0000950150-95-000508.txt : 19950815
0000950150-95-000508.hdr.sgml : 19950815
ACCESSION NUMBER: 0000950150-95-000508
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BERKSHIRE HATHAWAY INC /DE/
CENTRAL INDEX KEY: 0000109694
STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731]
IRS NUMBER: 042254452
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10125
FILM NUMBER: 95562672
BUSINESS ADDRESS:
STREET 1: 1440 KIEWIT PLZ
CITY: OMAHA
STATE: NE
ZIP: 68131
BUSINESS PHONE: 4023461400
MAIL ADDRESS:
STREET 1: 1440 KIEWIT PLAZA
CITY: OMAHA
STATE: NE
ZIP: 68131
10-Q
1
FORM 10-Q
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 June 30, 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)
DELAWARE 04 2254452
(State or other jurisdiction of (I.R.S. Employer Identification number)
incorporation or organization)
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.
YES X NO
--- ---
Number of shares of common stock outstanding as of August 11, 1995.... 1,193,512
2
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
PART I - FINANCIAL INFORMATION PAGE NO.
--------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -- 2
June 30, 1995 and December 31, 1994
Consolidated Statements of Earnings-- 3
Second Quarter and First Half, 1995 and 1994
Condensed Consolidated Statements of Cash Flows -- 4
First Half, 1995 and 1994
Notes to Interim Consolidated Financial Statements 5-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 8-11
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION 12
1
3
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
1995 1994
----------- -----------
ASSETS
Cash and cash equivalents...................................... $ 976,989 $ 273,881
Investments:
Securities with fixed maturities............................. 1,086,357 1,820,733
Marketable equity securities................................. 19,017,094 15,236,494
Salomon Inc.................................................. 1,019,744 1,023,418
Receivables.................................................... 902,749 580,600
Inventories.................................................... 606,928 425,431
Properties and equipment....................................... 339,733 275,667
Assets of finance businesses................................... 710,823 717,082
Other assets................................................... 1,209,432 984,876
----------- -----------
$25,869,849 $21,338,182
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Property and casualty insurance policyholder liabilities....... $ 4,660,532 $ 4,200,813
Accounts payable, accruals and other liabilities............... 418,508 397,384
Income taxes, principally deferred............................. 4,421,808 3,292,602
Borrowings under investment agreements and other debt.......... 898,392 810,719
Liabilities of finance businesses.............................. 533,633 562,443
----------- -----------
10,932,873 9,263,961
----------- ------------
Minority shareholders' interests............................... 234,707 199,339
----------- -----------
Shareholders' equity:
Common stock - par value of 1,381,308 issued shares.......... 6,907 6,907
Capital in excess of par value............................... 1,001,728 656,074
Unrealized appreciation of investments, net.................. 8,543,384 6,364,362
Retained earnings............................................ 5,184,969 4,885,173
----------- -----------
14,736,988 11,912,516
Less: Cost of common shares in treasury
(June 30, 1995 - 187,796; December 31, 1994 - 203,558)... 34,719 37,634
----------- -----------
Total shareholders' equity........................... 14,702,269 11,874,882
----------- -----------
$25,869,849 $21,338,182
=========== ===========
See accompanying Notes to Interim Consolidated Financial Statements
2
4
FORM 10-Q
BERKSHIRE HATHAWAY INC Q/E 6/30/95
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
Second Quarter First Half
---------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ----------
REVENUES:
Sales and service revenues.......................... $ 617,028 $ 554,738 $1,188,709 $1,109,586
Insurance premiums earned........................... 174,188 185,084 405,571 346,016
Interest and dividend income........................ 114,573 110,945 216,633 213,019
Income from investment in Salomon Inc............... 10,513 1,986 29,949 17,736
Income from finance businesses...................... 6,893 6,540 13,202 13,064
Realized investment gain............................ 81,677 9,067 74,358 86,902
---------- ---------- ---------- ----------
1,004,872 868,360 1,928,422 1,786,323
---------- ---------- ---------- ----------
COST AND EXPENSES:
Cost of products and services sold.................. 387,957 349,819 747,350 689,067
Insurance losses and loss adjustment expenses....... 132,803 73,503 315,679 278,530
Insurance underwriting expenses..................... 50,461 57,101 108,148 86,759
Selling, general and administrative expenses........ 170,089 144,868 325,027 297,112
Interest expense.................................... 13,410 15,491 26,632 31,467
---------- ---------- ---------- ----------
754,720 640,782 1,522,836 1,382,935
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST.... 250,152 227,578 405,586 403,388
Income taxes........................................ 66,314 60,305 98,179 100,957
Minority interest................................... 4,278 2,626 7,611 4,894
---------- ---------- ---------- ----------
NET EARNINGS.......................................... $ 179,560 $ 164,647 $ 299,796 $ 297,537
========== ========== ========== ==========
Average shares outstanding.......................... 1,183,392 1,177,750 1,180,587 1,177,750
NET EARNINGS PER SHARE................................ $152 $140 $254 $253
==== ==== ==== ====
See accompanying Notes to Interim Consolidated Financial Statements
3
5
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
First Half
----------------------------
1995 1994
---------- ----------
Net cash flows from operating activities............................... $ 512,293 $ 199,614
---------- ----------
Cash flows from investing activities:
Purchases of investments....................................... (1,260,629) (2,451,740)
Proceeds on sales and maturities of investments................ 1,626,177 758,005
Loans and investments originated in finance businesses......... (167,278) (123,815)
Principal collections on loans and investments originated
in finance businesses........................................ 163,514 176,604
Other.......................................................... (8,188) (6,100)
---------- ----------
Net cash flows from investing activities............................... 353,596 (1,647,046)
---------- ----------
Cash flows from financing activities:
Proceeds from borrowings of finance businesses................. 74,766 150,216
Proceeds from other borrowings................................. 513,743 651,503
Repayments of borrowings of finance businesses................. (144,628) (188,566)
Repayments of other borrowings................................. (596,114) (723,133)
Other.......................................................... (332) (686)
---------- ----------
Net cash flows from financing activities............................... (152,565) (110,666)
---------- ----------
Increase (decrease) in cash and cash equivalents....................... 713,324 (1,558,098)
Cash and cash equivalents at beginning of year*........................ 289,857 1,854,621
---------- ----------
Cash and cash equivalents at end of first half*........................ $1,003,181 $ 296,523
========== ==========
Supplemental cash flow information:
Non-cash investing and financing activities:
Liabilities assumed in connection with acquisitions
of businesses................................................ $ 248,445 $ --
Common shares issued in connection with acquisitions
of businesses................................................ 348,569 --
Cash paid during the period for:
Income taxes................................................... 145,522 312,823
Interest....................................................... 39,787 45,868
* 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 half --
Finance businesses............................................... $ 26,192 $ 21,842
Other............................................................ 976,989 274,681
---------- -----------
$1,003,181 $ 296,523
========== ===========
See accompanying Notes to Interim Consolidated Financial Statements
4
6
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
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. BUSINESS ACQUISITIONS
During 1995's second quarter, the Company consummated mergers with
Helzberg's Diamond Shops, Inc. ("Helzberg's") and with 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 outstanding common stock of each of
these companies. Helzberg's operates a chain of 150 jewelry stores operating in
26 states and R.C. Willey, through its seven locations, is the dominant retailer
of home furnishings in Utah. Both mergers were accounted for by the purchase
method of accounting and, accordingly, the operating results of each of these
businesses are included in the Company's consolidated statement of earnings from
the effective dates of each of the mergers (Helzberg's -- April 30, 1995; R.C.
Willey -- June 29, 1995).
NOTE 3. 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 4 and 9) are shown in
the tabulation below.
(000s omitted)
June 30, December 31,
1995 1994
---------- ----------
Amortized cost............................. $1,057,092 $1,805,515
Gross unrealized gains..................... 31,971 39,766
Gross unrealized losses.................... (2,706) (24,548)
---------- ----------
Estimated fair value....................... $1,086,357 $1,820,733
========== ==========
5
7
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INVESTMENT IN SALOMON INC
The Company's investment in Salomon Inc consists of the following:
(000s omitted)
June 30, 1995 December 31, 1994
--------------------------------------- --------------------------------------
Fair Market Carrying Fair Market Carrying
Cost Value Value Cost Value Value
---------- ---------- ---------- ---------- ---------- ----------
Cumulative Convertible Preferred Stock......... $ 700,000 $ 735,000 $ 735,000 $ 700,000 $ 735,000 $ 735,000
Common Stock................................... 324,445 266,173 284,744 324,445 248,760 288,418
---------- ---------- ---------- ---------- ---------- ----------
$1,024,445 $1,001,173 $1,019,744 $1,024,445 $ 983,760 $1,023,418
========== ========== ========== ========== ========== ==========
Berkshire subsidiaries possess slightly in excess of 20% of the total voting
rights in Salomon Inc and, therefore the investment in Salomon Inc common stock
is accounted for on the equity method. 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.
NOTE 5. INVESTMENTS IN MARKETABLE EQUITY SECURITIES
Data with respect to investments in marketable equity securities are shown
in the tabulation below.
(000s omitted)
June 30, December 31,
1995 1994
----------- -----------
Total cost.......................................................................... $ 5,976,803 $ 5,583,111
Gross unrealized gains.............................................................. 13,067,278 9,789,589
Gross unrealized losses............................................................. (26,987) (136,206)
----------- -----------
Total approximate market value...................................................... $19,017,094 $15,236,494
=========== ===========
Carrying value:
American Express Company.......................................................... $ 1,709,625 $ 818,918
Capital Cities/ABC, Inc........................................................... 2,160,000 1,705,000
The Coca-Cola Company............................................................. 6,375,000 5,150,000
GEICO Corporation................................................................. 1,939,406 1,678,250
The Gillette Company.............................................................. 2,136,000 1,797,000
Wells Fargo & Company............................................................. 1,224,117 984,727
All others........................................................................ 3,472,946 3,102,599
----------- -----------
Total............................................................................. $19,017,094 $15,236,494
=========== ===========
NOTE 6. OTHER ASSETS
Other assets are summarized below:
(000s omitted)
June 30, December 31,
1995 1994
---------- ----------
Goodwill............................................................................ $ 692,715 $ 454,633
Deferred charges re reinsurance assumed............................................. 415,175 440,664
Other............................................................................... 101,542 89,579
---------- ----------
$1,209,432 $ 984,876
========== ==========
6
8
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. PROPERTY AND CASUALTY INSURANCE POLICYHOLDER LIABILITIES
Property and casualty insurance policyholder liabilities are summarized below:
(000s omitted)
June 30, December 31,
1995 1994
---------- ----------
Unpaid losses and loss adjustment expenses.......................................... $3,571,408 $3,430,028
Unearned premiums................................................................... 569,895 307,232
Funds held under reinsurance assumed................................................ 360,109 307,287
Other............................................................................... 159,120 156,266
---------- ----------
$4,660,532 $4,200,813
========== ==========
NOTE 8. DEFERRED INCOME TAX LIABILITY
The tax effects of significant items comprising the Company's net deferred
tax liability as of June 30, 1995 and December 31, 1994 are as follows:
(000s omitted)
June 30, December 31,
1995 1994
----------- ----------
Deferred tax liabilities:
Relating to unrealized appreciation of investments.................................... $4,572,972 $3,381,328
Other................................................................................. 67,194 71,883
----------- ----------
4,640,166 3,453,211
Deferred tax assets....................................................................... (262,885) (223,010)
---------- ----------
Net deferred tax liability............................................................ $4,377,281 $3,230,201
========== ==========
NOTE 9. FINANCE BUSINESSES
Assets and liabilities of Berkshire's finance businesses are summarized
below.
(000s omitted)
June 30, December 31,
1995 1994
---------- ----------
Assets
Cash and cash equivalents........................................................... $ 26,192 $ 15,976
Installment loans receivable........................................................ 147,532 157,985
Fixed maturity investments.......................................................... 532,843 538,866
Other............................................................................... 4,256 4,255
---------- ----------
$ 710,823 $ 717,082
========== ==========
Liabilities
8.125% Notes, payable in 1996....................................................... $ 120,000 $ 120,000
Borrowings under investment agreements.............................................. 300,102 369,964
Annuity reserves.................................................................... 78,274 41,021
Other............................................................................... 35,257 31,458
---------- ----------
$ 533,633 $ 562,443
========== ==========
7
9
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. 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 second
quarter and first half of 1995 and 1994:
(000s omitted)
Second Quarter First Half
-------------------------- --------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Increase in unrealized appreciation..................... $1,872,726 $ 289,614 $3,400,955 $ 116,690
Increase in deemed applicable income taxes.............. (656,118) (101,590) (1,191,645) (41,856)
Increase in minority shareholders' interest............. (14,651) (10,084) (30,288) (12,864)
---------- ---------- ---------- ----------
Net increase.......................................... 1,201,957 177,940 2,179,022 61,970
Balance at beginning of period.......................... 7,341,427 5,296,682 6,364,362 5,412,652
---------- ---------- ---------- ----------
Balance at end of second quarter........................ $8,543,384 $5,474,622 $8,543,384 $5,474,622
========== ========== ========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net earnings for the second quarter and first half of the current and prior
year are disaggregated in the following table. Amounts are in thousands and
each figure is income tax effected.
Second Quarter First Half
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
Insurance, except realized investment gain................... $ 91,654 $119,872 $179,520 $163,448
Manufacturing, merchandising and services.................... 38,402 43,082 77,635 88,704
Unallocated income/expense, net.............................. 6,198 5,500 12,204 8,976
Interest expense *........................................... (8,424) (9,670) (16,545) (20,032)
-------- -------- -------- --------
Earnings before realized investment gain................. 127,830 158,784 252,814 241,096
Realized investment gain..................................... 51,730 5,863 46,982 56,441
-------- -------- -------- --------
Net earnings............................................. $179,560 $164,647 $299,796 $297,537
======== ======== ======== ========
* For purposes of the above table, interest expense of finance businesses is
netted against the directly related service activity revenues.
8
10
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
INSURANCE GROUP
The after tax figures shown above for Insurance Group earnings, except
realized investment gain, are aggregated in the following table. Dollar
amounts are in thousands.
Second Quarter First Half
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
Premiums earned from:
Primary or direct insurance.............................. $ 57,516 $ 53,721 $115,857 $104,816
Reinsurance assumed...................................... 116,672 131,363 289,714 241,200
-------- -------- -------- --------
$174,188 $185,084 $405,571 $346,016
======== ======== ======== ========
Underwriting gain (loss) attributable to:
Primary or direct insurance.............................. $ 1,371 $ 12,201 $ 3,494 $ 5,003
Reinsurance assumed...................................... (10,676) 42,050 (22,207) (24,734)
-------- -------- -------- --------
Total underwriting gain (loss)......................... (9,305) 54,251 (18,713) (19,731)
Net investment income........................................ 115,289 101,351 226,667 209,032
-------- -------- -------- --------
Earnings before income taxes........................... 105,984 155,602 207,954 189,301
Income tax expense........................................... (12,475) (34,464) (24,308) (23,376)
Minority interest............................................ (1,855) (1,266) (4,126) (2,477)
-------- -------- -------- --------
Net earnings from Insurance,
except realized investment gain..................... $ 91,654 $119,872 $179,520 $163,448
======== ======== ======== ========
Premiums earned during the second quarter and first half of 1995 by the
Group's primary or direct insurance businesses exceeded amounts earned in the
corresponding prior year periods by $3.8 million (7.1%) and $11.0 million
(10.5%), respectively, and derived primarily from increased premiums from the
Group's credit insurance and homestate operations. Premium volume for other
primary or direct businesses continues to be constrained by management's
perception of inadequate rates for many property/casualty coverages. Primary or
direct insurance activities produced lower net underwriting gains in 1995
periods than in 1994. However, 1994's underwriting results for the second
quarter and first half included credits of about $11 million from reductions of
loss reserves established for pre-1994 loss occurrences with respect to
professional/specialty risk coverages. Excluding the benefit of these credits in
1994, underwriting results of the primary or direct insurance businesses for the
first half of 1995 were somewhat improved over 1994.
Premiums earned from catastrophe reinsurance excess of loss coverages
totalled $40 million and $83 million for the second quarter of 1995 and 1994,
respectively. Premiums earned from such coverages during the first half were
$120 million for 1995 compared to $143 million for 1994. Reinsurance
underwriting results for the second quarter included gains from catastrophe
excess of loss coverages of $29 million for 1995 and $78 million for 1994. For
the first half of 1995 and 1994, this business produced underwriting gains of
$68 million and $43 million, respectively. Management believes that increased
levels of industry capital devoted to this business in recent years has resulted
in some price deterioration for catastrophe coverages. This, in turn, has caused
a reduction in the volume of business accepted by the Group. Additional
comparative declines in premiums earned may occur during the remainder of 1995.
9
11
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
INSURANCE GROUP (Continued)
Premiums earned during the second quarter from non catastrophe reinsurance
treaties totalled $77 million for 1995 and $48 million for 1994. For the first
half, premiums earned from such policies were $169 million for 1995 and $98
million for 1994. Much of the comparative increase in non catastrophe
reinsurance premiums earned in 1995 periods derived from a few sizable
contracts. Underwriting losses from non catastrophe reinsurance coverages
during the second quarter were $22 million for 1995 and $20 million for 1994.
For the first half, underwriting losses were $56 million for 1995 and $36
million for 1994. Generally, time value of money concepts are important
considerations in establishing premium prices due to anticipation of extended
claim payment periods. Underwriting losses often occur as the estimates of
losses and loss adjustment expenses are established on an undiscounted basis in
amounts exceeding premiums earned. Nevertheless, this business is accepted
because of the large amounts of investable policyholder funds ("float")
generated. Underwriting results from reinsurance activities also include
accretion of discounted structured settlement liabilities and amortization of
deferred charges re reinsurance assumed. These charges, with no offsetting
premium income, totalled approximately $18 million and $15 million for
the second quarter of 1995 and 1994, respectively. For the first half, such
charges totalled about $34 million for 1995 and $32 million for 1994.
Estimates of unpaid losses and loss adjustment expenses reflected in the
accompanying Consolidated Balance Sheet were nearly $3.6 billion at June 30,
1995. In the future, those liabilities will be settled and additional
information will be revealed which will cause that amount to be reestimated. The
effects of the reestimation error will be charged or credited to earnings in the
period made and may have a substantial effect on periodic underwriting results.
In addition, the timing and magnitude of catastrophe loss occurrences may cause
significant volatility in underwriting results for the remainder of 1995.
Significant amounts of investment income continue to be earned reflecting
substantial levels of invested assets derived primarily from reinvested net
earnings and investable policyholder float. Policyholder float approximated $3.7
billion at June 30, 1995. Investment income earned is net of the Group's equity
in the net loss of Salomon Inc with respect to its investment in the common
stock of that company. Exclusive of the effects of such losses ($1.6 million and
$13.8 million for the first half of 1995 and 1994 respectively), net investment
income earned in 1995's first half exceeded the amount earned in the
corresponding prior year period by about $5.5 million (2.5%).
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.
Second Quarter First Half
----------------------------------- ---------------------------------------
1995 1994 1995 1994
---------------- ---------------- ------------------ ------------------
Amount % Amount % Amount % Amount %
-------- ----- -------- ----- ---------- ----- ---------- -----
Revenues ............................... $622,524 100.0 $561,784 100.0 $1,202,102 100.0 $1,124,484 100.0
Costs and expenses...................... 555,991 89.3 491,320 87.5 1,070,934 89.1 978,705 87.0
-------- ----- -------- ----- ---------- ----- ---------- -----
Earnings before income taxes............ 66,533 10.7 70,464 12.5 131,168 10.9 145,779 13.0
Applicable income taxes................. 27,182 4.4 26,343 4.7 51,659 4.3 55,312 4.9
Applicable minority interest............ 949 0.1 1,039 0.1 1,874 0.1 1,763 0.2
-------- ----- -------- ----- ---------- ----- ---------- -----
Net earnings............................ $ 38,402 6.2 $ 43,082 7.7 $ 77,635 6.5 $ 88,704 7.9
======== ===== ======== ===== ========== ===== ========== =====
10
12
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
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
second quarter and first half were greater by $60.7 million (10.8%) and $77.6
million (6.9%). Much of the increase during the second quarter and for the first
half resulted from the acquisition of Helzberg's Diamond Shops, Inc.
("Helzberg's"). As discussed in the Notes to the Interim Consolidated Financial
Statements, effective April 30, 1995 the Company acquired 100% of the
outstanding common stock of Helzberg's. Helzberg's operates a chain of 150
jewelry stores and its results are included in the Company's 1995 consolidated
results from the acquisition date. The Company also acquired R.C. Willey Home
Furnishings ("R.C. Willey") effective June 29, 1995. R.C. Willey is the
dominant retailer of home furnishings in Utah and its results will be included
in the Company's 1995 consolidated results beginning in the third quarter. It is
anticipated that Helzberg's and R.C. Willey will generate combined annual
revenues of about $600 million.
Also contributing to the aforementioned revenue increases were comparative
increases recorded for both the second quarter and first half by Berkshire's
home furnishings (Nebraska Furniture Mart) and home cleaning systems (Kirby
brand products) segments. Somewhat offsetting these increases were declines in
comparative revenues for both the second quarter and first six months 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 $4.7 million (10.9%)
during 1995's second quarter and $11.1 million (12.5%) during 1995's first half
as compared to the prior year. Most of the reduction both in the second quarter
and first half 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 second
quarter and first half as recorded during the comparable 1994 periods.
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
half of 1995 were approximately $135 million less than the average amount
outstanding during the first half of 1994. The decline in borrowings accounted
for most of the reduction in interest expense in 1995 as compared to 1994.
REALIZED INVESTMENT GAIN
Realized investment gain 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 June 30, 1995, was $14.7
billion or $12,318 per share. Over the past twelve months, net book value per
share has grown by 34.5%.
11
13
FORM 10-Q
BERKSHIRE HATHAWAY INC. Q/E 6/30/95
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders of Berkshire Hathaway Inc.
("Berkshire"), held May 1, 1995, Berkshire's shareholders reelected Berkshire's
Directors in an uncontested election. Proxies for the meeting had previously
been solicited pursuant to Regulation 14A under the Securities Exchange Act of
1934.
Following are the votes cast in favor and against each Director. There were
no votes withheld, abstentions or broker non-votes.
Directors For Against
--------- --------- -------
Warren E. Buffett 1,036,854 1,407
Howard G. Buffett 1,036,749 1,512
Susan T. Buffett 1,036,787 1,474
Malcolm G. Chace III 1,036,843 1,418
Charles T. Munger 1,036,832 1,429
Walter Scott, Jr. 1,036,840 1,421
At the aforementioned annual meeting, Berkshire's shareholders approved
the recommendation of its Board of Directors to amend its Certificate of
Incorporation so as to add a provision authorizing the Board of Directors to
issue up to 1,000,000 shares of preferred stock in one or more series with such
preferences, limitations and relative rights as the Board of Directors may
determine.
Following is a tabulation of the votes regarding this matter:
Broker Non-
For Against Abstain Votes
------- ------- ------- -----------
963,155 16,978 3,240 54,692
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 August 11, 1995 /s/ Marc D. Hamburg
-------------------------------
(Signature)
Marc D. Hamburg, Vice President
and Principal Financial Officer
12
EX-27
2
FINANCIAL DATA SCHEDULE
5
1,000
U.S. DOLLARS
6-MOS
DEC-31-1995
JAN-01-1995
JUN-30-1995
1
976,989
21,123,195
902,749
0
606,928
0
339,733
0
25,869,849
0
898,392
6,907
0
0
14,695,362
25,869,849
1,188,709
1,607,482
747,350
1,171,177
0
0
26,632
405,586
98,179
299,796
0
0
0
299,796
254
254