Edgar Filing: BERKSHIRE HATHAWAY INC

a6813983.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, 2011

	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 28, 2011:

Class A — 939,981
Class B — 1,066,954,104

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information

Item 1.	Financial Statements
	Consolidated Balance Sheets—
	June 30, 2011 and December 31, 2010	2
	Consolidated Statements of Earnings—
	Second Quarter and First Six Months 2011 and 2010	3
	Consolidated Statements of Cash Flows—
	First Six Months 2011 and 2010	4
	Consolidated Statements of Changes in Shareholders’ Equity—
	First Six Months 2011 and 2010	5
	Consolidated Statements of Comprehensive Income—
	Second Quarter and First Six 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	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	(Removed and Reserved)	34
Item 5.	Other Information	34
Item 6.	Exhibits	35

Signature		35

Part I Financial Information

Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	June 30,		December 31,
	2011		2010
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents	$	43,193	$	34,767
Investments:
Fixed maturity securities		34,813		33,803
Equity securities		66,364		59,819
Other		13,121		19,333
Receivables		19,396		20,917
Inventories		7,960		7,101
Property, plant and equipment		15,645		15,741
Goodwill		27,999		27,891
Other		14,488		13,529
		242,979		232,901

Railroad, Utilities and Energy:
Cash and cash equivalents		2,804		2,557
Property, plant and equipment		79,307		77,385
Goodwill		20,095		20,084
Other		12,729		13,579
		114,935		113,605

Finance and Financial Products:
Cash and cash equivalents		1,894		903
Investments in fixed maturity securities		1,041		1,080
Other investments		2,817		3,676
Loans and finance receivables		14,199		15,226
Goodwill		1,031		1,031
Other		3,800		3,807
		24,782		25,723
	$	382,696	$	372,229

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses	$	65,060	$	60,075
Unearned premiums		9,630		7,997
Life, annuity and health insurance benefits		8,892		8,565
Accounts payable, accruals and other liabilities		16,494		15,826
Notes payable and other borrowings		10,161		12,471
		110,237		104,934

Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		12,081		12,367
Notes payable and other borrowings		32,276		31,626
		44,357		43,993

Finance and Financial Products:
Accounts payable, accruals and other liabilities		1,143		1,168
Derivative contract liabilities		8,086		8,371
Notes payable and other borrowings		14,280		14,477
		23,509		24,016
Income taxes, principally deferred		37,809		36,352
Total liabilities		215,912		209,295

Shareholders’ equity:
Common stock		8		8
Capital in excess of par value		37,771		37,533
Accumulated other comprehensive income		21,106		20,583
Retained earnings		104,122		99,194
Berkshire Hathaway shareholders’ equity		163,007		157,318
Noncontrolling interests		3,777		5,616
Total shareholders’ equity		166,784		162,934
	$	382,696	$	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)

	Second Quarter						First Six Months
	2011			2010			2011			2010
	(Unaudited)						(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned	$	8,949		$	6,864		$	16,431		$	14,290
Sales and service revenues		18,336			17,210			35,108			32,741
Interest, dividend and other investment income		1,426			1,514			2,703			2,809
Investment gains/losses		1,128			381			1,214			1,696
Other-than-temporary impairment losses on investments		—			—			(506	)		—
		29,839			25,969			54,950			51,536

Railroad, Utilities and Energy:
Operating revenues		7,436			6,724			14,813			11,734
Other		32			42			68			82
		7,468			6,766			14,881			11,816

Finance and Financial Products:
Interest, dividend and other investment income		359			401			757			802
Investment gains/losses		161			2			174			5
Derivative gains/losses		(184	)		(2,176	)		87			(1,765	)
Other		631			747			1,145			1,352
		967			(1,026	)		2,163			394
		38,274			31,709			71,994			63,746

Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		6,262			3,917			12,280			8,103
Life, annuity and health insurance benefits		976			887			1,991			2,379
Insurance underwriting expenses		1,720			1,344			3,445			2,747
Cost of sales and services		14,955			14,192			28,814			27,098
Selling, general and administrative expenses		2,122			1,915			4,157			3,754
Interest expense		70			68			137			135
		26,105			22,323			50,824			44,216

Railroad, Utilities and Energy:
Cost of sales and operating expenses		5,651			5,060			11,223			8,892
Interest expense		427			394			852			741
		6,078			5,454			12,075			9,633

Finance and Financial Products:
Interest expense		165			175			331			354
Other		661			819			1,265			1,507
		826			994			1,596			1,861
		33,009			28,771			64,495			55,710
Earnings before income taxes		5,265			2,938			7,499			8,036
Income tax expense		1,725			848			2,354			2,184
Earnings from equity method investment		—			—			—			50
Net earnings		3,540			2,090			5,145			5,902
Less: Earnings attributable to noncontrolling interests		123			122			217			301
Net earnings attributable to Berkshire Hathaway	$	3,417		$	1,968		$	4,928		$	5,601
Average common shares outstanding *		1,649,052			1,647,175			1,648,732			1,623,171
Net earnings per share attributable to Berkshire Hathaway shareholders *	$	2,072		$	1,195		$	2,989		$	3,451

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 Six Months
	2011			2010
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	5,145		$	5,902
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses and other-than-temporary impairment losses		(882	)		(1,701	)
Depreciation		2,276			2,015
Other		149			103
Changes in operating assets and liabilities before business acquisitions:
Losses and loss adjustment expenses		4,332			(103	)
Deferred charges reinsurance assumed		(645	)		237
Unearned premiums		1,580			1,050
Receivables and originated loans		(1,981	)		(2,691	)
Derivative contract assets and liabilities		(294	)		1,584
Income taxes		599			(301	)
Other assets and liabilities		(296	)		765
Net cash flows from operating activities		9,983			6,860

Cash flows from investing activities:
Purchases of fixed maturity securities		(4,227	)		(4,510	)
Purchases of equity securities		(4,453	)		(3,282	)
Sales of fixed maturity securities		1,355			3,150
Redemptions and maturities of fixed maturity securities		3,518			3,327
Sales of equity securities		209			2,710
Redemptions of other investments		9,345			—
Purchases of loans and finance receivables		(1,511	)		(441	)
Principal collections on loans and finance receivables		2,494			366
Acquisitions of businesses, net of cash acquired		(172	)		(15,363	)
Purchases of property, plant and equipment		(3,444	)		(2,716	)
Other		79			(141	)
Net cash flows from investing activities		3,193			(16,900	)

Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		51			8,149
Proceeds from borrowings of railroad, utilities and energy businesses		1,540			750
Proceeds from borrowings of finance businesses		1,527			1,037
Repayments of borrowings of insurance and other businesses		(2,237	)		(322	)
Repayments of borrowings of railroad, utilities and energy businesses		(618	)		(218	)
Repayments of borrowings of finance businesses		(1,676	)		(1,680	)
Change in short term borrowings, net		(524	)		(61	)
Acquisitions of noncontrolling interests and other		(1,769	)		(74	)
Net cash flows from financing activities		(3,706	)		7,581
Effects of foreign currency exchange rate changes		194			(146	)
Increase (decrease) in cash and cash equivalents		9,664			(2,605	)
Cash and cash equivalents at beginning of year *		38,227			30,558
Cash and cash equivalents at end of first six months *	$	47,891		$	27,953


* 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 six months—
Insurance and Other	$	43,193		$	25,164
Railroad, Utilities and Energy		2,804			1,986
Finance and Financial Products		1,894			803
	$	47,891		$	27,953

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(dollars in millions)

	Berkshire Hathaway shareholders’ equity
	Common stock and capital in excess of par value			Accumulated other comprehensive income			Retained earnings		Total			Non- controlling interests
Balance at December 31, 2009	$	27,082		$	17,793		$	86,227	$	131,102		$	4,683
Net earnings		—			—			5,601		5,601			301
Other comprehensive income, net		—			(4,944	)		—		(4,944	)		(57	)
Issuance of common stock and other transactions		11,016			—			—		11,016			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(13	)		1			—		(12	)		(176	)
Balance at June 30, 2010	$	38,085		$	12,850		$	91,828	$	142,763		$	4,751


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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in millions)

	Second Quarter						First Six Months
	2011			2010			2011			2010
Comprehensive income attributable to Berkshire Hathaway:
Net earnings	$	3,417		$	1,968		$	4,928		$	5,601
Other comprehensive income:
Net change in unrealized appreciation of investments		(54	)		(9,032	)		598			(5,902	)
Applicable income taxes		40			3,179			(177	)		2,069
Reclassification of investment appreciation in earnings		(1,353	)		(376	)		(920	)		(711	)
Applicable income taxes		474			132			322			249
Foreign currency translation		205			(466	)		644			(901	)
Applicable income taxes		(22	)		24			(35	)		24
Prior service cost and actuarial gains/losses of defined benefit plans		15			12			11			63
Applicable income taxes		(4	)		(1	)		(4	)		(14	)
Other, net		(39	)		71			8			179
Other comprehensive income, net		(738	)		(6,457	)		447			(4,944	)
Comprehensive income attributable to Berkshire Hathaway	$	2,679		$	(4,489	)	$	5,375		$	657
Comprehensive income of noncontrolling interests	$	138		$	45		$	237		$	244

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 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 with the current year presentation. Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with accounting principles generally accepted in the United States (“GAAP”).

For a number of reasons, our results for interim periods are not normally indicative of results to be expected for the year. The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be relatively more significant to results of interim periods than to results for a full year. Variations in the 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 proven to have responded directly to the advertising and the probable future revenues generated from the advertising are proven to be in excess of expected future costs to be incurred in realizing those revenues. ASU 2010-26 is effective for Berkshire beginning January 1, 2012 and may be applied on a prospective or retrospective basis. We do not believe that the adoption of ASU 2010-26 will have a material effect on our Consolidated Financial Statements.

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. 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. We do not believe that the adoption of ASU 2011-04 will have a material effect on our Consolidated Financial Statements.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 changes the way other comprehensive income (“OCI”) appears within the financial statements. Companies will be required to show 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. Any reclassification between OCI and net income will be presented on the face of the financial statements. ASU 2011-05 is effective for Berkshire beginning January 1, 2012. The adoption of ASU 2011-05 will not impact the measurement of net earnings or other comprehensive income.

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 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.

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

On March 13, 2011, Berkshire and The Lubrizol Corporation (“Lubrizol”) entered into a merger agreement, whereby Berkshire will acquire all of the outstanding shares of Lubrizol common stock for cash of $135 per share. The aggregate merger consideration is expected to be approximately $9 billion. The acquisition was approved at a special meeting of Lubrizol shareholders on June 9, 2011. In addition to approval by Lubrizol’s shareholders, the completion of the acquisition is subject to customary closing conditions, including the expiration of waiting periods and the receipt of approvals under U.S. and applicable non-U.S. merger control regulations. We expect all such approvals to be obtained within the next one to three months.

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

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 June 30, 2011 and December 31, 2010 are summarized below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2011
U.S. Treasury, U.S. government corporations and agencies	$	2,225	$	43	$	—		$	2,268
States, municipalities and political subdivisions		3,083		219		—			3,302
Foreign governments		13,264		206		(46	)		13,424
Corporate bonds		11,468		2,537		(23	)		13,982
Mortgage-backed securities		2,573		317		(12	)		2,878
	$	32,613	$	3,322	$	(81	)	$	35,854


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).

	June 30,		December 31,
	2011		2010
Insurance and other	$	34,813	$	33,803
Finance and financial products		1,041		1,080
	$	35,854	$	34,883

As of June 30, 2011, fixed maturity investments that were in a continuous unrealized loss position for more than 12 months had unrealized losses of $21 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 June 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	$	8,314	$	14,485	$	4,578	$	2,663	$	2,573	$	32,613
Fair value		8,515		15,801		5,428		3,232		2,878		35,854

Note 5. Investments in equity securities

Investments in equity securities as of June 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
June 30, 2011
Banks, insurance and finance	$	15,562	$	10,334	$	(688	)	$	25,208
Consumer products		13,227		13,607		—			26,834
Commercial, industrial and other		10,716		4,830		(3	)		15,543
	$	39,505	$	28,771	$	(691	)	$	67,585


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).

	June 30,		December 31,
	2011		2010
Insurance and other	$	66,364	$	59,819
Railroad, utilities and energy *		727		1,182
Finance and financial products *		494		512
	$	67,585	$	61,513

*	Included in Other assets.

As of June 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. Included in the OTTI losses was $337 million related 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 are not reflected in earnings but are instead recorded directly in shareholders’ equity as a component of accumulated other comprehensive income.

Note 6. Other investments

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

	Cost		Unrealized Gains		Fair Value		Carrying Value
June 30, 2011
Other fixed maturity and equity securities:
Insurance and other	$	11,809	$	2,396	$	14,205	$	13,121
Finance and financial products		2,198		631		2,829		2,817
	$	14,007	$	3,027	$	17,034	$	15,938


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

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.

Note 7. Investment gains/losses

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

	Second Quarter						First Six Months
	2011			2010			2011			2010
Fixed maturity securities —
Gross gains from sales and other disposals	$	94		$	270		$	176		$	568
Gross losses from sales and other disposals		(4	)		—			(4	)		(3	)
Equity and other securities —
Gross gains from sales and other disposals		1,267			123			1,268			335
Gross losses from sales and other disposals		(4	)		(17	)		(14	)		(189	)
Other		(64	)		7			(38	)		990
	$	1,289		$	383		$	1,388		$	1,701

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


Insurance and other	$	1,128	$	381	$	1,214	$	1,696
Finance and financial products		161		2		174		5
	$	1,289	$	383	$	1,388	$	1,701

Equity and other securities investment gains in the second quarter and first six months of 2011 included $1.25 billion with respect to the redemption of our GS Preferred investment. In 2010, other investment gains included a one-time holding gain of $979 million related to our BNSF acquisition in February.

Note 8. Receivables

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

	June 30,			December 31,
	2011			2010
Insurance premiums receivable	$	7,336		$	6,342
Reinsurance recoverable on unpaid losses		2,961			2,735
Trade and other receivables		9,481			12,223
Allowances for uncollectible accounts		(382	)		(383	)
	$	19,396		$	20,917

As of December 31, 2010, trade and other receivables included approximately CHF 3.7 billion ($3.9 billion) related to the redemption of 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).

	June 30,			December 31,
	2011			2010
Consumer installment loans and finance receivables	$	13,734		$	14,042
Commercial loans and finance receivables		839			1,557
Allowances for uncollectible loans		(374	)		(373	)
	$	14,199		$	15,226

Allowances for uncollectible loans primarily relate to consumer installment loans. Provisions for consumer loan losses were $161 million in the first six months of 2011 and $178 million for the first six months of 2010. Loan charge-offs, net of recoveries, were $160 million in the first six months of 2011 and $176 million for the first six months of 2010. Consumer loan amounts are net of acquisition discounts of $550 million at June 30, 2011 and $580 million at December 31, 2010. At June 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 June 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).

	June 30,		December 31,
	2011		2010
Raw materials	$	1,207	$	1,066
Work in process and other		638		509
Finished manufactured goods		2,423		2,180
Goods acquired for resale		3,692		3,346
	$	7,960	$	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).

	June 30,		December 31,
	2011		2010
Balance at beginning of year	$	49,006	$	33,972
Acquisition of BNSF		—		14,803
Other		119		231
Balance at end of period	$	49,125	$	49,006

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

	June 30, 2011				December 31, 2010
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other	$	7,023	$	2,033	$	6,944	$	1,816
Railroad, utilities and energy		2,087		470		2,082		306
	$	9,110	$	2,503	$	9,026	$	2,122


Trademarks and trade names	$	2,033	$	192	$	2,027	$	166
Patents and technology		2,970		1,215		2,922		1,013
Customer relationships		2,682		709		2,676		612
Other		1,425		387		1,401		331
	$	9,110	$	2,503	$	9,026	$	2,122

Notes To Consolidated Financial Statements (Continued)

Note 10. Goodwill and other intangible assets (Continued)

Amortization expense was $374 million for the first six months of 2011 and $340 million for the first six months of 2010. Intangible assets with indefinite lives as of June 30, 2011 and December 31, 2010 were $1,640 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	June 30, 2011			December 31, 2010
Land	—	$	760		$	744
Buildings and improvements	3 – 40 years		4,842			4,661
Machinery and equipment	3 – 25 years		11,707			11,573
Furniture, fixtures and other	3 – 20 years		2,061			1,932
Assets held for lease	12 –30 years		5,838			5,832
			25,208			24,742
Accumulated depreciation			(9,563	)		(9,001	)
		$	15,645		$	15,741

Depreciation expense of insurance and other businesses for the first six months of 2011 and 2010 was $791 million and $762 million, respectively.

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

	Ranges of estimated useful life	June 30, 2011			December 31, 2010
Railroad:
Land	—	$	5,913		$	5,901
Track structure and other roadway	5 – 100 years		35,952			35,463
Locomotives, freight cars and other equipment	5 – 37 years		4,757			4,329
Construction in progress	—		747			453
Utilities and energy:
Utility generation, distribution and transmission system	5 – 85 years		38,542			37,643
Interstate pipeline assets	3 – 67 years		5,940			5,906
Independent power plants and other assets	3 – 30 years		1,100			1,097
Construction in progress	—		1,769			1,456
			94,720			92,248
Accumulated depreciation			(15,413	)		(14,863	)
		$	79,307		$	77,385

The utility generation, distribution and transmission system and interstate pipeline assets are the regulated assets of public utility and natural gas pipeline subsidiaries. Depreciation expense of the railroad, utilities and energy businesses for the first six months of 2011 was $1,396 million. Depreciation expense for the first six months of 2010 was $1,144 million, which includes depreciation expense of BNSF from February 13, 2010 through June 30, 2010.

Notes To Consolidated Financial Statements (Continued)

Note 12. Derivative contracts

Derivative contracts are used primarily by our finance and financial products businesses and our railroad, utilities and energy businesses. As of June 30, 2011 and December 31, 2010, substantially all of the derivative contracts of our finance and financial products businesses are not designated as hedges for financial reporting purposes. These contracts were initially entered into with the expectation that the premiums received would exceed the amounts ultimately paid to counterparties. Changes in the fair values of such contracts are reported in earnings as derivative gains/losses. A summary of derivative contracts of our finance and financial products businesses follows (in millions).

	June 30, 2011									December 31, 2010
	Assets (3)			Liabilities			Notional Value			Assets (3)			Liabilities			Notional Value
Equity index put options	$	—		$	6,761		$	35,089	(1)	$	—		$	6,712		$	33,891	(1)
Credit default contracts:
High yield indexes		—			110			4,841	(2)		—			159			4,893	(2)
States/municipalities		—			1,038			16,042	(2)		—			1,164			16,042	(2)
Individual corporate		88			—			3,565	(2)		84			—			3,565	(2)
Other		370			216						341			375
Counterparty netting		(81	)		(39	)					(82	)		(39	)
	$	377		$	8,086					$	343		$	8,371

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

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

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

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

	Second Quarter						First Six Months
	2011			2010			2011			2010
Equity index put options	$	(271	)	$	(1,797	)	$	(48	)	$	(1,619	)
Credit default contracts		142			(320	)		212			(112	)
Other		(55	)		(59	)		(77	)		(34	)
	$	(184	)	$	(2,176	)	$	87		$	(1,765	)

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 June 30, 2011, the aggregate intrinsic value (the undiscounted liability assuming the contracts are settled on their future expiration dates based on the June 30, 2011 index values and foreign currency exchange rates) was approximately $3.9 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 9.5 years at June 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 June 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 June 30, 2011 of approximately 9.7 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 June 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 June 30, 2011, our collateral posting requirement under contracts with collateral provisions was $25 million compared to $31 million at December 31, 2010. As of June 30, 2011, had Berkshire’s credit ratings (currently AA+ from Standard & Poor’s and Aa2 from Moody’s) been downgraded below either A- by Standard & Poor’s or A3 by Moody’s an additional $1.1 billion would have been required to be posted as collateral.

Our railroad and regulated utility subsidiaries are exposed to variations in the market prices in the purchases and sales of natural gas and electricity and in the 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 $142 million and $231 million as of June 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 $464 million as of June 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 six months of 2011 and 2010 is presented in the following table (in millions).

	First Six Months
	2011		2010
Cash paid during the period for:
Income taxes	$	802	$	2,319
Interest of insurance and other businesses		115		80
Interest of railroad, utilities and energy businesses		904		790
Interest of finance and financial products businesses		340		361

Non-cash investing and financing activities:
Liabilities assumed in connection with acquisition of BNSF		—		30,968
Common stock issued in connection with acquisition of BNSF		—		10,577
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 June 30, 2011. Maturity date ranges are based on borrowings as of June 30, 2011.

	Average Interest Rate			June 30, 2011		December 31, 2010
Insurance and other:
Issued by Berkshire parent company due 2012-2047		1.9	%	$	6,287	$	8,360
Short-term subsidiary borrowings		0.3	%		1,532		1,682
Other subsidiary borrowings due 2011-2036		5.3	%		2,342		2,429
				$	10,161	$	12,471

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

	Average Interest Rate			June 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	%	$	5,371	$	5,371
Subsidiary and other debt due 2011-2039		5.7	%		14,389		14,275
Issued by BNSF due 2011-2097		6.0	%		12,516		11,980
				$	32,276	$	31,626

MidAmerican subsidiary debt represents amounts issued pursuant to separate financing agreements. All or substantially all of the assets of certain MidAmerican subsidiaries are or may be pledged or encumbered to support or otherwise secure the debt. These borrowing arrangements generally contain various covenants including, but not limited to, leverage ratios, interest coverage ratios and debt service coverage ratios. BNSF’s borrowings are primarily unsecured. As of June 30, 2011, BNSF and MidAmerican and its subsidiaries were in compliance with all applicable covenants. Berkshire does not guarantee any debt or other borrowings of BNSF, MidAmerican or their subsidiaries.

	Average Interest Rate			June 30, 2011		December 31, 2010
Finance and financial products:
Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2012-2040		4.3	%	$	11,529	$	11,535
Issued by other subsidiaries due 2011-2036		5.1	%		2,751		2,942
				$	14,280	$	14,477

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

Our subsidiaries have approximately $5.9 billion of available unused lines of credit and commercial paper capacity in the aggregate at June 30, 2011, to support our short-term borrowing programs and provide additional liquidity. Generally, Berkshire’s guarantee of a subsidiary’s debt obligation is an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all present and future payment obligations.

Notes To Consolidated Financial Statements (Continued)

Note 15. Fair value measurements

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

	Carrying Value				Fair Value
	June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010
Investments in fixed maturity securities	$	35,854	$	34,883	$	35,854	$	34,883
Investments in equity securities		67,585		61,513		67,585		61,513
Other investments		15,938		23,009		17,034		24,147
Loans and finance receivables		14,199		15,226		13,436		14,453
Derivative contract assets (1)		519		574		519		574
Notes payable and other borrowings: