.

We have owned a controlling interest in Marmon Holdings, Inc. (“Marmon”) since 2008. In the first quarter of 2011, we increased our ownership in Marmon to 80.2% as a result of acquiring 16.6% of Marmon’s outstanding common stock for approximately $1.5 billion. We are contractually required to acquire substantially all of the remaining noncontrolling interests of Marmon no later than March 31, 2014 for an amount that will be based on Marmon’s future operating results. In June 2011, we acquired all of the noncontrolling interests in Wesco Financial Corporation for aggregate consideration of $543 million, consisting of cash of approximately $298 million and 3,253,472 shares of Berkshire Class B common stock.

Note 4. Investments in fixed maturity securities

Investments in securities with fixed maturities as of June 30, 2012 and December 31, 2011 are summarized by type below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2012
U.S. Treasury, U.S. government corporations and agencies	$	2,594	$	36	$	—		$	2,630
States, municipalities and political subdivisions		2,716		194		—			2,910
Foreign governments		10,917		303		(84	)		11,136
Corporate bonds		10,234		1,836		(16	)		12,054
Mortgage-backed securities		2,373		343		(11	)		2,705
	$	28,834	$	2,712	$	(111	)	$	31,435


December 31, 2011
U.S. Treasury, U.S. government corporations and agencies	$	2,894	$	41	$	—		$	2,935
States, municipalities and political subdivisions		2,862		208		—			3,070
Foreign governments		10,608		283		(48	)		10,843
Corporate bonds		11,120		1,483		(155	)		12,448
Mortgage-backed securities		2,564		343		(15	)		2,892
	$	30,048	$	2,358	$	(218	)	$	32,188

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

	June 30,		December 31,
	2012		2011
Insurance and other	$	30,512	$	31,222
Finance and financial products		923		966
	$	31,435	$	32,188

Investments in foreign government securities include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of June 30, 2012, approximately 94% of foreign government holdings were rated AA or higher by at least one of the major rating agencies. Investments in obligations issued or guaranteed by Germany, the United Kingdom, Canada, Australia and the Netherlands represent approximately 80% of the investments in foreign government obligations. Unrealized losses on fixed maturity investments in a continuous unrealized loss position for more than twelve consecutive months were $24 million as of June 30, 2012 and $20 million as of December 31, 2011.

Notes To Consolidated Financial Statements (Continued)

Note 4. Investments in fixed maturity securities (Continued)

The amortized cost and estimated fair value of securities with fixed maturities at June 30, 2012 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	$	5,960	$	13,617	$	4,472	$	2,412	$	2,373	$	28,834
Fair value		5,955		14,656		5,171		2,948		2,705		31,435

Note 5. Investments in equity securities

Investments in equity securities as of June 30, 2012 and December 31, 2011 are summarized based on the primary industry of the investee in the table below (in millions).

	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2012
Banks, insurance and finance	$	17,661	$	13,665	$	(230	)	$	31,096
Consumer products		9,843		15,549		(2	)		25,390
Commercial, industrial and other		23,690		6,496		(456	)		29,730
	$	51,194	$	35,710	$	(688	)	$	86,216


December 31, 2011
Banks, insurance and finance	$	16,697	$	9,480	$	(1,269	)	$	24,908
Consumer products		12,390		14,320		—			26,710
Commercial, industrial and other		20,523		4,973		(123	)		25,373
	$	49,610	$	28,773	$	(1,392	)	$	76,991

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

	June 30,		December 31,
	2012		2011
Insurance and other	$	85,270	$	76,063
Railroad, utilities and energy *		424		488
Finance and financial products *		522		440
	$	86,216	$	76,991

*	Included in other assets.

As of June 30, 2012, unrealized losses on equity securities in a continuous unrealized loss position for more than twelve consecutive months were $52 million. There were none as of December 31, 2011. As of June 30, 2012 and December 31, 2011, we concluded that the unrealized losses were temporary. Our conclusions were based on: (a) our ability and intent to hold the securities to recovery; (b) our assessment that the underlying business and financial condition of each of these issuers was favorable; (c) our opinion that the relative price declines were not significant; and (d) our belief that it was reasonably possible that market prices will increase to and exceed our cost in a relatively short period of time.

Notes To Consolidated Financial Statements (Continued)

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
June 30, 2012
Other fixed maturity and equity securities:
Insurance and other	$	13,045	$	2,171	$	15,216	$	14,297
Finance and financial products		3,198		1,200		4,398		4,388
	$	16,243	$	3,371	$	19,614	$	18,685


December 31, 2011
Other fixed maturity and equity securities:
Insurance and other	$	13,051	$	1,055	$	14,106	$	13,111
Finance and financial products		3,198		623		3,821		3,810
	$	16,249	$	1,678	$	17,927	$	16,921

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. 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. We continue to hold the GS Warrants, which expire on October 1, 2013. The GS Warrants are exercisable for an aggregate cost of $5 billion ($115/share).

In 2008, we 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 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. We continue to hold the GE Warrants, which expire on October 16, 2013. The GE Warrants are exercisable for an aggregate cost of $3 billion ($22.25/share).

In 2008, we acquired $4.4 billion par amount of 11.45% Wrigley subordinated notes maturing in 2018 and $2.1 billion of 5% Wrigley preferred stock. The subordinated notes may be called prior to maturity at par plus the prepayment premium applicable at that time. In 2009, we also acquired $1.0 billion par amount of Wrigley senior notes maturing in 2013 and 2014. We currently own $800 million of the Wrigley senior notes and an unconsolidated joint venture in which we hold a 50% economic interest owns $200 million. 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. The Wrigley preferred stock is classified as available-for-sale and recorded in our financial statements at fair value.

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 of Dow common stock (equivalent to a conversion price of $41.32 per share). 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. 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).

Notes To Consolidated Financial Statements (Continued)

Note 7. Investment gains/losses and other-than-temporary impairment losses on investments

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

	Second Quarter						First Six Months
	2012			2011			2012			2011
Fixed maturity securities —
Gross gains from sales and other disposals	$	58		$	94		$	91		$	176
Gross losses from sales and other disposals		(329	)		(4	)		(345	)		(4	)
Equity securities —
Gross gains from sales and other disposals		385			1,267			573			1,268
Gross losses from sales and other disposals		(7	)		(4	)		(7	)		(14	)
Other		18			(64	)		44			(38	)
	$	125		$	1,289		$	356		$	1,388

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

	Second Quarter				First Six Months
	2012		2011		2012		2011
Insurance and other	$	102	$	1,128	$	332	$	1,214
Finance and financial products		23		161		24		174
	$	125	$	1,289	$	356	$	1,388

In the second quarter of 2011, we realized an investment gain of $1.25 billion from the redemption of our investment in GS Preferred.

Other-than-temporary impairment (“OTTI”) losses were as follows (in millions).

	Second Quarter				First Six Months
	2012		2011		2012		2011
Equity securities	$	—	$	—	$	—	$	506
Fixed maturity securities		—		—		337		—
	$	—	$	—	$	337	$	506

We record investments in equity and fixed maturity securities classified as available-for-sale at fair value and record the difference between fair value and cost in other comprehensive income. OTTI losses recognized in earnings represent reductions in the cost basis of the investment, but not the fair value. Accordingly, such losses that are included in earnings are generally offset by a corresponding credit to other comprehensive income and therefore have no net effect on shareholders’ equity as of the balance sheet date.

In the first quarter of 2012, we recorded OTTI losses of $337 million on certain fixed maturity investments issued by Texas Competitive Electric Holdings where we concluded that we were unlikely to receive all of the remaining contractual interest and principal amounts when due. 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 included $337 million with respect to 103.6 million shares of our investment in Wells Fargo & Company (“Wells Fargo”) common stock. These shares had an aggregate original cost of $3,621 million. At that time, we also held an additional 255.4 million shares of Wells Fargo which were acquired at an aggregate cost of $4,394 million and which had unrealized gains 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 realized gains and losses from dispositions 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 8. Receivables

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

	June 30,			December 31,
	2012			2011
Insurance premiums receivable	$	7,750		$	6,663
Reinsurance recoverable on unpaid losses		2,894			2,953
Trade and other receivables		10,917			9,772
Allowances for uncollectible accounts		(369	)		(376	)
	$	21,192		$	19,012

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).

	June 30,			December 31,
	2012			2011
Consumer installment loans and finance receivables	$	13,159		$	13,463
Commercial loans and finance receivables		885			860
Allowances for uncollectible loans		(380	)		(389	)
	$	13,664		$	13,934

Allowances for uncollectible loans primarily relate to consumer installment loans. Provisions for consumer loan losses for each of the first six month periods of 2012 and 2011 were $161 million. Loan charge-offs, net of recoveries, for the first six months were $170 million in 2012 and $160 million in 2011. Consumer loan amounts are net of unamortized acquisition discounts of $519 million at June 30, 2012 and $500 million at December 31, 2011. At June 30, 2012, 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 June 30, 2012, 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.

Note 9. Inventories

Inventories are comprised of the following (in millions).

	June 30,		December 31,
	2012		2011
Raw materials	$	1,713	$	1,598
Work in process and other		902		897
Finished manufactured goods		3,229		3,114
Goods acquired for resale		3,681		3,366
	$	9,525	$	8,975

Note 10. Goodwill and other intangible assets

A reconciliation of the change in the carrying value of goodwill for the six months ended June 30, 2012 and the year ended December 31, 2011 follows (in millions).

	June 30,			December 31,
	2012			2011
Balance at beginning of year	$	53,213		$	49,006
Acquisitions of businesses		115			4,179
Other, including foreign currency translation		(183	)		28
Balance at end of period	$	53,145		$	53,213

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

	June 30, 2012				December 31, 2011
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other	$	11,124	$	2,639	$	11,016	$	2,319
Railroad, utilities and energy		2,097		783		2,088		623
	$	13,221	$	3,422	$	13,104	$	2,942

Trademarks and trade names	$	2,672	$	250	$	2,655	$	219
Patents and technology		4,943		1,777		4,900		1,496
Customer relationships		4,124		991		4,060		840
Other		1,482		404		1,489		387
	$	13,221	$	3,422	$	13,104	$	2,942

Notes To Consolidated Financial Statements (Continued)

Note 10. Goodwill and other intangible assets (Continued)

Amortization expense was $502 million for the first six months of 2012 and $374 million for the first six months of 2011. Intangible assets with indefinite lives as of June 30, 2012 and December 31, 2011 were $2,274 million and $2,250 million, respectively.

Note 11. Property, plant and equipment

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

	Ranges of estimated useful life	June 30, 2012			December 31, 2011
Land	—	$	964		$	940
Buildings and improvements	3 – 40 years		5,494			5,429
Machinery and equipment	3 – 25 years		13,811			13,589
Furniture, fixtures and other	2 – 20 years		2,645			2,397
Assets held for lease	12 – 30 years		6,362			5,997
			29,276			28,352
Accumulated depreciation			(10,888	)		(10,175	)
		$	18,388		$	18,177

Depreciation expense of insurance and other businesses for the first six months of 2012 and 2011 was $955 million and $791 million, respectively.

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

	Ranges of estimated useful life	June 30, 2012			December 31, 2011
Railroad:
Land	—	$	5,926		$	5,925
Track structure and other roadway	5 – 100 years		37,453			36,760
Locomotives, freight cars and other equipment	5 – 37 years		6,038			5,533
Construction in progress	—		965			885
Utilities and energy:
Utility generation, distribution and transmission system	5 – 80 years		41,083			40,180
Interstate pipeline assets	3 – 80 years		6,278			6,245
Independent power plants and other assets	3 – 30 years		1,115			1,106
Construction in progress	—		2,265			1,559
			101,123			98,193
Accumulated depreciation			(16,680	)		(15,979	)
		$	84,443		$	82,214

Railroad property, plant and equipment includes the land, other roadway, track structure and rolling stock (primarily locomotives and freight cars) of BNSF. 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 six months of 2012 and 2011 was $1,476 million and $1,396 million, respectively.

Notes To Consolidated Financial Statements (Continued)

Note 12. Derivative contracts

As of June 30, 2012, derivative contracts are used primarily by our finance and financial products and energy businesses. Substantially all of the derivative contracts of our finance and financial products businesses are not designated as hedges for financial reporting purposes. We entered into these contracts 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).

	June 30, 2012									December 31, 2011
	Assets (3)			Liabilities			Notional Value			Assets (3)			Liabilities			Notional Value
Equity index put options	$	—		$	8,983		$	33,463	(1)	$	—		$	8,499		$	34,014	(1)
Credit default contracts:
High yield indexes		—			15			3,258	(2)		—			198			4,568	(2)
States/municipalities		—			953			16,042	(2)		—			1,297			16,042	(2)
Individual corporate		60			19			3,565	(2)		55			32			3,565	(2)
Other		220			206						268			156
Counterparty netting		(61	)		(39	)					(67	)		(43	)
	$	219		$	10,137					$	256		$	10,139

(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.

Derivative gains/losses of our finance and financial products businesses included in our Consolidated Statements of Earnings were as follows (in millions).

	Second Quarter						First Six Months
	2012			2011			2012			2011
Equity index put options	$	(1,173	)	$	(271	)	$	(484	)	$	(48	)
Credit default obligations		171			142			511			212
Other		(66	)		(55	)		(93	)		(77	)
	$	(1,068	)	$	(184	)	$	(66	)	$	87

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. We received the premiums on these contracts in full at the contract inception dates and therefore have no counterparty credit risk. We entered into no new contracts in 2011 or 2012.

At June 30, 2012, the aggregate intrinsic value (which is the undiscounted liability assuming the contracts are settled on their future expiration dates based on the June 30, 2012 index values and foreign currency exchange rates) was approximately $5.7 billion. However, these contracts may not be unilaterally terminated or fully settled before the expiration dates which occur between June 2018 and January 2026. Therefore, the ultimate amount of cash basis gains or losses on these contracts will not be determined for many years. The remaining weighted average life of all contracts was approximately 8.5 years at June 30, 2012.

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 2011 or 2012.

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 in-force at June 30, 2012 will expire in December 2012 and in 2013. State/municipality contracts are comprised of over 500 state and municipality issuers and had a remaining weighted average contract life at June 30, 2012 of approximately 8.8 years. Subsequent to June 30, 2012, Berkshire entered into an agreement with the counterparty to certain of the state/municipality contracts to terminate contracts with notional values of $8.25 billion. Future loss payments, if any, related to the remaining 50% of the notional value of the state/municipality contracts cannot be unilaterally settled before the maturity dates of the underlying municipality obligation, 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. Future losses, if any, under substantially all of our high yield index contracts in-force as of June 30, 2012 are subject to sizable aggregate deductibles that must be satisfied before we have any payment obligations. Our payment obligations under state/municipality contracts are on a first loss basis.

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. All of the contracts in-force as of June 30, 2012 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 June 30, 2012, our collateral posting requirement under contracts with collateral provisions was $271 million compared to $238 million at December 31, 2011. 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 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 a portion of these price risks. Unrealized gains and losses under the contracts of our regulated utilities that are probable of recovery through rates are recorded as regulatory assets or liabilities. 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 are included in other assets of railroad, utilities and energy businesses and were $39 million and $71 million as of June 30, 2012 and December 31, 2011, respectively. Derivative contract liabilities are included in accounts payable, accruals and other liabilities of railroad, utilities and energy businesses and were $312 million and $336 million as of June 30, 2012 and December 31, 2011, respectively.

Note 13. Supplemental cash flow information

A summary of supplemental cash flow information for the first six months of 2012 and 2011 is presented in the following table (in millions).

	First Six Months
	2012		2011
Cash paid during the period for:
Income taxes	$	1,378	$	802
Interest:
Interest of insurance and other businesses		167		102
Interest of railroad, utilities and energy businesses		890		904
Interest of finance and financial products businesses		317		340

Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions		99		31
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 weighted average interest rates and maturity date ranges shown in the following tables are based on borrowings as of June 30, 2012.

	Weighted Average Interest Rate	June 30, 2012		December 31, 2011
Insurance and other:
Issued by Berkshire parent company due 2013-2047	2.3%	$	8,323	$	8,287
Short-term subsidiary borrowings	0.3%		1,392		1,490
Other subsidiary borrowings due 2012-2035	6.0%		3,816		3,991
		$	13,531	$	13,768

In connection with the BNSF acquisition in 2010, the Berkshire parent company issued $8.0 billion aggregate par amount of senior unsecured notes, including $1.1 billion of floating rate and $600 million of 1.4% notes that matured in February 2012. In January 2012, the Berkshire parent company issued $1.1 billion of 1.9% senior notes due in 2017 and $600 million of 3.4% senior notes due in 2022.

	Weighted Average Interest Rate	June 30, 2012		December 31, 2011
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	$	5,363
Subsidiary and other debt due 2012-2042	5.3%		15,057		14,552
Issued by BNSF due 2012-2097	5.7%		13,728		12,665
		$	34,148	$	32,580

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. In the first six months of 2012, MidAmerican subsidiaries issued $1.7 billion of debt with interest rates from 1.43% to 5.75% and maturities ranging from 2015 to 2042 and repaid $1.1 billion of borrowings. In the third and fourth quarters of 2012, MidAmerican and subsidiary debt of approximately $1.0 billion will mature. In March 2012, BNSF issued $1.25 billion in debentures comprised of $625 million of 3.05% debentures due in March 2022 and $625 million of 4.40% debentures due in March 2042. BNSF’s borrowings are primarily unsecured. As of June 30, 2012, BNSF and MidAmerican and their subsidiaries were in compliance with all applicable covenants. Berkshire does not guarantee any debt or other borrowings of BNSF, MidAmerican or their subsidiaries.

	Weighted Average Interest Rate	June 30, 2012		December 31, 2011
Finance and financial products:
Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2012-2040	4.3%	$	11,165	$	11,531
Issued by other subsidiaries due 2012-2036	4.8%		2,288		2,505
		$	13,453	$	14,036

BHFC is a 100% owned finance subsidiary of Berkshire, which has fully and unconditionally guaranteed BHFC’s borrowings. During the first six months of 2012, $1.95 billion of BHFC notes matured. In the third quarter of 2012, an additional $750 million of BHFC notes will mature. In May 2012, BHFC issued $1.6 billion of senior notes consisting of $750 million of 1.6% notes due in 2017, $350 million of 3.0% notes due in 2022 and $500 million of 4.4% notes due in 2042.

Our subsidiaries in the aggregate have approximately $5.1 billion of unused lines of credit and commercial paper capacity at June 30, 2012, to support our short-term borrowing programs and provide additional liquidity. In addition to borrowings of BHFC, Berkshire guarantees approximately $4.6 billion of other subsidiary borrowings as of June 30, 2012. 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.

Notes To Consolidated Financial Statements (Continued)

Note 15. Fair value measurements

Our financial assets and liabilities are summarized below according to the fair value hierarchy. The carrying values of cash and cash equivalents, accounts receivable and accounts payable, accruals and other liabilities are considered to be reasonable estimates of their fair values. As of June 30, 2012 and December 31, 2011, the carrying values and fair values of financial assets and liabilities were as follows (in millions).