Berkshire Hathaway 10-Q 2022-09-30

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2022

OR

For the transition period from to

Commission file number 001-14905

BERKSHIRE HATHAWAY INC**.**

(Exact name of registrant as specified in its charter)

3555 Farnam Street**,** Omaha**,** Nebraska 68131

(Address of principal executive office) (Zip Code)

(402) 346-1400

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of shares of common stock outstanding as of October 26, 2022:

BERKSHIRE HATHAWAY INC.

Part I Financia****l Information

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BA****LANCE SHEETS

(dollars in millions)

*** *Includes U.S. Treasury Bills with maturities of three months or less when purchased of $*1.9 *billion at September 30, 2022 and $*61.7 billion at December 31, 2021.

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CON****SOLIDATED BALANCE SHEETS

(dollars in millions)

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEM****ENTS OF EARNINGS

(dollars in millions except per share amounts)

(Unaudited)

Showing the first 8K of 144K characters. Open the full section

Railroad (Continued)

The following table summarizes BNSF’s railroad freight volumes by business group (cars/units in thousands).

Railroad operating revenues increased 16.8% in the third quarter and 14.3% in the first nine months of 2022 compared to 2021, attributable to increases in average revenue per car/unit resulting from higher fuel surcharge revenue driven by higher fuel prices, along with increased rates per car/unit, partially offset by lower volumes. BNSF’s pre-tax earnings decreased 7.1% in the third quarter and increased 3.1% in the first nine months of 2022 compared to 2021. Results for the third quarter were impacted by lower freight volumes and higher fuel and other operating costs, partially offset by higher revenue per car.

Operating revenues from consumer products were $2.4 billion in the third quarter and $7.0 billion in the first nine months of 2022, increases of 15.3% and 14.5%, respectively, from 2021. The increases reflected higher average revenue per car/unit, partially offset by volume decreases of 7.2% in the third quarter and 7.7% in the first nine months of 2022 compared to 2021. The volume decreases were primarily due to lower international intermodal shipments resulting from supply chain disruptions. Operating revenues from industrial products were $1.5 billion in the third quarter and $4.2 billion in the first nine months of 2022, increases of 7.1% and 6.9%, respectively, from 2021. The increases reflected higher average revenue per car/unit, partially offset by volume decreases of 6.8% in the third quarter and 3.4% in the first nine months of 2022 compared to 2021. The volume decreases in both the third quarter and first nine months were primarily due to lower petroleum and building products shipments.

Operating revenues from agricultural products were $1.3 billion in the third quarter and $4.1 billion in the first nine months of 2022, increases of 25.7% and 12.0%, respectively, compared to 2021. The increases were primarily attributable to higher average revenue per car/unit. Volumes increased 4.2% in the third quarter due to higher domestic grain shipments and increased renewable diesel and oil feedstock shipments, while volumes decreased 1.3% in the first nine months of 2022, primarily due to lower grain exports, partially offset by higher volumes of domestic grains, renewable diesel and oil feedstocks. Operating revenues from coal were $1.1 billion in the third quarter and $3.0 billion in the first nine months of 2022, increases of 27.0% and 28.8%, respectively, from 2021. The increases were primarily attributable to higher average revenue per car/unit. Volumes decreased 1.2% in the third quarter primarily due to network challenges, while volumes increased 2.8% in the first nine months of 2022 due to increased electricity generation, higher natural gas prices and improved export demand.

Railroad operating expenses were $4.4 billion in the third quarter and $12.2 billion in the first nine months of 2022, increases of $1.1 billion (32.8%) and $2.2 billion (21.8%), respectively, compared to 2021. The increases were primarily due to significant increases in the cost of fuel, as well as higher compensation and benefits expenses. Our ratio of railroad operating expenses to railroad operating revenues increased 8.2 percentage points to 67.7% in the third quarter and 4.0 percentage points to 65.2% in the first nine months of 2022 versus the comparable 2021 periods. Compensation and benefits expenses increased $311 million (26.6%) in the third quarter and $439 million (12.6%) in the first nine months of 2022 compared to 2021, primarily due to wage inflation, including the impact from tentative or ratified union labor agreements, higher health and welfare costs and lower productivity. Fuel expenses increased $567 million (80.4%) in the third quarter and $1.5 billion (75.0%) in the first nine months of 2022 compared to 2021, primarily due to higher fuel prices, partially offset by lower volumes. Equipment rents, materials and other expenses increased $170 million (50.3%) in the third quarter and $232 million (18.4%) in the first nine months of 2022 compared to 2021, primarily due to general inflation, lower gains from land and easement sales and higher casualty costs.

Approximately 30,500 of BNSF’s employees are members of a labor union. The U.S. Class I railroads and rail labor unions were engaged in negotiations from January 2020 through June 2022. Federal mediation was included in that timeframe, followed by a release from the National Mediation Board for a Presidential Emergency Board (PEB). In accordance with the Railway Labor Act (RLA), the PEB issued its report and recommendations to settle the bargaining disputes on August 16, 2022. Tentative agreements based on these recommendations were reached with all labor unions in September 2022. To date, six unions have ratified those agreements. Two labor unions did not ratify their tentative agreement, and the parties have agreed to maintain the status quo as discussions continue. Ratification results for the remaining unions are scheduled to be announced through November 2022. Where settlements have not been successful following the RLA process, Congress may act by extending the status quo period or passing a law imposing a resolution on the parties.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Utilities and Energy

We currently own 92% of Berkshire Hathaway Energy Company (“BHE”), which operates a global energy business. BHE’s domestic regulated utility interests include PacifiCorp, MidAmerican Energy Company (“MEC”) and NV Energy. BHE subsidiaries also operate two regulated electricity distribution businesses referred to as Northern Powergrid in Great Britain. BHE’s natural gas pipelines consist of five domestic regulated interstate natural gas pipeline systems and a 25% interest in a liquefied natural gas export, import and storage facility (“LNG interest”), which BHE operates and consolidates for financial reporting purposes. Other energy businesses include a regulated electricity transmission-only business in Alberta, Canada (“AltaLink, L.P.”) and a diversified portfolio of mostly renewable independent power projects and investments. BHE also operates a residential real estate brokerage business and a large network of residential real estate brokerage franchises in the United States.

The rates our regulated businesses charge customers for energy and services are largely based on the costs of business operations, including income taxes and a return on capital, and are subject to regulatory approval. To the extent such costs are not allowed in the approved rates, operating results will be adversely affected. A summary of BHE’s net earnings follows (dollars in million

Showing the first 8K of 70K characters. Open the full section

Reference is made to Berkshire’s most recently issued Annual Report and in particular the “Market Risk Disclosures” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of September 30, 2022, there were no material changes in the market risks described in Berkshire’s Annual Report on Form 10-K for the year ended December 31, 2021.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer) concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings. During the quarter, there have been no significant changes in the Company’s internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

Berkshire and its subsidiaries are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. We do not believe that such normal and routine litigation will have a material effect on our consolidated financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations.

Our significant business risks are described in Item 1A to Form 10-K for the year ended December 31, 2021, to which reference is made herein. The risks and uncertainties we describe are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business or operations. Any adverse effect on our business, financial condition or operating results could result in a decline in the value of our securities and the loss of all or part of your investment.

Item 2. Unregistered Sales of Equity Securities and Use o****f Proceeds and Issuer Repurchases of Equity Securities

Berkshire’s common stock repurchase program permits Berkshire to repurchase its Class A and Class B shares any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. Repurchases may be in the open market or through privately negotiated transactions. Information with respect to Berkshire’s Class A and Class B common stock repurchased during the third quarter of 2022 follows.

• The program does not specify a maximum number of shares to be repurchased or obligate Berkshire to repurchase any specific dollar amount or number of Class A or Class B shares and there is no expiration date to the repurchase program. Berkshire will not repurchase its common stock if the repurchases reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings to less than $30 billion.

Item 3. Defaults Upo****n Senior Securities

None

Item 4. Mine Safe****ty Disclosures

Information regarding the Company’s mine safety violations and other legal matters disclosed in accordance with Section 1503(a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form 10-Q.

None

SIGNAT****URE

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.