Edgar Filing: BERKSHIRE HATHAWAY INC

a6381775.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, 2010

¨	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 30, 2010:

Class A — 976,414

Class B — 1,006,635,055

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information

Item 1.	Financial Statements
	Consolidated Balance Sheets— June 30, 2010 and December 31, 2009	2
	Consolidated Statements of Earnings— Second Quarter and First Six Months 2010 and 2009	3
	Consolidated Statements of Cash Flows— First Six Months 2010 and 2009	4
	Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income— Second Quarter and First Six Months 2010 and 2009	5
	Notes to Consolidated Financial Statements	6-21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22-35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

Part II – Other Information

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	(Removed and Reserved)	36
Item 5.	Other Information	36
Item 6.	Exhibits	36

Signature		36

Part I Financial Information

Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	June 30,		December 31,
	2010		2009
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents	$	25,164	$	28,223
Investments:
Fixed maturity securities		33,319		35,729
Equity securities		52,526		56,562
Other		21,492		29,440
Receivables		17,407		14,792
Inventories		6,563		6,147
Property, plant and equipment		15,408		15,720
Goodwill		28,021		27,614
Other		12,868		13,070
		212,768		227,297
Railroad, Utilities and Energy:
Cash and cash equivalents		1,986		429
Property, plant and equipment		75,739		30,936
Goodwill		20,062		5,334
Other		13,332		8,072
		111,119		44,771
Finance and Financial Products:
Cash and cash equivalents		803		1,906
Investments in fixed maturity securities		1,206		1,402
Other investments		3,001		3,160
Loans and finance receivables		15,669		13,989
Goodwill		1,030		1,024
Other		3,591		3,570
		25,300		25,051
	$	349,187	$	297,119
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses	$	58,450	$	59,416
Unearned premiums		8,874		7,925
Life, annuity and health insurance benefits		7,147		5,228
Accounts payable, accruals and other liabilities		15,335		15,530
Notes payable and other borrowings		12,144		4,561
		101,950		92,660
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		11,918		5,895
Notes payable and other borrowings		31,184		19,579
		43,102		25,474
Finance and Financial Products:
Accounts payable, accruals and other liabilities		1,108		937
Derivative contract liabilities		10,791		9,269
Notes payable and other borrowings		14,642		13,769
		26,541		23,975
Income taxes, principally deferred		30,080		19,225
Total liabilities		201,673		161,334

Shareholders’ equity:
Common stock		8		8
Capital in excess of par value		38,077		27,074
Accumulated other comprehensive income		12,850		17,793
Retained earnings		91,828		86,227
Berkshire Hathaway shareholders’ equity		142,763		131,102
Noncontrolling interests		4,751		4,683
Total shareholders’ equity		147,514		135,785
	$	349,187	$	297,119

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
	2010			2009			2010			2009
	(Unaudited)						(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned	$	6,864		$	6,485		$	14,290		$	14,668
Sales and service revenues		17,210			15,587			32,741			29,897
Interest, dividend and other investment income		1,514			1,514			2,809			2,888
Investment gains/losses		381			33			1,696			(337	)
Other-than-temporary impairment losses on investments		—			(30	)		—			(3,126	)
		25,969			23,589			51,536			43,990
Railroad, Utilities and Energy:
Operating revenues		6,724			2,502			11,734			5,471
Other		42			153			82			133
		6,766			2,655			11,816			5,604
Finance and Financial Products:
Interest, dividend and other investment income		401			359			802			721
Investment gains/losses		2			(30	)		5			(30	)
Derivative gains/losses		(2,176	)		2,357			(1,765	)		840
Other		747			677			1,352			1,266
		(1,026	)		3,363			394			2,797
		31,709			29,607			63,746			52,391
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		3,917			4,072			8,103			10,086
Life, annuity and health insurance benefits		887			430			2,379			938
Insurance underwriting expenses		1,344			1,885			2,747			3,233
Cost of sales and services		14,192			13,128			27,098			25,086
Selling, general and administrative expenses		1,915			2,073			3,754			4,036
Interest expense		68			52			135			100
		22,323			21,640			44,216			43,479
Railroad, Utilities and Energy:
Cost of sales and operating expenses		5,060			1,955			8,892			4,310
Interest expense		394			298			741			589
		5,454			2,253			9,633			4,899
Finance and Financial Products:
Interest expense		175			160			354			309
Other		819			763			1,507			1,456
		994			923			1,861			1,765
		28,771			24,816			55,710			50,143
Earnings before income taxes and equity method earnings		2,938			4,791			8,036			2,248
Income tax expense		848			1,520			2,184			506
Earnings from equity method investments		—			113			50			196
Net earnings		2,090			3,384			5,902			1,938
Less: Earnings attributable to noncontrolling interests		122			89			301			177
Net earnings attributable to Berkshire Hathaway	$	1,968		$	3,295		$	5,601		$	1,761
Average common shares outstanding *		1,647,175			1,551,724			1,623,171			1,550,610
Net earnings per share attributable to Berkshire Hathaway shareholders *	$	1,195		$	2,123		$	3,451		$	1,136

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
	2010			2009
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	5,902		$	1,938
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses and other-than-temporary impairment losses		(1,701	)		3,493
Depreciation		2,015			1,536
Other		103			(101	)
Changes in operating assets and liabilities before business acquisitions:
Losses and loss adjustment expenses		(103	)		1,793
Deferred charges reinsurance assumed		237			62
Unearned premiums		1,050			908
Receivables and originated loans		(2,691	)		(166	)
Derivative contract assets and liabilities		1,584			(2,324	)
Income taxes		(301	)		(321	)
Other assets and liabilities		765			679
Net cash flows from operating activities		6,860			7,497

Cash flows from investing activities:
Purchases of fixed maturity securities		(4,510	)		(7,450	)
Purchases of equity securities		(3,282	)		(974	)
Purchases of other investments		—			(6,068	)
Sales of fixed maturity securities		3,150			2,282
Redemptions and maturities of fixed maturity securities		3,327			2,716
Sales of equity securities		2,710			1,343
Purchases of loans and finance receivables		(441	)		(148	)
Principal collections on loans and finance receivables		366			356
Acquisitions of businesses, net of cash acquired		(15,363	)		(221	)
Purchases of property, plant and equipment		(2,716	)		(2,633	)
Other		(141	)		1,156
Net cash flows from investing activities		(16,900	)		(9,641	)

Cash flows from financing activities:
Proceeds from borrowings of finance businesses		1,037			1,504
Proceeds from borrowings of railroad, utilities and energy businesses		750			992
Proceeds from other borrowings		8,149			58
Repayments of borrowings of finance businesses		(1,680	)		(214	)
Repayments of borrowings of railroad, utilities and energy businesses		(218	)		(230	)
Repayments of other borrowings		(322	)		(308	)
Change in short term borrowings, net		(61	)		(339	)
Acquisitions of noncontrolling interests and other		(74	)		(387	)
Net cash flows from financing activities		7,581			1,076
Effects of foreign currency exchange rate changes		(146	)		40
Decrease in cash and cash equivalents		(2,605	)		(1,028	)
Cash and cash equivalents at beginning of year *		30,558			25,539
Cash and cash equivalents at end of first six months *	$	27,953		$	24,511

* Cash and cash equivalents are comprised of the following:
Beginning of year—
Insurance and Other	$	28,223		$	24,356
Railroad, Utilities and Energy		429			280
Finance and Financial Products		1,906			903
	$	30,558		$	25,539

End of first six months—
Insurance and Other	$	25,164		$	21,514
Railroad, Utilities and Energy		1,986			875
Finance and Financial Products		803			2,122
	$	27,953		$	24,511

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME

(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, 2008	$	27,141		$	3,954		$	78,172	$	109,267		$	4,440
Net earnings		—			—			1,761		1,761			177
Other comprehensive income, net		—			3,442			—		3,442			22
Issuance of common stock and other transactions		175			—			—		175			—
Changes in noncontrolling interests:
Interests acquired and other transactions		(227	)		109			—		(118	)		(329	)
Balance at June 30, 2009	$	27,089		$	7,505		$	79,933	$	114,527		$	4,310

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

	Second Quarter						First Six Months
	2010			2009			2010			2009
Comprehensive income attributable to Berkshire:
Net earnings	$	1,968		$	3,295		$	5,601		$	1,761
Other comprehensive income:
Net change in unrealized appreciation of investments		(9,032	)		11,596			(5,902	)		1,133
Applicable income taxes		3,179			(4,063	)		2,069			(403	)
Reclassification of investment appreciation in earnings		(376	)		(2	)		(711	)		3,427
Applicable income taxes		132			1			249			(1,199	)
Foreign currency translation		(466	)		982			(901	)		577
Applicable income taxes		24			5			24			60
Prior service cost and actuarial gains/losses of defined benefit plans		12			(180	)		63			(165	)
Applicable income taxes		(1	)		25			(14	)		21
Other		71			71			179			(9	)
Other comprehensive income, net		(6,457	)		8,435			(4,944	)		3,442
Comprehensive income attributable to Berkshire	$	(4,489	)	$	11,730		$	657		$	5,203
Comprehensive income of noncontrolling interests	$	45		$	205		$	244		$	199

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2010

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 2009 have been reclassified to conform with the current year presentation. Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with accounting principles generally accepted in the United States (“GAAP”).

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

Note 2. New accounting pronouncements

In 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-16 which eliminated the concept of a qualifying special-purpose entity (“QSPE”) and the exemption of QSPEs from previous consolidation guidance. ASU 2009-16 also modified the criteria for derecognizing financial assets by transferors. In 2009, the FASB also issued ASU 2009-17, which amended the standards related to consolidation of variable interest entities. ASU 2009-17 included new criteria for determining the primary beneficiary of variable interest entities and increased the frequency in which reassessments must be made to determine the primary beneficiary of variable interest entities. ASU 2009-16 and 2009-17 became effective for fiscal years beginning after November 15, 2009. See Note 14 for a description of the effect on our Consolidated Financial Statements from adopting this guidance.

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures About Fair Value Measurements.” Effective January 1, 2010, ASU 2010-06 requires the separate disclosure of significant transfers into and out of the Level 1 and Level 2 categories and the reasons for such transfers, and also requires fair value measurement disclosures for each class of assets and liabilities as well as disclosures about valuation techniques and inputs used for recurring and nonrecurring Level 2 and Level 3 fair value measurements. Effective in fiscal years beginning after December 31, 2010, ASU 2010-06 also requires Level 3 disclosure of purchases, sales, issuances and settlements activity on a gross rather than a net basis. We do not anticipate that the remaining disclosures under ASU 2010-06 will have a material impact on our Consolidated Financial Statements.

In July 2010, the FASB issued ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” ASU 2010-20 requires increased disclosures about the credit quality of financing receivables and allowances for credit losses, including disclosure about credit quality indicators, past due information and modifications of finance receivables. The guidance is generally effective for reporting periods ending after December 15, 2010. We do not anticipate the adoption of ASU 2010-20 will have a material impact on our Consolidated Financial Statements.

Notes To Consolidated Financial Statements (Continued)

Note 3. Acquisition of Burlington Northern Santa Fe Corporation

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

On February 12, 2010, we acquired all of the outstanding common stock of the Burlington Northern Santa Fe Corporation that we did not already own (about 264.5 million shares or 77.5%) for aggregate consideration of $26.5 billion that consisted of cash of approximately $15.9 billion with the remainder in Berkshire common stock (80,931 Class A shares and 20,976,621 Class B shares). Approximately 50% of the cash component was funded with existing cash balances and the remaining 50% was funded with proceeds from new 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 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 $6.6 billion. We are accounting for the acquisition of BNSF pursuant to the acquisition method under Accounting Standards Codification Section 805 Business Combinations (“ASC 805”). Upon completion of the acquisition of the remaining BNSF shares, we were required under ASC 805 to re-measure our previously owned investment in BNSF at fair value as of the acquisition date. In the first quarter of 2010, we recognized a one-time holding gain of approximately $1.0 billion for the difference between the fair value of the BNSF shares and our carrying value under the equity method.

A preliminary allocation of the aggregate $34.5 billion purchase price (including the fair value of the previously owned shares of BNSF and the value of certain BNSF outstanding equity awards that were converted into Berkshire Class B equity awards on the acquisition date) to BNSF’s assets and liabilities is summarized below (in millions):

Assets:			Liabilities and Net assets acquired:
Cash and cash equivalents	$	971	Accounts payable and other liabilities	$	6,623
Property, plant and equipment		43,987	Notes payable and other borrowings		11,142
Goodwill		14,803	Income taxes, principally deferred		13,203
Other		5,702			30,968
	$	65,463	Net assets acquired		34,495
				$	65,463

BNSF’s financial statements are included in our consolidated financial statements beginning as of February 12, 2010. The following table sets forth certain unaudited pro forma consolidated earnings data for the first six months of 2010 and 2009, as if the BNSF acquisition was consummated on the same terms at the beginning of 2010 and 2009. Amounts are in millions, except earnings per share.

	2010		2009
Total revenues	$	65,556	$	59,252
Net earnings attributable to Berkshire Hathaway shareholders		5,838		2,366
Earnings per equivalent Class A common share attributable to Berkshire Hathaway shareholders		3,545		1,438

Notes To Consolidated Financial Statements (Continued)

Note 4. Investments in fixed maturity securities

Investments in securities with fixed maturities as of June 30, 2010 and December 31, 2009 are summarized below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses *			Fair Value
June 30, 2010
U.S. Treasury, U.S. government corporations and agencies	$	2,247	$	60	$	—		$	2,307
States, municipalities and political subdivisions		3,613		263		—			3,876
Foreign governments		10,229		308		(46	)		10,491
Corporate bonds		12,714		2,214		(752	)		14,176
Mortgage-backed securities		3,326		365		(16	)		3,675
	$	32,129	$	3,210	$	(814	)	$	34,525

Insurance and other	$	31,030	$	3,103	$	(814	)	$	33,319
Finance and financial products		1,099		107		—			1,206
	$	32,129	$	3,210	$	(814	)	$	34,525



December 31, 2009
U.S. Treasury, U.S. government corporations and agencies	$	2,362	$	46	$	(1	)	$	2,407
States, municipalities and political subdivisions		3,689		275		(1	)		3,963
Foreign governments		11,518		368		(42	)		11,844
Corporate bonds		13,094		2,080		(502	)		14,672
Mortgage-backed securities		3,961		310		(26	)		4,245
	$	34,624	$	3,079	$	(572	)	$	37,131

Insurance and other	$	33,317	$	2,984	$	(572	)	$	35,729
Finance and financial products		1,307		95		—			1,402
	$	34,624	$	3,079	$	(572	)	$	37,131

*	Includes $708 million at June 30, 2010 and $471 million at December 31, 2009, related to securities that have been in an unrealized loss position for 12 months or more.

The amortized cost and estimated fair value of securities with fixed maturities at June 30, 2010 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	$	6,080	$	13,495	$	6,158	$	3,070	$	3,326	$	32,129
Fair value		6,187		14,911		6,114		3,638		3,675		34,525

Notes To Consolidated Financial Statements (Continued)

Note 5. Investments in equity securities

Investments in equity securities as of June 30, 2010 and December 31, 2009 are summarized below (in millions).

	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2010
American Express Company	$	1,287	$	4,732	$	—		$	6,019
The Coca-Cola Company		1,299		8,725		—			10,024
The Procter & Gamble Company		4,399		21		—			4,420
Wells Fargo & Company		7,394		2,538		(1,376	)		8,556
Other		23,418		4,979		(2,763	)		25,634
	$	37,797	$	20,995	$	(4,139	)	$	54,653

Insurance and other	$	37,128	$	19,528	$	(4,130	)	$	52,526
Railroad, utilities and energy *		232		1,453		—			1,685
Finance and financial products *		437		14		(9	)		442
	$	37,797	$	20,995	$	(4,139	)	$	54,653

December 31, 2009
American Express Company	$	1,287	$	4,856	$	—		$	6,143
The Coca-Cola Company		1,299		10,101		—			11,400
The Procter & Gamble Company		4,962		78		—			5,040
Wells Fargo & Company		7,394		2,721		(1,094	)		9,021
Other		22,265		7,118		(1,953	)		27,430
	$	37,207	$	24,874	$	(3,047	)	$	59,034

Insurance and other	$	36,538	$	23,070	$	(3,046	)	$	56,562
Railroad, utilities and energy *		232		1,754		—			1,986
Finance and financial products *		437		50		(1	)		486
	$	37,207	$	24,874	$	(3,047	)	$	59,034

*	Included in Other assets.

Unrealized losses of other equity investments at June 30, 2010 included $1,889 million related to securities that have been in an unrealized loss position for 12 months or more. Approximately 95% of these losses at June 30, 2010 were concentrated in four issuers. In addition, although our investment in Wells Fargo & Company is in a net unrealized gain position of $1,162 million, certain of the shares with aggregate unrealized losses of $875 million have been in an unrealized loss position for greater than 12 months. We use no bright-line test in determining whether impairments are temporary or other than temporary. We consider several factors in determining other-than-temporary impairment losses including the current and expected long-term business prospects of the issuer, the length of time and relative magnitude of the price decline and our ability and intent to hold the investment until the price recovers. In our judgment, the future earnings potential and underlying business economics of these companies are favorable and we possess the ability and intent to hold these securities until their prices recover. Changing market conditions and other facts and circumstances may change the business prospects of these issuers as well as our ability and intent to hold these securities until the prices recover.

Notes To Consolidated Financial Statements (Continued)

Note 6. Other Investments

A summary of other investments follows (in millions).

	Cost		Unrealized Gains		Fair Value		Carrying Value
June 30, 2010
Fixed maturity securities	$	5,400	$	1,151	$	6,551	$	5,400
Equity securities		15,689		3,404		19,093		19,093
	$	21,089	$	4,555	$	25,644	$	24,493

Insurance and other	$	18,347	$	4,283	$	22,630	$	21,492
Finance and financial products		2,742		272		3,014		3,001
	$	21,089	$	4,555	$	25,644	$	24,493

December 31, 2009
Fixed maturity and equity securities	$	21,089	$	5,879	$	26,968	$	26,014
Equity method		5,851		1,721		7,572		6,586
	$	26,940	$	7,600	$	34,540	$	32,600

Insurance and other	$	24,198	$	7,172	$	31,370	$	29,440
Finance and financial products		2,742		428		3,170		3,160
	$	26,940	$	7,600	$	34,540	$	32,600

Fixed maturity and equity investments in the preceding table include our investments in The Goldman Sachs Group, Inc. (“GS”) and The General Electric Company (“GE”) that we made in 2008 and investments in Swiss Reinsurance Company Ltd. (“Swiss Re”) and The Dow Chemical Company (“Dow”) that we made in 2009. In addition, fixed maturity and equity investments include investments in Wm. Wrigley Jr. Company (“Wrigley”) that we made in both 2008 and 2009. Additional information regarding these investments follows.

We own 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”) which were acquired for a combined cost of $5 billion. The GS Preferred may be redeemed at any time by GS at a price of $110,000 per share ($5.5 billion in aggregate). The GS Warrants expire in 2013 and can be exercised for an additional aggregate cost of $5 billion ($115/share). We also own 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”) which were acquired 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).

We own $4.4 billion par amount of 11.45% subordinated notes due 2018 of Wrigley (“Wrigley Notes”) and $2.1 billion of 5% preferred stock of Wrigley (“Wrigley Preferred”). The Wrigley Notes and Wrigley Preferred were acquired in 2008 in connection with Mars, Incorporated’s acquisition of Wrigley. During 2009, we also acquired $1.0 billion par amount of Wrigley senior notes due in 2013 and 2014. The Wrigley subordinated and senior notes are classified as held-to-maturity and accordingly we are carrying these investments at cost.

On March 23, 2009, we acquired a 12% convertible perpetual capital instrument issued by Swiss Re at a cost of $2.7 billion. The instrument has a face amount of 3 billion Swiss Francs (“CHF”) and has no maturity or mandatory redemption date but can be redeemed under certain conditions at the option of Swiss Re at 140% of the face amount until March 23, 2011 and thereafter at 120% of the face amount. The instrument possesses no voting rights and is subordinated to senior securities of Swiss Re as defined in the agreement. Beginning on March 23, 2012, the instrument can be converted at our option into 120,000,000 common shares of Swiss Re (a rate of 25 CHF per share of Swiss Re common stock).

On April 1, 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. The Dow Preferred was issued in connection with Dow’s acquisition of the Rohm and Haas Company. Under certain conditions, each share of the Dow Preferred is convertible into 24.201 shares of Dow

Notes To Consolidated Financial Statements (Continued)

Note 6. Other Investments (Continued)

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.

As of December 31, 2009, we owned 22.5% of BNSF’s outstanding common stock. As of December 31, 2009, our equity in net assets of BNSF was $2,884 million and the excess of our carrying value over our equity in net assets of BNSF was $3,702 million. Prior to February 12, 2010, we accounted for our investment in BNSF pursuant to the equity method. Upon completion of the acquisition of the remaining outstanding shares of BNSF, we discontinued the use of the equity method. See Note 3.

Note 7. Investment gains/losses

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

	Second Quarter						First Six Months
	2010			2009			2010			2009
Fixed maturity securities —
Gross gains from sales and other disposals	$	270		$	22		$	568		$	172
Gross losses from sales and other disposals		—			—			(3	)		(9	)
Equity securities —
Gross gains from sales and other disposals		123			61			335			95
Gross losses from sales		(17	)		(51	)		(189	)		(559	)
Other *		7			(29	)		990			(66	)
	$	383		$	3		$	1,701		$	(367	)

*	In 2010 includes a one-time holding gain of $979 million related to the BNSF acquisition. See Note 3.

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


Insurance and other	$	381	$	33		$	1,696	$	(337	)
Finance and financial products		2		(30	)		5		(30	)
	$	383	$	3		$	1,701	$	(367	)

Note 8. Receivables

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

	June 30,			December 31,
	2010			2009
Insurance premiums receivable	$	6,750		$	5,295
Reinsurance recoverables		3,616			2,922
Trade and other receivables		7,431			6,977
Allowances for uncollectible accounts		(390	)		(402	)
	$	17,407		$	14,792

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

	June 30,			December 31,
	2010			2009
Consumer installment loans and finance receivables	$	14,166		$	12,779
Commercial loans and finance receivables		1,874			1,558
Allowances for uncollectible loans		(371	)		(348	)
	$	15,669		$	13,989

Notes To Consolidated Financial Statements (Continued)

Note 9. Inventories

Inventories are comprised of the following (in millions).

	June 30,		December 31,
	2010		2009
Raw materials	$	956	$	924
Work in process and other		520		438
Finished manufactured goods		1,992		1,959
Purchased goods		3,095		2,826
	$	6,563	$	6,147

Note 10. Goodwill

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

	June 30,		December 31,
	2010		2009
Balance at beginning of year	$	33,972	$	33,781
Acquisition of BNSF		14,803		—
Other		338		191
Ending balance	$	49,113	$	33,972

Note 11. Property, plant and equipment

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

	Ranges of estimated useful life	June 30, 2010			December 31, 2009
Land	—	$	735		$	740
Buildings and improvements	3 – 40 years		4,628			4,606
Machinery and equipment	3 – 25 years		10,868			10,845
Furniture, fixtures and other	3 – 20 years		1,625			1,595
Assets held for lease	12 – 30 years		5,748			5,706
			23,604			23,492
Accumulated depreciation			(8,196	)		(7,772	)
		$	15,408		$	15,720

Depreciation expense of insurance and other businesses for the first six months of 2010 and 2009 was $762 million and $816 million, respectively.

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

	Ranges of estimated useful life	June 30, 2010			December 31, 2009
Railroad:
Land	—	$	5,903		$	—
Track structure and other roadway	5 – 100 years		34,762			—
Locomotives, freight cars and other equipment	1 – 37 years		3,945			—
Construction in progress	—		574			—

Utilities and Energy:
Utility generation, distribution and transmission system	5 – 85 years		35,866			35,616
Interstate pipeline assets	3 – 67 years		5,801			5,809
Independent power plants and other assets	3 – 30 years		1,155			1,157
Construction in progress	—		2,001			2,152
			90,007			44,734
Accumulated depreciation			(14,268	)		(13,798	)
		$	75,739		$	30,936

Notes To Consolidated Financial Statements (Continued)

Note 11. Property, plant and equipment (Continued)

Railroad property, plant and equipment includes the land, other roadway, track structure and rolling stock (primarily locomotives and freight cars) of BNSF, which we acquired on February 12, 2010. See Note 3. The cost of these assets represents the estimated fair value as of the acquisition date. Through BNSF Railway Company, BNSF operates one of the largest railroad systems in North America with approximately 32,000 route miles of track in 28 states and two Canadian provinces.

Railroad property, plant and equipment is depreciated and amortized on a straight-line basis over the estimated useful lives. Depreciation is determined under the group method in which a single depreciation rate is applied to the gross investment in a particular class of property. BNSF conducts studies of depreciation rates and the required accumulated depreciation balance as required by the Surface Transportation Board, which is generally every three years for equipment property and every six years for track structure and other roadway property. The effect of changes in the estimated service lives of these assets is recorded on a prospective basis. Upon normal sale or retirement of most depreciable railroad property, no gain or loss is recognized. The disposals of land and non-rail property as well as significant premature retirements are recorded as gains or losses at the time of their occurrence.

The utility generation, distribution and transmission system and interstate pipeline assets are the regulated assets of public utility and natural gas pipeline subsidiaries. At June 30, 2010 and December 31, 2009, accumulated depreciation and amortization related to regulated assets was approximately $13.3 billion. Substantially all of the construction in progress at June 30, 2010 and December 31, 2009 related to the construction of regulated assets.

Depreciation expense of the railroad, utilities and energy businesses for the first six months of 2010 and 2009 was $1,144 million and $610 million, respectively.

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, 2010, substantially all of the derivative contracts in-force 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, 2010									December 31, 2009
	Assets(3)			Liabilities			Notional Value			Assets(3)			Liabilities			Notional Value
Equity index put options	$	—		$	8,928		$	35,934	(1)	$	—		$	7,309		$	37,990	(1)
Credit default obligations:
High yield indexes		—			615			5,008	(2)		—			781			5,533	(2)
States/municipalities		—			1,020			16,042	(2)		—			853			16,042	(2)
Individual corporate		47			—			3,565	(2)		81			—			3,565	(2)
Other		292			259						378			360
Counterparty netting and funds held as collateral		(83	)		(31	)					(193	)		(34	)
	$	256		$	10,791					$	266		$	9,269

(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, assuming a sufficient number of credit defaults occur. 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 the default.

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

Notes To Consolidated Financial Statements (Continued)

Note 12. Derivative contracts (Continued)

A summary of derivative gains/losses included in the Consolidated Statements of Earnings are as follows (in millions).

	Second Quarter					First Six Months
	2010			2009		2010			2009
Equity index put options	$	(1,797	)	$	1,956	$	(1,619	)	$	1,790
Credit default obligations		(320	)		391		(112	)		(960	)
Other		(59	)		10		(34	)		10
	$	(2,176	)	$	2,357	$	(1,765	)	$	840

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 2028. We received the premiums on these contracts in full at the contract inception dates and therefore we have no counterparty credit risk.

At June 30, 2010, the aggregate intrinsic value (the undiscounted liability assuming the contracts are settled on their future expiration dates based on the June 30, 2010 index values) was approximately $6.4 billion. However, these contracts may not be terminated or fully settled before the expiration dates and 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 11 years at June 30, 2010.

Our credit default contracts pertain to various indexes of non-investment grade (or “high yield”) corporate issuers, state/municipal debt issuers and individual corporate issuers. These contracts cover the loss in value of specified debt obligations of the issuers arising from default events, which are usually for non-payment or bankruptcy. Loss amounts are subject to contract limits.

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, 2010 expire from 2010 through 2013. State and municipality contracts are comprised of over 500 state and municipality issuers and had a weighted average contract life at June 30, 2010 of approximately 11 years. Potential obligations related to approximately 50% of the notional amount of the state and municipality contracts cannot be settled before the maturity dates of the underlying obligations, which range from 2019 to 2054.

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

Individual corporate credit default contracts primarily relate to issuers of investment grade obligations. In most instances, premiums are due from counterparties on a quarterly basis over the terms of the contracts. As of June 30, 2010, all of the remaining in-force individual corporate issuer contracts 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, 2010, our collateral posting requirement under contracts with collateral provisions was $173 million compared to about $35 million at December 31, 2009. As of June 30, 2010, 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 commodity fuel costs. Derivative instruments, including forward purchases and sales, futures, swaps and options are used to manage these price risks. Unrealized gains and losses under these contracts are either probable of recovery through rates and therefore are recorded as a regulatory net asset or liability or are accounted for as cash flow hedges and therefore are recorded as accumulated other comprehensive income or loss. Derivative contract assets included in other assets of railroad, utilities and energy businesses were $239 million and $188 million as of June 30, 2010 and December 31, 2009, respectively. Derivative contract liabilities included in accounts payable, accruals and other liabilities of railroad, utilities and energy businesses were $690 million as of June 30, 2010 and $581 million as of December 31, 2009.

Notes To Consolidated Financial Statements (Continued)

Note 13. Supplemental cash flow information

A summary of supplemental cash flow information for the first six months of 2010 and 2009 is presented in the following table (in millions).

	First Six Months
	2010		2009
Cash paid during the period for:
Income taxes	$	2,319	$	1,333
Interest of finance and financial products businesses		361		296
Interest of railroad, utilities and energy businesses		790		556
Interest of insurance and other businesses		80		77

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

Note 14. Notes payable and other borrowings

Notes payable and other borrowings are summarized below (in millions). The average interest rates shown in the following tables are the weighted average interest rates on outstanding debt as of June 30, 2010.

	Average Interest Rate	June 30, 2010		December 31, 2009
Insurance and other:
Issued by Berkshire parent company due 2010-2047	1.5%	$	8,380	$	340
Short-term subsidiary borrowings	0.3%		1,335		1,607
Other subsidiary borrowings due 2010-2036	5.2%		2,429		2,614
		$	12,144	$	4,561

In February 2010, Berkshire issued $8.0 billion aggregate par amount of senior unsecured notes consisting of $2.0 billion par amount of floating rate notes due in 2011; $1.1 billion par amount of floating rate notes due in 2012; $1.2 billion par amount of floating rate notes due in 2013; $600 million par amount of 1.4% notes due in 2012; $1.4 billion par amount of 2.125% notes due in 2013; and $1.7 billion par amount of 3.2% notes due in 2015. These notes were issued in connection with the BNSF acquisition.

		Average Interest Rate			June 30, 2010				December 31, 2009
Railroad, utilities and energy: