10-QPeriod: Q2 FY2020

BERKSHIRE HATHAWAY INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 10, 2020For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. (BRK-B) reported its second quarter and first six months 2020 results, significantly impacted by the COVID-19 pandemic. While overall revenues declined compared to the prior year, the company experienced a substantial surge in investment and derivative gains in the second quarter, primarily driven by unrealized gains on equity securities, which offset significant goodwill and intangible asset impairment charges. The insurance underwriting segment showed strength, particularly GEICO, benefiting from reduced claims frequency due to less driving. However, other segments like manufacturing, service, and retailing faced considerable headwinds from reduced demand and operational disruptions. The company maintained a strong liquidity position with substantial cash and U.S. Treasury Bills, signaling resilience despite the challenging economic environment.

Financial Highlights

29 data points
Beta

Revenue

$56.84B

Net Income

$26.30B

46.3% Net Margin

Total Assets

$788.13B

Cash & Equivalents

$36.59B

Free Cash Flow

$7.45B

Financial Statements
Beta
Revenue$56.84B
Operating Expenses$61.26B
Net Income$26.30B

Key Highlights

  • 1Net earnings attributable to Berkshire Hathaway shareholders were $26.3 billion in Q2 2020, a significant increase from $14.1 billion in Q2 2019, primarily driven by a $31.6 billion net gain from investments and derivatives.
  • 2Total revenues for Q2 2020 were $56.8 billion, a decrease from $63.6 billion in Q2 2019, reflecting the broad economic impact of the COVID-19 pandemic across many business segments.
  • 3The company recorded substantial goodwill and intangible asset impairment charges of $10.9 billion (after-tax) in the first six months of 2020, primarily related to the aerospace industry.
  • 4GEICO's pre-tax underwriting earnings surged to $2.1 billion in Q2 2020 from $393 million in Q2 2019, benefiting from reduced claims frequency due to lower driving during the pandemic.
  • 5Manufacturing, service, and retailing segments experienced significant declines in earnings, with pre-tax earnings down 41.7% in Q2 2020 compared to the prior year.
  • 6Berkshire Hathaway Energy announced a significant acquisition of Dominion Energy's natural gas transmission and storage business for approximately $4.0 billion, funded by cash.
  • 7The company maintained strong liquidity, with cash, cash equivalents, and U.S. Treasury Bills totaling $142.8 billion at June 30, 2020, and repurchased $6.7 billion of its own stock in the first six months of 2020.

Frequently Asked Questions

The COVID-19 pandemic had a mixed impact. While it led to revenue declines and operational disruptions across many segments, particularly manufacturing, service, and retailing, it also resulted in lower claims frequency for GEICO, significantly boosting underwriting earnings. Additionally, market volatility led to substantial unrealized investment gains in the second quarter, which helped offset significant impairment charges taken in other segments.

The substantial increase in net earnings to $26.3 billion was primarily driven by a $31.6 billion net gain from investments and derivatives. This gain was largely composed of unrealized gains on equity securities due to market recoveries, which more than offset other negative factors like impairment charges and revenue declines in various operating businesses.

The $10.9 billion after-tax impairment charge, largely related to Precision Castparts Corp. (PCC) in the aerospace sector, reflects a reassessment of the long-term value of these assets due to the severe impact of the pandemic on industries like air travel and aerospace. This indicates a significant and potentially prolonged downturn in those specific sectors affecting Berkshire's holdings.

Berkshire maintained a robust liquidity position, ending the quarter with $142.8 billion in cash, cash equivalents, and U.S. Treasury Bills. The company also continued its share repurchase program, buying back $6.7 billion of its stock in the first six months of 2020. Management emphasizes financial strength and redundant liquidity, indicating a conservative approach to navigating economic uncertainty.