Everything Warren Buffett: CNBC: Berkshire Hathaway Takes $1.9B After-Tax Charge On Money Losing ConocoPhillips Stake

Saturday, May 9, 2009

CNBC: Berkshire Hathaway Takes $1.9B After-Tax Charge On Money Losing ConocoPhillips Stake

Published: Friday, 8 May 2009 | 5:05 PM ET

By: Alex Crippen
Executive Producer

Warren Buffett's Berkshire Hathaway took a $1.9 billion after-tax charge at the end of the first quarter, as it cut its stake in ConocoPhillips by selling shares at a loss.

In a news release, Berkshire says it sold 13.7 million ConocoPhillips shares during the first quarter and has sold more since then.

While it expects ConocoPhillips

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] shares to "increase over time to levels that exceed our original cost," Berkshire says it will probably sell more shares before that happens to "generate additional capital losses that we can carry back to prior tax years when we generated net capital gains."

The company notes that back in 2006 it paid about $690 million in federal tax on capital gains. Berkshire says the payment can only be fully recovered "if capital losses of at least $1.98 billion are taken in 2009."

Back in November, Berkshire revealed that it had sharply increased its stake in ConocoPhillips during the second and third quarters of 2008, reaching 84 million shares as of September 30.

Berkshire's first quarter operating earnings per share came in at $1,100.

That's a decline of almost 12 percent from $1,247 in the first quarter of last year.

Operating earnings before investment and derivative gains or losses fell almost 11 percent to $1.705 billion from $1.931 billion.

Buffett had given us a rough preview of the first quarter operating earnings during Saturday's question-and-answer session with shareholders in Omaha.

Losses from investments and derivatives totaled $3.239 billion in the quarter, substantially larger than the $991 million loss last year. This quarter's figure includes $2.012 billion of writedowns. almost all of it from ConocoPhillips.

Derivative losses declined a bit from last year: $986 million vs $1.067 billion in 2008's Q1.

Berkshire says the derivative losses "primarily relate to an increase in our potential loss under our high yield credit default contracts" due to bankruptcy filings that resulted in Berkshire paying losses of about $675 million.

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