Berkshire Hathaway 2006 Annual Report Download - page 37

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Notes to Consolidated Financial Statements (Continued)
(2) Investments in MidAmerican Energy Holdings Company (Continued)
A condensed consolidated balance sheet as of December 31, 2005 and condensed statements of earnings for the years ending
December 31, 2005 and 2004 of MidAmerican are as follows (in millions).
Assets Liabilities and shareholders’ equity
Property, plant and equipment, net......................... $11,915 Debt, except debt owed to Berkshire ........... $10,296
Goodwill................................................................. 4,156 Debt owed to Berkshire ............................... 1,289
Other assets ............................................................ 4,122 Other liabilities and minority interests ......... 5,223
$20,193 16,808
Shareholders’ equity .................................... 3,385
$20,193
2005 2004
Operating revenue and other income............................................................................... $7,279 $6,727
Costs and expenses:
Cost of sales and operating expenses .............................................................................. 5,586 5,028
Interest expense – debt held by Berkshire....................................................................... 157 170
Other interest expense..................................................................................................... 717 713
6,460 5,911
Earnings before taxes...................................................................................................... 819 816
Income taxes and minority interests................................................................................ 261 278
Earnings from continuing operations .............................................................................. 558 538
Gain (loss) on discontinued operations ........................................................................... 5 (368) *
Net earnings .................................................................................................................... $ 563 $ 170
* On September 10, 2004, MidAmerican’s management decided to cease operations of mineral extraction facilities installed near certain
geothermal energy generation sites (“the Project”) at which proprietary processes were used to extract zinc from geothermal brine and fluids.
MidAmerican’s management concluded that the Project could not become commercially viable. Consequently, a non-cash impairment charge of
approximately $340 million, after tax, was recorded to write-down assets of the Project, rights to quantities of extractable minerals and allocated
goodwill to estimated net realizable value.
(3) Significant business acquisitions
Berkshire’ s long-held acquisition strategy is to purchase businesses with consistent earning power, good returns on equity and
able and honest management at sensible prices. During the last three years, Berkshire acquired several businesses which are
described in the following paragraphs.
On June 30, 2005, Berkshire acquired Medical Protective Corporation (“MedPro”) from GE Insurance Solutions. MedPro is
one of the nation’ s premier professional liability insurers for physicians, dentists and other primary health care providers. On August
31, 2005, Berkshire acquired Forest River, Inc., (“Forest River”) a leading manufacturer of leisure vehicles in the U.S. Forest River
manufactures a complete line of motorized and towable recreational vehicles, utility trailers, buses, boats and manufactured houses.
Operating results of MedPro and Forest River are consolidated with Berkshire’ s results beginning as of July 1, 2005 and September 1,
2005, respectively. Inclusion of MedPro’ s and Forest River’ s results as of the beginning of 2004 would not have materially impacted
Berkshire’ s consolidated results of operations as reported. Aggregate consideration paid for all business acquisitions completed
during 2005, including smaller acquisitions directed by certain Berkshire subsidiaries, was $2.4 billion.
On February 28, 2006, Berkshire acquired Business Wire, a leading global distributor of corporate news, multimedia and
regulatory filings. On March 21, 2006, PacifiCorp, a regulated electric utility providing service to customers in six Western states,
was acquired for approximately $5.1 billion in cash. On May 19, 2006, Berkshire acquired 85% of Applied Underwriters
(“Applied”), an industry leader in integrated workers’ compensation solutions. Under certain conditions, existing minority
shareholders of Applied may acquire up to an additional 4% interest in Applied from Berkshire.
On July 5, 2006, Berkshire acquired 80% of the Iscar Metalworking Companies (“IMC”) for cash in a transaction that valued
IMC at $5 billion. IMC, headquartered in Israel, is an industry leader in the metal cutting tools business through its Iscar, TaeguTec,
Ingersoll and other IMC companies. IMC provides a comprehensive range of tools for the full scope of metalworking applications.
IMC’ s products are manufactured through a global network of world-class, technologically advanced manufacturing facilities located
in Israel, Korea, the United States, Brazil, China, Germany, India, Italy and Japan, and are sold through subsidiary offices and agents
located in 61 major industrial countries worldwide. On August 2, 2006, Berkshire acquired Russell Corporation, a leading branded
athletic apparel and sporting goods company for cash of approximately $600 million.