10-QPeriod: Q3 FY2015

BERKSHIRE HATHAWAY INC Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 6, 2015For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. (BRK-B) reported strong financial results for the nine months ending September 30, 2015, with net earnings attributable to shareholders increasing to $18.6 billion from $15.7 billion in the prior year period. This growth was significantly bolstered by a substantial non-cash holding gain of approximately $6.8 billion related to the investment in The Kraft Heinz Company, which arose from the merger with Kraft Foods. Excluding this significant non-cash item and other investment gains/losses, the operating businesses demonstrated continued strength. Total revenues for the nine months increased to $159.0 billion, up from $146.4 billion in the prior year, driven by growth across most segments, including manufacturing, service, and retailing, as well as finance and financial products. The insurance segment, a core pillar of Berkshire's operations, maintained robust underwriting and investment income, although underwriting gains saw a slight decrease year-over-year, partly due to increased claims frequency and severity at GEICO. The company continued to make strategic acquisitions, notably Berkshire Hathaway Automotive and AltaLink, contributing to overall asset and revenue growth. Berkshire maintained a strong liquidity position with significant cash and cash equivalents and a robust shareholders' equity of $248.3 billion.

Financial Highlights

28 data points
Beta

Revenue

$59.07B

Net Income

$9.43B

16.0% Net Margin

Total Assets

$545.47B

Cash & Equivalents

$66.26B

Free Cash Flow

$5.25B

Financial Statements
Beta
Revenue$59.07B
Operating Expenses$44.92B
Net Income$9.43B
Shares Outstanding (Basic)1.64M

Key Highlights

  • 1Net earnings attributable to Berkshire Hathaway shareholders increased by 16.6% to $18.6 billion for the first nine months of 2015, significantly boosted by a $6.8 billion non-cash holding gain from The Kraft Heinz Company investment.
  • 2Total revenues grew by 8.6% to $159.0 billion for the first nine months of 2015, with contributions from most business segments.
  • 3Consolidated shareholders' equity increased by $8.1 billion to $248.3 billion as of September 30, 2015.
  • 4Significant acquisitions, including Berkshire Hathaway Automotive ($4.1 billion) and AltaLink ($2.7 billion), were completed in early 2015, contributing to asset and revenue growth.
  • 5GEICO experienced strong premium growth (10.7% year-to-date) but saw its loss ratio increase, leading to lower underwriting gains compared to the prior year.
  • 6The company maintained substantial liquidity, with cash and cash equivalents totaling $66.3 billion at the end of the third quarter.
  • 7Berkshire Hathaway announced a definitive agreement to acquire Precision Castparts Corp. (PCC) for approximately $31.7 billion, indicating continued strategic acquisition focus.
  • 8Investment and derivative gains/losses, excluding the Kraft Heinz gain, showed volatility, with significant gains from equity security dispositions but also losses from derivative contracts.

Frequently Asked Questions

The primary driver of the significant increase in net earnings attributable to Berkshire Hathaway shareholders was a non-cash holding gain of approximately $6.8 billion recognized in the third quarter of 2015. This gain stemmed from accounting for the investment in The Kraft Heinz Company under the equity method after a reduction in ownership percentage due to a stock issuance related to the merger with Kraft Foods.

The insurance segment remained a strong contributor. While GEICO experienced robust premium growth, its underwriting gains were lower year-over-year due to increased loss frequency and severity. Other insurance segments also contributed positively through a combination of underwriting and investment income. The company highlighted its strong capital strength within its insurance businesses, with Statutory Surplus of approximately $129 billion at year-end 2014.

Berkshire Hathaway completed significant acquisitions including Berkshire Hathaway Automotive for $4.1 billion and AltaLink for approximately $2.7 billion. Furthermore, the company announced a definitive agreement to acquire Precision Castparts Corp. (PCC) for approximately $31.7 billion, signaling continued aggressive acquisition strategy. The merger of H.J. Heinz Holding Corporation with Kraft Foods to form The Kraft Heinz Company was also a major event impacting investment income.

The report indicates continued operational strength across many segments. BNSF railroad showed improved operating performance and higher earnings due to capacity additions and operational initiatives. Berkshire Hathaway Energy also reported increased earnings, benefiting from acquisitions and favorable rate structures. Manufacturing, service, and retailing businesses showed mixed results, with some segments experiencing growth and others facing headwinds from foreign currency impacts and specific market conditions. The finance and financial products segment, particularly Clayton Homes, demonstrated strong earnings growth.