10-QPeriod: Q1 FY2004

BERKSHIRE HATHAWAY INC Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 10, 2004For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. reported a net earnings of $1.55 billion for the first quarter of 2004, a decrease from $1.73 billion in the same period of 2003. This decline was primarily influenced by a reduction in realized investment gains and lower net investment income from insurance businesses. Despite the dip in net earnings, the company demonstrated strong operational performance across its diverse segments, with significant revenue growth in non-insurance businesses, notably McLane Company, which was acquired in the previous year. The company's financial condition remained robust, with total shareholders' equity reaching $79.7 billion and significant liquidity maintained through substantial cash and cash equivalents. The balance sheet reflects an increase in assets and liabilities due to the consolidation of Value Capital, L.P., in accordance with new accounting pronouncements (FIN 46). Management highlights the continued strategic focus on preserving capital and maintaining flexibility for future acquisitions.

Key Highlights

  • 1Net earnings for Q1 2004 were $1.55 billion, down from $1.73 billion in Q1 2003, primarily due to lower realized investment gains and reduced investment income.
  • 2Insurance underwriting saw a net gain of $192 million, a slight increase from $188 million in the prior year, with GEICO showing strong premium growth and improved loss ratios.
  • 3Non-insurance businesses demonstrated robust revenue growth, increasing to $10.92 billion from $4.56 billion in Q1 2003, largely driven by the inclusion of McLane Company and growth in Shaw Industries and building products.
  • 4Consolidated assets and liabilities significantly increased due to the adoption of FIN 46, leading to the consolidation of Value Capital, L.P.
  • 5Total shareholders' equity stood at $79.7 billion as of March 31, 2004, indicating a strong capital base.
  • 6The company maintained substantial liquidity, with cash and cash equivalents totaling $40.9 billion across all businesses.
  • 7Management noted a decline in net investment income due to the reinvestment of proceeds from higher-yielding securities into lower-yielding instruments, prioritizing capital preservation and acquisition flexibility.

Frequently Asked Questions

Berkshire Hathaway reported net earnings of $1.55 billion for the first quarter of 2004, a decrease compared to $1.73 billion in the same period of 2003. This reduction was primarily driven by lower realized investment gains and a decline in net investment income from its insurance operations.

The insurance underwriting segment showed a net gain of $192 million, a slight improvement from the prior year. Non-insurance businesses experienced significant revenue growth, increasing to $10.92 billion from $4.56 billion, largely due to the acquisition of McLane Company and expansion in sectors like Shaw Industries and building products. The finance and financial products segment also saw revenue increases, partly due to the consolidation of Value Capital and Clayton Homes.

Berkshire adopted new accounting rules (FIN 46) requiring the consolidation of Value Capital, L.P. This led to a significant increase in both consolidated assets and liabilities as of March 31, 2004. However, Berkshire does not guarantee Value Capital's liabilities, and its exposure is limited to its net investment in the partnership.

The company maintained a strong liquidity position, with cash and cash equivalents totaling $40.9 billion. Management emphasized a strategy of capital preservation and maintaining flexibility for future acquisitions, even at the cost of lower short-term investment income due to reinvestment in lower-yielding instruments.