Berkshire Hathaway 2012 Annual Report Download - page 86

Management’s Discussion (Continued)
Financial Condition (Continued)
Assets of the finance and financial products businesses, which consisted primarily of loans and finance receivables, cash
and cash equivalents, other fixed maturity and equity investments, were approximately $25.4 billion as of December 31, 2012
and $25.0 billion at December 31, 2011. Liabilities were approximately $22.1 billion as of December 31, 2012 and $25.4 billion
as of December 31, 2011. As of December 31, 2012, notes payable and other borrowings of finance businesses were $13.0
billion and included approximately $11.2 billion of notes issued by Berkshire Hathaway Finance Corporation (“BHFC”). In
2012, $2.7 billion of BHFC notes matured. In May and September 2012, BHFC issued $2.35 billion of new notes with
maturities in 2017, 2022 and 2042. In 2013, $3.45 billion of BHFC notes will mature, including $500 million that matured in
January 2013. BHFC issued new debt of $500 million in January 2013 with maturities in 2017 and 2022. We currently intend to
issue additional new debt through BHFC to replace some or all of the upcoming debt maturities. The proceeds from the BHFC
notes are used to finance originated and acquired loans of Clayton Homes. The full and timely payment of principal and interest
on the BHFC notes is guaranteed by Berkshire.
We regularly access the credit markets, particularly through our railroad, utilities and energy and finance and financial
products businesses. Restricted access to credit markets at affordable rates in the future could have a significant negative impact
on our operations.
We are party to several equity index put option and credit default contracts as described in Note 11 to the Consolidated
Financial Statements. With limited exception, these contracts contain no collateral posting requirements under any
circumstances, including changes in either the fair value or intrinsic value of the contracts or a downgrade in Berkshire’s credit
ratings. Substantially all of these contracts were entered into prior to December 31, 2008. At December 31, 2012, the net
liabilities recorded for such contracts were approximately $7.9 billion and our collateral posting requirements were $40 million.
On July 21, 2010, President Obama signed into law financial regulatory reform legislation, known as the Dodd-Frank Wall
Street Reform and Consumer Protection Act (the “Reform Act”). The Reform Act reshapes financial regulations in the United
States by creating new regulators, regulating new markets and market participants and providing new enforcement powers to
regulators. Virtually all major areas of the Reform Act are subject to extensive rulemaking proceedings being conducted both
jointly and independently by multiple regulatory agencies, some of which have been completed and others that are expected to
be finalized in 2013. Although the Reform Act may adversely affect some of our business activities, it is not currently expected
to have a material impact on our consolidated financial results or financial condition.
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 reflected in our Consolidated Balance Sheets, such as notes payable, 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, which are not currently reflected in the financial statements, such as minimum
rentals under operating leases. Such obligations will be reflected in future periods as the goods are delivered or services
provided. Amounts due as of the balance sheet date for purchases where the goods and services have been received and a
liability incurred are not included to the extent that such amounts are due within one year of the balance sheet date.
The timing and/or amount of the payments under certain contracts are contingent upon the outcome of future events.
Actual payments will likely vary, perhaps significantly, from estimates reflected in the table that follows. Most significantly, the
timing and amount of payments arising under property and casualty insurance contracts are contingent upon the outcome of
claim settlement activities or events that may occur over many years. In addition, obligations arising under life, annuity and
health insurance benefits are estimated based on assumptions as to future premium payments, allowances, mortality, morbidity,
expenses and policy lapse rates. The amounts presented in the following table are based on the liability estimates reflected in
our Consolidated Balance Sheet as of December 31, 2012. Although certain insurance losses and loss adjustment expenses and
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