10-QPeriod: Q2 FY2016

BERKSHIRE HATHAWAY INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 5, 2016For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc.'s (BRK-B) second quarter and first six months of 2016 results show continued growth in net earnings attributable to shareholders, reaching $5.0 billion and $10.6 billion respectively. This increase was driven by strong performance across most segments, notably manufacturing, service, and retailing, which benefited from significant acquisitions like Precision Castparts (PCC) and Duracell. The insurance underwriting segment also saw improved profitability. However, the railroad segment experienced a notable decline in earnings due to reduced volumes, particularly in coal and petroleum products. Berkshire Hathaway maintained a robust financial position with consolidated shareholders' equity increasing to $263.0 billion. Significant cash reserves were maintained, demonstrating strong liquidity. The company strategically deployed capital, including the completion of the PCC acquisition in January 2016 for approximately $32.7 billion and the redemption of its Kraft Heinz Preferred Stock for $8.32 billion in June 2016. While investments in equity securities show unrealized losses, management believes these are temporary. The company continues to explore strategic acquisitions and capital allocation opportunities.

Financial Highlights

27 data points
Beta

Revenue

$54.25B

Net Income

$5.00B

9.2% Net Margin

Total Assets

$592.82B

Cash & Equivalents

$43.92B

Free Cash Flow

$4.51B

Financial Statements
Beta
Revenue$54.25B
Operating Expenses$47.09B
Net Income$5.00B

Key Highlights

  • 1Net earnings attributable to Berkshire Hathaway shareholders increased to $5.0 billion for Q2 2016 and $10.6 billion for the first six months of 2016.
  • 2Consolidated shareholders' equity rose to $263.0 billion as of June 30, 2016.
  • 3The company completed the acquisition of Precision Castparts Corp. (PCC) for approximately $32.7 billion in January 2016.
  • 4Berkshire received $8.32 billion from the redemption of its Kraft Heinz Preferred Stock investment in June 2016.
  • 5Insurance underwriting profit increased, driven by GEICO and other primary insurance operations, while reinsurance experienced mixed results.
  • 6The railroad segment (BNSF) saw a significant earnings decline due to lower volumes, particularly in coal and petroleum products.
  • 7Manufacturing, service, and retailing segments showed strong revenue growth, boosted by recent acquisitions (PCC, Duracell) and organic growth in areas like home furnishings retail.

Frequently Asked Questions

Earnings growth in the second quarter of 2016 was primarily driven by strong performance in the manufacturing, service, and retailing segments, which benefited from recent acquisitions such as Precision Castparts (PCC) and Duracell. The insurance underwriting segment also contributed positively with improved profitability from GEICO and other primary insurance operations. Investment and derivative gains also played a role, although management notes these can be volatile.

Berkshire Hathaway's financial position remains strong. Consolidated shareholders' equity increased from $258.6 billion at December 31, 2015, to $263.0 billion at June 30, 2016. The company maintained substantial cash and cash equivalents, demonstrating strong liquidity, while also making significant capital deployments such as the PCC acquisition.

The acquisitions of Precision Castparts Corp. (PCC) in January 2016 and Duracell in February 2016 significantly boosted revenues and earnings in the manufacturing, service, and retailing segments. PCC's results were consolidated from its acquisition date, contributing substantially to industrial products revenue and earnings. Duracell's inclusion also positively impacted consumer products revenue.

Yes, as of June 30, 2016, Berkshire Hathaway reported gross unrealized losses on its investments in equity and fixed maturity securities totaling approximately $2.4 billion. A significant portion, about $1.5 billion, related to its investment in IBM common stock. However, management concluded that these losses were temporary, citing factors such as their ability and intent to hold the investments and the issuers' underlying financial condition.