Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Financial Condition
Our consolidated balance sheet continues to reflect significant liquidity and a strong capital base. Our consolidated
shareholders equity at June 30, 2018 was $358.1 billion, an increase of $9.8 billion since December 31, 2017. Net earnings attributable to Berkshire shareholders in the first six months of 2018 were $10.9 billion,
which included
after-tax
losses on our investments in equity securities of approximately $1.7 billion.
At June 30, 2018, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of approximately
$103.2 billion, of which $84.7 billion was held in U.S. Treasury Bills. Investments in securities (excluding our investment in Kraft Heinz) were $192.6 billion. Berkshire parent company debt outstanding at June 30, 2018 was
approximately $17.8 billion, a decrease of $1.0 billion from December 31, 2017, reflecting a maturity of $800 million in term debt and a $219 million
year-to-date
decrease attributable to foreign currency exchange rate changes applicable to the 6.85 billion par amount of Euro-denominated senior notes.
Berkshire term debt of $750 million will mature in August 2018.
Our railroad, utilities and energy businesses
(conducted by BNSF and BHE) maintain very large investments in capital assets (property, plant and equipment) and will regularly make significant capital expenditures in the normal course of business. We forecast capital expenditures of these two
operations will approximate $10 billion for the year ending December 31, 2018, of which approximately $4.1 billion was made in the first six months.
BNSFs outstanding debt approximated $22.5 billion as of June 30, 2018, relatively unchanged since
December 31, 2017. In August 2018, BNSF issued $750 million of 4.15% senior unsecured debentures due in 2048. Outstanding borrowings of BHE and its subsidiaries were approximately $40.1 billion at June 30, 2018, an increase of
$451 million since December 31, 2017. In July 2018, BHE issued $1.0 billion of 4.45% senior unsecured debt that matures in 2049. BHE subsidiaries also issued debt in July 2018, aggregating $1.05 billion and due in 2049. The
proceeds from these financings were used to repay borrowings and for other general corporate purposes. Over the remainder of 2018, approximately $1.7 billion of BHE and subsidiary term debt will mature. Berkshire does not guarantee the
repayment of debt issued by BNSF, BHE or any of their subsidiaries and is not committed to provide capital to support BNSF, BHE or any of their subsidiaries.
Finance and financial products assets were approximately $38.2 billion as of June 30, 2018, a decrease of
$3.7 billion since December 31, 2017. Finance assets consist primarily of loans and finance receivables, various types of property held for lease, cash, cash equivalents and U.S. Treasury Bills. Finance and financial products liabilities
declined $4.1 billion in the first six months of 2018 to approximately $12.6 billion at June 30, 2018, attributable to $4.1 billion of debt maturities of a wholly-owned financing subsidiary, Berkshire Hathaway Finance Corporation
(BHFC). An additional $500 million of BHFC senior notes will mature over the remainder of 2018. BHFCs senior note borrowings are used to fund loans originated and acquired by Clayton Homes and a portion of assets held for
lease by our UTLX railcar leasing business. Berkshire guarantees the full and timely payment of principal and interest with respect to BHFCs senior notes.
Berkshire has a common stock repurchase program, which as amended on July 17, 2018, permits Berkshire to repurchase its
Class A and Class B shares at prices below Berkshires intrinsic value, as conservatively determined by Warren Buffett, Berkshires Chairman of the Board and Chief Executive Officer, and Charlie Munger, a Vice-Chairman of the
Board. The program allows share repurchases in the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased. The program is expected to continue indefinitely. We will not repurchase
our stock if it reduces the total amount of Berkshires consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire.
There were no share repurchases in 2018.
Contractual Obligations
We are party to contracts associated with ongoing business and financing activities, which will result in cash payments to
counterparties in future periods. Certain obligations are included in our Consolidated Balance Sheets, such as notes payable, which require future payments on contractually specified dates and in fixed and determinable amounts. Other obligations
pertain to the acquisition of goods or services in the future, such as minimum rentals under operating leases and certain purchase obligations, and are not currently reflected in the financial statements, but will be recognized in future periods as
the goods are delivered or services are provided.
The timing and amount of the payments under certain contracts, such as
insurance and reinsurance contracts, are contingent upon the outcome of future events and claim settlements. Actual payments will likely vary, perhaps materially, from the estimated liabilities currently recorded in our Consolidated Balance Sheet.
Except as otherwise disclosed in this Quarterly Report, our contractual obligations as of June 30, 2018 were, in the
aggregate, not materially different from those disclosed in the Contractual Obligations section of Managements Discussion and Analysis of Financial Condition and Results of Operations contained in Berkshires
Annual Report on Form
10-K
for the year ended December 31, 2017.
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