10-QPeriod: Q1 FY2009

BERKSHIRE HATHAWAY INC Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 8, 2009For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. reported a net loss of $1.534 billion for the first quarter of 2009, a significant shift from the $940 million net earnings in the same period of 2008. This loss was heavily influenced by substantial investment and derivative losses totaling $3.2 billion, primarily driven by a difficult credit environment and declines in equity markets. Despite the net loss, the company's operating businesses showed resilience, with insurance underwriting contributing a gain of $219 million and utilities and energy segments performing steadily. During the quarter, Berkshire Hathaway's equity investments saw a significant decline in fair value, contributing to a decrease in shareholders' equity. However, the company maintained substantial liquidity with over $22 billion in cash and cash equivalents within its insurance operations. Management acknowledged the ongoing global economic recession and its impact on most of Berkshire's businesses, but expressed confidence in the long-term strength of its diverse operations and anticipates a return to historical performance levels, though the timing of recovery remains uncertain.

Financial Highlights

17 data points
Beta

Revenue

$22.78B

Net Income

-$1.53B

-6.7% Net Margin

EPS (Diluted)

$-990.00

Cash & Equivalents

$25.55B

Free Cash Flow

$3.27B

Financial Statements
Beta
Revenue$22.78B
Operating Expenses$25.33B
Net Income-$1.53B
EPS (Basic)$-990.00
Shares Outstanding (Basic)1.55M

Key Highlights

  • 1Net loss attributable to Berkshire Hathaway shareholders of $1.534 billion for Q1 2009, compared to a net earning of $940 million in Q1 2008.
  • 2Significant investment and derivative losses of $3.2 billion in Q1 2009, primarily due to credit default contracts and equity market declines.
  • 3Insurance underwriting operations generated a pre-tax gain of $339 million, with GEICO showing premium growth and improved policy-in-force numbers.
  • 4Utilities and Energy (MidAmerican) segment's earnings before interest and taxes decreased to $383 million from $599 million, impacted by lower energy prices and demand.
  • 5Manufacturing, Service, and Retailing segments experienced revenue declines due to the global economic recession, with notable impacts on other manufacturing and other service businesses.
  • 6Berkshire Hathaway maintained strong liquidity, with $22.7 billion in cash and cash equivalents within its insurance and other businesses as of March 31, 2009.
  • 7Shareholders' equity decreased by $6.5 billion to $102.8 billion, primarily due to unrealized losses on equity investments.

Frequently Asked Questions

The primary driver of Berkshire Hathaway's net loss in the first quarter of 2009 was significant investment and derivative losses totaling $3.2 billion. These losses were mainly attributed to credit default contracts experiencing defaults and widening spreads, as well as declines in equity markets impacting equity index put option contracts.

The global economic recession negatively impacted most of Berkshire Hathaway's diverse businesses. Manufacturing, service, and retailing segments saw reduced sales volume, revenues, and profit margins due to curtailed consumer spending. The finance and financial products segment also faced challenges from the economic downturn and credit crisis, leading to lower revenues and increased provisions for loan losses. Utilities and Energy experienced some revenue decline due to lower demand and energy prices.

Berkshire Hathaway maintained a strong liquidity position. As of March 31, 2009, its insurance and other businesses held $22.7 billion in cash and cash equivalents. Consolidated cash and invested assets across these operations totaled approximately $114.8 billion.

Insurance underwriting operations generated a pre-tax gain of $339 million. GEICO, a major auto insurer, experienced a 7.6% increase in premiums earned and a rise in policies-in-force, attributed to consumers seeking cost savings during the recession. The Berkshire Hathaway Reinsurance Group saw a significant increase in premiums earned, partly due to a large retroactive reinsurance contract with Swiss Re.