<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 16, 1996
BERKSHIRE HATHAWAY INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10125 04 2254452
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1440 Kiewit Plaza, Omaha, NE 68131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 346-1400
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 5.
On January 2, 1996, the Registrant consummated its merger with GEICO
Corporation. That significant acquisition was reported on Forms 8-K to the
Securities and Exchange Commission ("SEC") on January 16, 1996 and March 26,
1996. The merger agreement is incorporated by reference. See Exhibit 2.
Generally accepted accounting principles currently require that prior year
financial statements be restated when control of a business is obtained on a
"step-by-step" basis. Accordingly, Registrant's Consolidated Financial
Statements have been restated to account for Berkshire's previous investment in
GEICO common stock under the equity method. The principal effect of the
restatement was to decrease shareholders' equity as of December 31, 1995 by
about $478 million from the amount reported in Berkshire's Consolidated
Financial Statements included in its Annual Report on Form 10-K for the year
ended December 31, 1995. This filing provides restated Consolidated Financial
Statements of Registrant from those which were included in its Annual Report on
Form 10-K for the year ended December 31, 1995. Registrant is filing this
Current Report on Form 8-K to ensure that its restated Consolidated Financial
Statements are available to the public although such financial statements are
not currently required to be filed with the SEC.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibits
2 Agreement and Plan of Merger dated as of August 25, 1995, between the
Registrant and GEICO Corporation. Incorporated by reference to
Exhibit 1 to the Registrant's Form 8-K dated August 25, 1995.
23 Independent Auditors' Consent
99 Restated Consolidated Balance Sheets of Berkshire Hathaway Inc. as of
December 31, 1995 and 1994, and the related Restated Consolidated
Statements of Earnings, Shareholders' Equity and Cash Flows for each
of the three years in the period ended December 31, 1995, together
with the Notes to Consolidated Financial Statements and the related
Independent Auditors' Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BERKSHIRE HATHAWAY INC.
Date: July 22, 1996 /s/ Marc D. Hamburg
-------------------------------
Marc D. Hamburg
Vice President & Chief
Financial Officer
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements of
Berkshire Hathaway Inc. on Forms S-3 (File No. 33-50989, File No. 33-58983 and
File No. 33-60855) of our report dated March 8, 1996 [July 16, 1996 as to the
restatement described in Note 1(a)], appearing in this current Report on Form
8-K of Berkshire Hathaway Inc. for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 22, 1996
<PAGE> 1
EXHIBIT 99
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Berkshire Hathaway Inc.
We have audited the accompanying consolidated balance sheets
of Berkshire Hathaway Inc. and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of earnings, and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Berkshire Hathaway
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 1(a) to the consolidated financial
statements, the Company has restated its consolidated financial statements.
As discussed in Note 1(n) to the consolidated financial
statements, in 1993 the Company changed its method of accounting for income
taxes and investments to conform with recent pronouncements of the Financial
Accounting Standards Board.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 8, 1996
[July 16, 1996 as to the restatement described in Note 1(a)]
1
<PAGE> 2
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1995 1994
---------- ----------
ASSETS
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,703.8 $ 273.9
Investments:
Securities with fixed maturities . . . . . . . . . . . . . . . . . . . . 1,423.2 2,555.7
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,017.6 14,796.3
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 718.9 580.6
Assets of finance businesses . . . . . . . . . . . . . . . . . . . . . . . . . 756.7 717.1
Goodwill of acquired businesses . . . . . . . . . . . . . . . . . . . . . . . . 672.0 454.6
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,419.2 1,231.4
--------- ---------
$28,711.4 $20,609.6
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . $ 3,698.6 $ 3,430.0
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374.1 307.2
Accounts payable, accruals and other liabilities . . . . . . . . . . . . . . . 1,039.1 860.9
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,849.5 2,787.6
Borrowings under investment agreements and other debt . . . . . . . . . . . . . 1,061.7 810.7
Liabilities of finance businesses . . . . . . . . . . . . . . . . . . . . . . . 685.2 562.4
--------- ---------
11,708.2 8,758.8
--------- ---------
Minority shareholders' interests . . . . . . . . . . . . . . . . . . . . . . . 264.5 199.3
--------- ---------
Shareholders' equity:
Common stock of $5 par value. Authorized 1,500,000 shares;
Issued 1,381,308 shares . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 6.9
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . 1,001.7 656.1
Unrealized appreciation of investments, net . . . . . . . . . . . . . . . . 9,220.7 5,276.9
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,544.1 5,749.2
--------- ---------
16,773.4 11,689.1
Less common stock in treasury, at cost
(187,796 shares in 1995; 203,558 shares in 1994) . . . . . . . . . . . . . . 34.7 37.6
--------- ---------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 16,738.7 11,651.5
--------- ---------
$28,711.4 $20,609.6
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE> 3
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in millions except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
REVENUES:
Insurance premiums earned . . . . . . . . . . . . . . . . . $ 957.5 $ 923.2 $ 650.7
Sales and service revenues . . . . . . . . . . . . . . . . . 2,755.9 2,351.9 1,962.9
Interest, dividend and other investment income . . . . . . . 629.2 519.0 520.7
Income from finance businesses . . . . . . . . . . . . . . . 26.6 24.9 22.2
Realized investment gain . . . . . . . . . . . . . . . . . . 194.1 91.3 546.4
-------- --------- --------
4,563.3 3,910.3 3,702.9
-------- -------- --------
COST AND EXPENSES:
Insurance losses and loss adjustment expenses . . . . . . . 612.0 565.3 450.7
Insurance underwriting expenses . . . . . . . . . . . . . . 325.0 228.0 169.1
Cost of products and services sold . . . . . . . . . . . . . 1,706.7 1,450.0 1,180.6
Selling, general and administrative expenses . . . . . . . . 759.6 599.6 544.3
Goodwill amortization . . . . . . . . . . . . . . . . . . . 16.3 13.8 8.3
Interest expense . . . . . . . . . . . . . . . . . . . . . . 59.3 60.1 56.6
Other-than-temporary decline in value of investment in
USAir Group, Inc. Preferred Stock . . . . . . . . . . . . -- 268.5 --
-------- -------- ---------
3,478.9 3,185.3 2,409.6
-------- -------- --------
EARNINGS BEFORE INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE . . . . . . . . . 1,084.4 725.0 1,293.3
Income taxes -
Other than effect of change in income tax rate
on deferred taxes applicable to unrealized
appreciation . . . . . . . . . . . . . . . . . . . . . 276.2 163.3 352.9
Effect of change in income tax rate on deferred
taxes applicable to unrealized appreciation . . . . . . -- -- 53.5
Minority interest . . . . . . . . . . . . . . . . . . . . . 13.3 8.7 10.0
--------- --------- ----------
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE . . . . 794.9 553.0 876.9
Cumulative effect of change in accounting for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . -- -- (33.3)
--------- --------- ---------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . $ 794.9 $ 553.0 $ 843.6
======== ======== ========
Average shares outstanding . . . . . . . . . . . . . . . . . 1,187,102 1,177,750 1,156,243
========= ========= =========
EARNINGS PER SHARE:
Before cumulative effect of accounting change . . . . . . . $670 $469 $759
Cumulative effect of change in accounting for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . -- -- (29)
---- ---- ----
Net earnings . . . . . . . . . . . . . . . . . . . . $670 $469 $730
==== ==== ====
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 794.9 $ 553.0 $ 843.6
Adjustments to reconcile net income to cash flows
from operating activities:
Realized investment gain . . . . . . . . . . . . . . . . (194.1) (91.3) (546.4)
Other than temporary decline in value of investment
in USAir Group, Inc. Preferred Stock . . . . . . . -- 268.5 --
Depreciation and amortization . . . . . . . . . . . . . 75.7 62.5 50.2
Effect of change in income tax rate on deferred taxes . . -- -- 53.5
Cumulative effect of accounting change . . . . . . . . . -- -- 33.3
Changes in assets and liabilities before effects from
business acquisitions:
Losses and loss adjustment expenses . . . . . . . . . 268.6 274.1 (22.8)
Deferred charges re reinsurance assumed . . . . . . . 51.0 25.3 16.2
Unearned premiums . . . . . . . . . . . . . . . . . . 66.9 (8.5) 83.9
Receivables . . . . . . . . . . . . . . . . . . . . . (35.4) (49.8) 134.1
Accounts payable, accruals and other liabilities . . . 228.2 210.5 35.0
Income taxes . . . . . . . . . . . . . . . . . . . . . (29.9) (252.4) 115.5
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (98.0) (62.8) (69.9)
-------- -------- --------
Net cash flows from operating activities . . . . . . 1,127.9 929.1 726.2
-------- -------- --------
Cash flows from investing activities:
Purchases of fixed maturity investments . . . . . . . . . . (273.9) (2,485.8) (272.3)
Purchases of equity securities . . . . . . . . . . . . . . . (1,459.9) (3,050.0) (858.9)
Proceeds from sales of fixed maturity investments . . . . . 669.7 1,772.1 --
Proceeds from redemptions and maturities of fixed
maturity investments . . . . . . . . . . . . . . . . . . 954.6 85.9 318.9
Proceeds from sales of equity securities . . . . . . . . . . 1,352.7 1,466.8 1,188.5
Loans and investments originated in finance businesses . . . (381.2) (246.8) (866.8)
Principal collection on loans and investments
originated in finance businesses . . . . . . . . . . . . 363.0 332.4 269.3
Other . . . . . . . . . . . . . . . . . . . . . . . . . (11.4) (23.2) 19.6
-------- -------- --------
Net cash flows from investing activities . . . . . . 1,213.6 (2,148.6) (201.7)
-------- -------- --------
Cash flows from financing activities:
Proceeds from borrowings of finance businesses . . . . . . . 265.7 208.6 591.9
Proceeds from other borrowings . . . . . . . . . . . . . . . 1,232.7 1,225.3 1,265.0
Repayments of borrowings of finance businesses . . . . . . . (232.1) (390.5) (316.3)
Repayments of other borrowings . . . . . . . . . . . . . . . (1,151.7) (1,387.7) (1,399.9)
Other . . . . . . . . . . . . . . . . . . . . . . . . . (1.5) (0.9) (2.9)
-------- -------- --------
Net cash flows from financing activities . . . . . . 113.1 (345.2) 137.8
-------- -------- --------
Increase (decrease) in cash and cash equivalents . . 2,454.6 (1,564.7) 662.3
Cash and cash equivalents at beginning of year . . . . . . . . 289.9 1,854.6 1,192.3
-------- -------- --------
Cash and cash equivalents at end of year * . . . . . . . . . . $2,744.5 $ 289.9 $1,854.6
======== ======== ========
*Cash and cash equivalents at end of year are comprised of the following:
Finance businesses . . . . . . . . . . . . . . . . . . $ 40.7 $ 16.0 $ 37.1
Other . . . . . . . . . . . . . . . . . . . . . . . . 2,703.8 273.9 1,817.5
-------- -------- --------
$2,744.5 $ 289.9 $1,854.6
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) Restatement
As more fully discussed in Note 3, on January 2, 1996, GEICO
Corporation ("GEICO") became a wholly-owned subsidiary of
Berkshire Hathaway Inc. ("Berkshire" or "Company"). Prior to
January 2, 1996, Berkshire owned approximately 51% of the
outstanding common stock of GEICO. Previously the investment in
GEICO common stock had been classified as an available-for-sale
security and was carried in Berkshire's Consolidated Balance
Sheet at fair value.
Generally accepted accounting principles currently require that
prior year financial statements be restated when control of a
business is obtained on a "step-by-step" basis. Accordingly, the
accompanying Consolidated Financial Statements have been restated
to account for Berkshire's previous investment in GEICO common
stock under the equity method. Berkshire's proportionate share
of GEICO's net income reduced by amortization of related goodwill
is included in the Consolidated Statements of Earnings as a
component of interest, dividends and other investment income.
The principal effect of the restatement was to decrease
shareholders' equity as of December 31, 1995 by about $478
million from the amount reported in Berkshire's Consolidated
Financial Statements included in its Annual Report on Form 10-K
for the year ended December 31, 1995.
(b) Nature of operations and basis of consolidation
Berkshire is a holding company owning subsidiaries engaged in a
number of diverse business activities. The most important of
these is the property and casualty insurance business conducted
on both a direct and reinsurance basis. Further information
regarding this business and Berkshire's other reportable business
segments is contained in Note 17.
The accompanying consolidated financial statements include the
accounts of Berkshire consolidated with accounts of all its
subsidiaries. Intercompany accounts and transactions have been
eliminated. Certain reclassifications have been made from the
amounts previously reported in the Company's Consolidated
Financial Statements included in its Annual Report on Form 10-K
for the year ended December 31, 1995.
(c) Use of estimates in preparation of financial statements
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities at the date of the
financial statements and the reported amount of revenues and
expenses during the period. Actual results may differ from the
estimates and assumptions used in preparing the consolidated
financial statements.
(d) Cash equivalents
Cash equivalents consist of funds invested in money market accounts
and in investments with a maturity of three months or less when
purchased.
(e) Investments
Management determines the appropriate classifications of investments
in securities with fixed maturities and equity securities at the
time of purchase and reevaluates such designations as of each
balance sheet date. Investments in securities with fixed
maturities, except for such securities held by finance
businesses, are classified as available-for-sale. Securities
with fixed maturities held by finance businesses are classified
as held-to-maturity. Investments in equity securities, except for
investments accounted for under the equity method, are classified
as available-for-sale. Securities with fixed maturities are
deemed to be held-to-maturity securities when the Company has the
ability and positive intent to hold them to maturity.
Held-to-maturity securities are carried at amortized cost.
Available-for-sale securities are stated at fair value, with
unrealized gains and losses, net of tax, reported in a separate
component of shareholders' equity. Realized gains and losses on
sales of investments, as determined on a specific identification
basis, are included in the consolidated statements of earnings.
(f) Goodwill of acquired businesses
The difference between purchase cost and the fair value of the net
assets of acquired businesses is amortized on a straight line
basis over forty years.
(g) Insurance premium acquisition costs
For financial reporting purposes, certain costs of acquiring
insurance premiums are deferred, subject to ultimate
recoverability, and charged to income as the premiums are earned.
Generally, the ultimate recoverability of premium acquisition
costs is determined without regard to investment income.
5
<PAGE> 6
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)
(h) Deferred charges re reinsurance assumed
The excess of estimated liabilities for claims and claim costs
ultimately payable by the Insurance Group over consideration
received with respect to retroactive property/casualty
reinsurance contracts that provide for indemnification of
insurance risk, other than structured settlements, is established
as a deferred charge at inception of such contracts. The deferred
charges are subsequently amortized using the interest method over
the expected settlement periods of the claim liabilities. The
unamortized balance of deferred charges is included in other
assets.
(j) Losses and loss adjustment expenses
Liability for unpaid losses and loss adjustment expenses represents
the aggregate of such obligations of members of the Insurance
Group with respect to: (i) prospective property/casualty
insurance and reinsurance contracts, (ii) retroactive
property/casualty reinsurance contracts that provide for
indemnification of insurance risk, other than structured
settlements, and (iii) reinsurance contracts providing for
periodic payments with respect to settled claims ("structured
settlements"). Except for structured settlement liabilities which
are stated at discounted present values, the liability for unpaid
losses and loss adjustment expenses is at the aggregate of
estimated ultimate payment amounts.
Ultimate payment amounts with respect to prospective contracts are
determined from (i) individual case estimates, (ii) estimates of
incurred but not reported losses, based on past experience, and
(iii) reports of losses from ceding insurers.
Ultimate payment amounts with respect to retroactive reinsurance
contracts that provide for indemnification of insurance risk,
other than structured settlements, are established for financial
reporting purposes at maximum limits of indemnification under the
contracts. (See also 1(h) above related to deferred charges re
reinsurance assumed.)
Liabilities under structured settlement contracts are established
when the contracts are entered into, at the then present value of
the actuarially determined ultimate payment amount discounted at
the prevailing market interest rate. Annual accretions to the
liabilities are charged to losses incurred. (This accounting
policy also applies to annuity reserves which are included in the
liabilities of finance businesses.)
(k) Insurance premiums
Insurance premiums for prospective insurance and non-property
catastrophe reinsurance policies are recognized as revenues
ratably over their terms with unearned premiums computed on a
monthly or daily pro rata basis. Premiums for catastrophe excess
of loss reinsurance coverages are deferred until the earlier of a
loss occurrence or policy expiration. Consideration received for
indemnification of risk under retroactive reinsurance contracts
and structured settlements is accounted for as premiums earned at
the inception of the contracts. Premiums earned are stated net of
amounts ceded to reinsurers.
(m) Reinsurance
Provisions for losses and loss adjustment expenses are reported in
the accompanying consolidated statements of earnings after
deducting estimates of recoveries under reinsurance contracts.
Such recoveries totalled $14 million, $61 million, and $34
million for 1995, 1994 and 1993, respectively. Reinsurance
contracts do not relieve the Insurance Group Members of their
obligations to indemnify policyholders with respect to the
underlying insurance and reinsurance contracts. Estimates of
losses and loss adjustment expenses recoverable under reinsurance
contracts are included in receivables.
(n) Accounting changes
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). The adoption of SFAS 109 changed
the Company's method of accounting for income taxes from the
"deferred method" to the "asset and liability method." Under the
asset and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for future tax consequences
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases. The provisions of SFAS 109 require that the effect on
deferred taxes of a change in tax rates be recognized in income
in the period that includes the enactment date.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS 115").
As permitted under the statement, the Company elected to adopt the
statement's provisions as of December 31, 1993. Among its
provisions, the statement requires a change in the accounting for
equity securities held by non-insurance entities. Prior to the
adoption of SFAS 115, such securities were carried at the lower of
aggregate cost or market. Under the provisions of SFAS 115, these
securities are now carried at market and accounted for in the same
manner as equity securities held by the Company's insurance
subsidiaries.
6
<PAGE> 7
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(2) BUSINESS ACQUISITIONS
During 1995, the Company consummated mergers with Helzberg's Diamond
Shops, Inc. ("Helzberg's") and R.C. Willey Home Furnishings ("R.C. Willey") by
reissuing 15,762 shares of its common stock held in treasury in exchange for
100% of the common stock of each of these companies. Helzberg's consists of a
chain of 166 jewelry stores operating in 25 states and R.C. Willey, through its
seven locations, is the dominant retailer of home furnishings in Utah.
In 1993, the Company consummated a merger with the privately held Dexter
Shoe Companies ("Dexter") by reissuing 25,203 shares of its common stock held
in treasury in exchange for 100% of the outstanding common stock of Dexter.
Dexter manufactures and distributes men's and women's dress, casual and
athletic shoes.
Each of these mergers was accounted for by the purchase method and,
accordingly, the operating results of these businesses are included in the
Company's consolidated results of operations from the effective dates of the
mergers (Dexter -- November 7, 1993; Helzberg's -- April 30, 1995; R.C. Willey
- -- June 29, 1995). Had the results of these businesses been included commencing
with operations at the beginning of the year of their respective acquisition by
Berkshire, the reported results would not have been materially affected.
(3) MERGER WITH GEICO CORPORATION
On January 2, 1996, GEICO Corporation ("GEICO") became an indirect
wholly-owned subsidiary of Berkshire as a result of the merger of an indirect
wholly-owned subsidiary of Berkshire with and into GEICO. (The date of January
2, 1996 is hereafter referred to as the "Merger Date".) The merger was
consummated pursuant to an Agreement and Plan of Merger (the "Agreement") dated
August 25, 1995. Pursuant to the Agreement, each issued and outstanding common
share of GEICO on the Merger Date, except shares held by Berkshire's
subsidiaries and GEICO, was converted into the right to receive $70 per share,
or an aggregate amount of $2.3 billion (the "Merger Consideration"). The
amount of the Merger Consideration was determined based upon 33,284,733
outstanding common shares held by the public on the Merger Date.
As of the Merger Date, subsidiaries of Berkshire owned 34,250,000 common
shares of GEICO which were acquired in 1980 and earlier years for an aggregate
cost of $45.7 million. Up to the Merger Date, neither Berkshire nor its
subsidiaries had acquired any shares of GEICO's common stock since 1980.
However, Berkshire's ownership percentage, due to intervening stock repurchases
by GEICO, gradually increased from about 33% in 1980 to almost 51% immediately
prior to the Merger Date.
GEICO, through its subsidiaries, is a multiple line property casualty
insurer, the principal business of which is writing private passenger
automobile insurance. The condensed financial statements which follow are
derived from GEICO's audited consolidated financial statements as of December
31, 1995 and for the year then ended.
GEICO CORPORATION
(dollars in millions)
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET CONDENSED STATEMENT OF EARNINGS
AS OF DECEMBER 31, 1995 FOR THE YEAR ENDED DECEMBER 31, 1995
<S> <C> <C> <C>
ASSETS REVENUES
Cash and cash equivalents . . . . . . . . $ 391.6 Premiums . . . . . . . . . . . . . . . . $2,787.0
Net investment income . . . . . . . . . . 226.8
Investments: Realized investment gain . . . . . . . . 21.6
Securities with fixed maturities . . . 3,680.8 Other . . . . . . . . . . . . . . . . . . 18.6
Equity securities . . . . . . . . . . . 971.1 --------
3,054.0
Other . . . . . . . . . . . . . . . . . . 752.0 -------
------- COST AND EXPENSES
$5,795.5 Insurance losses and expenses . . . . . . 2,711.3
======== Interest on debt . . . . . . . . . . . . 34.4
LIABILITIES AND SHAREHOLDERS' EQUITY -------
Property and casualty insurance 2,745.7
policyholder liabilities . . . . . . . $3,025.8 -------
Debt . . . . . . . . . . . . . . . . . . 434.4
Earnings before income taxes . . . . . . 308.3
Other . . . . . . . . . . . . . . . . . . 466.9 Income taxes . . . . . . . . . . . . . . 60.7
------- -------
3,927.1 Net earnings . . . . . . . . . . . . . . $247.6
Shareholders' equity . . . . . . . . . . 1,868.4 ======
-------
$5,795.5
========
</TABLE>
7
<PAGE> 8
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) MERGER WITH GEICO CORPORATION (Continued)
The merger will be accounted for by the purchase method and, therefore,
assets and liabilities of GEICO will be recorded in Berkshire's consolidated
financial statements at fair value. The excess of the purchase cost over the
fair value of net assets acquired at the Merger Date will be recorded as
goodwill and subsequently amortized over 40 years. The following unaudited pro
forma combined condensed balance sheet results from combining GEICO's condensed
consolidated balance sheet with Berkshire's consolidated balance sheet as of
December 31, 1995 to give effect to the merger as if it had occurred on such
date.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1995
(dollars in millions)
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Cash and cash equivalents . . . . . . . $ 758.3 Property and casualty insurance
policyholder liabilities . . . . . .$ 7,655.5
Investments:
Securities with fixed maturities . . . 5,104.0 Income taxes, principally deferred . . 4,873.6
Equity securities . . . . . . . . . . . 20,812.9 Borrowings under investment agreements
Receivables . . . . . . . . . . . . . . . 1,213.9 and other debt . . . . . . . . . . . 1,475.5
Goodwill . . . . . . . . . . . . . . . . 2,293.7 Other liabilities . . . . . . . . . . . 1,607.8
-------
Other assets . . . . . . . . . . . . . . 2,432.9 15,612.4
-------- --------
$32,615.7 Minority shareholders' interest . . . . 264.5
========= -------
Total shareholders' equity . . . . . . 16,738.8
--------
$32,615.7
=========
</TABLE>
The preceding pro forma balance sheet reflects purchase accounting
adjustments which result in the consolidation of Berkshire's previously owned
investments in GEICO on a "step-by-step" basis, in accordance with the
provisions of Accounting Research Bulletin 51, "Consolidated Financial
Statements". Prior to the Merger Date the investment in GEICO common stock
was classified as an available- for-sale security and carried at market value
in accordance with the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (See Note 1[a]).
(4) REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) from sales and redemptions of investments are
summarized below (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Equity securities --
Gross realized gains . . . . . . . . . . . . . . . . . . . . $109.9 $185.7 $518.4 *
Gross realized losses . . . . . . . . . . . . . . . . . . . . (14.2) (96.9) (11.9)
Securities with fixed maturities --
Gross realized gains . . . . . . . . . . . . . . . . . . . . 100.8 6.8 40.1
Gross realized losses . . . . . . . . . . . . . . . . . . . . (2.4) (4.3) (0.2)
------ ------- ------
$194.1 $ 91.3 $546.4
====== ====== ======
</TABLE>
* During the fourth quarter of 1993, a subsidiary of Berkshire sold 10,000,000
common shares of its investment in Capital Cities/ABC, Inc. in connection
with that company's offer to buy from its shareholders up to 20,000,000 of
its common shares. Berkshire's gross realized gain from this transaction was
$457.5.
8
<PAGE> 9
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) INVESTMENTS IN SECURITIES WITH FIXED MATURITIES
The amortized cost and estimated fair values as of December 31, 1995 and
1994, of investments in securities with fixed maturities are as follows (in
millions):
<TABLE>
<CAPTION>
December 31, 1995 Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies . . . $ 80.9 $ 2.2 $ -- $ 83.1
Obligations of states, municipalities
and political subdivisions . . . . . . . . . . 346.4 17.2 (0.5) 363.1
Redeemable preferred stocks . . . . . . . . . . . . 682.5 153.4 (2.9) 833.0
Mortgage-backed securities . . . . . . . . . . . . 138.3 5.9 (0.2) 144.0
-------- ------ ------ --------
$1,248.1 $178.7 $ (3.6) $1,423.2
======== ====== ====== ========
December 31, 1994 Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------- ------------
Bonds:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies . . . $ 733.5 $ -- $ (16.7) $ 716.8
Obligations of states, municipalities
and political subdivisions . . . . . . . . . . 601.0 22.3 (3.5) 619.8
Corporate bonds . . . . . . . . . . . . . . . . . 8.0 2.5 -- 10.5
Redeemable preferred stocks . . . . . . . . . . . . 1,123.0 50.0 (3.0) 1,170.0
Mortgage-backed securities . . . . . . . . . . . . 40.0 -- (1.4) 38.6
-------- -------- ------- --------
$2,505.5 $ 74.8 $ (24.6) $2,555.7
======== ======== ======== ========
</TABLE>
Amounts above exclude securities with fixed maturities held by finance
businesses. See note 7.
Investments in securities with fixed maturities include 358,000 shares of
USAir Group, Inc. Series A Cumulative Convertible Preferred Stock ("USAir
Preferred Shares"). The USAir Preferred Shares were acquired in 1989 for $358
million. If not called or converted prior to August 7, 1999, the USAir
Preferred Shares are mandatorily redeemable by USAir Group, Inc. ("USAir") at
$1,000 per share ($358 million in the aggregate), plus accrued dividends.
On September 29, 1994, USAir announced that it was deferring the regular
quarterly dividend payments on the USAir Preferred Shares. Since that date,
USAir has not paid any dividends on the USAir Preferred Shares. For several
years prior to 1995, USAir incurred very significant losses. Consequently,
during 1994, Berkshire management concluded that an other-than-temporary
decline in the value of USAir Preferred Shares had arisen. The 1994
consolidated statement of earnings includes a pre-tax charge of $268.5 million
to reflect the decline.
During 1995, USAir returned to profitability, but continued the deferral
of dividends on the USAir Preferred Shares. Berkshire management has estimated
the fair value of the USAir Preferred Shares to be $214.8 million at December
31, 1995. The increase of $125.3 million in the estimated fair value over the
amount recorded at December 31, 1994, is included as a component of the
increase during 1995 in unrealized appreciation of investments.
Shown below are the amortized cost and estimated fair values of the above
securities at December 31, 1995, 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.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------------------------
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . $ 375.6 $ 388.0
Due after one year through five years . . . . . . . . . . . . . . . . . 699.6 850.3
Due after five years through ten years . . . . . . . . . . . . . . . . 31.1 37.1
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 3.8
-------- --------
1,109.8 1,279.2
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . 138.3 144.0
-------- --------
$1,248.1 $1,423.2
======== ========
</TABLE>
9
<PAGE> 10
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) INVESTMENTS IN EQUITY SECURITIES
Aggregate data with respect to the consolidated investment in equity
securities are shown below (in millions):
<TABLE>
<CAPTION>
December 31, 1995
Unrealized Carrying
Cost Gains Value ***
------------------------------------------
<S> <C> <C> <C>
Common stock of:
American Express Company (a) . . . . . . . . . . . . $1,392.7 $ 653.6 $ 2,046.3
Capital Cities/ABC, Inc. (b) . . . . . . . . . . . . 345.0 2,122.5 2,467.5
The Coca-Cola Company . . . . . . . . . . . . . . . 1,298.9 6,126.1 7,425.0
Federal Home Loan Mortgage Corporation . . . . . . . 260.1 783.9 1,044.0
GEICO Corporation (c) . . . . . . . . . . . . . . . 1,175.8 -- 1,175.8
The Gillette Company . . . . . . . . . . . . . . . 600.0 1,902.0 2,502.0
Wells Fargo & Company (d) . . . . . . . . . . . . . . 423.7 1,043.2 1,466.9
All other equity securities . . . . . . . . . . . . . . 1,680.0 1,210.1* 2,890.1
-------- --------- ---------
$7,176.2 $13,841.4 $21,017.6
======== ========= =========
December 31, 1994
Unrealized Carrying
Cost Gains Value ***
------------------------------------------
Common stock of:
American Express Company (a) . . . . . . . . . . . . $ 723.9 $ 95.0 $ 818.9
Capital Cities/ABC, Inc. (b) . . . . . . . . . . . . 345.0 1,360.0 1,705.0
The Coca-Cola Company . . . . . . . . . . . . . . . 1,298.9 3,851.1 5,150.0
Federal Home Loan Mortgage Corporation . . . . . . . 270.5 373.9 644.4
GEICO Corporation (c) . . . . . . . . . . . . . . . 949.7 -- 949.7
The Gillette Company . . . . . . . . . . . . . . . 600.0 1,197.0 1,797.0
Wells Fargo & Company (d) . . . . . . . . . . . . . . 423.7 561.0 984.7
All other equity securities. . . . . . . . . . . . . . . 2,163.8 582.8** 2,746.6
-------- -------- ---------
$6,775.5 $8,020.8 $14,796.3
======== ======== =========
</TABLE>
* Represents gross unrealized gains $1,302.1 less gross
unrealized losses $92.0.
** Represents gross unrealized gains $719.0 less gross unrealized
losses $136.2.
*** Represents market value for all investments in equity
securities except for GEICO Corporation. See footnote (c)
which follows.
(a) American Express Company
Common shares of American Express Company ("AXP") owned by Berkshire
and its subsidiaries possessed approximately 10% of the voting
rights of all AXP shares outstanding at December 31, 1995. The
shares are held subject to various agreements with the Federal
Reserve Board, Federal Deposit Insurance Corporation and certain
state insurance and banking regulators which, among other things,
prohibit Berkshire from (i) seeking representation on the Board of
Directors of AXP (Berkshire may agree, if it so desires, at the
request of management or the Board of Directors of AXP to have no
more than one representative stand for election to the Board of
Directors of AXP) and (ii) acquiring or retaining shares that
would cause its ownership of AXP voting securities to equal or
exceed 17% of the amount outstanding (should Berkshire have a
representative on the board of directors, such amount is limited
to 15%). In connection therewith, Berkshire has entered into an
agreement with AXP which became effective when Berkshire's
ownership interest in AXP voting securities reached 10% and will
remain effective so long as Berkshire owns 5% or more of AXP's
voting securities. The agreement, among other things, obligates
Berkshire, so long as Harvey Golub is chief executive officer of
AXP, to vote its shares in accordance with the recommendations of
AXP's Board of Directors. Additionally, subject to certain
exceptions, Berkshire has agreed not to sell AXP common shares to
any person who owns 5% or more of AXP voting securities or seeks
to control AXP, without the consent of AXP.
10
<PAGE> 11
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) INVESTMENTS IN EQUITY SECURITIES (Continued)
(b) Capital Cities/ABC, Inc.
Common shares of Capital Cities/ABC, Inc. ("Capital Cities") owned
by Berkshire subsidiaries possessed approximately 13% (consisting
of 20,000,000 Capital Cities common shares) of the voting rights
of all Capital Cities shares outstanding at December 31, 1995.
On January 4, 1996, shareholders of Capital Cities and The Walt
Disney Company ("Disney") approved an agreement by and between
Disney and Capital Cities whereby each Capital Cities common
share will be converted at the election of the holder, subject to
certain limitations including proration, into the right to
receive for each share of Capital Cities stock either a) one
share of Disney common stock and $65 in cash; or b) 2.048 shares
of Disney stock; or c) $127 in cash. Berkshire has elected to
receive 2.048 shares of Disney stock for each of its shares of
Capital Cities stock. However, the election is subject to
proration and the actual consideration to be received is not
currently known. It is expected that Berkshire will receive its
share of the consideration on or about March 14, 1996.
(c) GEICO Corporation
Subsidiaries of Berkshire owned shares of common stock of GEICO that
possessed approximately 51% of the voting rights of all GEICO
shares outstanding at December 31, 1995. Prior to January 2,
1996, Berkshire maintained an independent proxy arrangement for
voting of the shares as required by Order of GEICO's domiciliary
insurance supervisory authority. The Order, dating from Berkshire
subsidiaries' major purchase of the shares in 1976, prohibited
Berkshire from seeking or causing to change the independent
proxy. Also, under the Order, no officer or director of Berkshire
or of any affiliate or subsidiary of Berkshire was permitted to
serve as a director of GEICO. Because the Order divested
Berkshire of its voting rights with respect to the shares,
Berkshire has not consolidated the accounts of GEICO in its
financial statements. On January 2, 1996, Berkshire acquired the
remaining 49% of GEICO's common shares not previously owned for
$70 per share or approximately $2.3 billion. The acquisition of
such shares was pursuant to an Agreement and Plan of Merger dated
August 25, 1995, between Berkshire and GEICO. In connection
therewith, the independent proxy arrangement was vacated
effective January 2, 1996. Accordingly, beginning in 1996,
GEICO's accounts will be included in Berkshire's consolidated
financial statements. The cost and carrying value of the
investment in GEICO common stock included in the preceding table
represents Berkshire's cost plus its share of GEICO's
undistributed accumulated earnings and unrealized appreciation on
investments. See Notes 1(a) and 3 for additional information.
(d) Wells Fargo & Company
Subsidiaries of Berkshire owned common shares of Wells Fargo &
Company ("Wells Fargo") that possessed approximately 14% of the
voting rights of all Wells Fargo shares outstanding at December
31, 1995. The shares are held subject to a Passivity Agreement,
the terms of which among other things prohibit Berkshire, without
prior approval from the Federal Reserve Board of San Francisco,
from seeking representation on the Board of Directors of Wells
Fargo and from disposing of more than 5% of the Wells Fargo
securities in any single transaction. In connection therewith,
Berkshire has granted a proxy to the Secretary of Wells Fargo,
with respect to all Wells Fargo stock presently owned and with
respect to such additional shares of Wells Fargo stock as
Berkshire may purchase and hold in the future.
11
<PAGE> 12
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(7) FINANCE BUSINESSES
Berkshire's finance businesses are comprised of commercial and consumer
finance companies and an annuity business. Assets and liabilities of
Berkshire's finance businesses are summarized below (in millions):
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 40.7 $ 16.0
Installment loans and other receivables . . . . . . . . . . . . . . 185.9 158.0
Fixed maturity investments (a) . . . . . . . . . . . . . . . . . . 529.4 538.9
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7 4.2
------ -------
$756.7 $717.1
====== ======
LIABILITIES
8.125% Notes, payable in 1996 . . . . . . . . . . . . . . . . . . . $120.0 $120.0
Borrowings under investment agreements (b) . . . . . . . . . . . . 403.6 370.0
Annuity reserves . . . . . . . . . . . . . . . . . . . . . . . . . 116.7 41.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.9 31.4
------ ------
$685.2 $562.4
====== ======
</TABLE>
(a) At December 31, 1995 and 1994, mortgage-backed securities of $336.0
and $396.0 respectively were included in this caption. Estimated fair
values and gross unrealized gains and losses as of December 31, 1995
and 1994, are as follows (in millions):
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
-------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
1995 . . . . . . . . . $529.4 $ 29.0 $ (1.0) $557.4
1994 . . . . . . . . . 538.9 0.6 (21.1) 518.4
</TABLE>
(b) Borrowings under investment agreements are made pursuant to contracts
with terms generally ranging from six months to thirty years and at
fixed interest rates ranging from 4% to 7%. Payments of amounts
outstanding at December 31, 1995, are expected to be required no
earlier than as follows (in millions):
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . $303.3
1997 . . . . . . . . . . . . . . 26.5
1998 . . . . . . . . . . . . . . 0.3
1999 . . . . . . . . . . . . . . 1.9
2000 . . . . . . . . . . . . . . -0-
After 2000 . . . . . . . . . . . 71.6
</TABLE>
Income from finance businesses for each of the past three years is
summarized below (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
REVENUES
Interest on loans . . . . . . . . . . . . . . . . . . . . . $ 38.4 $ 37.4 $ 42.7
Interest and dividend income . . . . . . . . . . . . . . . 39.2 34.8 20.1
Annuity premiums earned . . . . . . . . . . . . . . . . . . 75.2 36.0 5.6
------- ------ ------
152.8 108.2 68.4
------- ------ ------
COST AND EXPENSES
Interest expense . . . . . . . . . . . . . . . . . . . . . 28.9 31.7 24.2
Annuity benefits and underwriting expenses . . . . . . . . 80.8 37.6 5.7
General and administrative expenses . . . . . . . . . . . . 16.5 14.0 16.3
----- ----- -----
126.2 83.3 46.2
----- ----- -----
$26.6 $24.9 $22.2*
===== ===== =====
</TABLE>
* Until October 1993, a savings and loan business was also included in this
group of businesses. Income from finance businesses includes earnings of
$5.9 in 1993 from this business.
12
<PAGE> 13
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(7) FINANCE BUSINESSES (Continued)
The preceding summarized financial data includes the commercial and
consumer finance activities conducted by the Scott Fetzer Financial Group and
its subsidiaries. Assets and liabilities of these businesses are summarized
below (in millions).
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1994
------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 40.5 $ 15.6
Installment loans and other receivables ** . . . . . . . . . . . . 334.9 176.7
Mortgage-backed securities, at cost
(Fair value: 1995 -- $211.6; 1994 -- $344.7) . . . . . . . . . . 211.7 357.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7 2.6
------ ------
$587.8 $551.9
====== ======
LIABILITIES
8.125% Notes, payable in 1996 . . . . . . . . . . . . . . . . . . . $120.0 $120.0
Borrowings under investment agreements . . . . . . . . . . . . . . 403.6 370.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.9 27.6
------ ------
$553.5 $517.6
====== ======
</TABLE>
** Includes receivables from affiliated companies of $182.8 and $18.7 at
December 31, 1995 and 1994, respectively.
Net income from Scott Fetzer Financial Group businesses for each of
the past three years is summarized below (in millions).
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ ------
<S> <C> <C> <C>
REVENUES
Interest on installment loans and other receivables *** . . $43.4 $41.4 $38.9
Other interest . . . . . . . . . . . . . . . . . . . . . . 15.0 21.3 7.8
----- ----- -----
58.4 62.7 46.7
----- ----- -----
COST AND EXPENSES
Interest expense . . . . . . . . . . . . . . . . . . . . . 28.9 31.7 17.3
General and administrative expenses . . . . . . . . . . . . 16.2 13.2 12.9
----- ----- -----
45.1 44.9 30.2
----- ----- -----
Income before taxes . . . . . . . . . . . . . . . . . . . . 13.3 17.8 16.5
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 4.6 6.3 7.2
----- ----- -----
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 8.7 $11.5 $ 9.3
===== ===== =====
</TABLE>
*** Includes interest on loans and receivables from affiliated companies of
$5.0, $4.0 and $0.9 in 1995, 1994 and 1993, respectively.
13
<PAGE> 14
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) OTHER ASSETS
Other assets are summarized below (in millions):
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1994
---------------------------
<S> <C> <C>
Inventory . . . . . . . . . . . . . . . . . . . . . . . . $ 601.1 $425.4
Deferred charges re reinsurance assumed . . . . . . . . . 389.7 440.7
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 428.4 365.3
------ ------
$1,419.2 $1,231.4
======== ========
</TABLE>
(9) UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
Supplemental data with respect to unpaid losses and loss adjustment
expenses of property/casualty insurance subsidiaries (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
Unpaid losses and loss adjustment expenses:
Balance at beginning of year . . . . . . . . . . . $3,430.0 $3,155.9 $3,219.4
Less ceded liabilities and deferred charges . . . . 573.9 597.9 655.3
-------- -------- --------
Net balance . . . . . . . . . . . . . . . . . . . . 2,856.1 2,558.0 2,564.1
-------- -------- --------
Incurred losses recorded:
Current accident year . . . . . . . . . . . . . . . 556.5 505.1 439.4
All prior accident years . . . . . . . . . . . . . 55.5 60.2 11.3
-------- -------- --------
Total incurred losses . . . . . . . . . . . . . . . 612.0 565.3 450.7
-------- -------- --------
Payments with respect to:
Current accident year . . . . . . . . . . . . . . . 43.6 50.9 47.1
All prior accident years . . . . . . . . . . . . . 246.2 216.3 409.7
-------- -------- --------
Total payments . . . . . . . . . . . . . . . . . . 289.8 267.2 456.8
-------- -------- --------
Unpaid losses and loss adjustment expenses:
Net balance at end of year . . . . . . . . . . . . 3,178.3 2,856.1 2,558.0
Plus ceded liabilities and deferred charges . . . . 520.3 573.9 597.9
-------- -------- --------
Balance at end of year * . . . . . . . . . . . . . . $3,698.6 $3,430.0 $3,155.9
======== ======== ========
</TABLE>
Incurred losses "all prior accident years" reflects the amount of
estimation error charged or credited to earnings in each year. In addition,
this amount includes amortization of deferred charges re reinsurance assumed
and accretion of discounted structured settlement liabilities. The use of
estimates is inherent in the process of establishing unpaid losses and loss
expenses. Additional information will be revealed over time and those
estimates and assumptions will be revised resulting in gains or losses in the
period made.
* Unpaid losses and loss adjustment expenses include liabilities
established with respect to retroactive reinsurance contracts that
provide for indemnification of insurance risk. These liabilities
aggregated $1,283.5, $1,296.0 and $1,181.2 at December 31, 1995, 1994 and
1993 respectively. Related deferred charges were established with respect
to these contracts and are reported as other assets. Also included in
unpaid losses and loss adjustment expenses are discounted structured
settlement reinsurance liabilities, which totalled $221.7, $231.3 and
$254.3 at December 31, 1995, 1994 and 1993 respectively.
14
<PAGE> 15
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(10) INCOME TAXES
The liability for income taxes as reflected in the accompanying
Consolidated Balance Sheets represent estimates of liabilities as follows (in
millions):
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1994
----------------------------
<S> <C> <C>
Payable currently . . . . . . . . . . . . . . . . . . . . $ 86.8 $ 62.4
Deferred . . . . . . . . . . . . . . . . . . . . . . . . 4,762.7 2,725.2
---------- ---------
$ 4,849.5 $ 2,787.6
========== =========
</TABLE>
As discussed in Note 1(n), the Company adopted SFAS 109 as of January 1,
1993. The cumulative effect of adopting SFAS 109 on the Company's financial
statements was to decrease 1993 net income by about $33 million. It primarily
represents the impact of adjusting deferred taxes related to unrealized
appreciation of equity securities which arose prior to 1987 to reflect the
then current capital gain tax rate of 34% as opposed to the 28% rate which was
in effect when the deferred taxes originated.
During 1993, the federal corporate income and capital gain tax rate was
increased from 34% to 35% retroactive to January 1, 1993. Accordingly, as
required under SFAS 109, the Company recorded a charge to 1993 earnings of
approximately $54 million. Most of this charge relates to the impact of
adjusting deferred taxes applicable to unrealized appreciation of equity
securities.
The Consolidated Statements of Earnings reflect charges for income taxes
as shown below (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------
<S> <C> <C> <C>
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . $252.3 $138.1 $328.0
State . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.6 22.1 20.9
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 3.1 4.0
------ ------ ------
$276.2 $163.3 $352.9 *
====== ====== ======
Current . . . . . . . . . . . . . . . . . . . . . . . . . . $331.0 $188.5 $400.8
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . (54.8) (25.2) (47.9)
------ ------ ------
$276.2 $163.3 $352.9 *
====== ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994, are shown below (in millions):
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Relating to unrealized appreciation of investments . . . . . . . $4,908.5 $2,809.9
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157.0 138.3
-------- --------
5,065.5 2,948.2
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . (302.8) (223.0)
-------- --------
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . $4,762.7 $2,725.2
======== ========
</TABLE>
Charges for income taxes are reconciled to hypothetical amounts computed
at the federal statutory rate in the table shown below (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
Net earnings before income taxes . . . . . . . . . . . . . $1,084.4 $ 725.0 $1,293.3
======== ========= ========
Hypothetical amounts applicable to above
computed at the federal statutory rate . . . . . . . . . $ 379.5 $ 253.8 $ 452.7
Decreases, resulting from:
Tax-exempt interest income . . . . . . . . . . . . . . . (10.6) (14.6) (15.0)
Dividends received deduction . . . . . . . . . . . . . . (86.3) (81.2) (68.3)
State income taxes, less federal income tax benefit . . . . 14.7 14.4 13.5
Other differences, net . . . . . . . . . . . . . . . . . . (21.1) (9.1) (30.0)
-------- -------- --------
Total income taxes . . . . . . . . . . . . . . . . . . . . $ 276.2 $ 163.3 $ 352.9*
======== ======== ========
</TABLE>
* Excludes the cumulative effect of change in accounting for income taxes
and the effect of the change in federal income tax rate on deferred taxes
applicable to unrealized appreciation of equity securities.
15
<PAGE> 16
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(11) BORROWINGS UNDER INVESTMENT AGREEMENTS AND OTHER DEBT
Liabilities reflected for this balance sheet caption are as follows
(in millions):
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1994
--------------------------------
<S> <C> <C>
Borrowings under investment agreements . . . . . . . . . . . . . . . . $ 878.9 $ 754.1
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.8 56.6
-------- --------
$1,061.7 $ 810.7
======== ========
</TABLE>
Borrowings under investment agreements are made pursuant to contracts
with terms generally ranging from three months to forty years and calling for
interest payable, normally semiannually, at fixed rates ranging from 3% to 9%
per annum. The borrowings are senior unsecured debt obligations of the Company.
No materially restrictive covenants are included in any of the various debt
agreements.
Payments of amounts outstanding at December 31, 1995, are expected to be
required no earlier than as follows (in millions):
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 After 2000
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$159.5 $59.2 $107.3 $44.6 $13.7 $677.4
</TABLE>
(12) SHAREHOLDERS' EQUITY ACCOUNTS
Changes in Shareholders' Equity accounts during the most recent three
years were as follows (dollars in millions except per share amounts):
<TABLE>
<CAPTION>
Common Capital
Stock of $5 in excess Net Unrealized Retained Treasury
Par Value of par value Appreciation Earnings Stock
----------- ------------ -------------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1992 . . . . . . . . . . . . . . $6.9 $ 182.3 $3,633.4 $4,352.6 $42.3
Common stock (3,944 shares) issued upon conversion
of Zero Coupon Convertible Subordinated Notes. . . 45.5
Common stock (25,203 shares) issued in connection
with acquisition of Dexter Shoe Companies . . . . 428.3 (4.7)
Increase during 1993 in unrealized appreciation
included in carrying value of equity securities. . 812.6
Change during 1993 in deemed applicable income
taxes . . . . . . . . . . . . . . . . . . . . . . (296.7)
Increase in minority shareholders' interest in
unrealized appreciation . . . . . . . . . . . . . (2.5)
Net earnings 1993 . . . . . . . . . . . . . . . . . . 843.6
Cumulative effect of adoption on December 31, 1993,
of SFAS 115 (See note 1[n]) . . . . . . . . . . . 171.8
---- -------- -------- -------- -----
Balance December 31, 1993 . . . . . . . . . . . . . . 6.9 656.1 4,318.6 5,196.2 37.6
Increase during 1994 in unrealized appreciation
included in carrying value of investments . . . . 1,486.5
Change during 1994 in deemed applicable income
taxes . . . . . . . . . . . . . . . . . . . . . . (518.3)
Increase in minority shareholders' interest in
unrealized appreciation . . . . . . . . . . . . . (9.9)
Net earnings 1994 . . . . . . . . . . . . . . . . . . 553.0
---- -------- -------- -------- -----
Balance December 31, 1994 . . . . . . . . . . . . . . 6.9 656.1 5,276.9 5,749.2 37.6
Common stock (15,762 shares) issued in connection
with acquisitions of Helzberg's Diamond Shops
and R.C. Willey Home Furnishings . . . . . . . . . 345.6 (2.9)
Increase during 1995 in unrealized appreciation
included in carrying value of investments . . . . 6,177.1
Change during 1995 in deemed applicable income
taxes . . . . . . . . . . . . . . . . . . . . . . (2,176.2)
Increase in minority shareholders' interest in
unrealized appreciation . . . . . . . . . . . . . (57.1)
Net earnings 1995 . . . . . . . . . . . . . . . . . . 794.9
---- -------- -------- -------- -----
Balance December 31, 1995 . . . . . . . . . . . . . . $6.9 $1,001.7 $9,220.7 $6,544.1 $34.7
==== ======== ======== ======== =====
</TABLE>
16
<PAGE> 17
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(13) DIVIDEND RESTRICTIONS - INSURANCE SUBSIDIARIES
Payments of dividends by Insurance Group members are restricted by
insurance statutes and regulations. Without prior regulatory approval in 1996,
Berkshire can receive up to approximately $787 million as dividends from
insurance subsidiaries.
Combined shareholders' equity of insurance subsidiaries determined
pursuant to statutory accounting rules (Statutory Surplus as Regards
Policyholders) was approximately $19.5 billion at December 31, 1995. This
amount exceeded by approximately $3.2 billion the corresponding amount
determined on the basis of generally accepted accounting principles; the
difference principally represents deferred income tax assets and liabilities
and deferred charges re reinsurance assumed recognized for financial reporting
purposes but not for statutory reporting purposes.
(14) FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107"), requires certain fair value
disclosures. Fair value disclosures are required for most investment securities
as well as other contractual assets and liabilities. Certain financial
instruments, including insurance contracts, were excluded from SFAS 107
disclosure requirements due to perceived difficulties in measuring fair value.
Accordingly, an estimation of fair value was not made with respect to unpaid
losses and loss adjustment expenses.
In determining fair value, the Company used quoted market prices when
available. For instruments where quoted market prices were not available, the
Company used independent pricing services or appraisals by the Company's
management. Those services and appraisals reflected the estimated present
values utilizing current risk adjusted market rates of similar instruments.
Considerable judgement is necessarily required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value.
The carrying values of cash and cash equivalents, receivables and
accounts payable, accruals and other liabilities are deemed to be reasonable
estimates of their fair values. The estimated fair values of the Company's
other financial instruments as of December 31, 1995 and 1994, are as follows
(in millions):
<TABLE>
<CAPTION>
Carrying Value Estimated Fair Value
-------------- ---------------------
1995 1994 1995 1994
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments in securities with fixed
maturities . . . . . . . . . . . . . . $ 1,423.2 $ 2,555.7 $ 1,423.2 $ 2,555.7
Investments in equity securities. . . . . 20,017.6 14,796.3 22,235.0 15,485.3
Assets of finance businesses . . . . . . 756.7 717.1 792.3 702.9
Borrowings under investment agreements and
other debt . . . . . . . . . . . . . . 1,061.7 810.7 1,095.0 768.6
Liabilities of finance businesses . . . . 685.2 562.4 704.4 546.7
</TABLE>
(15) SUPPLEMENTAL CASH FLOW INFORMATION
A summary of supplemental cash flow information is presented in the
following table (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . $ 294.6 $ 411.1 $ 235.0
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 83.9 90.6 70.6
Non-cash investing and financing activities:
Liabilities assumed in connection with acquisition of businesses 248.0 -- 26.1
Common shares issued in connection with acquisitions of
businesses . . . . . . . . . . . . . . . . . . . . . . . 348.5 -- 433.0
Common shares issued upon conversions of Zero Coupon
Convertible Subordinated Notes . . . . . . . . . . . . . -- -- 45.5
</TABLE>
17
<PAGE> 18
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(16) QUARTERLY DATA
A summary of revenues and earnings by quarter for each of the last two
years is presented in the following table. This information is unaudited.
Dollars are in millions, except per share amounts.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1995 Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $944.1 $1,018.3 $1,107.2 $1,493.7
------ -------- -------- --------
Earnings:
Excluding realized investment gain . . . . . . . . . $143.9 $140.3 $151.3 $234.4
Realized investment gain (loss) . . . . . . . . . . . (4.7) 51.7 43.2 34.8
------ ------ ------ ------
Net earnings . . . . . . . . . . . . . . . . . . . . $139.2 $192.0 $194.5 $269.2
====== ====== ====== ======
Earnings per share:
Before realized investment gain . . . . . . . . . . $122.22 $118.54 $126.78 $196.56
Realized investment gain (loss) . . . . . . . . . . . (4.03) 43.71 36.18 29.16
------- ------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . . . . $118.19 $162.25 $162.96 $225.72
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1994 Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $925.4 $886.8 $814.4 $1,283.7
------ ------ ------ --------
Earnings:
Excluding realized investment gain . . . . . . . . . $ 89.1 $175.8 $128.1 $ 98.8*
Realized investment gain (loss) . . . . . . . . . . . 50.6 5.9 (4.7) 9.3
------ ------- ------ --------
Net earnings . . . . . . . . . . . . . . . . . . . . $139.7 $181.7 $123.4 $ 108.1
====== ====== ====== ========
Earnings per share:
Before realized investment gain . . . . . . . . . . . $ 75.68 $149.30 $108.72 $83.77*
Realized investment gain (loss) . . . . . . . . . . . 42.94 4.98 (3.94) 7.93
------- ------- ------- ------
Net earnings . . . . . . . . . . . . . . . . . . . . $118.62 $154.28 $104.78 $91.70
======= ======= ======= ======
</TABLE>
* Includes a nonrecurring charge of $172.6 ($146.53/share) representing an
other-than-temporary decline in value of investment in USAir Group, Inc.
Preferred Stock. See note 5.
18
<PAGE> 19
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(17) BUSINESS SEGMENT DATA
Berkshire identified eight business segments for purposes of 1995
reporting pursuant to Statement of Financial Accounting Standards No. 14. These
include the property and casualty insurance and reinsurance business (The
Insurance Segment) plus seven separately conducted non-insurance businesses as
follows:
<TABLE>
<CAPTION>
Business
identity and headquarters Product Activity
------------------------- ------- --------
<S> <C> <C>
See's Candies Candy Manufacture and distribution at retail
South San Francisco, CA and by catalog solicitation
World Book Encyclopedias and Publication and marketing,
Chicago, IL other reference materials principally by the direct sales method
Kirby, Douglas and
Cleveland Wood Divisions
of The Scott Fetzer Company Home cleaning systems Manufacture and sale principally to distributors
Cleveland, OH
Nebraska Furniture Mart and Home furnishings Retailing
R.C. Willey Home Furnishings
Omaha, NE and Salt Lake
City, UT
Buffalo News Newspaper Publication of a daily and Sunday newspaper
Buffalo, NY
H. H. Brown Shoe Co.,
Lowell Shoe, Inc. and
Dexter Shoe Companies Shoes Manufacture, importing and distribution at wholesale
Greenwich, CT, Hudson, and retail
NH and Dexter, ME
Fechheimer Bros. Co. Uniforms Manufacture and distribution at wholesale and retail
Cincinnati, OH
</TABLE>
The business segments identified above were responsible in 1995 for 79%
of Berkshire's consolidated revenues. Other businesses activities that
contributed for 1995, in the aggregate, 20% of Berkshire's consolidated
revenues, were as follows:
<TABLE>
<CAPTION>
Business identity Product/Service/Activity
----------------- ------------------------
<S> <C>
Adalet - PLM Explosion proof electrical enclosures, cable couplers and terminations
BHR Real estate management
Berkshire Hathaway
Credit Corporation Commercial financing
Berkshire Hathaway Life
Insurance Co. Annuities
Blue Chip Stamps Marketing motivational services
Borsheim's Retailing fine jewelry
Campbell Hausfeld Air compressors, air tools, painting systems, pressure washers and generators
Carefree Sun and shade control products for the home and campground
France Appliance and HVAC controls, ignition and sign transformers
Halex Zinc die cast conduit fittings and other electrical construction materials
Helzberg's Diamond Shops Retailing fine jewelry
K&W Products Automotive compounds
Meriam Pressure and flow measurement devices
Northland Fractional horsepower electric motors
Powerwinch Marine winches and windlasses; general purpose winches and hoists
Precision Steel Products Steel service center
Quikut Cutlery for home and sporting goods markets
ScottCare Cardiopulmonary rehabilitation and monitoring equipment
Scott Fetzer Financial Group Commercial and consumer finance companies
Scot Labs Cleaning and maintenance chemicals
Stahl Custom service bodies, flatbed bodies, cranes and tool boxes for trucks
Wayne Furnace burners; sump, utility and sewage pumps
Wesco Financial Real estate management
Western Enterprises Medical and industrial compressed gas fittings and regulators
Western Plastics Molded plastic components
</TABLE>
19
<PAGE> 20
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(17) BUSINESS SEGMENT DATA (Continued)
A disaggregation of Berkshire's consolidated data for each of the three
most recent years is presented in the tables which follow on this and the
following page. Amounts are in millions.
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT BEFORE TAXES
1995 1994 1993 1995 1994 1993
-------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Identified Segments:
Insurance . . . . . . . . . . . . . . $1,715.7 $1,499.8 $1,694.8 $ 776.5 $ 702.0 $1,065.0
Non-insurance businesses . . . . . . 1,918.9 1,771.9 1,440.2 249.3 275.4 224.8
-------- -------- -------- -------- -------- --------
3,634.6 3,271.7 3,135.0 1,025.8 977.4 1,289.8
Other than identified segments . . . . . 928.7 638.6 567.9 114.6 (192.3)* 60.1
Interest expense * . . . . . . . . . . . (56.0) (60.1) (56.6)
--------- --------- --------- -------- -------- --------
Aggregate consolidated total $4,563.3 $3,910.3 $3,702.9 $1,084.4 $ 725.0 $1,293.3
======== ======== ======== ======== ======== ========
</TABLE>
* Amounts of interest expense represent those for borrowings under
investment agreements and other debt exclusive of that of finance
businesses and interest allocated to certain identified segments.
** Includes pre-tax charge of $268.5 representing an other than temporary
decline in value of investment in USAir Group, Inc. Preferred Stock.
<TABLE>
<CAPTION>
INSURANCE SEGMENT REVENUES OPERATING PROFIT BEFORE TAXES
-----------------
1995 1994 1993 1995 1994 1993
--------- --------- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
Premiums earned: *
Primary or direct . . . . . . . . . . $ 287.3 $ 281.1 $ 249.6
Reinsurance assumed . . . . . . . . . 718.4 688.5 442.4
Reinsurance ceded . . . . . . . . . . (48.2) (46.4) (41.3)
------- ------- --------
957.5 923.2 650.7
Underwriting . . . . . . . . . . . . . . $ 19.6 $129.0 $ 30.1
Investment income . . . . . . . . . . . 577.1 484.6 488.2 575.8 481.0 479.0
Realized investment gain . . . . . . . . 181.1 92.0 555.9 181.1 92.0 555.9
-------- ------- -------- ------ ------ --------
$1,715.7 $1,499.8 $1,694.8 $776.5 $702.0 $1,065.0
======== ======== ======== ====== ====== ========
* Premiums written were as follows:
1995 1994 1993
-------------------------------
Primary or direct . . . . . . . . . . $ 294.8 $271.2 $247.2
Reinsurance assumed . . . . . . . . . 777.9 689.9 528.8
Reinsurance ceded . . . . . . . . . . (48.5) (45.6) (38.9)
-------- ------ ------
$1,024.2 $915.5 $737.1
======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
NON-INSURANCE BUSINESS SEGMENTS REVENUES OPERATING PROFIT BEFORE TAXES
-------------------------------
1995 1994 1993 1995 1994 1993
-------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Candy . . . . . . . . . . . . . . . . . $ 233.6 $ 216.1 $ 201.0 $ 49.3 $ 46.6 $ 40.3
Encyclopedias, other reference material 157.9 191.3 198.8 7.4 24.4 19.4
Home cleaning systems . . . . . . . . . 235.6 207.6 193.9 52.6 43.9 40.9
Home furnishings . . . . . . . . . . . . 428.1 245.4 208.6 28.1 16.9 21.1
Newspaper . . . . . . . . . . . . . . . 154.8 150.9 145.5 46.3 53.7 50.4
Shoes . . . . . . . . . . . . . . . . . 565.1 609.4 370.2 49.5 76.4 40.0
Uniforms . . . . . . . . . . . . . . . . 143.8 151.2 122.2 16.1 13.5 12.7
-------- -------- -------- ------ ------ ------
$1,918.9 $1,771.9 $1,440.2 $249.3 $275.4 $224.8
======== ======== ======== ====== ====== ======
</TABLE>
20
<PAGE> 21
EXHIBIT 99
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(17) BUSINESS SEGMENT DATA (Continued)
<TABLE>
<CAPTION>
OTHER THAN IDENTIFIED SEGMENTS REVENUES OPERATING PROFIT BEFORE TAXES
------------------------------
1995 1994 1993 1995 1994 1993
--------- --------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Other businesses . . . . . . . . . . . . $877.9 $607.3 $550.7 $ 77.7 $ 59.2 $ 55.2
Not identified with specific businesses:
Interest and dividend income . . . . 37.8 32.0 26.6 37.8 32.0 26.6
Realized investment gain (loss) . . . 13.0 (0.7) (9.4) 13.0 (0.7) (9.4)
All other except interest expense . . (13.9) (282.8)* (12.3)
------ ------ ------ ------ ------- ------
$928.7 $638.6 $567.9 $114.6 $(192.3) $ 60.1
====== ====== ====== ====== ======= ======
</TABLE>
* Includes pre-tax charge of $268.5 representing an other than temporary
decline in value of investment in USAir Group, Inc. Preferred Stock.
<TABLE>
<CAPTION>
DEPREC. & AMORT.
CAPITAL EXPENDITURES* OF TANGIBLE ASSETS
1995 1994 1993 1995 1994 1993
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Insurance . . . . . . . . . . . . . . . $ 1.2 $ 0.9 $ 1.2 $ 0.9 $ 0.9 $ 0.8
Candy . . . . . . . . . . . . . . . . . 5.1 4.1 4.3 4.1 4.1 4.1
Encyclopedias, other reference material -- 0.1 0.7 1.0 1.4 1.4
Home cleaning systems . . . . . . . . . 0.3 1.0 1.5 3.0 4.2 5.3
Home furnishings . . . . . . . . . . . . 9.2 22.6 5.3 9.7 6.2 2.7
Newspaper . . . . . . . . . . . . . . . 1.8 5.2 3.6 4.9 2.2 1.9
Shoes . . . . . . . . . . . . . . . . . 13.7 17.9 4.4 12.0 10.2 5.2
Uniforms . . . . . . . . . . . . . . . . 0.6 4.6 1.0 2.2 2.5 1.8
Other . . . . . . . . . . . . . . . . . 22.3 10.7 13.0 22.5 17.9 17.3
----- ----- ----- ----- ----- -----
$54.2 $67.1 $35.0 $60.3 $49.6 $40.5
===== ===== ===== ===== ===== =====
</TABLE>
* Excludes expenditures which were part of business acquisitions.
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
AT YEAR-END
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
Insurance . . . . . . . . . . . . . . . . . . . . . . . $25,280.0 $17,765.6 $15,303.9
Candy . . . . . . . . . . . . . . . . . . . . . . . . . 74.5 69.4 70.2
Encyclopedias, other reference material . . . . . . . . 71.8 75.9 74.7
Home cleaning systems . . . . . . . . . . . . . . . . . 42.9 42.1 48.7
Home furnishings . . . . . . . . . . . . . . . . . . . . 427.7 128.4 101.1
Newspaper . . . . . . . . . . . . . . . . . . . . . . . 45.0 48.4 45.4
Shoes . . . . . . . . . . . . . . . . . . . . . . . . . 656.7 672.7 641.6
Uniforms . . . . . . . . . . . . . . . . . . . . . . . . 83.5 94.9 87.6
Other . . . . . . . . . . . . . . . . . . . . . . . . . 2,029.3 1,712.2 2,324.3
--------- --------- ---------
$28,711.4 $20,609.6 $18,697.5
========= ========= =========
</TABLE>
(18) ACCOUNTING RULE TO BE ADOPTED IN 1996
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121). The
Company's required adoption date is January 1, 1996. SFAS 121 standardizes the
accounting practices for the recognition and measurement of impairment losses
on certain long-lived assets, including goodwill. The Company believes the
adoption of SFAS 121 will not have a material impact on its results of
operations or financial position.
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