10-QPeriod: Q2 FY2023

BERKSHIRE HATHAWAY INC Quarterly Report for Q2 Ended Jun 30, 2023

Filed August 7, 2023For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. reported a strong second quarter and first six months of 2023, driven significantly by a substantial increase in investment and derivative contract gains, largely from its equity securities portfolio. Net earnings attributable to shareholders surged to $35.91 billion in Q2 2023 and $71.42 billion for the first six months, a significant improvement from the net losses reported in the prior year periods. This strong performance was bolstered by the consolidation of Pilot Travel Centers (Pilot) starting February 1, 2023, which contributed billions in revenue and nearly $200 million in net earnings to Berkshire. Despite fluctuations in segment performance, such as a decline in BNSF earnings due to lower volumes and higher costs, and mixed results across manufacturing, service, and retailing segments, the overall financial health remains robust, underscored by a substantial increase in consolidated shareholders' equity and a healthy cash position. The company's strategic acquisitions and ongoing share repurchase program further demonstrate its commitment to enhancing shareholder value. The company's balance sheet remains exceptionally strong, with shareholders' equity growing to $539.9 billion. Berkshire maintained a significant liquidity position with over $141 billion in cash, cash equivalents, and U.S. Treasury Bills held by its insurance and other businesses. Total borrowings stood at $125.3 billion, with a significant portion attributed to major subsidiaries like BNSF, BHE, and Pilot. Capital expenditures for the first six months of 2023 totaled $8.4 billion, reflecting ongoing investments in property, plant, and equipment. The company continues to focus on financial strength and capital allocation, with share repurchases remaining an active strategy, limited only by maintaining a minimum liquidity threshold of $30 billion.

Financial Highlights

28 data points
Beta

Revenue

$92.50B

Net Income

$36.20B

39.1% Net Margin

Total Assets

$1.04T

Cash & Equivalents

$50.65B

Free Cash Flow

$7.75B

Financial Statements
Beta
Revenue$92.50B
Operating Expenses$80.64B
Net Income$36.20B

Key Highlights

  • 1Net earnings attributable to Berkshire Hathaway shareholders reached $35.91 billion in Q2 2023 and $71.42 billion for the first six months, a significant turnaround from net losses in the prior year.
  • 2Investment and derivative contract gains (losses) were a major driver, showing a substantial pre-tax gain of $33.06 billion in Q2 and $67.82 billion for the first six months of 2023.
  • 3The consolidation of Pilot Travel Centers, acquired in early 2023, significantly boosted revenues and contributed $197 million in net earnings for the first five months of its inclusion.
  • 4Shareholders' equity increased by $66.5 billion to $539.9 billion by June 30, 2023, reflecting strong profitability and capital accumulation.
  • 5Insurance underwriting earnings improved significantly to $1.25 billion in Q2 2023 and $2.16 billion for the first six months, driven by better performance at GEICO and the Primary Group.
  • 6BNSF experienced a decline in earnings due to lower freight volumes and increased operating costs, with pre-tax earnings down 24.9% in Q2 and 17.6% year-to-date.
  • 7The company maintained a strong liquidity position, with cash, cash equivalents, and U.S. Treasury Bills totaling $141.9 billion across its insurance and other businesses.

Frequently Asked Questions

The primary driver of Berkshire Hathaway's significant earnings increase in the first half of 2023 was the substantial positive swing in 'Investment and derivative contract gains (losses)', which generated $67.8 billion in pre-tax gains compared to $68.9 billion in losses for the same period in 2022. This was largely due to favorable market price changes in its equity securities portfolio.

Berkshire Hathaway acquired a controlling interest in Pilot Travel Centers on January 31, 2023, and began consolidating its financial results from February 1, 2023. For the five months ending June 30, 2023, Pilot contributed $24.3 billion in revenues and $197 million in net earnings attributable to Berkshire Hathaway shareholders. This acquisition significantly boosted the company's revenues in the Railroad, Utilities, and Energy segment.

GEICO showed a strong recovery in its underwriting performance. For the first six months of 2023, it reported pre-tax underwriting earnings of $1.22 billion, a significant improvement from a pre-tax underwriting loss of $665 million in the same period of 2022. This improvement was driven by higher average premiums per auto policy, reduced advertising costs, and lower losses and loss adjustment expenses.

Berkshire Hathaway holds a substantial portfolio of equity securities, with approximately 78% of the fair value concentrated in five companies as of June 30, 2023. Changes in market prices of these securities can lead to significant unrealized gains or losses, which are recognized in earnings. While these fluctuations increase earnings volatility, Berkshire's management views them as generally less meaningful for understanding the underlying economic performance of its operating businesses compared to realized gains or losses from sales. The company actively manages these positions, as evidenced by significant proceeds from sales of equity securities in the first six months of 2023.