Berkshire Hathaway 2003 Annual Report Download - page 44

43
(12) Notes payable and other borrowings (Continued)
On May 28, 2002, Berkshire issued 40,000 SQUARZ securities for net proceeds of $398 million. Each SQUARZ
security consists of a $10,000 par amount senior note due in November 2007 together with a warrant, which expires in
May 2007, to purchase either 0.1116 shares of Class A common stock or 3.3480 shares of Class B common stock for
$10,000. A warrant premium is payable to Berkshire at an annual rate of 3.75% and interest is payable to note holders
at a rate of 3.00% per annum. All debt and warrants issued in conjunction with SQUARZ securities were outstanding at
December 31, 2003.
In September 2003, Berkshire Hathaway Finance Corporation (“BHFC”), a wholly-owned subsidiary of Berkshire,
issued $1.5 billion par of senior notes consisting of $750 million par of 3.375% notes due 2008 and $750 million par of
4.625% notes due 2013. In December 2003, BHFC issued an additional $500 million par of 4.20% notes due 2010. The
proceeds were used in the financing activities of Clayton Homes.
Bank borrowings due 2006 relate to Berkadia LLC’ s (“Berkadia”) floating rate loan to FINOVA Capital
Corporation, a subsidiary of The FINOVA Group (“FNV”) in connection with a restructuring of all of that entity’ s then
outstanding bank debt and publicly traded debt securities in August 2001. Berkadia financed the entire loan to FNV
($5.6 billion) through a floating rate loan from a third party lending facility led by Fleet Bank (“Fleet Loan”), which is
secured by the FNV loan. Subsequent to December 31, 2003, FNV repaid the entire remaining principal amount on the
loan and Berkadia has fully repaid the Fleet Loan.
Generally, Berkshire’ s guarantee of a subsidiary’ s debt obligation is an absolute, unconditional and irrevocable
guarantee for the full and prompt payment when due of all present and future payment obligations of the issuer.
Payments of principal amounts expected during the next five years are as follows (in millions).
2004 2005 2006 2007 2008
Insurance and other.............................................................. $1,606 $255 $118 $556 $ 15
Finance and financial products ............................................ 1,347 79 129 107 1,057
$2,953 $334 $247 $663 $1,072
(13) Income taxes
The liability for income taxes as of December 31, 2003 and 2002 as reflected in the accompanying Consolidated
Balance Sheets is as follows (in millions). 2003 2002
Payable currently ................................................................................. $ 44 $ (21)
Deferred ............................................................................................... 11,435 8,072
$11,479 $8,051
The Consolidated Statements of Earnings reflect charges for income taxes as shown below (in millions).
2003 2002 2001
Federal ................................................................................................. $3,490 $1,916 $ 599
State ..................................................................................................... 81 87 68
Foreign ................................................................................................. 234 56 (77)
$3,805 $2,059 $ 590
Current ................................................................................................. $3,346 $2,218 $ 91
Deferred ............................................................................................... 459 (159) 499
$3,805 $2,059 $ 590