<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 1-10125
BERKSHIRE HATHAWAY INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 04 2254452
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
</TABLE>
1440 Kiewit Plaza, 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.
X
--- ----
YES NO
Number of shares of common stock outstanding as of May 12, 1995.... 1,185,782
<PAGE> 2
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -- 2
March 31, 1995 and December 31, 1994
Consolidated Statements of Earnings -- 3
First Quarter, 1995 and 1994
Condensed Consolidated Statements of Cash Flows -- 4
First Quarter, 1995 and 1994
Notes to Interim Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 8
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION 11
</TABLE>
1
<PAGE> 3
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 145,146 $ 273,881
Investments:
Securities with fixed maturities . . . . . . . . . . . . . . . 1,508,606 1,820,733
Marketable equity securities . . . . . . . . . . . . . . . . . 17,342,357 15,236,494
Salomon Inc . . . . . . . . . . . . . . . . . . . . . . . . . . 1,026,042 1,023,418
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 836,274 580,600
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 453,832 425,431
Properties and equipment . . . . . . . . . . . . . . . . . . . . 270,734 275,667
Assets of finance businesses . . . . . . . . . . . . . . . . . . 727,939 717,082
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 978,097 984,876
----------- -----------
$23,289,027 $21,338,182
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Property and casualty insurance policyholder liabilities . . . . $ 4,649,445 $ 4,200,813
Accounts payable, accruals and other liabilities . . . . . . . . 327,379 397,384
Income taxes, principally deferred . . . . . . . . . . . . . . . 3,825,431 3,292,602
Borrowings under investment agreements and other debt . . . . . . 768,074 810,719
Liabilities of finance businesses . . . . . . . . . . . . . . . . 528,632 562,443
----------- -----------
10,098,961 9,263,961
----------- -----------
Minority shareholders' interests . . . . . . . . . . . . . . . . 217,883 199,339
----------- -----------
Shareholders' equity:
Common stock - par value of 1,381,308 issued shares . . . . . . 6,907 6,907
Capital in excess of par value . . . . . . . . . . . . . . . . 656,074 656,074
Unrealized appreciation of investments, net . . . . . . . . . . 7,341,427 6,364,362
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 5,005,409 4,885,173
----------- -----------
13,009,817 11,912,516
Less: Cost of 203,558 common shares in treasury . . . . . . . . 37,634 37,634
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . 12,972,183 11,874,882
----------- -----------
$23,289,027 $21,338,182
=========== ===========
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements
2
<PAGE> 4
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
First Quarter
--------------------------
1995 1994
-------- --------
<S> <C> <C>
REVENUES:
Sales and service revenues . . . . . . . . . . . . . . . . . . . . . $571,681 $554,848
Insurance premiums earned . . . . . . . . . . . . . . . . . . . . . . 231,383 160,932
Interest and dividend income . . . . . . . . . . . . . . . . . . . . 102,060 102,074
Income from investment in Salomon Inc . . . . . . . . . . . . . . . . 19,436 15,750
Income from finance businesses . . . . . . . . . . . . . . . . . . . 6,309 6,524
Realized investment gain (loss) . . . . . . . . . . . . . . . . . . . (7,319) 77,835
-------- --------
923,550 917,963
-------- --------
COST AND EXPENSES:
Cost of products and services sold . . . . . . . . . . . . . . . . . 359,393 339,248
Insurance losses and loss adjustment expenses . . . . . . . . . . . . 182,876 205,027
Insurance underwriting expenses . . . . . . . . . . . . . . . . . . . 57,687 29,658
Selling, general and administrative expenses . . . . . . . . . . . . 154,938 152,244
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 13,222 15,976
-------- --------
768,116 742,153
-------- --------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST . . . . . . . . . . 155,434 175,810
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,865 40,652
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . 3,333 2,268
-------- --------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,236 $132,890
======== ========
Average shares outstanding . . . . . . . . . . . . . . . . . . . . . 1,177,750 1,177,750
NET EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . $102 $113
==== ====
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements
3
<PAGE> 5
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
First Quarter
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net cash flows from operating activities . . . . . . . . . . . . . . $ 314,814 $ 5,000
----------- -----------
Cash flows from investing activities:
Purchases of investments . . . . . . . . . . . . . . . . . . . . . (1,031,728) (1,082,945)
Proceeds on sales and maturities of investments . . . . . . . . . 703,244 621,088
Loans and investments originated in finance businesses . . . . . (94,181) (84,761)
Principal collections on loans and investments originated
in finance businesses . . . . . . . . . . . . . . . . . . . . . 77,059 94,377
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (723) (608)
----------- -----------
Net cash flows from investing activities . . . . . . . . . . . . . . (346,329) (452,849)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings of finance businesses . . . . . . . . . 25,083 74,088
Proceeds from other borrowings . . . . . . . . . . . . . . . . . 261,297 352,016
Repayments of borrowings of finance businesses . . . . . . . . . (72,155) (93,750)
Repayments of other borrowings . . . . . . . . . . . . . . . . . (303,588) (420,304)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (506) (296)
----------- -----------
Net cash flows from financing activities . . . . . . . . . . . . . . (89,869) (88,246)
----------- -----------
Decrease in cash and cash equivalents . . . . . . . . . . . . . . . . (121,384) (536,095)
Cash and cash equivalents at beginning of year* . . . . . . . . . . . 289,857 1,854,621
----------- -----------
Cash and cash equivalents at end of first quarter* . . . . . . . . . $ 168,473 $ 1,318,526
=========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,352 $ 249,482
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,718 22,813
*Cash and cash equivalents are comprised of the following:
Beginning of year --
Finance businesses . . . . . . . . . . . . . . . . . . . . . . . $ 15,976 $ 37,063
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,881 1,817,558
----------- -----------
$ 289,857 $ 1,854,621
=========== ===========
End of first quarter --
Finance businesses . . . . . . . . . . . . . . . . . . . . . . . $ 23,327 $ 34,558
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,146 1,283,968
----------- -----------
$ 168,473 $ 1,318,526
=========== ===========
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements
4
<PAGE> 6
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL
Reference is made to Berkshire's most recently issued Annual Report
that included information necessary or useful to understanding of Berkshire's
businesses and financial statement presentations. In particular, Berkshire's
significant accounting policies and practices were presented as Note 1 to the
Consolidated Financial Statements included in that Report.
Financial information in this Report reflects any adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair statement of results for the interim periods in
accordance with generally accepted accounting principles.
For a number of reasons, Berkshire's results for interim periods are
not normally indicative of results to be expected for the year. Most
significantly, 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 amount and timing of realized securities gains or losses cause
significant variations in periodic net earnings.
NOTE 2. INVESTMENTS IN SECURITIES WITH FIXED MATURITIES
Data with respect to investments in securities with fixed maturities
(other than Salomon Inc Cumulative Convertible Preferred Stock and securities
with fixed maturities held by finance businesses -- See Notes 3 and 8) are
shown in the tabulation below.
<TABLE>
<CAPTION>
(000s omitted)
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Amortized cost . . . . . . . . . . . . . . . . . . . . . $1,439,764 $1,805,515
Gross unrealized gains . . . . . . . . . . . . . . . . . 76,049 39,766
Gross unrealized losses . . . . . . . . . . . . . . . . . (7,207) (24,548)
---------- ----------
Estimated fair value . . . . . . . . . . . . . . . . . . $1,508,606 $1,820,733
========== ==========
</TABLE>
NOTE 3. INVESTMENT IN SALOMON INC
The Company's investment in Salomon Inc consists of the following:
<TABLE>
<CAPTION>
(000s omitted)
March 31, 1995 December 31, 1994
------------------------------------ ------------------------------------
Fair Market Carrying Fair Market Carrying
Cost Value Value Cost Value Value
---------- -------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Convertible Preferred Stock . . . $ 700,000 $735,000 $ 735,000 $ 700,000 $735,000 $ 735,000
Common Stock . . . . . . . . . . . . . . . . 324,445 224,713 291,042 324,445 248,760 288,418
---------- -------- ---------- ---------- -------- ----------
$1,024,445 $959,713 $1,026,042 $1,024,445 $983,760 $1,023,418
========== ======== ========== ========== ======== ==========
</TABLE>
Berkshire subsidiaries possess slightly in excess of 20% of the total
voting rights in Salomon Inc. Effective April 1, 1994, the Company adopted the
equity method of accounting with respect to its investment in Salomon Inc
common stock. The provisions of Accounting Principles Board Opinion No. 18
"The Equity Method of Accounting for Investments in Common Stock" require that
the equity method be applied only to investments in common stock. Accordingly,
the Cumulative Convertible Preferred Stock is carried at fair value.
5
<PAGE> 7
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INVESTMENTS IN MARKETABLE EQUITY SECURITIES
Data with respect to investments in marketable equity securities are shown
in the tabulation below.
<TABLE>
<CAPTION>
(000s omitted)
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,214,369 $ 5,583,111
Gross unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . 11,169,591 9,789,589
Gross unrealized losses . . . . . . . . . . . . . . . . . . . . . . . . . (41,603) (136,206)
----------- -----------
Total approximate market value . . . . . . . . . . . . . . . . . . . . . $17,342,357 $15,236,494
=========== ===========
Carrying value:
American Express Company . . . . . . . . . . . . . . . . . . . . . . . $ 1,691,437 $ 818,918
Capital Cities/ABC, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,770,000 1,705,000
The Coca-Cola Company . . . . . . . . . . . . . . . . . . . . . . . . . 5,637,500 5,150,000
GEICO Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,725,344 1,678,250
The Gillette Company . . . . . . . . . . . . . . . . . . . . . . . . . 1,959,000 1,797,000
Wells Fargo & Company . . . . . . . . . . . . . . . . . . . . . . . . . 1,061,977 984,727
All others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,497,099 3,102,599
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,342,357 $15,236,494
=========== ===========
</TABLE>
NOTE 5. OTHER ASSETS
Other assets are summarized below:
<TABLE>
<CAPTION>
(000s omitted)
March 31, December 31,
1995 1994
--------- -----------
<S> <C> <C>
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $451,432 $454,633
Deferred charges re reinsurance assumed . . . . . . . . . . . . . . . . . 427,920 440,664
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,745 89,579
-------- --------
$978,097 $984,876
======== ========
</TABLE>
NOTE 6. PROPERTY AND CASUALTY INSURANCE POLICYHOLDER LIABILITIES
Property and casualty insurance policyholder liabilities are summarized
below:
<TABLE>
<CAPTION>
(000s omitted)
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Unpaid losses and loss adjustment expenses . . . . . . . . . . . . . . . $3,560,384 $3,430,028
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,889 307,232
Funds held under reinsurance assumed . . . . . . . . . . . . . . . . . . 346,326 307,287
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,846 156,266
---------- ----------
$4,649,445 $4,200,813
========== ==========
</TABLE>
6
<PAGE> 8
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. DEFERRED INCOME TAX LIABILITY
The tax effects of significant items comprising the Company's net
deferred tax liability as of March 31, 1995 and December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
(000s omitted)
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Deferred tax liabilities:
Relating to unrealized appreciation of investments . . . . . . . . . . $3,916,855 $3,381,328
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,950 71,883
---------- ----------
3,984,805 3,453,211
Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . (251,097) (223,010)
---------- ----------
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . $3,733,708 $3,230,201
========== ==========
</TABLE>
NOTE 8. FINANCE BUSINESSES
Assets and liabilities of Berkshire's finance businesses are
summarized below.
<TABLE>
<CAPTION>
(000s omitted)
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Assets
------
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . $ 23,327 $ 15,976
Installment loans receivable . . . . . . . . . . . . . . . . . . . . . . . 150,651 157,985
Fixed maturity investments . . . . . . . . . . . . . . . . . . . . . . . . 549,872 538,866
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,089 4,255
-------- --------
$727,939 $717,082
======== ========
Liabilities
----------
8.125% Notes, payable in 1996. . . . . . . . . . . . . . . . . . . . . . . $120,000 $120,000
Borrowings under investment agreements . . . . . . . . . . . . . . . . . . 322,893 369,964
Annuity reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,253 41,021
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,486 31,458
-------- --------
$528,632 $562,443
======== ========
</TABLE>
NOTE 9. UNREALIZED APPRECIATION OF INVESTMENTS
Changes in "Unrealized appreciation of investments, net", the balance of
which is carried in shareholders' equity, were as follows during the first
quarter of 1995 and 1994:
<TABLE>
<CAPTION>
(000s omitted)
First Quarter
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
Increase (decrease) in unrealized appreciation . . . . . . . . . . . . . . $1,528,229 $ (172,924)
(Increase) decrease in deemed applicable income taxes . . . . . . . . . . (535,527) 59,734
(Increase) in minority
shareholders' interest . . . . . . . . . . . . . . . . . . . . . . . . . (15,637) (2,780)
---------- ----------
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . 977,065 (115,970)
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . 6,364,362 5,412,652
---------- ----------
Balance at end of first quarter . . . . . . . . . . . . . . . . . . . . . $7,341,427 $5,296,682
========== ==========
</TABLE>
7
<PAGE> 9
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net earnings for the first quarter of the current and prior year are
disaggregated in the following table. Amounts are in thousands and each figure
is income tax effected.
<TABLE>
<CAPTION>
First Quarter
--------------------
1995 1994
-------- --------
<S> <C> <C>
Insurance, except realized investment gain/loss. . . $ 87,866 $ 43,576
Manufacturing, merchandising and services. . . . . . 39,233 45,622
Unallocated income/expense, net. . . . . . . . . . . 6,006 3,476
Interest expense * . . . . . . . . . . . . . . . . . (8,121) (10,362)
-------- --------
Earnings before realized
investment gain/loss. . . . . . . . . . 124,984 82,312
Realized investment gain (loss). . . . . . . . . . . (4,748) 50,578
-------- --------
Net earnings $120,236 $132,890
========= ========
</TABLE>
* For purposes of the above table, interest expense of finance businesses is
netted against the directly related service activity revenues.
INSURANCE GROUP
The after tax figures shown above for Insurance Group earnings, except
realized investment gain/loss, are aggregated in the following table. Dollar
amounts are in thousands.
<TABLE>
<CAPTION>
First Quarter
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Premiums earned from:
Primary or direct insurance . . . . . . . . . . . . . . . . . . . . . . . . $ 58,341 $ 51,095
Reinsurance assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,042 109,837
-------- --------
$231,383 $160,932
======== ========
Underwriting gain (loss) attributable to:
Primary or direct insurance . . . . . . . . . . . . . . . . . . . . . . . . $ 2,123 $ (7,198)
Reinsurance assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,531) (66,784)
-------- --------
Total underwriting loss . . . . . . . . . . . . . . . . . . . . . . . . . (9,408) (73,982)
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,378 107,681
-------- --------
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . 101,970 33,699
Income tax benefit (expense) * . . . . . . . . . . . . . . . . . . . . . . . . (11,833) 11,088
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,271) (1,211)
-------- --------
Net earnings from Insurance,
except realized investment gain/loss . . . . . . . . . . . . . . . . . $ 87,866 $ 43,576
======== ========
</TABLE>
* Income tax benefits from the Group's underwriting losses are proportionate
to such losses at the full statutory income tax rates. For 1994's first
quarter, such benefits exceeded the income tax costs assignable at a lower
effective tax rate to the Group's net investment income. The latter
category of income includes tax-free interest income and tax-favored
dividend income.
Reinsurance premiums earned in the first quarter of 1995 exceeded amounts
earned in 1994 by about $63 million (58%). Premiums earned from catastrophe
excess of loss coverages were $81 million in 1995's first quarter and $60
million in the corresponding prior year period. During the first quarter of
1995, premiums earned from other reinsurance coverages (quota-share and non
catastrophe excess of loss contracts) were $92 million compared to $50 million
for the first quarter of 1994. Much of the increase in reinsurance premiums
earned from other reinsurance coverages derived from a few sizable contracts.
8
<PAGE> 10
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (Continued)
INSURANCE GROUP (Continued)
The catastrophe reinsurance business produced a net underwriting gain
of $39 million for the first quarter of 1995 compared to a net loss of $34
million for the first quarter of 1994. During the first quarter of 1995,
catastrophe losses incurred were $34 million compared to $92 million for the
corresponding 1994 period. Underwriting losses from quota share and other non
catastrophe excess of loss contracts aggregated $34 million and $15 million for
the first quarter of 1995 and 1994, respectively. Generally, time value of
money concepts are important considerations in establishing premium prices for
quota share and non catastrophe excess of loss contracts due to anticipation of
extended claim payment periods. However, underwriting losses often occur as
the estimates of unpaid losses and loss adjustment expenses are established on
an undiscounted basis, often in amounts exceeding premiums earned.
Nevertheless, this business is accepted because of the large amounts of
investable policyholder funds generated.
Premiums earned in the first quarter of 1995 by the Group's primary or
direct insurance businesses exceeded amounts earned in 1994 by $7 million.
Over half that amount was attributable to increased premium volume from the
Group's credit card credit insurance business. Soft market conditions for many
commercial property/casualty coverages persist. Given the Group's disciplined
underwriting approaches which encourage rejection of underpriced risks,
management foresees no meaningful increase in premium volume in 1995.
The Group's primary or direct insurance businesses produced an underwriting
gain ($2 million) in the first quarter of 1995 compared to a net loss ($7
million) for the first quarter of 1994. Modest gains in comparative first
quarter underwriting results were achieved in 1995 by nearly all of the primary
or direct underwriting units.
The accompanying Consolidated Balance Sheet includes liabilities of
about $3.5 billion representing estimated unpaid losses and loss expenses
related to Berkshire's insurance and reinsurance activities. Subsequent loss
payments will likely differ from the estimates and revisions will occur. These
revisions will be reflected in earnings when made and may have a substantial
effect on future periods' underwriting results. In addition, the timing of
catastrophe loss occurrences could produce extreme variations in periodic
underwriting results during the remainder of 1995.
Significant amounts of investment income continue to be earned
reflecting substantial levels of invested assets. The Insurance Group employs
large amounts of investable policyholder funds (or "float") -- about $3.6
billion at March 31, 1995. Net investment income earned in the first quarter
of 1995 also includes equity in net earnings of Salomon Inc attributable to the
Group's investment in common stock of that company. (See Note 3 to the
accompanying Interim Consolidated Financial Statements).
MANUFACTURING, MERCHANDISING AND SERVICES
Results of operations of Berkshire's diverse non-insurance businesses
are aggregated in the following table. Dollar amounts are in thousands.
<TABLE>
<CAPTION>
First Quarter
-----------------------------------
1995 1994
---------------- ---------------
Amount % Amount %
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,578 100.0 $562,700 100.0
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 514,943 88.8 487,385 86.6
-------- ----- -------- -----
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . 64,635 11.2 75,315 13.4
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . 24,477 4.2 28,969 5.2
Applicable minority interest . . . . . . . . . . . . . . . . . . . . . 925 0.2 724 0.1
-------- ----- -------- -----
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,233 6.8 $ 45,622 8.1
======== ===== ======== =====
</TABLE>
9
<PAGE> 11
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (Continued)
MANUFACTURING, MERCHANDISING AND SERVICES (Continued)
Revenues from these several and diverse business activities during
1995's first quarter were greater by $16.9 million (3.0%) than revenues
recorded during the corresponding 1994 period. Comparative revenue increases
were recorded by Berkshire's home furnishings (Nebraska Furniture Mart), home
cleaning systems (Kirby brand products) and uniforms (Fechheimer Brothers
Company) segments. Revenue increases were also recorded by certain of
Berkshire's diversified manufacturing businesses. Somewhat offsetting these
increases were declines in revenues by Berkshire's encyclopedia (World Book
products) and shoe (H. H. Brown Shoe Company, Lowell Shoe, Inc. and Dexter Shoe
Company) segments.
Net earnings from this group of businesses declined $6.4 million
(14.0%) during 1995's first quarter. Most of the reduction was due to declines
in 1995 net earnings as compared to 1994 from Berkshire's encyclopedia and shoe
segments. In the aggregate, Berkshire's other non-insurance businesses
recorded roughly the same net earnings in 1995's first quarter as recorded
during the comparable 1994 period.
UNALLOCATED INCOME/EXPENSE, NET
Unallocated income/expense represents principally investment income of
the parent company and non-insurance subsidiaries, reduced by parent company
administrative costs.
INTEREST EXPENSE
Average outstanding borrowings under investment agreements during the
first quarter of 1995 were approximately $145 million less than the average
amount outstanding during the first quarter of 1994. The decline in borrowings
accounted for most of the reduction in interest expense in 1995 as compared to
1994.
REALIZED INVESTMENT GAIN/LOSS
Realized investment gain/loss has been a recurring element in
Berkshire's net earnings for many years. The amount -- recorded when
securities are sold or other than temporarily impaired -- may fluctuate
significantly from period to period, with a meaningful effect upon Berkshire's
consolidated net earnings. But, the amount of realized investment gain or loss
for any given period has no predictive value, and variations in amount from
period to period have no practical analytical value, particularly in view of
the net unrealized price appreciation now existing in Berkshire's consolidated
investment portfolio.
FINANCIAL CONDITION
Berkshire's balance sheet continues to reflect significant liquidity
and above average capital strength. Shareholders' equity at March 31, 1995,
was $12.97 billion or $11,014 per share. Over the past twelve months, net book
value per share has grown by 24.2%.
10
<PAGE> 12
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 3/31/95
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 -- Financial Data Schedule
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BERKSHIRE HATHAWAY INC.
(Registrant)
Date May 12, 1995 /s/ Marc D. Hamburg
------------- -------------------------------
(Signature)
Marc D. Hamburg, Vice President
and Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED IN FORM 10-Q AS
FILED HEREWITH, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND RELATED NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 145,146
<SECURITIES> 19,877,005
<RECEIVABLES> 836,274
<ALLOWANCES> 0
<INVENTORY> 453,832
<CURRENT-ASSETS> 0
<PP&E> 270,734
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,289,027
<CURRENT-LIABILITIES> 0
<BONDS> 768,074
<COMMON> 6,907
0
0
<OTHER-SE> 12,965,276
<TOTAL-LIABILITY-AND-EQUITY> 23,289,027
<SALES> 571,681
<TOTAL-REVENUES> 809,373
<CGS> 359,393
<TOTAL-COSTS> 599,956
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,222
<INCOME-PRETAX> 155,434
<INCOME-TAX> 31,865
<INCOME-CONTINUING> 120,236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,236
<EPS-PRIMARY> 102
<EPS-DILUTED> 102
</TABLE>
