Berkshire Hathaway 2004 Annual Report Download - page 46

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(12) Unpaid losses and loss adjustment expenses (Continued)
Berkshire monitors evolving case law and its effect on environmental and latent injury claims. Changing
government regulations, newly identified toxins, newly reported claims, new theories of liability, new contract
interpretations and other factors could result in significant increases in these liabilities. Such development could be
material to Berkshire’ s results of operations. It is not possible to reliably estimate the amount of additional net loss, or
the range of net loss, that is reasonably possible.
(13) Notes payable and other borrowings
Notes payable and other borrowings of Berkshire and its subsidiaries are summarized below. Amounts are in
millions.
December 31, December 31,
2004 2003
Insurance and other:
Issued by Berkshire:
SQUARZ notes due 2007......................................................................................... $ 400 $ 400
Investment Agreements due 2012-2033................................................................... 406 632
Issued by subsidiaries and guaranteed by Berkshire:
Commercial paper and other short-term borrowings................................................ 1,139 1,527
Other debt due 2006-2035........................................................................................ 315 315
Issued by subsidiaries and not guaranteed by Berkshire due 2005-2041 ...................... 1,190 1,308
$3,450 $4,182
Finance and financial products:
Issued by subsidiaries and guaranteed by Berkshire:
3.4% notes due 2007* .............................................................................................. $ 699 $ —
3.375% notes due 2008* .......................................................................................... 1,049 744
4.20% notes due 2010* ............................................................................................ 497 497
4.625% notes due 2013* .......................................................................................... 948 744
5.1% notes due 2014* .............................................................................................. 401 —
Other borrowings ..................................................................................................... 344 809
Issued by subsidiaries and not guaranteed by Berkshire due 2005-2030 ...................... 1,449 2,143
$5,387 $4,937
*Issued by Berkshire Hathaway Finance Corporation.
Investment agreements represent numerous individual borrowing arrangements under which Berkshire is required
to periodically pay interest over contract terms, which range from a few months to over 30 years. Interest under such
contracts may be at fixed or variable rates. The weighted average interest rate on amounts outstanding as of December
31, 2004 and 2003 was 3.8% and 3.1%, respectively. Under certain conditions, principal amounts may be redeemed
without premium prior to the contractual maturity date at the option of the counterparties.
Commercial paper and other short-term borrowings are obligations of certain businesses that utilize short-term
borrowings as part of financing their operations. Weighted average interest rates as of December 31, 2004 and 2003
were 2.4% and 1.3% respectively. Berkshire affiliates have approximately $2.6 billion of available unused lines of
credit and commercial paper capacity to support their short-term borrowing programs and, otherwise, provide additional
liquidity.
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. The warrants may be exercised to purchase either 0.1116 shares of Class A common stock (effectively at
$89,606 per share) or 3.3480 shares (effectively at $2,987 per share) 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, 2004.
In 2003, Berkshire Hathaway Finance Corporation (“BHFC”), a wholly-owned subsidiary of Berkshire, issued
$2.0 billion par in the aggregate of senior notes due from 2008 to 2013. In 2004, BHFC issued an additional $1.6 billion
par in the aggregate of senior notes due from 2007 to 2014. The proceeds were used in the financing of manufactured
housing loan originations and portfolio acquisitions of Clayton Homes. On January 4, 2005, BHFC issued an additional