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10-K_1067983_0001193125-17-056969.htm
10-K 1 d303001d10k.htm FORM 10-K Form 10-K Table of Contents     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 Commission file number 001-14905 BERKSHIRE HATHAWAY INC. (Exact name of Registrant as specified in its charter)   Delaware   47-0813844 State or other jurisdiction of incorporation or organization   (I.R.S. Employer Identification Number) 3555 Farnam Street, Omaha, Nebraska   68131 (Address of principal executive office)   (Zip Code) Registrant’s telephone number, including area code (402) 346-1400 Securities registered pursuant to Section 12(b) of the Act:   Title of each class    Name of each exchange on which registered Class A common stock, $5.00 Par Value    New York Stock Exchange Class B common stock, $0.0033 Par Value    New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☑    No  ☐ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☑ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐ Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months.    Yes  ☑    No  ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:   Large accelerated filer ☑    Accelerated filer  ☐    Non-accelerated filer  ☐    Smaller reporting company  ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☑ State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2016: $278,053,000,000* Indicate number of shares outstanding of each of the Registrant’s classes of common stock:   February 16, 2017—Class A common stock, $5 par value      774,680 shares   February 16, 2017—Class B common stock, $0.0033 par value      1,304,592,522 shares   DOCUMENTS INCORPORATED BY REFERENCE   Document    Incorporated In Proxy Statement for Registrant’s Annual Meeting to be held May 6, 2017    Part III   * This aggregate value is computed at the last sale price of the common stock on June 30, 2016. It does not include the value of Class A common stock (316,766 shares) and Class B common stock (70,408,573 shares) held by Directors and Executive Officers of the Registrant and members of their immediate families, some of whom may not constitute “affiliates” for purpose of the Securities Exchange Act of 1934.       Table of Contents Table of Contents             Page No.   Part I   Item 1.    Business      1   Item 1A.    Risk Factors      23   Item 1B.    Unresolved Staff Comments      26   Item 2.    Description of Properties      26   Item 3.    Legal Proceedings      30   Item 4.    Mine Safety Disclosures      30   Part II   Item 5.    Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities      30   Item 6.    Selected Financial Data      31   Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      32   Item 7A.    Quantitative and Qualitative Disclosures About Market Risk      62   Item 8.    Financial Statements and Supplementary Data      63      Consolidated Balance Sheets—December 31, 2016 and December 31, 2015      64      Consolidated Statements of Earnings—Years Ended December 31, 2016, December  31, 2015, and December 31, 2014      66      Consolidated Statements of Comprehensive Income—Years Ended December  31, 2016, December 31, 2015, and December 31, 2014      67      Consolidated Statements of Changes in Shareholders’ Equity—Years Ended December  31, 2016, December 31, 2015, and December 31, 2014      67      Consolidated Statements of Cash Flows—Years Ended December 31, 2016, December  31, 2015, and December 31, 2014      68      Notes to Consolidated Financial Statements      69   Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure      108   Item 9A.    Controls and Procedures      108   Item 9B.    Other Information      108   Part III   Item 10.    Directors, Executive Officers and Corporate Governance      109   Item 11.    Executive Compensation      109   Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      109   Item 13.    Certain Relationships and Related Transactions and Director Independence      109   Item 14.    Principal Accountant Fees and Services      109   Part IV   Item 15.    Exhibits and Financial Statement Schedules      109   Signatures      110   Exhibit Index      115   Table of Contents Part I   Item 1. Business Berkshire Hathaway Inc. (“Berkshire,” “Company” or “Registrant”) is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these are insurance businesses conducted on both a primary basis and a reinsurance basis, a freight rail transportation business and a group of utility and energy generation and distribution businesses. Berkshire also owns and operates a large number of other businesses engaged in a variety of activities, as identified herein. Berkshire is domiciled in the state of Delaware, and its corporate headquarters are located in Omaha, Nebraska. Berkshire’s operating businesses are managed on an unusually decentralized basis. There are essentially no centralized or integrated business functions (such as sales, marketing, purchasing, legal or human resources) and there is minimal involvement by Berkshire’s corporate headquarters in the day-to-day business activities of the operating businesses. Berkshire’s corporate office senior management participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. It also is responsible for establishing and monitoring Berkshire’s corporate governance practices, including, but not limited to, communicating the appropriate “tone at the top” messages to its employees and associates, monitoring governance efforts, including those at the operating businesses, and participating in the resolution of governance-related issues as needed. Berkshire and its consolidated subsidiaries employ approximately 367,700 people worldwide. Insurance and Reinsurance Businesses Berkshire’s insurance and reinsurance business activities are conducted through numerous domestic and foreign-based insurance entities. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty risks and also reinsure life, accident and health risks worldwide. In direct insurance activities, the insurer assumes the risk of loss from persons or organizations that are directly subject to the risks. Such risks may relate to property, casualty (or liability), life, accident, health, financial or other perils that may arise from an insurable event. In reinsurance activities, the reinsurer assumes defined portions of risks that other direct insurers or reinsurers have assumed in their own insuring activities. Reinsurance contracts are normally classified as treaty or facultative contracts. Treaty reinsurance refers to reinsurance coverage for all or a portion of a specified group or class of risks ceded by the direct insurer, while facultative reinsurance involves coverage of specific individual underlying risks. Reinsurance contracts are further classified as quota-share or excess. Under quota-share (proportional or pro-rata) reinsurance, the reinsurer shares proportionally in the original premiums and losses of the direct insurer or reinsurer. Excess (or non-proportional) reinsurance provides for the indemnification of the direct insurer or reinsurer for all or a portion of the loss in excess of an agreed upon amount or “retention.” Both quota-share and excess reinsurance contracts may provide for aggregate limits of indemnification. Insurance and reinsurance are generally subject to regulatory oversight throughout the world. Except for regulatory considerations, there are virtually no barriers to entry into the insurance and reinsurance industry. Competitors may be domestic or foreign, as well as licensed or unlicensed. The number of competitors within the industry is not known. Insurers and reinsurers compete on the basis of reliability, financial strength and stability, financial ratings, underwriting consistency, service, business ethics, price, performance, capacity, policy terms and coverage conditions. Insurers based in the United States (“U.S.”) are subject to regulation by their states of domicile and by those states in which they are licensed to write policies on an admitted basis. The primary focus of regulation is to assure that insurers are financially solvent and that policyholder interests are otherwise protected. States establish minimum capital levels for insurance companies and establish guidelines for permissible business and investment activities. States have the authority to suspend or revoke a company’s authority to do business as conditions warrant. States regulate the payment of dividends by insurance companies to their shareholders and other transactions with affiliates. Dividends, capital distributions and other transactions of extraordinary amounts are subject to prior regulatory approval. Insurers may market, sell and service insurance policies in the states where they are licensed. These insurers are referred to as admitted insurers. Admitted insurers are generally required to obtain regulatory approval of their policy forms and premium rates. Non-admitted insurance markets have developed to provide insurance that is otherwise unavailable through admitted insurers. Non-admitted insurance, often referred to as “excess and surplus” lines, is procured by either state-licensed surplus lines brokers who place risks with insurers not licensed in that state or by the insured party’s direct procurement from non-admitted insurers. Non-admitted insurance is subject to considerably less regulation with respect to policy rates and forms. Reinsurers are normally not required to obtain regulatory approval of premium rates or reinsurance contracts.   1 Table of Contents The insurance regulators of every state participate in the National Association of Insurance Commissioners (“NAIC”). The NAIC adopts forms, instructions and accounting procedures for use by U.S. insurers and reinsurers in preparing and filing annual statutory financial statements. However, an insurer’s state of domicile has ultimate authority over these matters. In addition to its activities relating to the annual statement, the NAIC develops or adopts statutory accounting principles, model laws, regulations and programs for use by its members. Such matters deal with regulatory oversight of solvency, risk management, compliance with financial regulation standards and risk-based capital reporting requirements. Berkshire’s insurance companies maintain capital strength at exceptionally high levels. This strength differentiates Berkshire’s insurance companies from their competitors. Collectively, the aggregate statutory surplus of Berkshire’s U.S. based insurers was approximately $136 billion at December 31, 2016. Berkshire’s major insurance subsidiaries are rated AA+ by Standard & Poor’s and A++ (superior) by A.M. Best with respect to their financial condition and claims paying ability. The Terrorism Risk Insurance Act of 2002 established within the Department of the Treasury a Terrorism Insurance Program (“Program”) for commercial property and casualty insurers by providing federal reinsurance of insured terrorism losses. The Program currently extends to December 31, 2020 through other Acts, most recently the Terrorism Risk Insurance Program Reauthorization Act of 2015 (the “2015 TRIA Reauthorization”). Hereinafter these Acts are collectively referred to as TRIA. Under TRIA, the Department of the Treasury is charged with certifying “acts of terrorism.” In 2017, coverage under TRIA occurs when the industry insured loss for certified events occurring during a calendar year exceeds $140 million. Under the 2015 TRIA Reauthorization, the level of insured losses for certified events occurring during a calendar year required to trigger coverage under TRIA will increase annually by $20 million per year until the level of insured losses required to trigger coverage reaches $200 million in 2020. To be eligible for federal reinsurance, insurers must make available insurance coverage for acts of terrorism, by providing policyholders with clear and conspicuous notice of the amount of premium that will be charged for this coverage and of the federal share of any insured losses resulting from any act of terrorism. Assumed reinsurance is specifically excluded from TRIA participation. TRIA currently also excludes certain forms of direct insurance (such as personal and commercial auto, burglary, theft, surety and certain professional liability lines). Reinsurers are not required to offer terrorism coverage and are not eligible for federal reinsurance of terrorism losses. In the event of a certified act of terrorism, the federal government will reimburse insurers (conditioned on their satisfaction of policyholder notification requirements) for 83% of their insured losses in excess of an insurance group’s deductible. Under the 2015 TRIA Reauthorization, the federal government’s reimbursement obligation will be reduced annually by 1% per year until the level of reimbursement is reduced to 80% in 2020. Under the Program, the deductible is 20% of the aggregate direct subject earned premium for relevant commercial lines of business in the immediately preceding calendar year. The aggregate deductible in 2017 for Berkshire’s consolidated insurance and reinsurance businesses is expected to approximate $1.1 billion. There is also an aggregate limit of $100 billion on the amount of the federal government coverage for each TRIA year. Regulation of the insurance industry outside of the United States is subject to the laws and regulations of each country in which an insurer has operations or writes premiums. Some jurisdictions impose comprehensive regulatory requirements on insurance businesses, such as in the United Kingdom, where insurers are subject to regulation by the Prudential Regulation Authority and the Financial Conduct Authority and in Germany where insurers are subject to regulation by the Federal Financial Supervisory Authority (BaFin). Other jurisdictions may impose fewer requirements. In certain foreign countries, reinsurers are also required to be licensed by governmental authorities. These licenses may be subject to modification, suspension or revocation dependent on such factors as amount and types of insurance liabilities and minimum capital and solvency tests. The violation of regulatory requirements may result in fines, censures and/or criminal sanctions in various jurisdictions. Berkshire’s insurance underwriting operations comprise the following sub-groups: (1) GEICO and its subsidiaries, (2) General Re and its subsidiaries, (3) Berkshire Hathaway Reinsurance Group and (4) Berkshire Hathaway Primary Group. Except for retroactive reinsurance and structured settlement and periodic payment annuity reinsurance products that generate significant amounts of up-front premiums along with estimated claims expected to be paid over very long periods of time (creating “float,” see Investments section below), Berkshire expects to achieve a net underwriting profit over time and to reject inadequately priced risks. Underwriting profit is defined as earned premiums less associated incurred losses, loss adjustment expenses and underwriting and policy acquisition expenses. Underwriting profit does not include investment income earned from investments. Berkshire’s insurance subsidiaries employ approximately 44,000 people. Additional information related to each of Berkshire’s four underwriting groups follows. GEICO—GEICO is headquartered in Chevy Chase, Maryland and its insurance subsidiaries consist of: Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, GEICO Casualty Company, GEICO Advantage Insurance Company, GEICO Choice Insurance Company, GEICO Secure Insurance Company, GEICO County Mutual Insurance Company and GEICO Marine Insurance Company. These companies primarily offer private   2 Table of Contents passenger automobile insurance to individuals in all 50 states and the District of Columbia. In addition, GEICO insures motorcycles, all-terrain vehicles, recreational vehicles, boats and small commercial fleets and acts as an agent for other insurers who offer homeowners, renters, boat, life and identity management insurance to individuals to provide insurance and financial services for buyers who desire insurance coverages other than those offered by GEICO. GEICO markets its policies primarily through direct response methods in which applications for insurance are submitted directly to the companies via the Internet or by telephone. GEICO competes for private passenger auto insurance customers with other companies that sell directly to the customer as well as with companies that use agency sales forces. The automobile insurance business is highly competitive in the areas of price and service. Some insurance companies may exacerbate price competition by selling their products for a period of time at less than adequate rates. GEICO will not knowingly follow that strategy. GEICO competes for private passenger automobile insurance customers in the preferred, standard and non-standard risk markets with other companies that sell directly to the customer as well as with companies that use agency sales forces, including State Farm, Allstate (including Esurance), Progressive and USAA. As a result of an aggressive advertising campaign and competitive rates, voluntary policies-in-force have increased about 38% over the past five years. GEICO was the second largest private passenger auto insurer in the United States in terms of premium volume in 2016. According to most recently published A.M. Best data, the five largest automobile insurers had a combined market share in 2015 of approximately 54%, with GEICO’s market share being approximately 11.4%. Since the publication of that data, management believes that GEICO’s current market share has grown to approximately 12%. Seasonal variations in GEICO’s insurance business are not significant. However, extraordinary weather conditions or other factors may have a significant effect upon the frequency or severity of automobile claims. Private passenger auto insurance is stringently regulated by state insurance departments. As a result, it is difficult for insurance companies to differentiate their products. Competition for private passenger automobile insurance, which is substantial, tends to focus on price and level of customer service provided. GEICO’s cost-efficient direct response marketing methods and emphasis on customer satisfaction enable it to offer competitive rates and value to its customers. GEICO primarily uses its own claims staff to manage and settle claims. The name and reputation of GEICO is a material asset and management protects it and other service marks through appropriate registrations. General Re—General Re Corporation (“General Re”) is the holding company of General Reinsurance Corporation (“GRC”) and its subsidiaries and affiliates. GRC’s subsidiaries include General Reinsurance AG, (“GRAG”), a major international reinsurer based in Germany. General Re subsidiaries currently conduct business activities globally in 45 cities and provide insurance and reinsurance coverages throughout the world. General Re provides property/casualty insurance and reinsurance, life/health reinsurance and other reinsurance intermediary and risk management services, underwriting management and investment management services. General Re is one of the largest reinsurers in the world based on premium volume and shareholder capital. Property/Casualty Insurance and Reinsurance General Re’s property/casualty reinsurance business in North America is conducted through GRC, which is domiciled in Delaware and licensed in the District of Columbia and all states but Hawaii, where it is an accredited reinsurer. Property/casualty operations in North America are headquartered in Stamford, Connecticut, and are also conducted through 13 branch offices in the U.S. and Canada. Reinsurance activities are marketed directly to clients without involving a broker or intermediary. In 2016, approximately 41% of net written premiums in North America related to casualty reinsurance coverages and 41% related to property reinsurance coverages. General Re’s property/casualty business in North America also includes specialty insurers domiciled in Delaware. General Star is a specialty and surplus lines provider, underwriting a broad array of property, casualty and professional liability business through a select group of wholesale brokers, managing general underwriters and program administrators. Genesis is an alternative risk insurance provider, offering solutions for the unique needs of public entity, commercial and captive customers. In 2016, these specialty insurers represented approximately 18% of General Re’s North American property/casualty net written premiums. General Re’s international property/casualty reinsurance business operations are conducted through internationally-based subsidiaries on a direct basis (without intermediaries) via General Reinsurance AG as well as several other General Re subsidiaries and branches in 18 countries. Coverages are written on both a quota-share and excess basis for multiple lines, including property, aviation and casualty. In 2016, international-based property/casualty operations principally wrote reinsurance on a direct basis in the form of treaties, with lesser amounts written on a facultative basis. International property/casualty business is also written through brokers, primarily via Faraday, a wholly-owned subsidiary. Faraday owns the managing agent of Syndicate 435 at Lloyd’s and provides capacity and participates in 100% of the results of Syndicate 435.   3 Table of Contents Life/Health Reinsurance General Re’s North American life/health business segments include life, disability, supplemental health, critical illness and long-term care. The international life/health business is segmented by geographic region and transacts business worldwide. The principal business segments include life, disability, critical illness, health and long-term care. The life/health business is marketed on a direct basis. In 2016, approximately 34% of life/health net premiums were written in the United States, 22% in Western Europe and the remaining 44% throughout the rest of the world. Berkshire Hathaway Reinsurance Group—Berkshire Hathaway Reinsurance Group (“BHRG”) operations are based in Stamford, Connecticut. Business activities are conducted through numerous subsidiaries, led by National Indemnity Company (“NICO”) and Columbia Insurance Company (“Columbia”). BHRG provides principally excess and quota-share reinsurance to other property and casualty insurers and reinsurers. BHRG also offers life reinsurance and annuity contracts through Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”). The type and volume of insurance and reinsurance business written by BHRG is dependent on current market conditions, including prevailing premium rates and coverage terms. The level of BHRG’s underwriting activities often fluctuates significantly from year to year depending on the perceived level of price adequacy in specific insurance and reinsurance markets as well as from the timing of particularly large reinsurance transactions. BHRG underwrites traditional non-catastrophe property and casualty insurance and reinsurance, catastrophe excess-of-loss treaty and facultative reinsurance, and individual primary insurance policies on an excess-of-loss basis for primarily large or otherwise unusual discrete risks, referred to as “individual risk.” BHRG periodically participates in underwriting placements with major brokers in the London Market through a wholly-owned subsidiary based in Great Britain. BHRG’s business is written through intermediary brokers or directly with the insured or reinsured. Effective July 1, 2015, NICO entered into a 10-year, 20% quota-share reinsurance agreement with Insurance Australia Group Limited (“IAG”). IAG is a large insurance group that currently writes multiple lines of business in Australia, New Zealand and other Asia Pacific countries. BHRG periodically assumes risks under retroactive reinsurance contracts. Retroactive reinsurance contracts afford protection to ceding companies against the adverse development of claims arising from events that have already occurred and that are insured under policies issued in prior years. Coverage under such contracts is provided on an excess basis or for losses payable immediately after the inception of the contract. Coverage provided is normally subject to large aggregate limits of indemnification. Significant amounts of asbestos, environmental and latent injury claims may arise under these contracts. In BHRG’s retroactive reinsurance business, the concept of time-value-of-money is an important element in establishing prices and contract terms, since the payment of losses under the insurance contracts are often expected to occur over long time periods. Losses payable under these policies are normally expected to exceed premiums and therefore, produce underwriting losses. This business is accepted, in part, because of the large amounts of policyholder funds (“float”) generated for investment, the economic benefit of which will be reflected through investment results in future periods. In 2014, NICO entered into a reinsurance contract with Liberty Mutual Insurance Company (“LMIC”). Under the agreement, NICO reinsures substantially all of LMIC’s unpaid losses and allocated loss adjustment expense liabilities related to (a) asbestos and environmental claims from policies incepting prior to 2005, and (b) workers’ compensation claims occurrences arising prior to January 1, 2014, subject to an aggregate retention of approximately $12.5 billion and subject to an aggregate limit of $6.5 billion. In January 2017, NICO entered into a retroactive reinsurance agreement with various subsidiaries of American International Group, Inc. (collectively, “AIG”). Under the agreement, NICO agreed to indemnify AIG for 80% of up to $25 billion, excess of $25 billion retained by AIG, of losses and allocated loss adjustment expenses with respect to certain commercial insurance loss events occurring in years prior to 2016 for a premium of about $10 billion. BHLN writes periodic payment annuity insurance policies and reinsures existing annuity-like obligations. Under these policies, it receives upfront premiums and makes a stream of annuity payments in the future and payment streams often extend for decades. Similar to retroactive reinsurance contracts, time-value-of money concepts are an important factor in establishing such premiums and underwriting losses are expected from the periodic accretion of time-value discounted liabilities. BHLN also writes reinsurance covering various forms of traditional life insurance. BHLN and its affiliates have also periodically reinsured certain guaranteed minimum death, income, and similar benefit coverages on closed-blocks of variable annuity reinsurance contracts.   4 Table of Contents Berkshire Hathaway Primary Group—The Berkshire Hathaway Primary Group (“BH Primary”) is a collection of independently managed primary insurance operations that provide a wide variety of insurance coverages to policyholders located principally in the United States. These various operations are discussed below. NICO and certain affiliates (“NICO Primary”) underwrite motor vehicle and general liability insurance to commercial enterprises on both an admitted and excess and surplus basis. This business is written nationwide primarily through insurance agents and brokers and is based in Omaha, Nebraska. The “Berkshire Hathaway Homestate Companies” (“BHHC”) is a group of insurers offering standalone workers’ compensation, commercial auto and commercial property coverages. BHHC has developed a national reach, with the ability to provide first-dollar and small to large deductible workers’ compensation coverage to employers in all states, except those where coverage is available only through state operated workers’ compensation funds. The volume of workers’ compensation business written in recent years has grown significantly. BHHC serves a diverse client base. BHHC’s business is generated primarily through independent agents and brokers. MedPro Group (“MedPro”) is a national leader in offering customized healthcare liability insurance, claims, patient safety and risk solutions to physicians, surgeons, dentists and other healthcare professionals, as well as hospitals, senior care and other healthcare facilities. MedPro has provided insurance coverage to protect healthcare providers against losses since 1899. Its insurance policies are distributed primarily through a nationwide network of appointed agents and brokers. MedPro recently began offering coverage options to healthcare providers in the United Kingdom, France and Singapore, as well as reinsurance options related to student health insurance programs. U.S. Investment Corporation (“USIC”) and its subsidiaries are specialty insurers that underwrite commercial, professional and personal lines of insurance on an admitted and excess and surplus basis. Policies are marketed in all 50 states and the District of Columbia through wholesale and retail insurance agents. USIC companies underwrite and market a wide variety of specialty insurance products. Applied Underwriters, Inc. (“Applied”) is a leading provider of payroll and insurance services to small and mid-sized employers. Applied, through its subsidiaries principally markets a product that bundles workers’ compensation and other employment related insurance coverages and business services into a seamless package that is designed to reduce the risks and remove the burden of administrative and regulatory requirements faced by small to mid-sized employers. Applied also markets a workers’ compensation product with a profit sharing component targeted to medium-sized employers. WestGUARD Insurance Company and its subsidiaries (collectively, the Berkshire Hathaway GUARD Insurance Companies) provides commercial property and casualty insurance coverage to small and mid-sized businesses and is based in Wilkes-Barre, Pennsylvania. Central States Indemnity Company of Omaha, based in Omaha, Nebraska, primarily writes Medicare Supplement insurance and credit insurance. Berkshire Hathaway Specialty Insurance (“BH Specialty”) was formed in April 2013. BH Specialty provides primary and excess commercial property, casualty, healthcare professional liability, executive and professional lines, surety and travel insurance and other insurance. BH Specialty writes business on both an excess and surplus lines basis and an admitted basis in the U.S., and on a locally admitted basis outside the U.S. BH Specialty is based in Boston, Massachusetts, with regional offices currently in several cities in the U. S. and international offices in Australia, New Zealand, Hong Kong, Singapore, Canada, Germany, United Kingdom and Macau. BH Specialty currently intends to further expand its operations. BH Specialty writes business through wholesale and retail insurance brokers, as well as managing general agents. Property and casualty loss liabilities Berkshire’s property and casualty insurance companies establish liabilities for estimated unpaid losses and loss adjustment expenses with respect to claims occurring on or before the balance sheet date. Such estimates include provisions for reported claims or case estimates, provisions for incurred-but-not-reported claims and legal and administrative costs to settle claims. The estimates of unpaid losses and amounts recoverable under reinsurance are established and continually reviewed by using a variety of actuarial, statistical and analytical techniques. Reference is made to Note 14 to the Consolidated Financial Statements included in Item 8 and “Critical Accounting Policies,” included in Item 7 of this Report. Investments—Invested assets of insurance businesses derive from shareholder capital as well as funds provided from policyholders through insurance and reinsurance business (“float”). Float is the approximate amount of net policyholder funds generated through underwriting activities that is available for investment. The major components of float are unpaid losses and   5 Table of Contents loss adjustment expenses, life, annuity and health benefit liabilities, unearned premiums and other policyholder liabilities less premium and reinsurance receivables, deferred policy acquisition costs and deferred charges on reinsurance contracts. On a consolidated basis, float has grown from approximately $70 billion at the end of 2011 to approximately $91 billion at the end of 2016, primarily through internal growth. BHRG and General Re accounted for approximately 69% of the consolidated float as of December 31, 2016. Over the past five years, Berkshire’s cost of float was negative, as insurance businesses produced net underwriting gains. Investments of insurance subsidiaries include a very large portfolio of publicly-traded equity securities, which are concentrated in relatively few issuers, as well as fixed maturity securities and cash and short-term investments. Investment portfolios are primarily managed by Berkshire’s corporate headquarters. Generally, there are no targeted investment allocation rates established by management with respect to investment activities. However, investment portfolios have historically included a much greater proportion of equity investments than is customary in the insurance industry. Railroad Business—Burlington Northern Santa Fe Burlington Northern Santa Fe, LLC (“BNSF”) is based in Fort Worth, Texas, and through BNSF Railway Company operates one of the largest railroad systems in North America. BNSF had approximately 42,000 employees at the end of 2016. In serving the Midwest, Pacific Northwest, Western, Southwestern and Southeastern regions and ports of the United States, BNSF transports a range of products and commodities derived from manufacturing, agricultural and natural resource industries. Over half of freight revenues are covered by contractual agreements of varying durations, while the balance is subject to common carrier published prices or quotations offered by BNSF. BNSF’s financial performance is influenced by, among other things, general and industry economic conditions at the international, national and regional levels. BNSF’s primary routes, including trackage rights, allow it to access major cities and ports in the western and southern United States as well as parts of Canada and Mexico. In addition to major cities and ports, BNSF efficiently serves many smaller markets by working closely with approximately 200 shortline railroads. BNSF has also entered into marketing agreements with other rail carriers, expanding the marketing reach for each railroad and their customers. For the year ending December 31, 2016, approximately 35% of freight revenues were derived from consumer products, 25% from industrial products, 22% from agricultural products and 18% from coal. Regulatory Matters BNSF is subject to federal, state and local laws and regulations generally applicable to all of its businesses. Rail operations are subject to the regulatory jurisdiction of the Surface Transportation Board (“STB”) of the United States Department of Transportation (“DOT”), the Federal Railroad Administration of the DOT, the Occupational Safety and Health Administration (“OSHA”), as well as other federal and state regulatory agencies and Canadian regulatory agencies for operations in Canada. The STB has jurisdiction over disputes and complaints involving certain rates, routes and services, the sale or abandonment of rail lines, applications for line extensions and construction, and the merger with or acquisition of control of rail common carriers. The outcome of STB proceedings can affect the profitability of BNSF’s business. The DOT and OSHA have jurisdiction under several federal statutes over a number of safety and health aspects of rail operations, including the transportation of hazardous materials. State agencies regulate some aspects of rail operations with respect to health and safety in areas not otherwise preempted by federal law. BNSF Railway is required to transport these commodities to the extent of its common carrier obligation. Environmental Matters BNSF’s rail operations, as well as those of its competitors, are also subject to extensive federal, state and local environmental regulation covering discharges to water, air emissions, toxic substances and the generation, handling, storage, transportation and disposal of waste and hazardous materials. This regulation has the effect of increasing the cost and liabilities associated with rail operations. Environmental risks are also inherent in rail operations, which frequently involve transporting chemicals and other hazardous materials. Many of BNSF’s land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. As a result, BNSF is now subject to, and will from time to time continue to be subject to, environmental cleanup and enforcement actions. In particular, the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as   6 Table of Contents the Superfund law, generally imposes joint and several liabilities for the cleanup and enforcement costs on current and former owners and operators of a site, without regard to fault or the legality of the original conduct. Accordingly, BNSF may be responsible under CERCLA and other federal and state statutes for all or part of the costs to clean up sites at which certain substances may have been released by BNSF, its current lessees, former owners or lessees of properties, or other third parties. BNSF may also be subject to claims by third parties for investigation, cleanup, restoration or other environmental costs under environmental statutes or common law with respect to properties they own that have been impacted by BNSF operations. Competition The business environment in which BNSF operates is highly competitive. Depending on the specific market, deregulated motor carriers and other railroads, as well as river barges, ships and pipelines in certain markets, may exert pressure on price and service levels. The presence of advanced, high service truck lines with expedited delivery, subsidized infrastructure and minimal empty mileage continues to affect the market for non-bulk, time-sensitive freight. The potential expansion of longer combination vehicles could further encroach upon markets traditionally served by railroads. In order to remain competitive, BNSF and other railroads seek to develop and implement operating efficiencies to improve productivity. As railroads streamline, rationalize and otherwise enhance their franchises, competition among rail carriers intensifies. BNSF’s primary rail competitor in the Western region of the United States is the Union Pacific Railroad Company. Other Class I railroads and numerous regional railroads and motor carriers also operate in parts of the same territories served by BNSF. Based on weekly reporting by the Association of American Railroads, BNSF’s share of the western United States rail traffic in 2016 was approximately 50.1%. Utilities and Energy Businesses—Berkshire Hathaway Energy Berkshire currently owns approximately 90% of the outstanding common stock of Berkshire Hathaway Energy Company (or “BHE”). BHE is a global energy company with subsidiaries that generate, transmit, store, distribute and supply energy. BHE’s businesses are managed as separate operating units. BHE’s domestic regulated energy interests are comprised of four regulated utility companies serving approximately 4.7 million retail customers, two interstate natural gas pipeline companies with approximately 16,400 miles of pipeline and a design capacity of approximately 7.9 billion cubic feet of natural gas per day and ownership interests in electricity transmission businesses. BHE’s Great Britain electricity distribution subsidiaries serve about 3.9 million electricity end-users and its electricity transmission-only business in Alberta, Canada serves approximately 85% of Alberta, Canada’s population. BHE’s interests also include a diversified portfolio of independent power projects, the second-largest residential real estate brokerage firm in the United States, and one of the largest residential real estate brokerage franchise networks in the United States. BHE employs approximately 21,000 people in connection with its various operations. General Matters PacifiCorp is a regulated electric utility company headquartered in Oregon, serving electric customers in portions of Utah, Oregon, Wyoming, Washington, Idaho and California. The combined service territory’s diverse regional economy ranges from rural, agricultural and mining areas to urban, manufacturing and government service centers. No single segment of the economy dominates the combined service territory, which helps mitigate PacifiCorp’s exposure to economic fluctuations. In addition to retail sales, PacifiCorp sells electricity on a wholesale basis. MidAmerican Energy Company (“MEC”) is a regulated electric and natural gas utility company headquartered in Iowa, serving electric and natural gas customers primarily in Iowa and also in portions of Illinois, South Dakota and Nebraska. MEC has a diverse customer base consisting of urban and rural residential customers and a variety of commercial and industrial customers. In addition to retail sales and natural gas transportation, MEC sells electricity principally to markets operated by regional transmission organizations and natural gas on a wholesale basis. NV Energy, Inc. (“NV Energy”), acquired by BHE on December 19, 2013, is an energy holding company headquartered in Nevada, primarily consisting of two regulated utility subsidiaries, Nevada Power Company (“Nevada Power”) and Sierra Pacific Power Company (“Sierra Pacific”) (collectively, the “Nevada Utilities”). Nevada Power serves electric customers in southern Nevada and Sierra Pacific serves electric and natural gas customers in northern Nevada. The Nevada Utilities’ combined service territory’s economy includes gaming, mining, recreation, warehousing, manufacturing and governmental services. In addition to retail sales and natural gas transportation, the Nevada Utilities sell electricity and natural gas on a wholesale basis. As vertically integrated utilities, BHE’s domestic utilities own approximately 27,600 net megawatts of generation capacity in operation and under construction. There are seasonal variations in these businesses that are principally related to the use of   7 Table of Contents electricity for air conditioning and natural gas for heating. Typically, regulated electric revenues are higher in the summer months, while regulated natural gas revenues are higher in the winter months. The Great Britain utilities consist of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc, which own a substantial electricity distribution network that delivers electricity to end-users in northeast England in an area covering approximately 10,000 square miles. The distribution companies primarily charge supply companies regulated tariffs for the use of their distribution systems. BHE acquired AltaLink L.P. (“AltaLink”) on December 1, 2014. AltaLink is a regulated electric transmission-only utility company headquartered in Calgary, Alberta. AltaLink connects generation plants to major load centers, cities and large industrial plants throughout its 87,000 square mile service territory. AltaLink receives all of its regulated transmission tariffs from the Alberta Electric System Operator (“AESO”) based on tariffs approved by the Alberta Utilities Commission (“AUC”). The natural gas pipelines consist of Northern Natural Gas Company (“Northern Natural”) and Kern River Gas Transmission Company (“Kern River”). Northern Natural, based in Nebraska, owns the largest interstate natural gas pipeline system in the United States, as measured by pipeline miles, reaching from west Texas to Michigan’s Upper Peninsula. Northern Natural’s pipeline system consists of approximately 14,700 miles of natural gas pipelines. Northern Natural’s extensive pipeline system, which is interconnected with many interstate and intrastate pipelines in the national grid system, has access to supplies from multiple major supply basins and provides transportation services to utilities and numerous other customers. Northern Natural also operates three underground natural gas storage facilities and two liquefied natural gas storage peaking units. Northern Natural’s pipeline system experiences significant seasonal swings in demand and revenue, with the highest demand typically occurring during the months of November through March. Kern River, based in Utah, owns an interstate natural gas pipeline system that consists of approximately 1,700 miles and extends from supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River transports natural gas for electric and natural gas distribution utilities, major oil and natural gas companies or affiliates of such companies, electric generating companies, energy marketing and trading companies, and financial institutions. BHE Renewables is based in Iowa and owns interests in independent power projects having approximately 4,000 net megawatts of generation capacity that are in service or under construction in California, Illinois, Nebraska, Texas, New York, Arizona, Minnesota, Kansas, Hawaii and the Philippines. These independent power projects sell power generated primarily from solar, wind, geothermal and hydro sources under long-term contracts. Regulatory Matters PacifiCorp, MEC and the Nevada Utilities are subject to comprehensive regulation by various federal, state and local agencies. The Federal Energy Regulatory Commission (“FERC”) is an independent agency with broad authority to implement provisions of the Federal Power Act, the Natural Gas Act, the Energy Policy Act of 2005 and other federal statutes. The FERC regulates rates for wholesale sales of electricity; transmission of electricity, including pricing and regional planning for the expansion of transmission systems; electric system reliability; utility holding companies; accounting and records retention; securities issuances; construction and operation of hydroelectric facilities; and other matters. The FERC also has the enforcement authority to assess civil penalties of up to $1.2 million per day per violation of rules, regulations and orders issued under the Federal Power Act. MEC is also subject to regulation by the Nuclear Regulatory Commission pursuant to the Atomic Energy Act of 1954, as amended, with respect to its 25% ownership of the Quad Cities Nuclear Station. With certain limited exceptions, BHE’s domestic utilities have an exclusive right to serve retail customers within their service territories and, in turn, have an obligation to provide service to those customers. In some jurisdictions, certain classes of customers may choose to purchase all or a portion of their energy from alternative energy suppliers, and in some jurisdictions retail customers can generate all or a portion of their own energy. Historically, state regulatory commissions have established retail electric and natural gas rates on a cost-of-service basis, which are designed to allow a utility an opportunity to recover what each state regulatory commission deems to be the utility’s reasonable costs of providing services, including a fair opportunity to earn a reasonable return on its investments based on its cost of debt and equity. The retail electric rates of PacifiCorp, MEC and the Nevada Utilities are generally based on the cost of providing traditional bundled services, including generation, transmission and distribution services. Northern Powergrid (Northeast) and Northern Powergrid (Yorkshire) each charge fees for the use of their distribution systems that are controlled by a formula prescribed by the British electricity regulatory body, the Gas and Electricity Markets Authority. The current eight-year price control period runs from April 1, 2015 through March 31, 2023.   8 Table of Contents AltaLink is regulated by the AUC, pursuant to the Electric Utilities Act (Alberta), the Public Utilities Act (Alberta), the Alberta Utilities Commission Act (Alberta) and the Hydro and Electric Energy Act (Alberta). The AUC is an independent quasi-judicial agency with broad authority that may impact many of AltaLink’s activities, including its tariffs, rates, construction, operations and financing. Under the Electric Utilities Act, AltaLink prepares and files applications with the AUC for approval of tariffs to be paid by the AESO for the use of its transmission facilities, and the terms and conditions governing the use of those facilities. The AESO is the independent system operator in Alberta, Canada that oversees Alberta’s integrated electrical system (“AIES”) and wholesale electricity market. The AESO is responsible for directing the safe, reliable and economic operation of the AIES, including long-term transmission system planning. The natural gas pipelines are subject to regulation by various federal, state and local agencies. The natural gas pipeline and storage operations of Northern Natural and Kern River are regulated by the FERC pursuant to the Natural Gas Act and the Natural Gas Policy Act of 1978. Under this authority, the FERC regulates, among other items, (a) rates, charges, terms and conditions of service and (b) the construction and operation of interstate pipelines, storage and related facilities, including the extension, expansion or abandonment of such facilities. Interstate natural gas pipeline companies are also subject to regulations administrated by the Office of Pipeline Safety within the Pipeline and Hazardous Materials Safety Administration, an agency within the DOT. Federal pipeline safety regulations are issued pursuant to the Natural Gas Pipeline Safety Act of 1968, as amended, which establishes safety requirements in the design, construction, operation and maintenance of interstate natural gas pipeline facilities. Environmental Matters BHE and its energy businesses are subject to federal, state, local and foreign laws and regulations regarding air and water quality, renewable portfolio standards, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations, such as the Federal Clean Air Act, provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. The Federal Clean Air Act, as well as state laws and regulations impacting air emissions, provides a framework for protecting and improving the nation’s air quality and controlling sources of air emissions. These laws and regulations continue to be promulgated and implemented and will impact the operation of BHE’s generating facilities and require them to reduce emissions at those facilities to comply with the requirements. Renewable portfolio standards have been established by certain state governments and generally require electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date. Utah, Oregon, Washington, California, Iowa and Nevada have adopted renewable portfolio standards. In addition, the potential adoption of state or federal clean energy standards, which include low-carbon, non-carbon and renewable electricity generating resources, may also impact electricity generators and natural gas providers. In December 2015, an international agreement was negotiated by 195 nations to create a universal framework for coordinated action on climate change in what is referred to as the Paris Agreement. The Paris Agreement reaffirms the goal of limiting global temperature increase well below 2 degrees Celsius, while urging efforts to limit the increase to 1.5 degrees Celsius; establishes commitments by all parties to make nationally determined contributions and pursue domestic measures aimed at achieving the commitments; commits all countries to submit emissions inventories and report regularly on their emissions and progress made in implementing and achieving their nationally determined commitments; and commits all countries to submit new commitments every five years, with the expectation that the commitments will get more aggressive. In the context of the Paris Agreement, the United States agreed to reduce greenhouse gas emissions 26% to 28% by 2025 from 2005 levels. The Paris Agreement formally entered into force November 4, 2016. Supporting the United States’ commitment under the Paris Agreement is the Clean Power Plan, finalized by the U.S. Environmental Protection Agency (“EPA”) in August 2015. The Clean Power Plan established the Best System of Emission Reduction for fossil-fueled power plants to include: (a) heat rate improvements; (b) increased utilization of existing combined-cycle natural gas-fueled generating facilities; and (c) increased deployment of new and incremental non-carbon generation placed in service after 2012. Applying the Best System of Emission Reduction, the EPA established uniform subcategory specific emission performance rates of 771 pounds per megawatt hour for natural gas combined cycle units and 1,305 pounds per megawatt hour for coal-fueled generating units and utilized these emission rates to establish the applicable state-by-state emission rates. The final Clean Power Plan compliance obligations begin in 2022, and extend through 2030. When fully   9 Table of Contents implemented the rule would achieve an overall reduction in carbon dioxide emissions from existing fossil-fueled electric generating units of 32% below 2005 levels. The final Clean Power Plan provides states the option to implement rate-based plans that limit the pounds per megawatt hour their effected generating units can emit or mass-based plans that limit the total tons of emissions from affected sources as well as to allow their affected units to engage in emission trading in either a mass- or rate-based plan. States were required under the final rule to submit initial plans to the EPA by September 6, 2016. However, on February 9, 2016, the United States Supreme Court ordered that the EPA’s emission guidelines for existing sources be stayed pending the disposition of the challenges to the rule in the D.C. Circuit Court of Appeals and any action on a writ of certiorari before the United States Supreme Court. The case has been fully briefed and oral argument was held before the D.C. Circuit Court of Appeals on September 27, 2016; the court has not yet issued its decision. The full impacts of the final rule or the federal plan on BHE and its energy subsidiaries cannot be determined until the outcome of the pending litigation and subsequent appeals, the outcome of any issues should the case be remanded for further action by the EPA, the development and implementation of state plans, and finalization of the federal plan. BHE continues to take actions to mitigate greenhouse gas emissions. For example, as of December 31, 2016, BHE has invested $19 billion in solar, wind, geothermal and biomass generation. Non-Energy Businesses BHE also owns HomeServices of America, Inc. (“HomeServices”), the second-largest residential real estate brokerage firm in the United States. In addition to providing traditional residential real estate brokerage services, HomeServices offers other integrated real estate services, including mortgage originations and mortgage banking, title and closing services, property and casualty insurance, home warranties, relocation services and other home-related services. It operates under 38 brand names with over 29,000 agents in nearly 540 brokerage offices in 28 states. In October 2012, HomeServices acquired a 66.7% interest in one of the largest residential real estate brokerage franchise networks in the United States, which offers and sells independently owned and operated residential real estate brokerage franchises. HomeServices’ franchise network currently includes over 375 franchisees in over 1,500 brokerage offices in 47 states with over 46,000 agents under three brand names. In exchange for certain fees, HomeServices provides the right to use the Berkshire Hathaway HomeServices, Prudential or Real Living brand names and other related service marks, as well as providing orientation programs, training and consultation services, advertising programs and other services. HomeServices’ principal sources of revenue are dependent on residential real estate sales, which are generally higher in the second and third quarters of each year. This business is highly competitive and subject to the general real estate market conditions. Manufacturing Businesses Berkshire’s numerous and diverse manufacturing businesses are grouped into three categories: (1) industrial products, (2) building products and (3) consumer products. Berkshire’s industrial products businesses manufacture specialty chemicals, metal cutting tools, components for aerospace and power generation applications and a variety of other products primarily for industrial use. The building products group produces flooring products, insulation, roofing and engineered products, building and engineered components, paint and coatings and bricks and masonry products that are primarily used in building and construction applications. The consumer products group manufactures recreational vehicles, alkaline batteries, various apparel products, jewelry and custom picture framing products. Information concerning these activities follows. Industrial products Lubrizol Corporation The Lubrizol Corporation (“Lubrizol”) is a specialty chemical company that produces and supplies technologies for the global transportation, industrial, oilfield and consumer markets. Lubrizol currently operates in two business sectors: (1) Lubrizol Additives, which includes engine additives, driveline additives and industrial specialties products; and (2) Lubrizol Advanced Materials, which includes personal and home care, engineered polymers, performance coatings, and life science solutions. Lubrizol’s products are used in a broad range of applications including engine oils, transmission fluids, gear oils, specialty driveline lubricants, fuel additives, refineries and oilfields, pipelines, metalworking fluids, compressor lubricants, greases for transportation and industrial applications, over-the-counter pharmaceutical products, performance coatings, personal care products, sporting goods and plumbing and fire sprinkler systems. Lubrizol is an industry leader in many of the markets in   10 Table of Contents which it competes. Its principal lubricant additives competitors are Infineum International Ltd., Chevron Oronite Company and Afton Chemical Corporation. The advanced materials industry is highly fragmented with a variety of competitors in each product line. Principal oilfield chemicals competitors include Nalco Energy Services, Baker Hughes Inc., Schlumberger Ltd., and Halliburton Company. From a base of approximately 3,240 patents, Lubrizol uses its technological leadership position in product development and formulation expertise to improve the quality, value and performance of its products, as well as to help minimize the environmental impact of those products. Lubrizol uses many specialty and commodity chemical raw materials in its manufacturing processes and uses base oil in processing and blending additives. Raw materials are primarily feedstocks derived from petroleum and petrochemicals and, generally, are obtainable from several sources. The materials that Lubrizol chooses to purchase from a single source typically are subject to long-term supply contracts to ensure supply reliability. Lubrizol operates facilities in 32 countries (including production facilities in 19 countries and laboratories in 15 countries). Lubrizol markets its products worldwide through a direct sales organization and sales agents and distributors. Lubrizol’s customers principally consist of major global and regional oil companies and industrial and consumer products companies that are located in more than 120 countries. Some of its largest customers also may be suppliers. In 2016, no single customer accounted for more than 10% of Lubrizol’s consolidated revenues. Lubrizol continues to implement a multi-year phased investment plan to upgrade operations, ensure compliance with health, safety and environmental requirements and increase global manufacturing capacity. Lubrizol is subject to foreign, federal, state and local laws to protect the environment and limit manufacturing waste and emissions. The company believes that its policies, practices and procedures are designed to limit the risk of environmental damage and consequent financial liability. Nevertheless, the operation of manufacturing plants entails ongoing environmental risks, and significant costs or liabilities could be incurred in the future. IMC International Metalworking Companies Berkshire acquired an 80% interest in IMC International Metalworking Companies B.V. (“IMC”) in 2006. On April 29, 2013, Berkshire acquired the remaining 20% noncontrolling interests of IMC. Through its subsidiaries, IMC is one of the world’s three largest multinational manufacturers of consumable precision carbide metal cutting tools for applications in a broad range of industrial end markets. IMC’s principal brand names include ISCAR®, TaeguTec®, Ingersoll®, Tungaloy®, Unitac®, UOP®, It.te.di®, Tool—Flo® and Outiltec®. IMC’s manufacturing facilities are located mainly in Israel, United States, Germany, Italy, France, Switzerland, South Korea, China, India, Japan and Brazil. IMC has five primary product lines: milling tools, gripping tools, turning/thread tools, drilling tools and tooling. The main products are split within each product line between consumable cemented tungsten carbide inserts and steel tool holders. Inserts comprise the vast majority of sales and earnings. Metal cutting inserts are used by industrial manufacturers to cut metals and are consumed during their use in cutting applications. IMC manufactures hundreds of types of highly engineered inserts within each product line that are tailored to maximize productivity and meet the technical requirements of customers. IMC’s staff of scientists and engineers continuously develop and innovate products that address its end user’s needs and requirements. IMC’s global sales and marketing network has representatives in virtually every major manufacturing center around the world staffed with highly skilled engineers and technical personnel. IMC’s customer base is very diverse, with its primary customers being large, multinational businesses in the automotive, aerospace, engineering and machinery industries. IMC operates a regional central warehouse system with locations in Israel, United States, Belgium, Korea, Japan and Brazil. Additional small quantities of products are maintained at local IMC offices in order to provide on-time customer support and inventory management. IMC competes in the metal cutting tools segment of the global metalworking tools market. The segment includes hundreds of participants who range from small, private manufacturers of specialized products for niche applications and markets to larger, global multinational businesses (such as Sandvik and Kennametal, Inc.) with a wide assortment of products and extensive distribution networks. Other manufacturing companies such as Kyocera, Mitsubishi, Sumitomo and Korloy also play a significant role in the cutting tool market.   11 Table of Contents Precision Castparts Berkshire acquired Precision Castparts Corp. (“PCC”) on January 29, 2016. PCC manufactures complex metal components and products, provides high-quality investment castings, forgings, fasteners/fastener systems and aerostructures for critical aerospace and power and energy applications. PCC also provides seamless pipe for coal-fired, industrial gas turbine (“IGT”) and nuclear power plants; downhole casing, clad pipe, fittings and various mill forms in a variety of nickel and steel alloys for severe-service oil and gas environments; investment castings and forgings for general industrial, armament, medical and other applications; nickel and titanium alloys in all standard mill forms from large ingots and billets to plate, foil, sheet, strip, tubing, bar, rod, extruded shapes, rod-in-coil, wire and welding consumables, as well as cobalt alloys, for the aerospace, chemical processing, oil and gas, pollution control and other industries; revert management solutions; fasteners for automotive and general industrial markets; specialty alloys for the investment casting and forging industries; heat treating and destructive testing services for the investment cast products and forging industries; refiner plates, screen cylinders and other products for the pulp and paper industry; grinder pumps and affiliated components for low-pressure sewer systems; critical auxiliary equipment and gas monitoring systems for the power generation industry; and metalworking tools for the fastener market and other applications. Investment casting technology involves a multi-step process that uses ceramic molds in the manufacture of metal components with more complex shapes, closer tolerances and finer surface finishes than parts manufactured using other casting methods. PCC uses this process to manufacture products for aircraft engines, IGT and other aeroderivative engines, airframes, medical implants, armament, unmanned aerial vehicles and other industrial applications. PCC also manufactures high temperature carbon and ceramic composite components, including ceramic matrix composites, for use in next-generation aerospace engines. PCC uses forging processes to manufacture components for the aerospace and power generation markets, including seamless pipe for coal-fired, industrial gas turbine and nuclear power plants, and downhole casings and clad pipe for severe service oil and gas markets. PCC manufactures high-performance, nickel-based alloys used to produce forged components for aerospace and non-aerospace applications in such markets as oil and gas, chemical processing and pollution control. The titanium products are used to manufacture components for the commercial and military aerospace, power generation, energy, and industrial end markets. PCC is also a leading developer and manufacturer of highly engineered fasteners, fastener systems, aerostructures and precision components, primarily for critical aerospace applications. These products are produced for the aerospace and power and energy markets, as well as for construction, automotive, heavy truck farm machinery, mining and construction equipment, shipbuilding, machine tools, medical equipment, appliances and recreation markets. The majority of sales to customers are individual purchase orders generated from long-term agreements. Most orders are subject to termination by the customer upon payment of the cost of work in process, plus a related profit factor. PCC typically does not experience significant order cancellations, although periodically it receives requests for delays in delivery schedules. PCC is subject to substantial competition in all of its markets. Components and similar products may be produced by competitors using either the same types of manufacturing processes or other forms of manufacturing. Although PCC believes its manufacturing processes, technology and experience provide advantages to its customers, such as high quality, competitive prices and physical properties that often meet more stringent demands, alternative forms of manufacturing can be used to produce many of the same components and products. Despite intense competition, PCC is a leading supplier in most of its principal markets. Several factors, including long-standing customer relationships, technical expertise, state-of-the-art facilities and dedicated employees, aid PCC in maintaining competitive advantages. A number of raw materials in its products, including certain metals such as nickel, titanium, cobalt, tantalum and molybdenum, are found in only a few parts of the world. These metals are required for the alloys used in manufactured products. The availability and costs of these metals may be influenced by private or governmental cartels, changes in world politics, labor relations between the metal producers and their work forces, and/or unstable governments in exporting nations and inflation. Marmon Holdings Berkshire currently owns 99.75% of Marmon Holdings, Inc. (“Marmon”), a holding company comprised of four autonomous companies consisting of fifteen diverse business sectors and approximately 175 independent manufacturing and service businesses. Marmon operates approximately 370 manufacturing, distribution and service facilities, which are located   12 Table of Contents primarily in the United States, as well as in 22 other countries worldwide. Marmon’s transportation equipment manufacturing, repair and leasing businesses (UTLX Company) discussed in the Finance and Financial Products businesses section of this Item. Marmon’s other diversified manufacturing and service operations are referred to as “Marmon manufacturing” and discussed further below. Marmon manufacturing includes Marmon Engineered Components Company (“Engineered Components”), Marmon Food, Beverage & Water Technologies Company (“Food, Beverage & Water”), Marmon Retail & Highway Technologies Company (“Retail & Highway”) and the Engineered Wire & Cable operations within Marmon Energy Services Company (“Energy Services”). The Engineered Wire & Cable sector supplies electrical and electronic wire and cable for energy related markets and other industries. Engineered Components includes: Metals Distribution/Services and Wire Products—provides specialty metal pipe, tubing, beams and related value-added services to markets such as construction, aerospace, industrial, and many others, and electrical building wire for residential, commercial and industrial buildings; Tubing & Fitting—supplies copper tube for the plumbing, HVAC and refrigeration markets, and aluminum tubing, brass fittings and valves for many commercial and industrial applications; and Industrial Products—provides construction fasteners, fastener coatings, custom-machined aluminum and brass forgings for construction, recreation and other industries, hand and arm protective wear, portable lighting equipment for mining and safety markets, and overhead electrification equipment for mass transit systems. Food, Beverage & Water includes: Foodservice Technologies—supplies commercial food equipment for restaurants, fast food chains and hotels; Beverage Technologies—produces beverage dispensing and cooling equipment for foodservice retailers as well as on-shelf management systems for single-serve beverages and a wide range of pre-tooled stock solutions for in-store applications; and Water Technologies—manufactures and markets residential water softening, purification and refrigeration filtration systems, treatment systems for industrial markets including power generation, oil and gas, chemical, and pulp and paper, gear drives for irrigation systems and cooling towers, and air-cooled heat exchangers. Retail & Highway includes: Retail Store Equipment—provides shelving systems, merchandising solutions, shopping carts, and other related services to retail stores in addition to material handling and security carts and automation equipment for several other industries; Retail Science—delivers retail market solutions to brands and retailers including merchandising displays, in-store digital merchandising and marketing programs; Retail Products—supplies a variety of products through the home center and other retail channels, including extension cords, work and garden gloves, and air compressors along with related tools and accessories; Automotive Solutions—serves the light vehicle automotive aftermarket industry primarily with clutches and engine mounts; and Highway Technologies—serves the heavy-duty highway transportation industry with fifth wheel coupling solutions, trailers, wheel-end products such as brake drums, undercarriage products such as severe duty axles and suspension systems, and truck modification services. Other industrial products CTB International Corp. (“CTB”), headquartered in Milford, Indiana, is a leading global designer, manufacturer and marketer of a wide range of agricultural systems and solutions for preserving grain, producing poultry, pigs and eggs, and for processing poultry, fish, vegetables and other foods. CTB operates from facilities located around the globe and supports customers through a worldwide network of independent distributors and dealers. CTB competes with a variety of manufacturers and suppliers, many of which offer only a limited number of the products offered by CTB and two of which offer products across many of CTB’s product lines. Competition is based on the price, value, reputation, quality and design of the products offered and the customer service provided by distributors, dealers and manufacturers of the products. CTB’s leading brand names, distribution network, diversified product line, product support and high-quality products enable it to compete effectively. CTB manufactures its products primarily from galvanized steel, steel wire, stainless steel and polymer materials and supplies of these materials have been sufficient in recent years. The Scott Fetzer companies are a diversified group of businesses that manufacture, distribute, service and finance a wide variety of products for residential, industrial and institutional use. The most significant of these businesses are Kirby home care systems and related businesses. On February 26, 2014, Berkshire acquired a global supplier of pipeline flow improver products from Phillips 66. The business, headquartered in Houston, Texas, was initially named Lubrizol Specialty Products, Inc. and in 2016 was renamed LiquidPower Specialty Products Inc. Berkshire’s industrial products manufacturers employ approximately 70,000 persons.   13 Table of Contents Building Products Shaw Industries Shaw Industries Group, Inc. (“Shaw”), headquartered in Dalton, Georgia, is the world’s largest carpet manufacturer based on both revenue and volume of production. Shaw designs and manufactures over 3,800 styles of tufted carpet, laminate and wood flooring for residential and commercial use under about 30 brand and trade names and under certain private labels. Shaw also provides installation services and sells ceramic and vinyl tile along with sheet vinyl. Shaw’s manufacturing operations are fully integrated from the processing of raw materials used to make fiber through the finishing of carpet. Shaw’s carpet and hard surface products are sold in a broad range of patterns, colors and textures. Shaw operates Shaw Sports Turf and Southwest Greens International, LLC which provide synthetic sports turf, golf greens and landscape turf products. During 2014, Shaw exited the woven rug business. In 2016, Shaw acquired USFloors, Inc. which is a leading innovator and marketer of wood-plastic composite flooring, as well as cork, bamboo and hardwood products. Shaw products are sold wholesale to over 30,000 retailers, distributors and commercial users throughout the United States, Canada and Mexico and are also exported to various overseas markets. Shaw’s wholesale products are marketed domestically by over 2,600 salaried and commissioned sales personnel directly to retailers and distributors and to large national accounts. Shaw’s seven carpet, four hard surface and one sample full-service distribution facilities and 25 redistribution centers, along with centralized management information systems, enable it to provide prompt and efficient delivery of its products to both its retail customers and wholesale distributors. Substantially all carpet manufactured by Shaw is tufted carpet made from nylon, polypropylene and polyester. In the tufting process, yarn is inserted by multiple needles into a synthetic backing, forming loops, which may be cut or left uncut, depending on the desired texture or construction. During 2016, Shaw processed approximately 99% of its requirements for carpet yarn in its own yarn processing facilities. The availability of raw materials continues to be good but costs are impacted by petro-chemical and natural gas price changes. Raw material cost changes are periodically factored into selling prices to customers. The floor covering industry is highly competitive with more than 100 companies engaged in the manufacture and sale of carpet in the United States and numerous manufacturers engaged in hard surface floor covering production and sales. According to industry estimates, carpet accounts for approximately 50% of the total United States consumption of all flooring types. The principal competitive measures within the floor covering industry are quality, style, price and service. Johns Manville Johns Manville (“JM”) is a leading manufacturer and marketer of premium-quality products for building insulation, mechanical insulation, industrial insulation, commercial roofing and roof insulation, as well as fibers and nonwovens for commercial, industrial and residential applications. JM serves markets that include aerospace, automotive and transportation, air handling, appliance, HVAC, pipe insulation, filtration, waterproofing, building, flooring, interiors and wind energy. Fiberglass is the basic material in a majority of JM’s products, although JM also manufactures a significant portion of its products with other materials to satisfy the broader needs of its customers. Raw materials are readily available in sufficient quantities from various sources for JM to maintain and expand its current production levels. JM regards its patents and licenses as valuable, however it does not consider any of its businesses to be materially dependent on any single patent or license. JM is headquartered in Denver, Colorado, and operates 43 manufacturing facilities in North America, Europe and China and conducts research and development at its technical center in Littleton, Colorado and at other facilities in the U.S. and Europe. The basic material in a significant number of JM’s products is fiber glass, made from proprietary organic and acrylic-based formaldehyde-free agents to bind many of its glass fibers. JM’s products contain materials other than fiber glass, including various chemical and petro-chemical-based materials used in roofing and other specialized products. JM uses recycled material when available and suitable to satisfy the broader needs of its customers. The raw materials used in these various products are readily available in sufficient quantities from various sources for JM to maintain and expand its current production levels. JM’s operations are subject to a variety of federal, state and local environmental laws and regulations. These laws and regulations regulate the discharge of materials into the air, land and water and govern the use and disposal of hazardous substances. The most relevant of the federal laws include are the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, which are administered by the EPA. In 2015, the EPA revised the hazardous air pollutant rules for the wool fiber glass and mineral wool manufacturing industries. While the new rules implement new emission standards, they are not expected to require material expenditures by JM to meet the compliance dates in 2017.   14 Table of Contents JM sells its products through a wide variety of channels including contractors, distributors, retailers, manufacturers and fabricators. JM operates in a highly competitive market, with competitors comprised primarily of several large global and national manufacturers and smaller regional manufacturers. JM holds leadership positions in the key markets that it serves. JM’s products compete primarily on the basis of value, product differentiation and customization and breadth of product line. Sales of JM’s products are moderately seasonal due to increases in construction activity that typically occur in the second and third quarters of the calendar year. JM is seeing a trend in customer purchasing decisions being determined based on the sustainable and energy efficient attributes of its products, services and operations. MiTek Industries MiTek Industries, Inc. (“MiTek”), based in Chesterfield, Missouri, operates in three separate markets: residential, commercial and industrial. MiTek operates worldwide with sales in over 100 countries and with manufacturing facilities and/or sales/engineering offices located in 21 countries. MiTek has completed a number of bolt-on acquisitions in the past five (5) years, intended to diversify product offerings and reducing the impact of the cyclical global housing markets. In the residential market MiTek is the world’s leading supplier of engineered connector products, construction hardware, engineering software and services and computer-driven manufacturing machinery to the truss component market of the building components industry. MiTek’s primary customers are component manufacturers who manufacture prefabricated roof and floor trusses and wall panels for the residential building market. MiTek also sells construction hardware to commercial distributors and do-it-yourself retail stores under the USP® Structural Connectors name. MiTek’s commercial market business includes products and services sold to the commercial construction industry. Product offering include curtain wall systems (Benson Industries, Inc.), anchoring systems for masonry and stone (Hohmann & Barnard, Inc.), light gauge steel framing products (Aegis Metal Framing Division of MiTek USA, Inc.), engineering services for a proprietary high-performance steel frame connection (SidePlate Systems, Inc.) and a comprehensive range of round, rectangular, oval and spiral ductwork for the ventilation market (M&M Manufacturing, Inc.). MiTek’s industrial market business includes: automated machinery for the battery manufacturing industry (TBS Engineering, Ltd.), highly customized air handling systems sold to commercial, institutional and industrial markets (TMI Climate Solutions, Inc.), design and supply of Nuclear Safety Related HVAC systems and components (Ellis & Watts Global Industries, Inc.), energy recovery and dehumidification systems for commercial applications (Heat-Pipe Technology, Inc.) and pre-engineered and pre-fabricated custom structural mezzanines and platforms for distribution and manufacturing facilities (Cubic Designs, Inc.). A significant raw material used is hot dipped galvanized sheet steel. While supplies are presently adequate, variations in supply have historically occurred, producing significant variations in cost and availability. Benjamin Moore Benjamin Moore & Co. (“Benjamin Moore”), headquartered in Montvale, New Jersey, is a leading formulator, manufacturer and retailer of a broad range of architectural coatings, available principally in the United States and Canada. Products include water-based and solvent-based general-purpose coatings (paints, stains and clear finishes) for use by the consumers, contractors and industrial and commercial users. Products are marketed under various registered brand names, including, but not limited to, Aura®, Natura®, Regal Select®, Ultra Spec®, MoorGard®, ben®, Eco Spec®, Coronado®, Corotech®, Insl-x® and Lenmar®. Benjamin Moore relies primarily on an independent dealer network for distribution of its products. Benjamin Moore’s distribution network includes over 3,300 independent retailers currently representing over 5,000 storefronts in the United States and Canada. The independent dealer channel offers a broad array of products including Benjamin Moore®, Coronado® and Insl-x® brands and other competitor coatings, wall coverings, window treatments and sundries. In addition, Benjamin Moore operates an on-line “pick up in store” program, which allows consumers to place orders via an e-commerce site or for national accounts and government agencies via its customer information center. These orders may be picked up at the customer’s nearest dealer. Benjamin Moore competes with numerous manufacturers, distributors and paint, coatings and related products retailers. Product quality, product innovation, breadth of product line, technical expertise, service and price determine the competitive advantage. Competitors include other paint and decorating stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated direct outlets, such as Sherwin-Williams Company, PPG Industries, Inc., The Valspar Corporation, The Home Depot, Inc. and Lowe’s Companies.   15 Table of Contents The most significant raw materials in Benjamin Moore products are titanium dioxide, solvents, and epoxy and other resins. Historically, these materials have been generally available, with pricing and availability subject to fluctuation. Acme Brick Acme Brick Company (“Acme”) headquartered in Fort Worth, Texas, manufactures and distributes clay bricks (Acme Brick®), concrete block (Featherlite) and cut limestone (Texas Quarries). In addition, Acme and its subsidiaries distribute a number of other building products of other manufacturers, including floor and wall tile, wood flooring and other masonry products. Products are sold primarily in the South Central and South Eastern United States through company-operated sales offices. Acme distributes products primarily to homebuilders and masonry and general contractors. Acme and its affiliates operate 26 clay brick manufacturing facilities at 22 sites located in eight states, six concrete block facilities in Texas and two stone fabrication facilities located in Texas and Alabama. In addition, Acme and its subsidiaries operate a glass block fabrication facility, a concrete bagging facility and a stone burnishing facility, all located in Texas. The demand for Acme’s products is seasonal, with higher sales in the warmer weather months, and is subject to the level of construction activity, which is cyclical. Acme also owns and leases properties and mineral rights that supply raw materials used in many of its manufactured products. Acme’s raw materials supply is believed to be adequate. The brick industry is subject to the EPA’s Maximum Achievable Control Technology Rule (MACT Rule) finalized in October of 2015 with a deadline for compliance of December 31, 2018. Key elements of the MACT Rule include emission limits established certain hazardous air pollutants and acidic gases. The MACT Rule also establishes work practices for “periodic” kilns, including using a designed firing time and temperature for each product, labeling maximum loads, keeping a log of each load, and developing and implementing inspection and maintenance procedures. While many of Acme’s facilities are in compliance, additional capital expenditures may be required to bring other facilities into compliance by the deadline. Berkshire’s building products manufacturers employ approximately 38,000 people. Consumer Products Apparel Fruit of the Loom (“FOL”) is headquartered in Bowling Green, Kentucky. FOL is primarily a manufacturer and distributor of basic apparel, underwear, casualwear, athletic apparel and hardgoods. Products, under the Fruit of the Loom® and JERZEES® labels are primarily sold in the mass merchandise, mid-tier chains and wholesale markets. In the Vanity Fair Brands product line, Vassarette® and Curvation® are sold in the mass merchandise market, while Vanity Fair® and Lily of France® products are sold to mid-tier chains and department stores. FOL also markets and sells athletic uniforms, apparel, sports equipment and balls to team dealers; collegiate licensed tee shirts and fleecewear to college bookstores; and athletic apparel, sports equipment and balls to sporting goods retailers under the Russell Athletic® and Spalding® brands. Additionally, Spalding® markets and sells balls in the mass merchandise market and dollar store channels. In 2016, approximately 41% of FOL’s sales were to Wal-Mart. In 2015, FOL exited an unprofitable intimate apparel business in Europe. FOL generally performs its own knitting, cloth finishing, cutting, sewing and packaging for apparel. For the North American market which comprised about 85% of FOL’s net sales in 2016, the majority of its cloth manufacturing was performed in Honduras. Labor-intensive cutting, sewing and packaging operations are located in lower labor cost facilities in Central America and the Caribbean. For the European market, products are either sourced from third-party contractors in Europe or Asia or sewn in Morocco from textiles internally produced in Morocco. FOL’s bras, athletic equipment, sporting goods and other athletic apparel lines are generally sourced from third-party contractors located primarily in Asia. U.S. grown cotton and polyester fibers are the main raw materials used in the manufacturing of FOL’s apparel products and are purchased from a limited number of third-party suppliers. Additionally in 2015, FOL entered into an agreement with one key supplier to provide the majority of FOL’s yarn. Management currently believes there are readily available alternative sources of raw materials and yarn. However, if relationships with suppliers cannot be maintained or delays occur in obtaining alternative sources of supply, production could be adversely affected, which could have a corresponding adverse effect on results of operations. Additionally, raw materials are subject to price volatility caused by weather, supply conditions, government regulations, economic climate and other unpredictable factors. FOL has secured contracts to purchase cotton, either directly or through the yarn suppliers, to meet the majority of its production plans for 2017. FOL’s markets are highly competitive, consisting of many domestic and foreign manufacturers and distributors. Competition is generally based upon product features, quality, customer service and price.   16 Table of Contents Garan designs, manufactures, imports and sells apparel primarily for children, including boys, girls, toddlers and infants. Products are sold under its own trademark Garanimals® and customer private label brands. Garan also licenses its registered trademark Garanimals® to third parties for apparel and non-apparel products. Garan conducts its business through operating subsidiaries located in the United States, Central America and Asia. Substantially all of Garan’s products are sold through its distribution centers in the United States with sales to Wal-Mart representing over 90% of its sales. Fechheimer Brothers manufactures, distributes and sells uniforms, principally for the public service and safety markets, including police, fire, postal and military markets. Fechheimer Brothers is based in Cincinnati, Ohio. Justin Brands and H.H. Brown Shoe Group manufacture and distribute work, rugged outdoor and casual shoes and western-style footwear under a number of brand names, including Justin, Tony Lama®, Nocona®, Chippewa®, BØRN®, B•Ø•C®, Carolina®, Söfft, Double-H Boots®, Eürosoft®, and Comfortiva®. Brooks Sports markets and sells performance running footwear and apparel to specialty and national retailers and directly to consumers under the Brooks® brand. Since 2011, Brooks® has maintained a #1 market share position in the running specialty channel in the United States. A significant volume of the shoes sold by Berkshire’s shoe businesses are manufactured or purchased from sources outside the United States. Products are sold worldwide through a variety of channels including department stores, footwear chains, specialty stores, catalogs and the Internet, as well as through company-owned retail stores. Other consumer products Forest River, Inc. (“Forest River”) is a manufacturer of recreational vehicles (“RV”), utility cargo trailers, buses and pontoon boats, headquartered in Elkhart, Indiana with products sold in the United States and Canada through an independent dealer network. Forest River has numerous manufacturing facilities located in six states. Forest River is a leading manufacturer of RV with brand names such as Berkshire, Cardinal, Cedar Creek, Cherokee, Coachman, Dynamax, Flagstaff, Forester, Georgetown, Palomino, Prime Time Manufacturing, Puma, Rockwood, Salem, Sandpiper, Sierra, Sunseeker, Surveyor, Viking RV and Wildwood. Utility cargo trailers are sold under Cargo Mate, Continental, Rance and US Cargo brand names among others. Buses are sold under the Elkhart Coach, Glaval Bus, Starcraft Bus, and Startrans Bus brand names. Pontoon boats are sold under the Berkshire, South Bay, and Trifecta brand names. The RV industry, Forest River’s principal market, is very competitive. Competition is based primarily on price, design, quality and service. Berkshire acquired the Duracell Company (“Duracell’), on February 26, 2016 from the Proctor & Gamble Company. Duracell, headquartered in Chicago, Illinois, is a leading manufacturer of high performance alkaline batteries. Duracell manufactures batteries in the U.S., Europe and China and provides a network of worldwide sales and distribution centers. Costco and Walmart are significant customers, each representing 10% of Duracell’s annual revenue. There are several competitors in the battery manufacturing market with Duracell holding an approximately 37% market share of the global alkaline battery market. Management believes there are sufficient sources of raw materials, which primarily include steel, zinc and manganese. Albecca Inc. (“Albecca”), headquartered in Norcross, Georgia, does business primarily under the Larson-Juhl® name. Albecca designs, manufactures and distributes a complete line of high quality, branded custom framing products, including wood and metal moulding, matboard, foamboard, glass, equipment and other framing supplies in the U.S., Canada and 13 countries outside of North America. Richline Group, Inc. is the business platform providing financial, operations and marketing support to its four independent strategic business units: Richline Jewelry, LeachGarner, Rio Grande and Inverness. Each business unit is uniquely a manufacturer and distributor of jewelry with precious metal and non-precious metal products to specific target markets including large jewelry chains, department stores, shopping networks, mass merchandisers, e-commerce retailers and artisans plus worldwide manufacturers and wholesalers. Berkshire’s consumer products manufacturers employ approximately 53,000 persons. Service and Retailing Businesses Service Businesses Berkshire’s service businesses provide grocery and foodservice distribution, professional aviation training programs, fractional aircraft ownership programs and distribution of electronic components. Other service businesses include a variety of media related businesses (newspaper, television and information distribution), franchising and servicing a large system of quick service restaurants, as well as steel service and logistics businesses. Berkshire’s service businesses employ approximately 22,000 people. Information concerning these activities follows.   17 Table of Contents McLane Company McLane Company, Inc. (“McLane”) provides wholesale distribution services in all 50 states to customers that include convenience stores, discount retailers, wholesale clubs, drug stores, military bases, quick service restaurants and casual dining restaurants. McLane provides wholesale distribution services to Wal-Mart Stores, Inc. (“Wal-Mart”), which accounts for approximately 25% of McLane’s revenues. McLane’s other significant customers include 7-Eleven and Yum! Brands, each of which accounted for over 10% of McLane’s revenues in 2016. A curtailment of purchasing by Wal-Mart or its other significant customers could have a material adverse impact on McLane’s periodic revenues and earnings. McLane’s business model is based on a high volume of sales, rapid inventory turnover and stringent expense controls. Operations are currently divided into three business units: grocery distribution, foodservice distribution and beverage distribution. McLane’s grocery distribution unit, based in Temple, Texas, maintains a dominant market share within the convenience store industry and serves most of the national convenience store chains and major oil company retail outlets. Grocery operations provide products to approximately 47,000 retail locations nationwide, including Wal-Mart. McLane’s grocery distribution unit operates 23 facilities in 19 states. McLane’s foodservice distribution unit, based in Carrollton, Texas, focuses on serving the quick service restaurant industry with high quality, timely-delivered products. Operations are conducted through 18 facilities in 16 states. The foodservice distribution unit services approximately 22,000 chain restaurants nationwide. Additionally in 2012, McLane acquired Meadowbrook Meat Company (MBM), a large customized foodservice distributor for national restaurant chains operating from 34 distribution facilities in 14 states. MBM services approximately 14,000 chain restaurants nationwide. Through its subsidiaries, McLane also operates several wholesale distributors of distilled spirits, wine and beer. Operations are conducted through 14 distribution centers in Georgia, North Carolina, Tennessee and Colorado. These beverage units, Empire Distributors, Horizon Wine & Spirits, Delta Wholesale Liquors, B&T Distributing and Baroness Small Estates, service approximately 26,000 retail locations in the Southeastern United States and Colorado. FlightSafety International FlightSafety International Inc. (“FlightSafety”), headquartered at New York’s LaGuardia Airport, is an industry leader in professional aviation training services to individuals, businesses (including certain commercial aviation companies) and the U.S. and foreign governments. FlightSafety primarily provides high technology training to pilots, aircraft maintenance technicians, flight attendants and dispatchers who operate and support a wide variety of business, commercial and military aircraft. FlightSafety operates a large fleet of advanced full flight simulators at its learning centers and training locations in the United States, Canada, China, France, Japan, Norway, Singapore, South Africa, the Netherlands, and the United Kingdom. The vast majority of FlightSafety’s instructors, training programs and flight simulators are qualified by the United States Federal Aviation Administration and other aviation regulatory agencies around the world. FlightSafety is also a leader in the design and manufacture of full flight simulators, visual systems, displays and other advanced technology training devices. This equipment is used to support FlightSafety training programs and is offered for sale to airlines and government and military organizations around the world. Manufacturing facilities are located in Oklahoma, Missouri and Texas. FlightSafety strives to maintain and manufacture simulators and develop courseware using state-of-the-art technology and invests in research and development as it builds new equipment and training programs. NetJets NetJets Inc. (“NetJets”) is the world’s leading provider of fractional ownership programs for general aviation aircraft. NetJets’ executive offices and U.S. operations are located in Columbus, Ohio, with most of its logistical and flight operations based at Port Columbus International Airport. NetJets’ European operations are based in Lisbon, Portugal. The fractional ownership concept is designed to meet the needs of customers who cannot justify the purchase of an entire aircraft based upon expected usage. In addition, fractional ownership programs are available for corporate flight departments seeking to outsource their general aviation needs or add capacity for peak periods, and for others that previously chartered aircraft. NetJets’ fractional aircraft ownership programs permit customers to acquire a specific percentage of a certain aircraft type and allow customers to utilize the aircraft for a specified number of flight hours per annum. In addition, NetJets offers prepaid flight cards and aviation solutions that provide aircraft management, ground support and flight operation services under a number of programs including NetJets Shares™, NetJets Leases™ and the Marquis Jet Card®.   18 Table of Contents NetJets is subject to the rules and regulations of the Federal Aviation Administration, the National Institute of Civil Aviation of Portugal and the European Aviation Safety Agency. Regulations address aircraft registration, maintenance requirements, pilot qualifications and airport operations, including flight planning and scheduling as well as security issues and other matters. NetJets places great emphasis on safety and customer service. Its programs are designed to offer customers guaranteed availability of aircraft, low and predictable operating costs and increased liquidity. TTI, Inc. TTI, Inc. (“TTI”), headquartered in Fort Worth, Texas, is a global specialty distributor of passive, interconnect, electromechanical and discrete components used by customers in the manufacturing and assembling of electronic products. TTI’s customer base includes original equipment manufacturers, electronic manufacturing services, original design manufacturers, military and commercial customers, as well as design and system engineers. TTI services a variety of industries including telecommunications, medical devices, computers and office equipment, military/aerospace, automotive and consumer electronics. TTI’s business model covers design through production in the electronic component supply chain and consists of its core business, which supports high volume production business and its Mouser division, which supports a broader base of customers with lower volume purchases. TTI’s distribution agreements with the industry’s leading suppliers allow it to uniquely leverage its product cost and to expand its business by providing new lines and products to its customers. TTI operates sales offices and distribution centers from more than 100 locations throughout North America, Europe, Asia and Israel. In 2012, TTI acquired Sager Electrical Supply Company, Inc. (“Sager”), a leading distributor of electronic components headquartered in Middleborough, Massachusetts. Sager’s business is focused on becoming a power specialist in the electronics distribution market. During the past two years, PowerGate, LLC and Norvell Electronics, Inc. were acquired to strengthen Sager’s value-added sales capabilities as well as market position as a power specialist in the North American market. Other services Business Wire provides electronic dissemination of full-text news releases to the media, online services and databases and the global investment community in 150 countries and in 45 languages. Approximately 88% of Business Wire’s revenues derive from its core news distribution business. The Buffalo News and BH Media Group, Inc. are publishers of 32 daily and 46 weekly newspapers in upstate New York, New Jersey, Nebraska, Iowa, Oklahoma, Texas, Virginia, Tennessee, North Carolina, South Carolina, Alabama and Florida. The newspapers operate primarily in small to mid-sized markets with strong local community connections. In June 2014, Berkshire acquired WPLG, Inc. an ABC affiliate broadcast station in Miami, Florida. International Dairy Queen develops and services a worldwide system of over 6,800 stores operating primarily under the names DQ Grill and Chill®, Dairy Queen® and Orange Julius® that offer various dairy desserts, beverages, prepared foods and blended fruit drinks. Precision Steel operates a metal service center and a manufacturer of tool room specialty and maintenance items both located in the Chicago metropolitan area. The service center buys stainless steel, low carbon sheet and strip steel, coated metals, spring steel and other metals, cuts these metals to order, and sells them to customers involved in a wide variety of industries. The manufacturer of tool room specialty and maintenance items sells its product through industrial distributors. In December 2014, Berkshire acquired Charter Brokerage (“Charter”), a leading non-asset based third party logistics provider to the petroleum and chemical industries. Charter’s service offerings include customs clearance, drawback of duties and taxes and fees, freight forwarding, marine logistics, trading and administration of foreign trade zone storage and distribution facilities. Charter’s business activities are primarily subject to U.S. Customs laws and regulations, which deal with the import and export of goods and the assessment of related tariffs and taxes. Charter’s offices are located in Connecticut, Texas, New York, Florida, Louisiana and Alberta, Canada. Berkshire’s service businesses employ approximately 45,500 employees. Retailing Businesses Berkshire’s retailing businesses principally include automotive, home furnishings and several other operations that sell various consumer products. Information regarding each of these operations follows. Berkshire Hathaway Automotive In the first quarter of 2015, Berkshire acquired a group of affiliated companies referred to as the Berkshire Hathaway Automotive Group, Inc. (BHA). BHA is the 4th largest automotive retailer in the United States, currently operating 109 new vehicle franchises through 83 dealerships located primarily in major metropolitan markets in the United States. The dealerships   19 Table of Contents sell new and used vehicles, vehicle maintenance and repair services, extended service contracts, vehicle protection products and other aftermarket products. BHA also arranges financing for its customers’ through third-party lenders. BHA operates 31 collision service centers directly connected to the dealerships’ operations and owns and operates two auto auctions and a fluid maintenance products distribution company. Dealership operations are highly concentrated in the Arizona and Texas markets, with approximately 70% of dealership-related revenues derived from sales in these markets. BHA currently maintains franchise agreements with 27 different vehicle manufacturers, although it derives a significant portion of its revenue from the Toyota/Lexus, General Motors, Ford/Lincoln, Nissan/Infiniti and Honda/Acura brands. Over 85% of BHA’s revenues are from dealerships representing these manufacturers. The retail automotive industry is highly competitive. BHA faces competition from other large public and private dealership groups, as well as individual franchised dealerships and competition via the Internet. Given the pricing transparency available via the Internet, and the fact that franchised dealers acquire vehicles from the manufacturers on the same terms irrespective of volume, the location and quality of the dealership facility, customer service and transaction speed are key differentiators in attracting customers and driving revenue. BHA’s overall relationships with the automobile manufacturers are governed by framework agreements. The framework agreements contain provisions relating to the management, operation, acquisition and the ownership structure of franchised automotive dealerships. Failure to meet the terms of these agreements could adversely impact BHA’s ability to make further acquisitions of such manufacturers’ stores. Additionally, these agreements contain limitations on the number of dealerships from a specific manufacturer that may be acquired by BHA. Individual dealerships operate under franchise agreements with the manufacturer, which grants the dealership entity a non-exclusive right to sell the manufacturer’s brand of vehicles and offer related parts and service within a specified market area, as well as the right to the manufacturer’s trademarks. The agreements contain various operational requirements and restrictions related to the management and operation of the franchised dealership and provide for termination of the agreement by the manufacturer or non-renewal for a variety of causes. The states generally have automotive dealership franchise laws that provide substantial protection to the franchisee, and it is very difficult for a manufacturer to terminate or not renew a franchise agreement outside of bankruptcy or with “good cause” under the applicable state franchise law. BHA owns approximately 6.0 million square feet of buildings and approximately 945 acres of land that are utilized in the BHA dealership and related operations. BHA also develops, underwrites and administers the various vehicle protection plans, life and accident and health insurance plans sold to consumers through the dealerships on products sold by BHA’s dealerships as well as third party dealerships. BHA also develops proprietary training programs and materials, and provides ongoing monitoring and training of the dealership’s finance and insurance personnel. Home furnishings retailing The home furnishings businesses are Nebraska Furniture Mart (“NFM”), R.C. Willey Home Furnishings (“R.C. Willey”), Star Furniture Company (“Star”) and Jordan’s Furniture, Inc. (“Jordan’s”). These businesses offer a wide selection of furniture, bedding and accessories. In addition, NFM and R.C. Willey sell a full line of major household appliances, electronics, computers and other home furnishings. These businesses also offer customer financing to complement their retail operations. An important feature of each of these businesses is their ability to control costs and to produce high business volume by offering significant value to their customers. NFM operates its business from three very large retail complexes with almost 2.8 million square feet of retail space and sizable warehouse and administrative facilities in Omaha, Nebraska, Kansas City, Kansas and The Colony, Texas. NFM is the largest furniture retailer in each of these markets. The Colony, Texas store opened in 2015 and includes retail space of approximately 560,000 square feet. NFM also owns Homemakers Furniture located in Des Moines, Iowa, which has approximately 215,000 square feet of retail space. R.C. Willey, based in Salt Lake City, Utah, is the dominant home furnishings retailer in the Intermountain West region of the United States. R.C. Willey currently operates 11 retail stores and three distribution centers. These facilities include approximately 1.3 million square feet of retail space with six stores located in Utah, one store in Idaho, three stores in Nevada and one store in California. Star’s retail facilities include about 700,000 square feet of retail space in 11 locations in Texas with eight in Houston. Star maintains a dominant position in each of its markets. Jordan’s operates a furniture retail business from six locations with approximately 755,000 square feet of retail space in stores located in Massachusetts, New Hampshire, Rhode Island and a   20 Table of Contents newly-opened store in New Haven, Connecticut. The retail stores are supported by an 800,000 square foot distribution center in Taunton, Massachusetts. Jordan’s is the largest furniture retailer, as measured by sales, in the Massachusetts and New Hampshire areas. Jordan’s is well known in its markets for its unique store arrangements and advertising campaigns. Other retailing Borsheim Jewelry Company, Inc. (“Borsheims”) operates from a single store in Omaha, Nebraska. Borsheims is a high volume retailer of fine jewelry, watches, crystal, china, stemware, flatware, gifts and collectibles. Helzberg’s Diamond Shops, Inc. (“Helzberg”) is based in North Kansas City, Missouri, and operates a chain of 223 retail jewelry stores in 36 states, which includes approximately 500,000 square feet of retail space. Helzberg’s stores are located in malls, lifestyle centers, power strip centers and outlet malls, and all stores operate under the name Helzberg Diamonds® or Helzberg Diamonds Outlet®. The Ben Bridge Corporation (“Ben Bridge Jeweler”), based in Seattle, Washington, operates a chain of 90 upscale retail jewelry stores located in 11 states primarily in the Western United States and in British Columbia, Canada. Thirty-six of its retail locations are concept stores that sell only PANDORA jewelry. Principal products include finished jewelry and timepieces. Ben Bridge Jeweler stores are located primarily in major shopping malls. Berkshire’s retail jewelry operations are subject to seasonality with over one-third of annual revenues generally earned in the fourth quarter. See’s Candies (“See’s”) produces boxed chocolates and other confectionery products with an emphasis on quality and distinctiveness in two large kitchens in Los Angeles and San Francisco and one smaller facility in Burlingame, California. See’s operates approximately 245 retail and quantity discount stores located mainly in California and other Western states. See’s revenues are highly seasonal with nearly half of its annual revenues earned in the fourth quarter. The Pampered Chef, Ltd. (“Pampered Chef”) is a premier direct seller of distinctive high quality kitchenware products with operations in the United States, Canada and Germany. Pampered Chef’s product portfolio consists of approximately 430 Pampered Chef branded kitchenware items in categories ranging from stoneware and cutlery to grilling and entertaining, all of which are curated to help the at-home cook save time. Pampered Chef’s products are available online as well as through a sales force of independent cooking consultants. Oriental Trading Company (“OTC”) is a leading multi-channel retailer and online destination for value-priced party supplies, arts and crafts, toy novelties, school supplies, educational games and patient giveaways. OTC, headquartered in Omaha, Nebraska, serves a broad base of nearly four million customers annually, including consumers, schools, churches, non-profit organizations, medical and dental offices and other businesses. OTC operates a number of websites and utilizes sophisticated online and print marketing efforts to drive sales and customer satisfaction. In April 2015, Berkshire acquired Detlev Louis Motorrad (“Louis”) which is headquartered in Hamburg, Germany. Louis is a leading retailer of motorcycle apparel and equipment in Europe. Louis carries over 32,000 different products from more than 600 manufacturers, primarily covering the clothing, technical equipment and leisure markets. Louis has over 70 stores in Germany and Austria and also sells through catalogs and via the Internet throughout most of Europe. In 2016, Louis opened its first store in Switzerland. Berkshire’s retailing businesses employ approximately 30,000 people. Finance and Financial Products Berkshire’s finance and financial products activities include an integrated manufactured housing and finance business, leasing of transportation equipment, and furniture leasing. Berkshire’s finance and financial products businesses employ approximately 24,000 people in the aggregate. Information concerning these activities follows. Clayton Homes Clayton Homes, Inc. (“Clayton”), headquartered near Knoxville, Tennessee, is a vertically integrated home building company. Clayton operates 38 manufacturing plants in 12 states. Clayton’s homes are marketed in 48 states through a network of 1,923 retailers, including 341 company-owned home centers and 100 subdivisions. Financing is offered through its finance subsidiaries to purchasers of Clayton’s manufactured homes as well as those purchasing homes from selected independent retailers.   21 Table of Contents Clayton competes at the manufacturing, retail and finance levels based on price, service, delivery capabilities and product performance and considers the ability to make financing available to retail purchasers a major factor affecting the market acceptance of its product. Retail sales are supported by Clayton’s offering of various financing and insurance programs. Financing programs support company-owned home centers and select independent retailers. Proprietary loan underwriting guidelines have been developed and include ability to repay calculations, including debt to income limits, consideration of residual income and credit score requirements, which are considered in evaluating loan applicants. Approximately 72% of the originations are home-only loans and the remaining 28% have land as additional collateral. The average down payment is approximately 15%, which may be from cash, trade or land equity. Certain loan types require an independent third-party valuation; additionally, if land is involved in the transaction it generally is independently appraised in order to establish the value of the land only or the home and the land as a package. Originations are all at fixed rates and for fixed terms. Loans outstanding include non-government originations, bulk purchases of contracts and notes from banks and other lenders. Clayton also provides inventory financing to certain independent retailers and community operators and services housing contracts and notes that were not purchased or originated. The bulk contract purchases and servicing arrangements may relate to the portfolios of other lenders or finance companies, governmental agencies, or other entities that purchase and hold housing contracts and notes. Clayton also acts as agent on physical damage insurance policies, homebuyer protection plan policies and other programs. Transportation Equipment Leasing UTLX Company (“UTLX”), headquartered in Chicago, Illinois, operates railcar, crane, intermodal tank container, manufacturing and service businesses under several brand names. Union Tank Car is a leading designer, builder and full-service lessor of tank cars and other specialized railcars. Union Tank Car and its Canadian affiliate Procor own a fleet of over 134,000 railcars which they lease to chemical, petrochemical, energy and agricultural/food customers across North America, supported by railcar repair facilities and mobile units. Union Tank Car also manufactures tank cars in two U.S. plants. Sterling Crane in Canada and the U.S. and Freo Group in Australia are major mobile crane service providers with a total fleet of approximately 1,000 cranes primarily serving energy, mining and petrochemical markets. EXSIF Worldwide is a leading international lessor of intermodal tank containers with a fleet of approximately 47,000 units primarily serving chemical producers and logistics operators. UTLX has a large number of customers diversified both geographically and across industries. UTLX, while subject to cyclicality and significant competition in all of its markets, successfully competes by offering a broad range of high quality products and services targeted at its niche markets from geographically strategic locations. Railcars and intermodal tank containers are usually leased for multiple-year terms and most of the leases are renewed upon expiration. As a result of selective ongoing capital investment and high maintenance standards, utilization rates (the number of units on lease to total units available) of UTLX’s railcar, crane and intermodal tank container equipment are generally relatively high. While tank cars operate in a highly regulated environment in North America, regulatory changes are not expected to materially impact UTLX’s operational capability, competitive position, or financial strength. XTRA Corporation (“XTRA”), headquartered in St. Louis, Missouri, is a leading transportation equipment lessor operating under the XTRA Lease® brand name. XTRA manages a diverse fleet of approximately 78,000 units located at 51 facilities throughout the United States. The fleet includes over-the-road and storage trailers, chassis, temperature controlled vans and flatbed trailers. XTRA is one of the largest lessors (in terms of units available) of over-the-road trailers in North America. Transportation equipment customers lease equipment to cover cyclical, seasonal and geographic needs and as a substitute for purchasing equipment. Therefore, as a provider of marginal capacity of transportation equipment, XTRA’s utilization rates and operating results tend to be cyclical. In addition, transportation providers often use leasing to maximize their asset utilization and reduce capital expenditures. By maintaining a large fleet, XTRA is able to provide customers with a broad selection of equipment and quick response times. Other financial activities CORT Business Services Corporation is the leading national provider of rental relocation services including rental furniture, accessories and related services in the “rent-to-rent” market of the furniture rental industry. BH Finance LLC invests in fixed-income and equity instruments. Historically, BH Finance LLC also entered into derivative contracts involving foreign currency, equity price and credit default risk. However, such derivative contracts are currently comprised of equity index contracts that were written prior to 2009. BH Finance’s activities are managed from Berkshire’s corporate headquarters. Management recognizes and accepts that losses may occur due to the nature of these activities as well as the markets in general. Additional information with respect to Berkshire’s businesses The amounts of revenue, earnings before taxes and identifiable assets attributable to the aforementioned business segments are included in Note 23 to Berkshire’s Consolidated Financial Statements contained in Item 8, Financial Statements and Supplementary Data. Additional information regarding Berkshire’s investments in fixed maturity securities, equity securities and other investments is included in Notes 3, 4 and 5 to Berkshire’s Consolidated Financial Statements.   22 Table of Contents Since June 2013, Berkshire has maintained significant investments in H.J. Heinz Holding Corporation (now The Kraft Heinz Company). Information concerning these investments is included in Note 6 to the Registrant’s Consolidated Financial Statements. Kraft Heinz is one of the largest food and beverage companies in the world, with sales in approximately 190 countries and territories. Kraft Heinz manufactures and markets food and beverage products, including condiments and sauces, cheese and dairy products, meats, refreshment beverages, coffee and other grocery products under a number of brands, including Kraft, Heinz, ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta. Berkshire maintains a website (http://www.berkshirehathaway.com) where its annual reports, certain corporate governance documents, press releases, interim shareholder reports and links to its subsidiaries’ websites can be found. Berkshire’s periodic reports filed with the SEC, which include Form 10-K, Form 10-Q, Form 8-K and amendments thereto, may be accessed by the public free of charge from the SEC and through Berkshire. Electronic copies of these reports can be accessed at the SEC’s website (http://www.sec.gov) and indirectly through Berkshire’s website (http://www.berkshirehathaway.com). Copies of these reports may also be obtained, free of charge, upon written request to: Berkshire Hathaway Inc., 3555 Farnam Street, Omaha, NE 68131, Attn: Corporate Secretary. The public may read or obtain copies of these reports from the SEC at the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549 (1-800-SEC-0330).   Item  1A. Risk Factors Berkshire and its subsidiaries (referred to herein as “we,” “us,” “our” or similar expressions) are subject to certain risks and uncertainties in its business operations which are described below. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties that are presently unknown or are currently deemed immaterial may also impair our business operations. We are dependent on a few key people for our major investment and capital allocation decisions. Major investment decisions and all major capital allocation decisions are made by Warren E. Buffett, Chairman of the Board of Directors and CEO, age 86, in consultation with Charles T. Munger, Vice Chairman of the Board of Directors, age 93. If for any reason the services of our key personnel, particularly Mr. Buffett, were to become unavailable, there could be a material adverse effect on our operations. However, Berkshire’s Board of Directors has identified certain current Berkshire subsidiary managers who, in their judgment, are capable of succeeding Mr. Buffett. Berkshire’s Board has agreed on a replacement for Mr. Buffett should a replacement be needed currently. The Board continually monitors this risk and could alter its current view regarding a replacement for Mr. Buffett in the future. We believe that the Board’s succession plan, together with the outstanding managers running our numerous and highly diversified operating units helps to mitigate this risk. We need qualified personnel to manage and operate our various businesses. In our decentralized business model, we need qualified and competent management to direct day-to-day business activities of our operating subsidiaries. Our operating subsidiaries also need qualified and competent personnel in executing their business plans and serving their customers, suppliers and other stakeholders. Changes in demographics, training requirements and the unavailability of qualified personnel could negatively impact one or more of our significant operating subsidiaries ability to meet demands of customers to supply goods and services. Recruiting and retaining qualified personnel is important to all of our operations. Although we have adequate personnel for the current business environment, unpredictable increases in demand for goods and services may exacerbate the risk of not having sufficient numbers of trained personnel, which could have a negative impact on our operating results, financial condition and liquidity. The past growth rate in Berkshire’s book value per share is not an indication of future results. In the years since present management acquired control of Berkshire, our book value per share has grown at a highly satisfactory rate. Because of the large size of our capital base (Berkshire shareholders’ equity was approximately $283 billion as of December 31, 2016), our book value per share will very likely not increase in the future at a rate close to its past rate. Investments are unusually concentrated and fair values are subject to loss in value. We concentrate a high percentage of the investments of our insurance subsidiaries in a relatively small number of equity securities and diversify our investment portfolios far less than is conventional in the insurance industry. A significant decline in the fair values of our larger investments may produce a material decline in our consolidated shareholders’ equity and our consolidated book value per share. Under certain circumstances, as required under existing GAAP, significant declines in the   23 Table of Contents fair values of these investments may require the recognition of other-than-temporary impairment losses. In addition, beginning in 2018 due to a pending change in GAAP, all changes in the fair values of these investments (whether realized or unrealized) will be recognized as gains or losses in our consolidated statement of earnings. Accordingly, periodic changes in reported earnings will likely be subject to significant variability. Since a large percentage of our investments are held in our insurance subsidiaries, a decrease in the fair values of our investments could produce a large decline in statutory surplus. Our large statutory surplus is a competitive advantage, and a material decline could have a materially adverse affect on our claims-paying ability ratings and our ability to write new insurance business thus affecting our future underwriting profitability. Competition and technology may erode our business franchises and result in lower earnings. Each of our operating businesses face intense competitive pressures within markets in which they operate. While we manage our businesses with the objective of achieving long-term sustainable growth by developing and strengthening competitive advantages, many factors, including market and technology changes, may erode or prevent the strengthening of competitive advantages. Accordingly, future operating results will depend to some degree on whether our operating units are successful in protecting or enhancing their competitive advantages. If our operating businesses are unsuccessful in these efforts, our periodic operating results in the future may decline. Deterioration of general economic conditions may significantly reduce our operating earnings and impair our ability to access capital markets at a reasonable cost. Our operating businesses are subject to normal economic cycles affecting the economy in general or the industries in which they operate. To the extent that the economy deteriorates for a prolonged period of time, one or more of our significant operations could be materially harmed. In addition, our utilities and energy businesses, our railroad business and our manufactured housing business regularly utilize debt as a component of their capital structures. These businesses depend on having access to borrowed funds through the capital markets at reasonable rates. To the extent that access to the capital markets is restricted or the cost of funding increases, these operations could be adversely affected. Terrorist acts against the United States could hurt our operating businesses. A successful (as defined by the aggressor) cyber, biological, nuclear or chemical attack against the United States could produce significant losses to our worldwide operations. Our business operations could be adversely affected directly through the loss of human resources or destruction of production facilities and information systems. This is a risk that we share with all U.S. based businesses. Regulatory changes may adversely impact our future operating results. In recent years, partially in response to financial markets crises, global economic recessions, and social and environmental issues, regulatory initiatives have accelerated in the United States and abroad. Such initiatives address for example, the regulation of banks and other major financial institutions, environmental and global-warming matters and health care reform. These initiatives impact not only our regulated insurance, energy and railroad transportation businesses, but also our manufacturing, services, retailing and financing businesses. Increased regulatory compliance costs could have a significant negative impact on our operating businesses, as well as on the businesses in which we have a significant but not controlling economic interest. We cannot predict whether such initiatives will have a material adverse impact on our consolidated financial position, results of operations or cash flows. Cyber security risks We rely on information technology in virtually all aspects of our business. A significant disruption or failure of our information technology systems could result in service interruptions, safety failures, security violations, regulatory compliance failures, an inability to protect information and assets against intruders, and other operational difficulties. Attacks perpetrated against our information systems could result in loss of assets and critical information and exposes us to remediation costs and reputational damage. Although we have taken steps intended to mitigate these risks, including business continuity planning, disaster recovery planning and business impact analysis, a significant disruption or cyber intrusion could lead to misappropriation of assets or data corruption and could adversely affect our results of operations, financial condition and liquidity. Additionally, if we are   24 Table of Contents unable to acquire or implement new technology, we may suffer a competitive disadvantage, which could also have an adverse effect on our results of operations, financial condition and liquidity. Cyber attacks could further adversely affect our ability to operate facilities, information technology and business systems, or compromise confidential customer and employee information. Political, economic, social or financial market instability or damage to or interference with our operating assets, or our customers or suppliers may result in business interruptions, lost revenue, higher commodity prices, disruption in fuel supplies, lower energy consumption, unstable markets, increased security and repair or other costs, any of which may materially adversely affect us in ways that cannot be predicted at this time. Any of these risks could materially affect our consolidated financial results. Furthermore, instability in the financial markets as a result of terrorism, sustained or significant cyber attacks, or war could also materially adversely affect our ability to raise capital. Derivative contracts may require significant future cash settlement payments and result in significant losses. We have assumed the risk of potentially significant losses under equity index put option contracts. Although we received considerable premiums as compensation for accepting these risks, there is no assurance that the premiums we received will exceed our aggregate settlement payments. Risks of losses under our equity index put option contracts are based on declines in equity prices of stocks comprising certain major stock indexes. When these contracts expire beginning in 2018, we could be required to make significant payments if equity index prices are significantly below the strike prices specified in the contracts. Equity index put option contracts are recorded at fair value in our Consolidated Balance Sheet and the periodic changes in fair values are reported in earnings. The valuations of these contracts and the impact on our periodic earnings can be particularly significant reflecting the inherent volatility of equity markets. Adverse changes in equity may result in material losses in periodic earnings. Risks unique to our regulated businesses Our tolerance for risk in our insurance businesses may result in significant underwriting losses. When properly paid for the risk assumed, we have been and will continue to be willing to assume more risk from a single event than any other insurer has knowingly assumed. Accordingly, we could incur a significant loss from a single event. We may also write coverages for losses arising from acts of terrorism. We attempt to take into account all possible correlations and avoid writing groups of policies from which pre-tax losses might aggregate above $10 billion. Currently, we estimate that our aggregate exposure from a single event under outstanding policies is significantly below $10 billion. However, despite our efforts, losses may aggregate in unanticipated ways. Our tolerance for significant insurance losses may result in lower reported earnings (or net losses) in a future period. The degree of estimation error inherent in the process of estimating property and casualty insurance loss reserves may result in significant underwriting losses. The principal cost associated with the property and casualty insurance business is claims. In writing property and casualty insurance policies, we receive premiums today and promise to pay covered losses in the future. However, it will take decades before all claims that have occurred as of any given balance sheet date will be reported and settled. Although we believe that liabilities for unpaid losses are adequate, we will not know whether these liabilities or the premiums charged for the coverages provided were sufficient until well after the balance sheet date. Except for certain product lines, our objective is to generate underwriting profits over the long-term. Estimating insurance claim costs is inherently imprecise. Our estimated unpaid losses arising under contracts covering property and casualty insurance risks are large ($77 billion at December 31, 2016) so even small percentage increases to the aggregate liability estimate can result in materially lower future periodic reported earnings. Changes in regulations and regulatory actions can adversely affect our operating results and our ability to allocate capital. Our insurance businesses are subject to regulation in the jurisdictions in which we operate. Such regulations may relate to among other things, the types of business that can be written, the rates that can be charged for coverage, the level of capital that must be maintained, and restrictions on the types and size of investments that can be made. Regulations may also restrict the timing and amount of dividend payments to Berkshire by these businesses. Accordingly, changes in regulations related to these or other matters or regulatory actions imposing restrictions on our insurance companies may adversely impact our results of operations and restrict our ability to allocate capital.   25 Table of Contents Our railroad business conducted through BNSF is also subject to a significant number of governmental laws and regulations with respect to rates and practices, taxes, railroad operations and a variety of health, safety, labor, environmental and other matters. Failure to comply with applicable laws and regulations could have a material adverse effect on BNSF’s business. Governments may change the legislative and/or regulatory framework within which BNSF operates without providing any recourse for any adverse effects that the change may have on the business. Federal legislation enacted in 2008 and amended in 2015 mandates the implementation of positive train control technology by December 31, 2018, on certain mainline track where intercity and commuter passenger railroads operate and where toxic-by-inhalation (“TIH”) hazardous materials are transported. Further, federal regulations promulgated in 2015 mandate the implementation of electronically controlled pneumatic braking systems on certain crude oil trains by 2021 and all high-hazard flammable trains, as defined by the Pipeline and Hazardous Materials Safety Administration and Federal Railroad Administration, by 2023. These types of technology require further testing and deploying them across BNSF’s railroad system and other railroads may pose significant operating and implementation risks and require significant capital expenditures. BNSF derives significant amounts of revenue from the transportation of energy-related commodities. Low natural gas prices or oil prices could impact future energy-related commodities demand. To the extent that changes in government environmental policies limit or restrict the usage of coal as a source of fuel in generating electricity or alternate fuels, such as natural gas, displace coal on a competitive basis, revenues and earnings could be adversely affected. As a common carrier, BNSF is also required to transport TIH chemicals and other hazardous materials. An accidental release of hazardous materials could expose BNSF to significant claims, losses, penalties and environmental remediation obligations. Increased economic regulation of the rail industry could negatively impact BNSF’s ability to determine prices for rail services and to make capital improvements to its rail network, resulting in an adverse effect on our results of operations, financial condition or liquidity. Our utilities and energy businesses operated under BHE are highly regulated by numerous federal, state, local and foreign governmental authorities in the jurisdictions in which they operate. These laws and regulations are complex, dynamic and subject to new interpretations or change. Regulations affect almost every aspect of our utilities and energy businesses, have broad application and limit their management’s ability to independently make and implement decisions regarding numerous matters, including acquiring businesses; constructing, acquiring or disposing of operating assets; operating and maintaining generating facilities and transmission and distribution system assets; complying with pipeline safety and integrity and environmental requirements; setting rates charged to customers; establishing capital structures and issuing debt or equity securities; transacting between our domestic utilities and our other subsidiaries and affiliates; and paying dividends or similar distributions. Failure to comply with or reinterpretations of existing regulations and new legislation or regulations, such as those relating to air and water quality, renewable portfolio standards, cyber security, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters, or changes in the nature of the regulatory process may have a significant adverse impact on our financial results. Our railroad business requires significant ongoing capital investment to improve and maintain its railroad network so that transportation services can be safely and reliably provided to customers on a timely basis. Our utilities and energy businesses also require significant amounts of capital to construct, operate and maintain generation, transmission and distribution systems to meet their customers’ needs and reliability criteria. Additionally, system assets may need to be operational for very long periods of time in order to justify the financial investment. The risk of operational or financial failure of capital projects is not necessarily recoverable through rates that are charged to customers. Further, a significant portion of costs of capital improvements are funded through debt issued by BNSF and BHE and their subsidiaries. Disruptions in debt capital markets that restrict access to funding when needed could adversely affect the results of operations, liquidity and capital resources of these businesses.   Item  1B. Unresolved Staff Comments None.   Item  2. Description of Properties The properties used by Berkshire’s business segments are summarized in this section. Berkshire’s railroad and utilities and energy businesses, in particular, utilize considerable physical assets in their businesses.   26 Table of Contents Railroad Business—Burlington Northern Santa Fe Through BNSF Railway, BNSF operates one of the largest railroad networks in North America. BNSF Railway operates approximately 32,500 route miles of track (excluding multiple main tracks, yard tracks and sidings) in 28 states, and also operates in three Canadian provinces. BNSF owns over 23,000 route miles, including easements, and operates over 9,000 route miles of trackage rights that permit BNSF to operate its trains with its crews over other railroads’ tracks. The total BNSF Railway system, including single and multiple main tracks, yard tracks and sidings, consists of over 50,000 operated miles of track, all of which are owned by or held under easement by BNSF except for over 10,000 miles operated under trackage rights. BNSF operates various facilities and equipment to support its transportation system, including its infrastructure, locomotives and freight cars. It also owns or leases other equipment to support rail operations such as vehicles. Support facilities for rail operations include yards and terminals throughout its rail network, system locomotive shops to perform locomotive servicing and maintenance, a centralized network operations center for train dispatching and network operations monitoring and management in Fort Worth, Texas, regional dispatching centers, computers, telecommunications equipment, signal systems and other support systems. Transfer facilities are maintained for rail-to-rail as well as intermodal transfer of containers, trailers and other freight traffic and include approximately 25 intermodal hubs located across the system. BNSF owns or holds under non-cancelable leases exceeding one year approximately 8,000 locomotives and 72,000 freight cars, in addition to maintenance of way and other equipment. In the ordinary course of business, BNSF makes significant capital investments to expand and improve its railroad network. BNSF incurs significant costs in repairing and maintaining its properties. In 2016, BNSF recorded approximately $2 billion in repairs and maintenance expense. Utilities and Energy Businesses—Berkshire Hathaway Energy BHE’s energy properties consist of the physical assets necessary to support its electricity and natural gas businesses. Properties of BHE’s electricity businesses include electric generation, transmission and distribution facilities, as well as coal mining assets that support certain of BHE’s electric generating facilities. Properties of BHE’s natural gas businesses include natural gas distribution facilities, interstate pipelines, storage facilities, compressor stations and meter stations. The transmission and distribution assets are primarily within each of BHE’s utility service territories. In addition to these physical assets, BHE has rights-of-way, mineral rights and water rights that enable BHE to utilize its facilities. Pursuant to separate financing agreements, a majority of these properties are pledged or encumbered to support or otherwise provide the security for the related subsidiary debt. BHE or its affiliates own or have interests in the following types of electric generation facilities at December 31, 2016:   Energy Source   Entity   Location by Significance   FacilityNetCapacity(MW) (1)     NetOwnedCapacity(MW)  (1)   Natural gas   PacifiCorp, MEC, NV Energy and BHE Renewables   Nevada, Utah, Iowa, Illinois, Washington, Oregon, Texas, New York, and Arizona     10,917       10,508   Coal   PacifiCorp, MEC and NV Energy   Wyoming, Iowa, Utah, Arizona, Nevada, Colorado and Montana     16,485       9,412   Wind   PacifiCorp, MEC and BHE Renewables   Iowa, Wyoming, Nebraska, Washington, California, Texas, Oregon, Illinois and Kansas     6,199       6,190   Solar   BHE Renewables and NV Energy   California, Arizona, Minnesota and Nevada     1,464       1,316   Hydroelectric   PacifiCorp, MEC and BHE Renewables   Washington, Oregon, The Philippines, Idaho, California, Utah, Hawaii, Montana, Illinois and Wyoming     1,297       1,275   Nuclear   MEC   Illinois     1,824       456   Geothermal   PacifiCorp and BHE Renewables   California and Utah     370       370                           Total     38,556       29,527                         (1) Facility Net Capacity (MW) represents the lesser of nominal ratings or any limitations under applicable interconnection, power purchase, or other agreements for intermittent resources and the total net dependable capability available during summer conditions for all other units. An intermittent resource’s nominal rating is the manufacturer’s contractually specified capability (in MW) under specified conditions. Net Owned Capacity indicates BHE’s ownership of Facility Net Capacity.   27 Table of Contents As of December 31, 2016, BHE’s subsidiaries also have electric generating facilities that are under construction in Iowa, and Minnesota having total Facility Net Capacity and Net Owned Capacity of 2,072 MW. PacifiCorp, MEC and NV Energy own electric transmission and distribution systems, including approximately 24,700 miles of transmission lines and approximately 1,700 substations, gas distribution facilities, including approximately 26,600 miles of gas mains and service lines, and an estimated 44 million tons of recoverable coal reserves in mines owned or leased in Wyoming and Colorado. Northern Powergrid (Northeast)’s and Northern Powergrid (Yorkshire)’s electricity distribution network includes approximately 18,000 miles of overhead lines, approximately 42,000 miles of underground cables and approximately 750 major substations. AltaLink’s electricity transmission system includes approximately 8,200 miles of transmission lines and approximately 300 substations. Northern Natural’s pipeline system consists of approximately 14,700 miles of natural gas pipelines, including approximately 6,300 miles of mainline transmission pipelines and approximately 8,400 miles of branch and lateral pipelines. Northern Natural’s end-use and distribution market area includes points in Iowa, Nebraska, Minnesota, Wisconsin, South Dakota, Michigan and Illinois and its natural gas supply and delivery service area includes points in Kansas, Texas, Oklahoma and New Mexico. Storage services are provided through the operation of one underground natural gas storage field in Iowa, two underground natural gas storage facilities in Kansas and two liquefied natural gas storage peaking units, one in Iowa and one in Minnesota. Kern River’s system consists of approximately 1,700 miles of natural gas pipelines, including approximately 1,400 miles of mainline section, including 100 miles of lateral pipelines, and approximately 300 miles of common facilities. Kern River owns the entire mainline section, which extends from the system’s point of origination in Wyoming through the Central Rocky Mountains area into California. Other Segments The physical properties used by Berkshire’s other significant business segments are summarized below:   Business    Country    Location    Type of Property/Facility   NumberofProperties      Owned/Leased Insurance Group:               GEICO    U.S.    Chevy Chase, MD and 6 other states    Offices     12      Owned       Various locations in 38 states    Offices     107      Leased General Re    U.S.    Stamford, CT    Offices     1      Owned       Various locations    Offices     25      Leased    Non-U.S.    Cologne, Germany    Offices     1      Owned       Various locations in 22 countries    Offices     27      Leased BHRG    U.S.    Stamford, CT and 4 other states    Offices     6      Leased    Non-U.S.    Various locations in 5 countries    Offices     9      Leased BH Primary Group    U.S.    Omaha, NE, Fort Wayne, IN, Princeton, NJ, Wilkes-Barre, PA and Oklahoma City, OK    Offices     7      Owned       Various locations in 23 states    Offices     74      Leased    Non-U.S    Locations in 7 countries    Offices     9      Leased Manufacturing    U.S.    Various locations    Manufacturing plants Manufacturing plants Offices/Warehouses Offices/Warehouses Retail/Showroom Retail/Showroom     470 158 214 398 21 49                Owned Leased Owned Leased Owned Leased   28 Table of Contents Business    Country    Location    Type of Property/Facility   NumberofProperties      Owned/Leased    Non-U.S.    Various locations in over 60 countries    Manufacturing plants Manufacturing plants Offices/Warehouses Offices/Warehouses Retail/Showroom     218 141 62 533 4              Owned Leased Owned Leased Leased Service    U.S.    Various locations    Training facilities/Hangars Training facilities/Hangars Offices/Distribution Offices/Distribution Production facilities Production facilities     19 120 56 175 26 2                Owned Leased Owned Leased Owned Leased    Non-U.S.    Various locations in 34 countries    Offices/Distribution/ Hangars/Training facilities Offices/Distribution/ Hangars/Training facilities     19 130        Owned Leased McLane Company    U.S.    Various locations    Distribution centers/Offices Distribution centers/Offices     57 36        Owned Leased Retailing    U.S.    Various locations    Offices/Warehouses/Plants Offices/Warehouses Retail/Showroom Retail/Showroom     29 26 143 560            Owned Leased Owned Leased    Non-U.S.    Germany Locations in 6 countries    Office/Warehouse Retail/Offices     1 89        Owned Leased Finance & Financial Products    U.S.    Various locations    Manufacturing plants Manufacturing plants Offices/Warehouses Offices/Warehouses Leasing/Showroom/Retail Leasing/Showroom/Retail Housing communities     65 8 17 62 229 249 101                  Owned Leased Owned Leased Owned Leased Owned    Non-U.S.    Various locations in 12 countries    Manufacturing plants Manufacturing plants Offices/Warehouses Offices/Warehouses     22 14 4 20            Owned Leased Owned Leased   29 Table of Contents Item 3. Legal Proceedings Berkshire and its subsidiaries are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. We do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations.   Item 4. Mine Safety Disclosures Information regarding the Company’s mine safety violations and other legal matters disclosed in accordance with Section 1503 (a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form 10-K. Executive Officers of the Registrant Following is a list of the Registrant’s named executive officers:   Name    Age    Position with Registrant    Since   Warren E. Buffett    86    Chairman of the Board      1970   Charles T. Munger    93    Vice Chairman of the Board      1978   Each executive officer serves, in accordance with the by-laws of the Registrant, until the first meeting of the Board of Directors following the next annual meeting of shareholders and until a successor is chosen and qualified or until such executive officer sooner dies, resigns, is removed or becomes disqualified. Mr. Buffett and Mr. Munger also serve as directors of the Registrant. Part II   Item 5. Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities Market Information Berkshire’s Class A and Class B common stock are listed for trading on the New York Stock Exchange, trading symbol: BRK.A and BRK.B. The following table sets forth the high and low sales prices per share, as reported on the New York Stock Exchange Composite List during the periods indicated:        2016      2015        Class A      Class B      Class A      Class B        High      Low      High      Low      High      Low      High      Low   First Quarter    $ 215,130      $ 186,900      $ 143.40      $ 123.55      $ 227,500      $ 215,151      $ 151.69      $ 142.50   Second Quarter      221,985        205,074        148.03        136.65        223,012        204,800        148.57        136.08   Third Quarter      226,490        211,500        151.05        140.95        217,100        190,007        144.69        125.50   Fourth Quarter      250,786        213,030        167.25        141.92        207,780        192,200        138.62        127.46   Shareholders Berkshire had approximately 2,300 record holders of its Class A common stock and 20,200 record holders of its Class B common stock at February 15, 2017. Record owners included nominees holding at least 430,000 shares of Class A common stock and 1,300,000,000 shares of Class B common stock on behalf of beneficial-but-not-of-record owners. Dividends Berkshire has not declared a cash dividend since 1967. Common Stock Repurchase Program Berkshire’s Board of Directors (“Berkshire’s Board”) has approved a common stock repurchase program under which Berkshire may repurchase its Class A and Class B shares at prices no higher than a 20% premium over the book value of the shares. Berkshire may repurchase shares in the open market or through privately negotiated transactions. Berkshire’s Board authorization does not specify a maximum number of shares to be repurchased. However, repurchases will not be made if they would reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion. The repurchase program does not obligate Berkshire to repurchase any dollar amount or number of Class A or Class B shares and there is no expiration date to the program. There were no share repurchases under the program in 2016.   30 Table of Contents Item 6. Selected Financial Data Selected Financial Data for the Past Five Years (dollars in millions except per-share data)        2016      2015      2014      2013      2012   Revenues:                Insurance premiums earned    $ 45,881      $ 41,294      $ 41,253      $ 36,684      $ 34,545   Sales and service revenues      119,489        107,001        97,097        92,993        81,447   Railroad, utilities and energy revenues      37,542        40,004        40,690        34,757        32,582   Interest, dividend and other investment income      4,725        5,357        5,052        5,196        4,532   Finance and financial products sales and service revenues and interest and dividend income      7,663        6,940        6,526        6,109        5,932   Investment and derivative gains/losses      8,304        10,347        4,081        6,673        3,425                                                Total revenues    $ 223,604      $ 210,943      $ 194,699      $ 182,412      $ 162,463                                                Earnings:                Net earnings attributable to Berkshire Hathaway (1)    $ 24,074      $ 24,083      $ 19,872      $ 19,476      $ 14,824                                                Net earnings per share attributable to Berkshire Hathaway shareholders (2)    $ 14,645      $ 14,656      $ 12,092      $ 11,850      $ 8,977                                                Year-end data:                Total assets    $ 620,854      $ 552,257      $ 525,867      $ 484,624      $ 427,252   Notes payable and other borrowings:                Insurance and other      27,175        14,599        11,854        12,396        12,970   Railroad, utilities and energy      59,085        57,739        55,306        46,399        35,979   Finance and financial products      15,384        11,951        12,730        13,122        13,587   Berkshire Hathaway shareholders’ equity      283,001        255,550        240,170        221,890        187,647   Class A equivalent common shares outstanding, in thousands      1,644        1,643        1,643        1,644        1,643   Berkshire Hathaway shareholders’ equity per outstanding Class A equivalent common share    $ 172,108      $ 155,501      $ 146,186      $ 134,973      $ 114,214                                                  (1)  Includes after-tax investment and derivative gains/losses of $6.5 billion in 2016, $6.7 billion in 2015, $3.3 billion in 2014, $4.3 billion in 2013 and $2.2 billion in 2012.   (2)  Represents net earnings per equivalent Class A common share. Net earnings per Class B common share is equal to 1/1,500 of such amount.   31 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net earnings attributable to Berkshire Hathaway shareholders for each of the past three years are disaggregated in the table that follows. Amounts are after deducting income taxes and exclude earnings attributable to noncontrolling interests (in millions).        2016      2015      2014   Insurance – underwriting    $ 1,370      $ 1,162      $ 1,692   Insurance – investment income      3,636        3,725        3,542   Railroad      3,569        4,248        3,869   Utilities and energy      2,287        2,132        1,882   Manufacturing, service and retailing      5,631        4,683        4,468   Finance and financial products      1,427        1,378        1,243   Investment and derivative gains/losses      6,497        6,725        3,321   Other      (343 )       30        (145 )                             Net earnings attributable to Berkshire Hathaway shareholders    $ 24,074      $ 24,083      $ 19,872                              Through our subsidiaries, we engage in a number of diverse business activities. We manage our operating businesses on an unusually decentralized basis. There are essentially no centralized or integrated business functions (such as sales, marketing, purchasing, legal or human resources) and there is minimal involvement by our corporate headquarters in the day-to-day business activities of the operating businesses. Our senior corporate management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. It also is responsible for establishing and monitoring Berkshire’s corporate governance practices, including, but not limited to, communicating the appropriate “tone at the top” messages to employees and associates, monitoring governance efforts, including those at the operating businesses, and participating in the resolution of governance-related issues as needed. The business segment data (Note 23 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion. Our insurance businesses generated after-tax earnings from underwriting of $1.4 billion in 2016, an increase of $208 million from 2015, primarily due to increased earnings from Berkshire Hathaway Reinsurance Group and General Re, partly offset by lower net underwriting gains from primary insurance. Our railroad business generated lower net earnings in 2016, primarily due to a 5.0% decline in unit volume. Earnings of our utilities and energy businesses increased in 2016, attributable to increased pre-tax earnings and a lower effective income tax rate. The increase in after-tax earnings in 2016 as compared to 2015 of our manufacturing, service and retailing businesses was primarily due to earnings from PCC, partly offset by comparatively lower overall earnings from the other businesses within this group. Our insurance businesses generated after-tax earnings from underwriting of $1.2 billion in 2015, a decline of $530 million from 2014, which reflected rising claim costs at GEICO and lower earnings from our reinsurers, partially offset by increased earnings from our other primary insurance operations. Our railroad business generated a 9.8% increase in after-tax earnings in 2015 compared to 2014, reflecting improved service levels and lower fuel costs. After-tax earnings of our utilities and energy businesses in 2015 increased 13.3% over 2014, attributable to the acquisition of AltaLink in December 2014 and higher earnings from several of our other energy businesses. After-tax earnings of our manufacturing, service and retailing businesses in 2015 increased 4.8% over 2014. The positive impacts of business acquisitions and higher earnings from our building products businesses were partly offset by lower earnings from certain of our industrial products and service businesses. After-tax investment and derivative gains were approximately $6.5 billion in 2016, $6.7 billion in 2015 and $3.3 billion in 2014. After-tax investment gains in 2016 included approximately $2.7 billion from the disposition or conversion of our Wrigley, Kraft Heinz and Dow preferred stock investments and non-cash gains of approximately $1.9 billion related to the exchange of P&G common stock for 100% of the common stock of Duracell. After-tax investment and derivative gains in 2015 included non-cash holding gains of approximately $4.4 billion in connection with our investment in Kraft Heinz common stock. In 2014, after-tax gains included approximately $2.0 billion related to the exchanges of Phillips 66 common stock and Graham Holdings Company common stock for a specified subsidiary of each of those companies. Derivative contracts contributed after-tax gains of $488 million in 2016, $633 million in 2015 and $329 million in 2014. We believe that investment and derivative gains/losses are often meaningless in terms of understanding our reported results or evaluating our economic performance. Investment and derivative gains and losses have caused and will likely continue to cause significant volatility in our periodic earnings.   32 Table of Contents Management’s Discussion and Analysis (Continued)     Insurance—Underwriting We engage in both primary insurance and reinsurance of property/casualty, life and health risks. In primary insurance activities, we assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In reinsurance activities, we assume defined portions of similar or dissimilar risks that other insurers or reinsurers have subjected themselves to in their own insuring activities. Our insurance and reinsurance businesses are GEICO, General Re, Berkshire Hathaway Reinsurance Group (“BHRG”) and Berkshire Hathaway Primary Group. Our management views insurance businesses as possessing two distinct operations – underwriting and investing. Underwriting decisions are the responsibility of the unit managers; investing decisions, with limited exceptions, are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett. Accordingly, we evaluate performance of underwriting operations without any allocation of investment income or investment gains/losses. The timing and amount of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly with respect to BHRG and General Re. Our periodic underwriting results may be affected significantly by changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years. Actual claim settlements and revised loss estimates will develop over time, which will likely differ from the liabilities recorded as of year-end 2016 of approximately $76.9 billion. Accordingly, the unpaid loss estimates recorded as of December 31, 2016 will develop upward or downward in future periods, producing a corresponding decrease or increase to pre-tax earnings. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation of non-U.S. Dollar denominated reinsurance liabilities of our U.S. based insurance subsidiaries as a result of foreign currency exchange rate fluctuations. Foreign currency exchange rates can be volatile and the resulting impact on our underwriting earnings can be relatively significant. Underwriting results of our insurance businesses are summarized below (in millions).        2016      2015      2014   Underwriting gain attributable to:          GEICO    $ 462      $ 460      $ 1,159   General Re      190        132        277   Berkshire Hathaway Reinsurance Group      822        421        606   Berkshire Hathaway Primary Group      657        824        626                              Pre-tax underwriting gain      2,131        1,837        2,668   Income taxes and noncontrolling interests      761        675        976                              Net underwriting gain    $ 1,370      $ 1,162      $ 1,692                              GEICO GEICO writes private passenger automobile insurance, offering coverages to insureds in all 50 states and the District of Columbia. GEICO’s policies are marketed mainly by direct response methods in which most customers apply for coverage directly to the company via the Internet or over the telephone. GEICO’s underwriting results are summarized below (in millions).        2016      2015      2014        Amount      %      Amount      %      Amount      %   Premiums written    $ 26,309         $ 23,378         $ 20,962                                          Premiums earned    $ 25,483        100.0      $ 22,718        100.0      $ 20,496        100.0                                                         Losses and loss adjustment expenses      21,044        82.6        18,647        82.1        15,924        77.7   Underwriting expenses      3,977        15.6        3,611        15.9        3,413        16.6                                                         Total losses and expenses      25,021        98.2        22,258        98.0        19,337        94.3                                                         Pre-tax underwriting gain    $ 462         $ 460         $ 1,159                                            33 Table of Contents Management’s Discussion and Analysis (Continued)   Insurance—Underwriting (Continued)   Premiums written in 2016 increased 12.5% to $26.3 billion and premiums earned increased approximately $2.8 billion (12.2%) compared to 2015. These increases reflected voluntary auto policy-in-force growth of 7% and increased average premiums per auto policy resulting from rate increases, changes in coverage and state and risk mix. Voluntary auto new business sales in 2016 increased 10.9% compared to the prior year. The growth in voluntary auto new business accelerated over the last half of 2016 and, for the year, voluntary auto policies-in-force increased 974,000. Losses and loss adjustment expenses incurred in 2016 increased $2.4 billion (12.9%) to $21.0 billion. In 2016, our loss ratio (the ratio of losses and loss adjustment expenses to earned premiums) increased 0.5 percentage points, reflecting increased storm losses and claims severity, partly offset by the aforementioned premium rate increases. Claims frequencies (claim counts per exposure unit) in 2016 for property damage, collision, bodily injury and personal injury protection (PIP) coverages were relatively unchanged from 2015. Average claims severities were higher in 2016 for bodily injury, physical damage and collision coverages (four to six percent range). In addition, storm-related losses (primarily from hail and flooding) in 2016 were approximately $423 million compared to $162 million in 2015. Underwriting expenses in 2016 were $4.0 billion, an increase of $366 million (10.1%) over 2015. Our expense ratio (underwriting expenses to premiums earned) in 2016 decreased 0.3 percentage points compared to 2015. The largest components of underwriting expenses are employee-related expenses (salaries and benefits) and advertising costs. The increase in underwriting expenses reflected the increase in policies-in-force. Premiums written and earned in 2015 increased 11.5% and 10.8% over 2014. The increases in premiums reflected growth in voluntary auto policies-in-force (5.4%) and rate increases. Voluntary auto new business sales in 2015 exceeded 2014 by about 1%. In 2015, our voluntary auto policies-in-force grew by 707,000 policies. Losses and loss adjustment expenses incurred in 2015 increased $2.7 billion (17.1%) over 2014. Our loss ratio was 82.1% in 2015 compared to 77.7% in 2014. Claims frequencies in 2015 increased in all major coverages over 2014, including property damage and collision coverages (three to five percent range), bodily injury coverage (four to six percent range) and PIP (one to two percent range). Average claims severities were also higher in 2015 for property damage and collision coverages (four to five percent range), bodily injury coverage (six to seven percent range) and PIP coverage (two to four percent range). We attributed these increases to miles driven, repair costs (parts and labor) and medical costs, as well as to weather conditions. Underwriting expenses in 2015 increased 5.8% to $3.6 billion. During 2015, advertising and employee-related costs grew at a slower rate than premiums. As a result, our expense ratio in 2015 declined 0.7 percentage points compared to 2014. General Re General Re conducts a reinsurance business offering property and casualty coverages to clients worldwide through General Reinsurance Corporation, Germany-based General Reinsurance AG, Faraday Holdings in London and other wholly-owned affiliates. We write property and casualty reinsurance primarily on a direct basis, but is also written through brokers and intermediaries. We write life and health reinsurance primarily on a direct basis through General Re Life Corporation and General Reinsurance AG. We strive to generate underwriting profits in essentially all of our product lines. Our management does not evaluate underwriting performance based upon market share and our underwriters are instructed to reject inadequately priced risks. General Re’s underwriting results are summarized in the following table (in millions).        Premiums written      Premiums earned      Pre-tax underwriting gain (loss)        2016      2015      2014      2016      2015      2014          2016              2015             2014       Property/casualty    $ 2,560      $ 2,725      $ 3,257      $ 2,569      $ 2,805      $ 3,103      $ 117      $ 150     $ 204   Life/health      3,069        3,165        3,161        3,068        3,170        3,161        73        (18 )      73                                                                                      $ 5,629      $ 5,890      $ 6,418      $ 5,637      $ 5,975      $ 6,264      $ 190      $ 132     $ 277                                                                                     34 Table of Contents Management’s Discussion and Analysis (Continued)   Insurance—Underwriting (Continued)   Property/casualty In 2016, property/casualty premiums written declined $165 million (6%) and premiums earned declined $236 million (8%) compared to 2015, primarily due to lower volume in direct and broker market business, and to a lesser degree, unfavorable foreign currency exchange rate changes. Insurance industry capacity remains high and price competition in most property/casualty reinsurance markets persists. We continue to decline business when we believe prices are inadequate. However, we remain prepared to write substantially more business when appropriate prices can be attained. Our property/casualty business produced pre-tax underwriting gains of $117 million in 2016 and $150 million in 2015. Results included pre-tax underwriting gains from property business of $211 million in 2016, a decline of $78 million compared to 2015. The decline was primarily due to lower gains from reductions of estimated losses on prior years’ property business. There were no significant catastrophe or large property losses in each of the past three years. Our casualty/workers’ compensation business produced pre-tax underwriting losses of $94 million in 2016 and $139 million in 2015. Underwriting results in each year included net losses on current year business and charges for recurring discount accretion on workers’ compensation liabilities and deferred charge amortization on retroactive reinsurance contracts, partially offset by gains from reductions of estimated losses on prior years’ business. Discount accretion and deferred charge amortization produced pre-tax underwriting losses of $89 million in 2016 and $94 million in 2015. Casualty losses tend to be long-tailed and the favorable loss experience is not a guarantee that the current ultimate liability estimates will develop favorably in the future. In 2015, property/casualty premiums written declined $532 million (16%), while premiums earned decreased $298 million (10%) compared to 2014. Adjusting for changes in foreign currency exchange rates, premiums written and earned in 2015 declined 9% and 2% compared to 2014. Our premium volume declined in both the direct and broker markets worldwide. Our property/casualty business produced pre-tax underwriting gains of $150 million in 2015 and $204 million in 2014. In 2015, our property business generated pre-tax underwriting gains of $289 million compared to $445 million in 2014. The comparative decrease in underwriting gains reflected an increase in the current accident year loss ratio, primarily attributable to a relative increase in reported losses. Our casualty/workers’ compensation business produced pre-tax underwriting losses of $139 million in 2015 and $241 million in 2014. Underwriting results in each year included net losses on current year business, partly offset by gains from reductions of estimated losses on prior years’ business. The reductions of prior years’ losses were net of recurring charges for discount accretion on workers’ compensation liabilities and deferred charge amortization on retroactive reinsurance contracts of $94 million in 2015 and $97 million in 2014. Life/health Life/health premiums earned in 2016 decreased 3% compared to 2015. Adjusting for changes in foreign currency exchange rates, premiums earned in 2016 were relatively unchanged from 2015, as growth in the United Kingdom and Asia markets was offset by a decline in Canada. Our life/health business produced pre-tax underwriting gains of $73 million in 2016 compared to losses of $18 million in 2015. In 2016, underwriting results reflected increased underwriting gains from our international life business, lower claim severity in North America, and lower losses from changes in actuarial assumptions related to long-term care business. Life/health premiums written and earned in 2015 were relatively unchanged from 2014. However, adjusting for changes in foreign currency exchange rates, premiums earned in 2015 increased $266 million (8%) as compared to 2014. In 2015, life business increased across a number of non-U.S. markets, particularly in Canada and Asia. Our life/health business produced aggregate pre-tax underwriting losses in 2015 of $18 million compared to gains of $73 million in 2014. Our North American long-term care business generated increased underwriting losses of $77 million in 2015 compared to 2014 due primarily to increased reserves from estimated premium deficiencies. We also experienced higher frequency and severity of losses in North American individual life business in 2015, partially offset by increased underwriting gains from international life business.   35 Table of Contents Management’s Discussion and Analysis (Continued)   Insurance—Underwriting (Continued)   Berkshire Hathaway Reinsurance Group BHRG underwrites excess-of-loss reinsurance and quota-share coverages on property and casualty risks for insurers and reinsurers worldwide, including property catastrophe insurance and reinsurance. BHRG also writes retroactive reinsurance on property/casualty exposures as well as life reinsurance and periodic payment annuity business. A summary of BHRG’s underwriting results follows (in millions).       Premiums written     Premiums earned     Pre-tax underwriting gain (loss)       2016     2015     2014     2016     2015     2014         2016             2015             2014       Property/casualty   $ 4,433     $ 4,702     $ 4,097     $ 4,649     $ 4,416     $ 4,064     $ 767     $ 944     $ 1,411   Retroactive reinsurance     1,254       5       3,371       1,254       5       3,371       (49 )      (469 )      (632 )  Life and annuity     2,601       2,786       2,681       2,601       2,786       2,681       104       (54 )      (173 )                                                                            $ 8,288     $ 7,493     $ 10,149     $ 8,504     $ 7,207     $ 10,116     $ 822     $ 421     $ 606                                                                           Property/casualty Premiums earned in 2016 increased $233 million (5.3%) reflecting an increase from the 10-year, 20% quota-share contract with Insurance Australia Group Ltd. (“IAG”), which became effective on July 1, 2015, partly offset by declines from property catastrophe and other quota-share business. The IAG quota-share contract represented 37% of our property/casualty earned premiums in 2016. Our premium volume is generally constrained for most property/casualty reinsurance coverages as rates, in our view, are generally inadequate. Consistent with General Re, we have the capacity and desire to write more business when appropriate pricing can be attained. Our property/casualty business generated pre-tax underwriting gains of $767 million in 2016 and $944 million in 2015. The decline in pre-tax underwriting gains in 2016 was primarily due to a comparative decline in gains from reductions of estimated prior years’ loss reserves. We experienced no significant catastrophe loss events during the last three years. Premiums written and earned in 2015 increased $605 million (15%) and $352 million (9%), respectively, compared to 2014. These increases were primarily attributable to the IAG quota-share contract, partially offset by lower property catastrophe, property quota-share and London facilities volume. The property/casualty business generated pre-tax underwriting gains in 2015 of $944 million compared to $1.4 billion in 2014. Underwriting results in 2015 included comparatively lower gains from property catastrophe reinsurance and comparatively lower gains from reductions of estimated prior years’ loss reserves. Retroactive reinsurance We periodically write retroactive reinsurance contracts, which provide indemnification of losses and loss adjustment expenses with respect to past loss events. Retroactive reinsurance premiums earned in 2016 primarily derived from three new contracts, including $670 million from a contract with Hartford Fire Insurance Company covering the adverse development of certain asbestos and pollution claims losses, subject to an aggregate limit of $1.5 billion. Premiums earned in 2014 included $3 billion from a contract with Liberty Mutual Insurance Company (“LMIC”), which covers claim liabilities from specified asbestos and environmental exposures under policies incepting before 2005, and workers’ compensation occurrences arising before 2014. Pre-tax underwriting results from certain retroactive reinsurance contracts include gains/losses associated with the re-measurement of foreign currency denominated liabilities due to changes in exchange rates. Such gains were $392 million in 2016, $150 million in 2015 and $273 million in 2014 and primarily related to strengthening of the U.S. Dollar versus the Great Britain Pound (“GBP”) and the Euro. Before such gains, retroactive reinsurance contracts produced pre-tax losses of $441 million in 2016, $619 million in 2015 and $905 million in 2014, attributable to deferred charge amortization and changes in the timing and amount of ultimate losses. The underwriting results of retroactive reinsurance include the periodic amortization of deferred charge assets established in connection with these contracts. At the inception of a contract, we recognize deferred charge assets for the excess, if any, of the estimated ultimate losses payable over the premiums earned. We subsequently amortize the deferred charges over the estimated claims payment period based on estimates of the timing and amount of future loss payments. Amortization charges and deferred charge adjustments resulting from changes to the estimated timing and amount of future loss payments are included in earnings.   36 Table of Contents Management’s Discussion and Analysis (Continued)   Insurance—Underwriting (Continued) Berkshire Hathaway Reinsurance Group (Continued) Retroactive reinsurance (Continued)   Changes in estimated ultimate liabilities for contracts written in prior years were relatively insignificant in 2016, whereas during each of the prior two years, we increased estimated ultimate liabilities approximately $550 million in 2015 and $825 million in 2014 for contracts written in prior years. We also reevaluated the timing of future payments of remaining liabilities, which produced changes to unamortized deferred charges. These increases in estimated ultimate liabilities, net of related deferred charge adjustments, produced incremental pre-tax underwriting losses of approximately $90 million in 2015 and $450 million in 2014. As discussed in Note 25 to the accompanying Consolidated Financial Statements, we entered into a retroactive reinsurance agreement with affiliates of American International Group, Inc. (collectively, “AIG”) in January 2017. Our premiums with respect to this contract are about $10 billion and our net aggregate limit is $20 billion. Gross unpaid losses assumed under retroactive reinsurance contracts were approximately $24.7 billion at December 31, 2016 and $23.7 billion at December 31, 2015. Unamortized deferred charges related to such reinsurance contracts were approximately $8.0 billion at December 31, 2016 and $7.6 billion at December 31, 2015. We currently estimate pre-tax losses in 2017 from deferred charge amortization of approximately $950 million, including approximately $375 million related to the new AIG agreement. Life and annuity A summary BHRG’s life and annuity underwriting results follows (in millions).        Premiums earned      Pre-tax underwriting gain (loss)        2016      2015      2014          2016             2015             2014       Periodic payment annuity    $ 1,082      $ 1,286      $ 1,105      $ (128 )    $ (202 )    $ (197 )  Life reinsurance      1,502        1,481        1,555        1       (45 )      (23 )  Variable annuity      17        19        21        231       193       47                                                          $ 2,601      $ 2,786      $ 2,681      $ 104     $ (54 )    $ (173 )                                                      Premiums earned in 2016 from periodic payment annuity contracts decreased $204 million (15.9%) compared to 2015. The decrease reflected the effect of a large reinsurance contract in 2015 that generated premiums of $425 million, which more than offset a comparative increase in direct business. There were no periodic payment annuity reinsurance contracts in 2016. Generally, we receive premiums under periodic payment annuity contracts in full at inception and we make annuity payments over time, often extending for decades. At inception, we discount annuity liabilities for time value and recognize no gains or losses in earnings. Pre-tax underwriting losses are recognized over the annuity payment period from the recurring accretion of discounted annuity liabilities. Periodic payment annuity contracts generated pre-tax underwriting losses of $128 million in 2016, $202 million in 2015 and $197 million in 2014. Liabilities under certain contracts of a U.S. subsidiary are denominated in foreign currencies, most significantly the GBP. Changes in the exchange rates produce changes in the values of related liabilities, which are reflected in underwriting results. Exchange rate changes resulted in pre-tax gains of $313 million in 2016, $103 million in 2015 and $102 million in 2014. Before foreign currency exchange rate changes, pre-tax underwriting losses from annuity contracts were $441 million in 2016, $305 million in 2015 and $299 million in 2014. The increase in underwriting losses in 2016 reflected increased liabilities from new business and the impact of lower interest rates, which increased expected future loss payments under reinsurance contracts. Discounted annuity liabilities were approximately $9.8 billion at December 31, 2016 and $8.7 billion at December 31, 2015. The weighted average interest rate of these contracts was approximately 4.1% as of December 31, 2016.   37 Table of Contents Management’s Discussion and Analysis (Continued)   Insurance—Underwriting (Continued) Berkshire Hathaway Reinsurance Group (Continued) Life and annuity (Continued)   Life reinsurance premiums increased 1.4% in 2016 compared to 2015, which declined 4.8% compared to 2014. The life reinsurance business produced near break-even results in 2016 and a pre-tax loss of $45 million in 2015. Underwriting losses in 2015 included losses of $53 million incurred in connection with certain terminated business. Our variable annuity business primarily consists of reinsurance contracts that provide guarantees on closed blocks of variable annuity business written by other insurers. Our pre-tax underwriting gains in each period of the past three years reflected changes in liabilities for guaranteed benefits, which were affected by changes in securities markets and interest rates, as well as from the periodic amortization of expected profit margins included in our liability estimates. Berkshire Hathaway Primary Group The Berkshire Hathaway Primary Group (“BH Primary”) consists of a wide variety of independently managed insurance underwriting businesses that primarily provide a variety of commercial insurance solutions, including healthcare malpractice, workers’ compensation, automobile, general liability, property and various specialty coverages for small, medium and large clients. The largest of these insurers include the MedPro Group, National Indemnity Company (“NICO Primary”), Berkshire Hathaway Homestate Companies (“BHHC”), Berkshire Hathaway Specialty Insurance (“BH Specialty”) and Berkshire Hathaway GUARD Insurance Companies (“GUARD”). Other BH Primary insurers include U.S. Liability Insurance Company, Applied Underwriters and Central States Indemnity Company.        2016      2015      2014        Amount      %      Amount      %      Amount      %   Premiums written    $ 6,684         $ 5,906         $ 4,904                                          Premiums earned    $ 6,257        100.0      $ 5,394        100.0      $ 4,377        100.0                                                         Losses and loss adjustment expenses      3,864        61.8        3,070        56.9        2,608        59.6   Underwriting expenses      1,736        27.7        1,500        27.8        1,143        26.1                                                         Total losses and expenses      5,600        89.5        4,570        84.7        3,751        85.7                                                         Pre-tax underwriting gain    $ 657         $ 824         $ 626                                          BH Primary premiums written and earned in 2016 increased 13.2% and 16.0%, respectively, compared to 2015. The increases were primarily attributable to volume increases from BH Specialty, MedPro Group, BHHC and GUARD. Premiums written and earned in 2015 increased 20.4% and 23.2%, respectively, over the prior year. The increases were primarily attributable to volume increases from BH Specialty, NICO Primary, BHHC and GUARD. BH Primary’s combined loss ratios were 61.8% in 2016, 56.9% in 2015 and 59.6% in 2014. The comparative increase in the loss ratio in 2016 reflected comparative declines in favorable loss development of prior years’ loss events and higher loss ratios on current year business. While our claims development has been favorable in recent years, our primary insurers write considerable amounts of healthcare malpractice, general liability and workers’ compensation business, which can have extended claim-tails. It should not be assumed that the current claim experience or underwriting results will continue into the future. Insurance—Investment Income A summary of net investment income generated from investments held by our insurance operations follows (in millions).        2016      2015      2014   Interest income    $ 930      $ 888      $ 1,009   Dividend income      3,552        3,662        3,348                              Investment income before taxes and noncontrolling interests      4,482        4,550        4,357   Income taxes and noncontrolling interests      846        825        815                              Net investment income    $ 3,636      $ 3,725      $ 3,542                                38 Table of Contents Management’s Discussion and Analysis (Continued)   Insurance—Investment Income (Continued)   Pre-tax investment income declined $68 million (1.5%) in 2016 compared to 2015, reflecting lower dividend income attributable to portfolio changes, partly offset by an increase in interest income. We continue to hold significant cash, cash equivalents and U.S. Treasury Bills earning very low yields, although such yields in 2016 were higher than in 2015. We believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to such balances. In December 2016, Dow exercised its option to convert our $3 billion Dow preferred stock investment into common stock. Prior to its conversion, we received dividends of $255 million per annum. Interest earned declined $121 million (12%) in 2015 versus 2014. The reduction reflected the maturities and dispositions of fixed maturity securities with higher interest rates. Dividend income increased $314 million (9%) in 2015 versus 2014. Dividend income in 2015 included income from our investment in Restaurant Brands International, Inc. 9% Preferred Stock ($3 billion stated value), which was acquired in December 2014. Invested assets of our insurance businesses derive from shareholder capital, including reinvested earnings, and from net liabilities under insurance contracts or “float.” The major components of float are unpaid losses, life, annuity and health benefit liabilities, unearned premiums and other liabilities to policyholders less premium and reinsurance receivables, deferred charges assumed under retroactive reinsurance contracts and deferred policy acquisition costs. Float approximated $91 billion at December 31, 2016, $88 billion at December 31, 2015 and $84 billion at December 31, 2014. The cost of float was negative over the last three years as our insurance business generated pre-tax underwriting gains in each year. A summary of cash and investments held in our insurance businesses as of December 31, 2016 and 2015 follows (in millions).        December 31,        2016      2015   Cash, cash equivalents and U.S. Treasury Bills    $ 48,888      $ 43,762   Equity securities      119,780        109,922   Fixed maturity securities      22,778        23,621   Other investments      14,364        15,683                        $ 205,810      $ 192,988                     Fixed maturity investments as of December 31, 2016 were as follows (in millions).        Amortizedcost      Unrealizedgains/losses      Carryingvalue   U.S. Treasury, U.S. government corporations and agencies    $ 4,243      $ 8      $ 4,251   States, municipalities and political subdivisions      1,129        57        1,186   Foreign governments      8,813        140        8,953   Corporate bonds, investment grade      5,457        459        5,916   Corporate bonds, non-investment grade      1,220        248        1,468   Mortgage-backed securities      886        118        1,004                                 $ 21,748      $ 1,030      $ 22,778                              U.S. government obligations are rated AA+ or Aaa by the major rating agencies and approximately 87% of all state, municipal and political subdivisions, foreign government obligations and mortgage-backed securities were rated AA or higher. Non-investment grade securities represent securities rated below BBB- or Baa3. Foreign government securities include obligations issued or unconditionally guaranteed by national or provincial government entities.   39 Table of Contents Management’s Discussion and Analysis (Continued)   Railroad (“Burlington Northern Santa Fe”) Burlington Northern Santa Fe, LLC (“BNSF”) operates one of the largest railroad systems in North America. BNSF operates approximately 32,500 route miles of track in 28 states and also operates in three Canadian provinces. BNSF’s major business groups are classified by type of product shipped and include consumer products, coal, industrial products and agricultural products. A summary of BNSF’s earnings follows (in millions).        2016      2015      2014   Revenues    $ 19,829      $ 21,967      $ 23,239                              Operating expenses:          Compensation and benefits      4,769        5,043        5,023   Fuel      1,934        2,656        4,478   Purchased services      2,418        2,546        2,592   Depreciation and amortization      2,128        2,001        2,123   Equipment rents, materials and other      1,895        2,018        2,021                              Total operating expenses      13,144        14,264        16,237   Interest expense      992        928        833                                   14,136        15,192        17,070                              Pre-tax earnings      5,693        6,775        6,169   Income taxes      2,124        2,527        2,300                              Net earnings    $ 3,569      $ 4,248      $ 3,869                              Consolidated revenues were approximately $19.8 billion in 2016, a decrease of $2.1 billion (9.7%) compared to 2015. Pre-tax earnings were $5.7 billion in 2016, a decrease of $1.1 billion (16.0%) compared to 2015. Our total volume was approximately 9.8 million cars/units in 2016 compared to approximately 10.3 million in 2015. In 2016, we experienced declining demand, especially in our coal and crude oil categories. Coal had the largest decline, driven by structural changes in that business as well as competition from low natural gas prices. While natural gas prices and the amount of electricity burn will affect the demand for coal in 2017, our long-term demand outlook for U.S. and global coal consumption is lower. Freight revenues reflected comparative declines in 2016 in average revenue per car/unit (5.2%) and volumes (5.0%). The decrease in average revenue per car/unit was primarily attributable to lower fuel surcharge revenue driven by lower fuel prices and to business mix changes. The fuel price impact on fuel surcharges generally lags its impact on fuel costs. Freight revenues from consumer products were $6.5 billion in 2016, a decline of 0.9% from 2015. The revenue decline reflected lower average revenue per car/unit, partially offset by volume increases of 1%. Consumer products volumes increased primarily due to higher domestic intermodal volumes and the addition of a new automotive customer. Lower international intermodal volumes attributable to soft economic activity and excess retail inventories partially offset these increases. Freight revenues from industrial products were $4.8 billion in 2016, a decline of 14.2% compared with 2015. The decrease reflects lower volumes, primarily for petroleum products, reflecting pipeline displacement of U.S. crude rail traffic and lower U.S. oil production. In addition, there was lower demand for steel and taconite, partially offset by increased plastics products volume. We expect low oil production and pipeline displacement will continue to negatively impact the demand for crude oil shipments in 2017. Freight revenues from agricultural products remained relatively flat at $4.2 billion. Agricultural product volume increased by 6.3% in 2016, primarily due to higher corn, soybean and wheat exports, offsetting a decrease in average revenue per car/unit. Freight revenues from coal decreased 26.9% to $3.4 billion in 2016 compared to 2015, reflecting a 21.1% decline in volumes and lower average rate per car/unit. Demand for coal has declined due to reduced energy consumption, coal unit retirements, high coal stockpiles and low natural gas prices.   40 Table of Contents Management’s Discussion and Analysis (Continued)   Railroad (“Burlington Northern Santa Fe”) (Continued)   Operating expenses were $13.1 billion in 2016, a decrease of $1.1 billion (7.9%) compared to 2015, and our ratio of operating expenses to revenues increased 1.4 percentage points to 66.3%. Compensation and benefits expenses decreased $274 million (5.4%) compared to 2015. The decline was primarily due to lower employment levels resulting from lower freight volumes and productivity improvements, partially offset by inflation. Fuel expenses declined $722 million (27.2%) compared to 2015, due to lower average fuel prices and lower volumes. Purchased services declined $128 million (5.0%) due to lower volumes and cost reductions. Depreciation and amortization expense increased $127 million (6.3%) compared to 2015 due to increased assets in service reflecting our ongoing capital additions and improvement programs. Equipment rents, materials and other expense declined $123 million (6.1%) compared to 2015, primarily due to lower freight volumes and productivity improvements. Interest expense was $992 million in 2016, an increase of $64 million (6.9%) compared to 2015. Interest expense in 2015 was $928 million, an increase of $95 million (11%) compared to 2014. BNSF funds its capital expenditures with cash flow from operations and new debt issuances. The comparative increases in each period resulted from higher average outstanding debt. Consolidated revenues were approximately $22.0 billion in 2015, a decrease of $1.3 billion (5%) compared to 2014. Pre-tax earnings were $6.8 billion in 2015, an increase of $606 million (10%) over 2014. Results in 2015 benefitted from significantly improved operating performance compared to substandard service during 2014. The operational improvements in 2015 reflected the capacity added in 2014 and 2015 through capital investments for line expansion, system improvement projects, other operational initiatives and more favorable winter weather conditions. Our total volume was approximately 10.3 million cars/units in 2015. During the second half of 2015 and particularly in the fourth quarter, we experienced declining demand, especially in coal and certain industrial products categories. The decrease in consolidated revenues in 2015 reflected a 6% decline in average revenue per car/unit and a 0.1% decrease in volume. The decrease in average revenue per car/unit was attributable to a 55% decline in fuel surcharges ($1.6 billion) versus 2014, primarily due to lower fuel prices. The impact of lower fuel surcharge revenues affected revenues of all product lines. Freight revenues from industrial products decreased 11% in 2015 compared to 2014 to $5.6 billion. The decrease reflected lower volumes for petroleum products, frac sand and steel products and lower average revenue per car/unit. Freight revenues from agricultural products increased 2% in 2015 to approximately $4.2 billion as compared to revenues in 2014. The increase in 2015 was attributable to higher domestic grain shipments and milo exports. Freight revenues from coal decreased 7% to $4.6 billion in 2015 compared to 2014. The revenue decline was primarily due to lower average rates per car. Coal volume increased 1% primarily due to higher demand in the early part of the year as customers restocked coal inventories. Freight revenues from consumer products were $6.6 billion in 2015, a decline of 6% from 2014. The revenue decline reflected lower average rates per car/unit, partially offset by volume increases of 1%. In the first quarter of 2015, we experienced a decline in international intermodal volume attributable to diversions of freight from U.S. West Coast ports to other import gateways as a result of the port productivity slow-down from port labor disruptions. Over the remainder of 2015, we experienced increased volume, as port productivity improvements allowed the backlog to clear, as well as from higher demand. Operating expenses were $14.3 billion in 2015, a decrease of $2 billion (12%) compared to 2014. The ratio of operating expenses to revenues declined 4.9 percentage points to 64.9% as compared to 2014. Compensation and benefits expenses were relatively flat versus 2014. In response to weakening customer demand in the latter half of 2015, employment levels were reduced. Fuel expenses declined $1.8 billion (41%) compared to 2014, reflecting significantly lower average fuel prices, improved efficiency and lower gross ton miles volume. Depreciation and amortization expense decreased $122 million (6%) compared to 2014 as a result of lower capitalized software amortization expenses, partially offset by increased depreciation expense attributable to increased levels of railroad assets in service. Utilities and Energy (“Berkshire Hathaway Energy Company”) We hold a 90% ownership interest in Berkshire Hathaway Energy Company (“BHE”), which operates a global energy business. BHE’s domestic regulated utility interests are comprised of PacifiCorp, MidAmerican Energy Company (“MEC”) and NV Energy. In Great Britain, BHE subsidiaries operate two regulated electricity distribution businesses referred to as Northern Powergrid. BHE also owns two domestic regulated interstate natural gas pipeline companies. Other energy businesses include AltaLink, L.P. (“AltaLink”), a regulated electricity transmission-only business in Alberta, Canada and a diversified portfolio of independent power projects. In addition, BHE also operates the second-largest residential real estate brokerage firm and one of the largest residential real estate brokerage franchise networks in the United States.   41 Table of Contents Management’s Discussion and Analysis (Continued)   Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued)   The rates our regulated businesses charge customers for energy and services are based, in large part, on the costs of business operations, including a return on capital, and are subject to regulatory approval. To the extent these operations are not allowed to include such costs in the approved rates, operating results will be adversely affected. Revenues and earnings of BHE are summarized below (in millions).       Revenues     Earnings       2016     2015     2014     2016     2015     2014   PacifiCorp   $ 5,245     $ 5,279     $ 5,315     $ 1,105     $ 1,026     $ 1,010   MidAmerican Energy Company     2,668       2,554       2,900       392       292       270   NV Energy     2,925       3,382       3,279       559       586       549   Northern Powergrid     997       1,141       1,284       367       460       527   Natural gas pipelines     986       1,018       1,093       413       401       379   Other energy businesses     2,223       2,321       1,582       377       394       264   Real estate brokerage     2,815       2,536       2,161       225       191       139                                                     $ 17,859     $ 18,231     $ 17,614                                       Earnings before corporate interest and income taxes (“EBIT”)           3,438       3,350       3,138   Corporate interest           465       499       427   Income taxes and noncontrolling interests           686       719       829                                 Net earnings attributable to Berkshire Hathaway shareholders         $ 2,287     $ 2,132     $ 1,882                                 PacifiCorp PacifiCorp operates a regulated electric utility in portions of several Western states, including Utah, Oregon and Wyoming. PacifiCorp’s revenues were $5.25 billion in 2016, slightly lower than 2015. Revenues reflected increased retail revenues and lower wholesale and other operating revenues. The increase in retail revenues was primarily due to higher retail rates as volumes were relatively unchanged. The declines in wholesale revenues were attributable to lower volumes and average prices. EBIT in 2016 increased $79 million (7.7%) from 2015, primarily due to increased gross margins (operating revenues less cost of sales), reflecting lower fuel prices and changes in fuel mix. Revenues declined $36 million (1%) in 2015 compared to 2014. Wholesale and other revenues declined $129 million, principally due to lower wholesale prices and volumes and lower renewable energy credit revenue, while retail revenues increased compared to 2014, reflecting higher average rates partially offset by slightly lower volumes. EBIT increased $16 million (2%) in 2015 compared to 2014. Gross margins increased $109 million versus 2014, as energy costs declined more than revenues. The increase in gross margins substantially offset an increase in depreciation and amortization expense ($35 million) due to increased plant-in-service, lower allowances for equity funds used during construction ($18 million) and the impact of the recognition in 2014 of expected insurance recoveries on fire losses. MidAmerican Energy Company MEC operates a regulated electric and natural gas utility primarily in Iowa and Illinois. Revenues increased $114 million (4.5%) in 2016 compared to 2015. Revenues in 2016 included increased electric revenues ($148 million), which were somewhat offset by lower natural gas revenues ($24 million). The increase in electric revenues resulted primarily from a 3.8% increase in customer volumes and higher rates. Wholesale and other revenues increased primarily due to increased average wholesale prices and higher transmission revenue. The decline in natural gas revenues was primarily due to lower average per-unit costs of gas sold ($42 million), which is offset in cost of sales, partly offset by higher wholesale volumes. EBIT increased $100 million (34.2%) in 2016 from 2015. The increase in EBIT was primarily due to increased gross margins from electric revenues and lower operations and maintenance expenses, partially offset by higher depreciation and amortization from additional assets placed in service, and higher interest expense. MEC’s revenues declined $346 million (12%) in 2015 from 2014. Regulated natural gas revenues declined $335 million, which was primarily attributable to lower average per-unit cost of gas sold, which is substantially offset in lower cost of sales. Regulated electric revenues increased slightly, due primarily to higher retail rates in Iowa and higher volumes, partially offset by lower average wholesale prices. The increases in regulated electric rates in Iowa are attributable to higher retail rates and changes in rate structure approved in August 2014, which results in a greater differential between higher rates from June to September and lower rates in the remaining months.   42 Table of Contents Management’s Discussion and Analysis (Continued)   Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued) MidAmerican Energy Company (Continued)   EBIT increased $22 million (8%) in 2015 compared to 2014, reflecting an increase in gross margins ($107 million), partially offset by increases in depreciation expense from new wind generation and other plant-in-service ($56 million), interest expense ($17 million) and lower allowances for equity funds used during construction ($19 million). The increase in gross margins derived primarily from the regulated electric business, which benefitted from the aforementioned changes in Iowa rates and rate structure and lower fuel and purchased power costs. In addition, EBIT included a gain of $13 million in 2015 from the sale of a generating facility lease. NV Energy NV Energy operates regulated electric and natural gas utilities in Nevada. Revenues were approximately $2.9 billion in 2016, a decrease of $457 million (13.5%) versus 2015. The decline was primarily attributable to lower electric retail rates resulting from lower energy costs. Electric retail volumes in 2016 were flat compared to 2015. EBIT fell $27 million (4.6%) compared to 2015. The decline in revenues was substantially offset by a decline in energy costs. Operating expenses increased $39 million (4%) and interest expense decreased $17 million (6.6%). The increase in operating expenses reflected higher depreciation and amortization and reductions in certain accrued liabilities in 2015. Revenues and EBIT were $3.4 billion and $586 million in 2015, representing increases of $103 million (3%) and $37 million (7%) over 2014. The increase in revenues was due primarily to higher retail electric revenues reflecting increased customers and higher volumes. The increase in EBIT was attributable to an increase in gross margins ($82 million) and lower interest expense ($22 million), partially offset by increased depreciation and amortization ($31 million) and higher other operating expenses, including increased energy efficiency costs. Northern Powergrid Revenues declined $144 million (12.6%) to $997 million in 2016, primarily due to the impact of a stronger U.S. Dollar ($127 million) and lower distribution revenues. EBIT declined $93 million (20.2%) to $367 million. The decline was due to lower distribution revenues and the stronger U.S. Dollar, as well as increases in depreciation expense from increased assets in service and higher asset impairment charges. Revenues declined $143 million (11%) in 2015 versus 2014, reflecting the adverse impact of the stronger U.S. Dollar ($90 million) and comparatively lower distribution revenues. The decline in distribution revenues reflected lower rates due mainly to the new price control period effective April 1, 2015. EBIT declined $67 million (13%) compared to 2014, reflecting the adverse effects of the stronger U.S. Dollar and lower distribution revenues partially offset by lower interest expense ($13 million). Natural Gas Pipelines Revenues declined $32 million (3.1%) in 2016 as compared to 2015, primarily due to the impact of lower gas sales from balancing activities and lower transportation revenues from lower volumes and rates, in part due to comparatively milder temperatures in the first quarter of 2016. EBIT increased $12 million (3.0%) versus 2015, reflecting lower interest expense, resulting from lower average debt balances and lower operating expenses, partly offset by the lower transportation revenues. Revenues declined $75 million (7%) in 2015 versus 2014, which was primarily due to lower gas sales as a result of reduced system and operational balancing activities, partially offset by higher transportation revenues. EBIT increased $22 million (6%) as compared to 2014, as decreased costs of gas sold and lower operating expenses more than offset the decline in revenues. Other energy businesses Revenues declined $98 million (4.2%) in 2016 compared to 2015. The decline in comparative revenues was principally attributable to lower revenues from AltaLink and from our unregulated retail services business. AltaLink’s year-to-date revenue decline reflected the impact of a regulatory decision in the second quarter of 2016 that resulted in one-time net reductions in revenue, which more than offset increased revenues from additional assets placed in service. The regulatory decision changed the timing of when construction-in-progress expenditures included in the rate base are billable to customers and earned in revenues, but had no impact on net earnings, as one-time reductions in expenses offset the one-time revenue reduction. EBIT declined $17 million (4.3%) compared to 2015, primarily due to lower earnings from our renewable energy businesses, primarily due to higher depreciation expense from additional assets placed in service.   43 Table of Contents Management’s Discussion and Analysis (Continued)   Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued) Other energy businesses (Continued)   Revenues of other energy businesses increased $739 million (46.7%) in 2015 over revenues in 2014, while EBIT increased $130 million (49%) versus 2014. Revenues and EBIT in 2015 reflect the acquisition of AltaLink on December 1, 2014. AltaLink’s revenues and EBIT in 2015 were $621 million and $170 million, respectively. The remaining increase in revenues was primarily due to an increase in solar capacity placed in service. Excluding the acquisition of AltaLink, the impact of higher revenues in 2015 was more than offset by higher operating, depreciation and interest expenses. Real estate brokerage Revenues increased 11.0% to $2.8 billion in 2016 compared to 2015. The increase was primarily attributable to increased closed brokerage transactions (primarily resulting from business acquisitions) and a 2% increase in average home sales prices, as well as higher mortgage revenues. EBIT increased $34 million (17.8%) in 2016 compared to 2015, primarily due to the increases in mortgage revenues. Real estate brokerage revenues and EBIT increased 17% and 37%, respectively, in 2015 compared to 2014. The revenue increase reflected comparative increases in closed transactions and average home prices and the impact of business acquisitions. The increase in EBIT was primarily due to the increased revenues, net of commission expense, as well as a lower operating expense to revenue ratio as compared to 2014. Corporate interest and income taxes Corporate interest includes interest on unsecured debt issued by BHE and borrowings from certain Berkshire insurance subsidiaries in connection with BHE’s acquisitions of NV Energy and AltaLink. The decline in corporate interest in 2016 was primarily due to lower average borrowings from Berkshire insurance subsidiaries. In 2015, corporate interest expense increased over the prior year due to new borrowings in connection with the AltaLink acquisition. BHE’s consolidated effective income tax rates were approximately 14% in 2016, 16% in 2015, and 23% in 2014. BHE’s effective income tax rates regularly reflect significant production tax credits from wind-powered electricity generation placed in service. In addition, pre-tax earnings of Northern Powergrid and AltaLink are taxed at lower statutory rates in the United Kingdom and Canada compared to the U.S. statutory tax rate. BHE’s effective rates in 2016 and 2015 also included reductions in deferred income tax liabilities resulting from enacted statutory income tax rate decreases in the United Kingdom and deferred state income tax benefits. Manufacturing, Service and Retailing A summary of revenues and earnings of our manufacturing, retailing and service businesses follows (in millions).        Revenues      Earnings *        2016      2015      2014      2016      2015      2014   Manufacturing    $ 46,506      $ 36,136      $ 36,773      $ 6,211      $ 4,893      $ 4,811   Service and retailing      73,553        71,689        60,916        2,251        2,222        1,981                                                            $ 120,059      $ 107,825      $ 97,689                                                Pre-tax earnings               8,462        7,115        6,792   Income taxes and noncontrolling interests               2,831        2,432        2,324                                                   $ 5,631      $ 4,683      $ 4,468                                         * Excludes certain acquisition accounting expenses, which were primarily from the amortization of identified intangible assets recorded in connection with our business acquisitions. The after-tax acquisition accounting expenses excluded from earnings above were $771 million in 2016, $476 million in 2015 and $496 million in 2014. These expenses are included in “other” in the summary of earnings on page 32 and in the “other” earnings section on page 51.   44 Table of Contents Management’s Discussion and Analysis (Continued)   Manufacturing, Service and Retailing (Continued)   Manufacturing Our manufacturing group includes a variety of businesses that produce industrial, building and consumer products. Industrial products businesses include specialty chemicals (The Lubrizol Corporation (“Lubrizol”)), metal cutting tools/systems (IMC International Metalworking Companies (“IMC”)), equipment and systems for the livestock and agricultural industries (CTB International), and a variety of industrial products for diverse markets (Marmon and Scott Fetzer). Beginning on January 29, 2016, our industrial products group also includes Precision Castparts Corp. (“PCC”), a leading manufacturer of complex metal products for aerospace, power and general industrial markets. Our building products businesses include flooring (Shaw), insulation, roofing and engineered products (Johns Manville), bricks and masonry products (Acme Building Brands), paint and coatings (Benjamin Moore), and residential and commercial construction and engineering products and systems (MiTek). Our consumer products businesses include leisure vehicles (Forest River), several apparel and footwear operations (including Fruit of the Loom, Garan, H.H. Brown Shoe Group and Brooks Sports), and beginning February 29, 2016, the Duracell Company (“Duracell”), a leading manufacturer of high performance alkaline batteries. This group also includes custom picture framing products (Larson Juhl) and jewelry products (Richline). A summary of revenues and pre-tax earnings of our manufacturing operations follows (in millions).        Revenues      Pre-tax earnings        2016      2015      2014      2016      2015      2014   Industrial products    $ 24,702      $ 16,760      $ 17,622      $ 4,209      $ 2,994      $ 3,159   Building products      10,772        10,316        10,124        1,178        1,167        896   Consumer products      11,032        9,060        9,027        824        732        756                                                            $ 46,506      $ 36,136      $ 36,773      $ 6,211      $ 4,893      $ 4,811                                                         Aggregate revenues in 2016 were approximately $46.5 billion, an increase of approximately $10.4 billion (28.7%) over 2015. Pre-tax earnings were approximately $6.2 billion in 2016, an increase of $1.3 billion (26.9%) compared to 2015. Excluding PCC and Duracell, manufacturing revenues were flat and pre-tax earnings declined compared to 2015. Industrial products Industrial products revenues increased approximately $7.9 billion (47.4%) in 2016 versus 2015, primarily due to the inclusion of PCC, partially offset by revenue declines of $859 million (5.1%) across our other businesses. Sales volumes of our other businesses declined compared to 2015, reflecting sluggish demand for many product categories, particularly for products sold to businesses in the oil and gas and heavy equipment industries. In addition, lower average costs of oil-based raw materials and metals and increased competitive pressures continued to lower average selling prices. Pre-tax earnings increased $1.2 billion (40.6%) in 2016 compared to 2015, reflecting the inclusion of PCC, partially offset by comparative earnings declines from our other businesses. Lubrizol’s earnings in 2016 included pre-tax losses of $365 million in 2016 related to the disposition in the fourth quarter of an underperforming business. Earnings from several of Marmon’s manufacturing businesses and Lubrizol’s continuing operations declined, while earnings from IMC increased slightly. Generally, our industrial products manufacturers experienced a combination of weaker customer demand, sales price and mix changes, and increased restructuring costs, which were partly offset by benefits from cost containment initiatives and lower average material prices. Revenues declined $862 million (5%) in 2015 versus 2014. The foreign currency translation impact of a stronger U.S. Dollar produced approximately $782 million of the comparative revenue decline. In addition, commodity cost deflation in petroleum and metals used in certain of our products resulted in lower average selling prices, in particular for specialty chemicals, metal cutting tools, copper wire and plumbing products. Certain of our businesses experienced slowing customer demand over the last half of 2015 as the decline in oil prices and competitive pressures resulted in significantly lower sales volumes to customers in or related to the oil and gas industry. These negative factors were partly offset by revenues from bolt-on acquisitions of Lubrizol. Pre-tax earnings declined $165 million (5%) in 2015 compared to 2014. The comparative declines in earnings reflected the adverse impact of the stronger U.S. Dollar, partially offset by earnings from bolt-on acquisitions, lower average commodity-based material costs, and actions taken in response to the slowing sales volumes previously referenced. Such actions address cost structures and exiting lower margin business.   45 Table of Contents Management’s Discussion and Analysis (Continued)   Manufacturing, Service and Retailing (Continued)   Building products Building products revenues increased $456 million (4.4%) in 2016 compared to 2015, reflecting volume-driven revenue increases by MiTek, Johns Manville, Acme and Shaw, as well as revenues from bolt-on acquisitions by Shaw and MiTek. The revenue increase reflected increased unit sales across several product categories, partly offset by lower average sales prices and changes in product mix. Pre-tax earnings increased $11 million (0.9%) in 2016 compared to 2015. The favorable effects of increased sales volume and lower manufacturing costs in 2016 (attributable to deflation in certain commodity unit costs) were offset by increased charges for asset impairments, pension settlements and environmental claims. Revenues increased $192 million (2%) in 2015 compared to 2014. The revenue increase reflected sales volume increases at Shaw, Johns Manville and MiTek, as well as the impact of bolt-on business acquisitions, partially offset by the unfavorable foreign currency translation from a stronger U.S. Dollar ($165 million). Pre-tax earnings increased $271 million (30%) compared to 2014. The overall increase in earnings was primarily attributable to the aforementioned increases in revenues and lower average raw material and energy costs, partially offset by the negative impact of foreign currency translation and increased restructuring charges. Shaw, Johns Manville and Benjamin Moore generated most of the comparative increase in earnings. Consumer products Consumer products revenues were approximately $11.0 billion in 2016, an increase of approximately $2.0 billion (21.8%) compared to 2015. The increase reflected the inclusion of Duracell and a 12% increase in Forest River’s revenues, which was primarily attributable to increased unit sales. Apparel revenues in 2016 declined $81 million (1.9%) compared to 2015, reflecting lower footwear sales and the impact of a divestiture by Fruit of the Loom in 2015. Consumer products pre-tax earnings increased $92 million (12.6%) in 2016 compared to 2015. The earnings increase reflected increased earnings from Forest River and apparel and footwear businesses, partly offset by pre-tax losses of Duracell. From its acquisition date, Duracell incurred approximately $109 million in transition, business integration and restructuring costs. Forest River generated a pre-tax earnings increase of 28%, primarily due to increased sales volumes and higher gross margins. Earnings of our apparel businesses increased 22% in 2016, primarily attributable to lower restructuring costs and a loss in 2015 from the disposition of a Fruit of the Loom operation, partly offset by lower earnings from our footwear businesses. Revenues of our consumer products manufacturers were approximately $9.1 billion in 2015, relatively unchanged from 2014. Forest River’s revenues increased 6% compared to 2014, due to a 4% increase in unit sales and increased average prices. Apparel revenues in 2015 declined 4% compared to 2014. The decline in apparel revenues was attributable to lower volume and the negative impact of foreign currency translation resulting from a stronger U.S. Dollar. Pre-tax earnings declined $24 million (3%) in 2015 compared to 2014. The decline was primarily due to a pre-tax loss in 2015 from the disposition of an unprofitable Fruit of the Loom operation and lower earnings from our footwear businesses, partially offset by higher earnings from Forest River. Service and retailing Our service and retailing businesses are comprised of a large group of independently managed businesses engaged in a variety of activities. A summary of revenues and pre-tax earnings of these operations follows (in millions).        Revenues    Pre-tax earnings      2016    2015    2014    2016    2015    2014 Service      $ 10,386      $ 10,201      $ 9,854      $ 1,161      $ 1,156      $ 1,202 Retailing        15,092        13,265        4,422        659        564        344 McLane Company        48,075        48,223        46,640        431        502        435                                                                        $ 73,553      $ 71,689      $ 60,916      $ 2,251      $ 2,222      $ 1,981                                                                   Service Our service businesses offer fractional ownership programs for general aviation aircraft (NetJets) and high technology training to operators of aircraft (FlightSafety). We also distribute electronic components (TTI) and franchise and service a network of quick service restaurants (Dairy Queen). Services also include the electronic distribution of corporate news, multimedia and regulatory filings (Business Wire), publication of newspapers and other publications (Buffalo News and the BH Media Group) and operation of a television station in Miami, Florida (WPLG). We also offer third party logistics services that primarily serve the petroleum and chemical industries (Charter Brokerage).   46 Table of Contents Management’s Discussion and Analysis (Continued)   Manufacturing, Service and Retailing (Continued) Service (Continued)   Service revenues increased 1.8% to approximately $10.4 billion in 2016 compared to 2015, primarily due to revenue increases from TTI and Charter Brokerage partly offset by a revenue decrease from NetJets. TTI’s revenues increased 7.2%, primarily due to sales volume increases in Asia, Europe and through the Internet, while the increase from Charter Brokerage primarily derived from a commodity trading business launched in 2015. NetJets’ revenues decreased 2.0% reflecting lower aircraft sales. Pre-tax earnings were $1.2 billion in 2016, relatively unchanged versus 2015, reflecting increased earnings from NetJets and lower earnings from our newspaper operations. NetJets’ earnings increased 19%, primarily due to lower subcontracting expense and a decline in losses from aircraft impairments and dispositions, partly offset by increases in depreciation and restructuring charges and reduced aircraft sale margins. TTI’s earnings were relatively unchanged, as changes in geographic sales mix and price competition produced lower gross margin rates, substantially offsetting the aforementioned revenue increase. Revenues increased $347 million (3.5%) in 2015 as compared to 2014. The increase included a 5% increase in NetJets’ revenues and the impact of the acquisitions of Charter Brokerage and WPLG during 2014, partly offset by reduced revenues from our newspaper operations. The increase in NetJets’ revenues was attributable to a 50% increase in aircraft sales, partially offset by lower flight operations revenue. Pre-tax earnings declined $46 million in 2015 compared to 2014. Earnings benefitted from the WPLG and Charter Brokerage acquisitions, which were more than offset by lower earnings from NetJets. Earnings declined at NetJets as the impact of increased aircraft sales margins was more than offset by increased personnel, aircraft subcontracting and maintenance expenses. A portion of the increase in personnel costs pertained to lump-sum payments made in connection with a collective bargaining agreement reached with our pilots in the fourth quarter of 2015. Retailing Our retailing businesses include four distinct home furnishings retailing businesses (Nebraska Furniture Mart, R.C. Willey, Star Furniture and Jordan’s), which sell furniture, appliances, flooring and electronics. Our retailers also include Berkshire Hathaway Automotive (“BHA”), which we acquired in the first quarter of 2015. BHA currently includes 83 auto dealerships. BHA sells new and pre-owned automobiles, offering repair and other related services and products, and also includes two related insurance businesses, two auto auctions and a distributor of automotive fluid maintenance products. Our other retailing businesses include three jewelry retailing businesses (Borsheims, Helzberg and Ben Bridge), See’s Candies (confectionary products), Pampered Chef (high quality kitchen tools), Oriental Trading Company (party supplies, school supplies and toys and novelties) and Detlev Louis Motorrad (“Louis”), a Germany-based retailer of motorcycle accessories acquired in the second quarter of 2015. Retailing revenues increased $1.8 billion (13.8%) in 2016 to $15.1 billion as compared to 2015. The increase in revenues reflected the impact of the BHA and Louis acquisitions during 2015, which accounted for approximately $1.6 billion of the comparative increase. Home furnishings revenues increased $227 million (7.8%), primarily due to new stores opened in 2015 by Nebraska Furniture Mart and Jordan’s, as well as modest organic growth. Pre-tax earnings increased $95 million (16.8%) in 2016 compared to 2015. The increase reflected the impact of the BHA and Louis acquisitions and increased earnings from most of our other retailers, which benefitted from a combination of revenue increases and cost savings initiatives. Revenues increased approximately $8.8 billion in 2015 as compared to 2014. The increase reflected the impact of the BHA and Louis acquisitions, which together contributed revenues of approximately $8.3 billion. Revenues of our home furnishings retailers increased $572 million (24%) over 2014, driven by Nebraska Furniture Mart, which opened a new store in March 2015 and from increases at R.C. Willey and Jordan’s. Pre-tax earnings increased $220 million (64%) compared to 2014. The increase was primarily due to the impact of the BHA and Louis acquisitions. McLane Company McLane operates a wholesale distribution business that provides grocery and non-food consumer products to retailers and convenience stores (“grocery”) and to restaurants (“foodservice”). McLane also operates businesses that are wholesale distributors of distilled spirits, wine and beer (“beverage”). The grocery and foodservice businesses generate high sales volumes and very low profit margins and have several significant customers, including Wal-Mart, 7-Eleven and Yum! Brands. A curtailment of purchasing by any of its significant customers could have an adverse impact on McLane’s periodic revenues and earnings.   47 Table of Contents Management’s Discussion and Analysis (Continued)   Manufacturing, Service and Retailing (Continued) McLane Company (Continued)   Revenues were $48.1 billion in 2016, a decline of $148 million (0.3%) relative to 2015. In 2016, we experienced a comparative decline in grocery revenues, partly offset by an increase in foodservice revenues. Earnings were $431 million in 2016, a decrease of $71 million (14%) compared to 2015. The reduced earnings was primarily due to a reduction in McLane’s operating margin (ratio of earnings to revenues). The decline was primarily due to increased employee related costs. Competition in our grocery and foodservice businesses has been and will likely continue to be intense and our ability to control operating costs is a key factor in maintaining profitability. Additionally, earnings in 2015 included a gain of $19 million from the disposition of a subsidiary. Revenues increased $1.6 billion (3%) in 2015 compared to 2014, reflecting revenue increases in the foodservice unit (6%), beverage unit (8%) and grocery unit (2%). Pre-tax earnings increased $67 million (15%) in 2015 versus 2014. Pre-tax earnings in 2015 included the aforementioned gain from the sale of a subsidiary and otherwise benefitted from lower fuel and trucking costs. Finance and Financial Products Our finance and financial products businesses include manufactured housing and finance (Clayton Homes), transportation equipment manufacturing and leasing businesses (UTLX and XTRA, and together, “transportation equipment leasing”), as well as other leasing and financing activities. A summary of revenues and earnings from our finance and financial products businesses follows (in millions).        Revenues    Earnings      2016    2015    2014    2016    2015    2014 Manufactured housing and finance      $ 4,230      $ 3,576      $ 3,310      $ 744      $ 706      $ 558 Transportation equipment leasing        2,650        2,540        2,427        959        909        827 Other        795        848        789        427        471        454                                                                        $ 7,675      $ 6,964      $ 6,526                                                                Pre-tax earnings                       2,130        2,086        1,839 Income taxes and noncontrolling interests                       703        708        596                                                                     $ 1,427      $ 1,378      $ 1,243                                                 Manufactured housing and finance Clayton Homes’ revenues increased $654 million (18%) in 2016 compared to 2015, attributable to a 30% increase in revenues from home sales, primarily due to a 25% increase in units sold and product mix changes. Interest and other financial service income increased 1.8% from 2015. Pre-tax earnings increased $38 million (5.4%) compared to 2015. Earnings benefitted from increased home sales and improved manufacturing and retailing operating margins, partly offset by lower earnings from lending and financial services, which were negatively impacted by increased insurance losses. A significant portion of Clayton’s earnings are generated from lending activities, which in recent years benefitted from relatively low delinquency rates and loan losses and from declining borrowing costs attributable to lower average interest rates. As of December 31, 2016, Clayton Homes’ installment loan portfolio was approximately $13.3 billion and approximately 94% of the loan balances were current in terms of payment status. Revenues and pre-tax earnings increased $266 million (8%) and $148 million (27%) in 2015, respectively, as compared to 2014. The revenue increase was primarily due to a 9% increase in home unit sales. The increase in earnings was primarily due to lower interest expense, improved manufacturing results, relatively low delinquency rates and lower loss rates on loan foreclosures. The decline in interest expense was primarily due to lower interest rates and to a lesser extent lower average balances. Transportation equipment leasing Transportation equipment leasing revenues increased $110 million (4.3%) in 2016 compared to 2015. The increase derived primarily from the acquisition of General Electric Company’s (“GE”) tank car fleet and its railcar repair services business in 2015 and increased rates and tank car additions. These increases were partly offset by lower utilization rates, unfavorable foreign currency effects, lower crane lease demand in North America and reduced volume related to oil and gas markets.   48 Table of Contents Management’s Discussion and Analysis (Continued)   Finance and Financial Products (Continued) Transportation equipment leasing (Continued)   Pre-tax earnings increased $50 million (5.5%) in 2016 compared to 2015. The increase was primarily attributable to revenue growth and lower depreciation rates on certain tank car assets, partially offset by higher repair costs and interest expense on new borrowings from a Berkshire financing subsidiary. Significant portions of transportation leasing expenses, such as depreciation, do not vary proportionately to revenue changes and therefore changes in revenues can disproportionately impact earnings. Revenues increased 5% in 2015 compared to 2014. The increase reflected increased railcar lease rates, a larger fleet of railcars, higher volumes in our Australian crane business, increased over-the-road trailers on lease and gains on dispositions of trailers. These increases were partially offset by the unfavorable effects of foreign currency exchange attributable to a stronger U.S. Dollar and lower volumes in our North American crane leasing business due to declines in oil drilling activity. As previously mentioned, we acquired GE’s tank car fleet on September 30, 2015, which included approximately 25,000 tank cars. We also acquired several railcar repair and maintenance facilities at the end of 2015. Pre-tax earnings increased $82 million (10%) in 2015 compared to 2014. The increase was primarily attributable to the positive impact of the revenue growth discussed above, which more than offset the unfavorable impact of foreign currency translation and higher railcar repair and warranty costs and depreciation attributable to a larger fleet size. Other Other finance activities include CORT furniture leasing, our share of the earnings of a commercial mortgage servicing business (“Berkadia”) in which we own a 50% interest, and interest and dividends from a portfolio of investments. Other earnings decreased $44 million in 2016 compared to 2015, reflecting lower earnings from investment securities, partly offset by increased earnings from CORT and Berkadia. Other earnings also includes income from interest rate spreads charged on borrowings by a Berkshire financing subsidiary that are used to finance Clayton Homes’ installment loans and beginning in 2016, UTLX’s fleet of rail/tank cars held for lease. Offsetting expenses ($74 million in 2016, $62 million in 2015 and $68 million in 2014) were included in Clayton Homes’ and UTLX’s results. Investment and Derivative Gains/Losses A summary of investment and derivative gains and losses and other-than-temporary impairment losses on investments follows (in millions).        2016     2015     2014   Investment gains/losses    $ 7,635     $ 9,399     $ 4,272   Other-than-temporary impairments      (82 )      (26 )      (697 )  Derivative gains/losses      751       974       506                            Gains/losses before income taxes and noncontrolling interests      8,304       10,347       4,081   Income taxes and noncontrolling interests      1,807       3,622       760                            Net gains/losses    $ 6,497     $ 6,725     $ 3,321                            Investment gains/losses Investment gains/losses arise primarily from the sale, redemption or exchange of investments. The timing of gains or losses can have a material effect on periodic earnings. Investment gains and losses included in earnings usually have minimal impact on the periodic changes in our consolidated shareholders’ equity since most of our investments are recorded at fair value with the unrealized gains and losses included in shareholders’ equity as a component of accumulated other comprehensive income. We believe the amount of investment gains/losses included in earnings in any given period typically has little analytical or predictive value. Our decisions to sell securities are not motivated by the impact that the resulting gains or losses will have on our reported earnings. Although we do not consider investment gains and losses as necessarily meaningful or useful in evaluating our periodic results, we are providing information to explain the nature of such gains and losses when reflected in our earnings.   49 Table of Contents Management’s Discussion and Analysis (Continued)   Investment and Derivative Gains/Losses (Continued) Investment gains/losses (Continued)   Pre-tax investment gains were $7.6 billion in 2016 and included gains of $2.4 billion from the sale to Mars Inc. of our Wrigley preferred stock investment, $610 million from the Kraft Heinz Preferred Stock redemption, $1.2 billion from the Dow Preferred Stock conversion into common stock, and $1.1 billion from the exchange of shares of P&G common stock for 100% of the common stock of Duracell. Income tax expense allocated to investment gains included a benefit from the reduction of certain deferred income tax liabilities in connection with the exchange of P&G common stock for Duracell. Pre-tax investment gains included non-cash holding gains related to our investment in Kraft Heinz of $6.8 billion in 2015. In connection with its acquisition of Kraft Foods on July 2, 2015, Kraft Heinz issued new shares of its common stock in exchange for the outstanding shares of Kraft Foods common stock, thus reducing Berkshire’s ownership interest in Kraft Heinz by approximately 50%. Under the equity method of accounting, such transactions are treated by the investor as if it sold a portion of its interests. Pre-tax investment gains were $4.3 billion in 2014, which included gains of approximately $2.1 billion realized in connection with the exchanges of common stock of Phillips 66 and Graham Holdings Company for 100% of the common stock of a specified subsidiary of each of those companies. Each exchange transaction in 2016 and 2014 was structured as a tax-free reorganization under the Internal Revenue Code. As a result, no income taxes are payable on the excess of the fair value of the businesses received over the tax-basis of the common stock exchanged. Other-than-temporary impairments (“OTTI”) OTTI charges in 2016 and 2015 were not significant and in 2014 were $697 million, predominantly relating to our investment in equity securities of Tesco PLC. Although we have periodically recorded OTTI charges in earnings in past years, we continue to hold some of those securities. If the market values of those investments increase following the date we recorded OTTI charges, the increases are included in shareholders’ equity as a component of accumulated other comprehensive income and not in earnings. When recorded, OTTI charges have no impact whatsoever on the asset values otherwise recorded in our Consolidated Balance Sheets or on our consolidated shareholders’ equity. In addition, the recognition of such losses in earnings rather than in accumulated other comprehensive income does not necessarily indicate that sales are planned and sales ultimately may not occur for a number of years. Furthermore, the recognition of OTTI charges does not necessarily indicate that the loss in value of the security is permanent or that the market price of the security will not subsequently increase to and ultimately exceed our original cost. Derivative gains/losses Derivative gains/losses primarily represented the changes in fair value of our credit default and equity index put option contract liabilities. The periodic changes in the fair values of these liabilities are recorded in earnings and can be significant, reflecting the volatility of underlying credit and equity markets and the changes in the inputs used to measure such liabilities. Changes in the values of our equity index put option contract liabilities produced pre-tax gains of $662 million in 2016, which were primarily due to increases in the index values, favorable foreign currency exchange rate changes and shorter remaining contract durations, partly offset by lower interest rates. Our equity index put option contracts produced pre-tax gains of approximately $1.0 billion in 2015, which were primarily attributable to a stronger U.S. Dollar and shorter remaining durations. These contracts produced pre-tax gains of $108 million in 2014. Such gains reflected the favorable impact of foreign currency exchange rate changes and generally higher index values, partially offset by the effect of lower interest rate assumptions. As of December 31, 2016, the aggregate intrinsic value of our equity put option contracts was approximately $1.0 billion and our recorded liability was approximately $2.9 billion. Our ultimate payment obligations, if any, under our equity index put option contracts will be determined as of the contract expiration dates (beginning in 2018), and will be based on the intrinsic value as defined under the contracts. In July 2016, our remaining credit default contract was terminated by mutual agreement with the counterparty and we paid the counterparty $195 million. This contract produced pre-tax earnings of $89 million in 2016, pre-tax losses of $34 million in 2015 and pre-tax earnings of $397 million in 2014. We have no further exposure to losses under credit default contracts.   50 Table of Contents Management’s Discussion and Analysis (Continued)   Other A summary of after-tax other earnings (losses) which include corporate income (including income from our investments in Kraft Heinz), expenses and income taxes not allocated to operating businesses is summarized below (in millions).              2016                 2015                 2014         Kraft Heinz earnings    $ 706     $ 841     $ 653   Acquisition accounting expenses      (846 )      (515 )      (531 )  Corporate interest expense      (97 )      (191 )      (153 )  Other      (106 )      (105 )      (114 )                           Net earnings (losses) attributable to Berkshire Hathaway shareholders    $ (343 )    $ 30     $ (145 )                           The reduced earnings in 2016 from our investments in Kraft Heinz were due to lower dividends from our Preferred Stock investment, which was redeemed in June 2016, somewhat offset by increased equity method earnings from our common stock investment. Other earnings also include charges from the application of the acquisition method in connection with Berkshire’s business acquisitions. Such charges were primarily from the amortization of intangible assets recorded in connection with those business acquisitions, which we view as corporate expenses. Corporate interest expense includes after-tax foreign exchange gains of $159 million in 2016 and losses of $45 million in 2015 with respect to Euro denominated debt issued by Berkshire in March 2015 (€3.0 billion par) and March 2016 (€2.75 billion par). Excluding foreign currency effects, after-tax corporate interest expense was $256 million in 2016 and $146 million in 2015. The increase in 2016 was attributable to increased average outstanding debt. Financial Condition Our balance sheet continues to reflect significant liquidity and a strong capital base. Our consolidated shareholders’ equity at December 31, 2016 was $283.0 billion, an increase of $27.5 billion since December 31, 2015. Net earnings attributable to Berkshire shareholders in 2016 were $24.1 billion. At December 31, 2016, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of $70.9 billion, and investments (excluding our investment in Kraft Heinz) of $158.3 billion. In January 2016, we used cash of approximately $32.1 billion to fund the acquisition of PCC, which we funded through a combination of cash on hand and $10 billion borrowed under a 364-day revolving credit agreement. We repaid these borrowings following our issuance in March 2016, of €2.75 billion and $5.5 billion of senior unsecured notes. In August 2016, we issued $750 million of senior unsecured notes to replace $750 million of maturing notes. In January 2017, Berkshire issued new senior notes aggregating €1.1 billion and repaid $1.1 billion of maturing senior notes. There are no other parent company term debt maturities in 2017. Our railroad, utilities and energy businesses (conducted by BNSF and BHE) maintain very large investments in capital assets (property, plant and equipment) and will regularly make significant capital expenditures in the normal course of business. In 2016, capital expenditures included $5.1 billion by BHE and $3.8 billion by BNSF. Aggregate capital expenditures of these businesses are forecasted to be $8.6 billion in 2017. We expect future capital expenditures will be funded by cash flows from operations and debt issuances. BNSF’s outstanding debt was approximately $22.0 billion as of December 31, 2016, an increase of $307 million from December 31, 2015. Outstanding borrowings of BHE and its subsidiaries, excluding its borrowings from Berkshire insurance subsidiaries, were approximately $37.0 billion as of December 31, 2016, an increase of approximately $1.0 billion from December 31, 2015. BNSF and BHE debt maturities in 2017 will be $3.6 billion. Berkshire does not guarantee the repayment of debt issued by BNSF, BHE or any of their subsidiaries and is not committed to provide capital to support BNSF or BHE or any of their subsidiaries. Finance and financial products assets were approximately $41.7 billion as of December 31, 2016, an increase of approximately $2.7 billion since December 31, 2015. Finance assets consist primarily of loans and finance receivables, various types of property held for lease, and cash, cash equivalents, U.S. Treasury Bills and other investments. In September 2016, a Berkshire finance subsidiary received approximately $4.6 billion from the sale of its Wrigley preferred stock investment.   51 Table of Contents Management’s Discussion and Analysis (Continued)   Financial Condition (Continued)   Finance and financial products liabilities were approximately $19.7 billion as of December 31, 2016, an increase of approximately $2.5 billion compared to December 31, 2015. The increase was attributable to $3.5 billion of debt issued by Berkshire Hathaway Finance Corporation (“BHFC”) in March, partly offset by lower derivative contract liabilities. The debt proceeds were used to fund loans originated and acquired by Clayton Homes and to fund a portion of existing assets held for lease by our UTLX railcar leasing business. In January 2017, BHFC issued new senior notes aggregating $1.3 billion due in 2019 and 2020 and repaid $1.05 billion of maturing notes. Over the remainder of 2017, an additional $1.75 billion of BHFC senior notes will mature. While we currently intend to have BHFC issue additional notes in 2017 to replace the maturing debt, the amount to be issued will be based on prevailing market conditions. Berkshire’s Board of Directors has authorized Berkshire to repurchase its Class A and Class B common shares at prices no higher than a 20% premium over the book value of the shares. Berkshire may repurchase shares at management’s discretion and there is no obligation to repurchase any shares. We expect the program to continue indefinitely. We will not repurchase shares if it reduces the total amount of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire. There were no share repurchases under the program in 2016. 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 are included in our Consolidated Balance Sheets, such as notes payable, which 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, such as minimum rentals under operating leases and certain purchase obligations, and are not currently reflected in the financial statements, but will be recognized in future periods as the goods are delivered or services are provided. 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 future payments arising under property and casualty insurance and reinsurance contracts are contingent upon the outcome of claim settlement activities or events. In addition, obligations arising under life, annuity and health insurance benefits are contingent on future premiums, allowances, mortality, morbidity, expenses and policy lapse rates, as applicable. These amounts are included in the following table based on the liability estimates reflected in our Consolidated Balance Sheet as of December 31, 2016. Although certain insurance losses and loss adjustment expenses and life, annuity and health benefits are recoverable under reinsurance contracts, those receivables recorded in the Consolidated Balance Sheet are not reflected in the table. A summary of contractual obligations as of December 31, 2016 follows (in millions).        Estimated payments due by period      Total    2017    2018-2019    2020-2021    After 2021 Notes payable and other borrowings, including interest      $ 152,519      $ 14,038      $ 26,047      $ 14,396      $ 98,038 Operating leases        8,285        1,337        2,168        1,610        3,170 Purchase obligations (1)        38,189        11,072        7,560        4,937        14,620 Losses and loss adjustment expenses (2)        78,351        17,591        17,684        9,791        33,285 Life, annuity and health insurance benefits (3)        30,705        1,299        323        490        28,593 Other        13,173        2,221        909        1,639        8,404                                                        Total      $ 321,222      $ 47,558      $ 54,691      $ 32,863      $ 186,110                                                          (1)  Primarily obligations of BHE, BNSF and NetJets.   (2)  Before reserve discounts of $1.4 billion.   (3)  Amounts represent estimated undiscounted benefits, net of estimated future premiums, as applicable.   52 Table of Contents Management’s Discussion and Analysis (Continued)   Critical Accounting Policies Certain accounting policies require us to make estimates and judgments that affect the amounts reflected in the Consolidated Financial Statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances. Property and casualty losses We record liabilities for unpaid losses and loss adjustment expenses based upon estimates of the ultimate amounts payable for losses occurring on or before the balance sheet date. Except for certain workers’ compensation reinsurance claims, we record all liabilities for unpaid losses and loss adjustment expenses (referred to in this section as “gross unpaid losses”) in the Consolidated Balance Sheets without discounting for time value. The timing and amount of ultimate loss payments are contingent upon, among other things, the timing of claim reporting from insureds and ceding companies and the final determination of the loss amount through the loss adjustment process. We use a variety of techniques in establishing liabilities and all techniques require significant judgments and assumptions. We believe the processes and techniques utilized best suit the underlying claims and available data. As of any balance sheet date, recorded liabilities include provisions for reported claims, as well as claims not yet reported and the development of reported claims. The period between the loss occurrence date and loss settlement date is the “claim-tail.” Property claims usually have relatively short claim-tails, absent litigation. Casualty claims usually have longer claim-tails, occasionally extending for decades. Casualty claims may be more susceptible to litigation and the impact of changing contract interpretations. The legal environment and judicial process further contributes to extending claim-tails. Our liabilities as of December 31, 2016 were $76.9 billion, of which 85% related to GEICO, General Re and BHRG. Additional information regarding significant uncertainties inherent in the processes and techniques of GEICO, General Re and BHRG follows. GEICO GEICO predominantly writes private passenger auto insurance. As of December 31, 2016, GEICO’s gross unpaid losses and loss adjustment expenses were $15.5 billion and unpaid losses net of reinsurance recoverable were $14.4 billion. GEICO’s claim reserving methodologies produce liability estimates based upon the individual claims. The key assumptions affecting our liability estimates include projections of ultimate claim counts (“frequency”) and average loss per claim (“severity”). We utilize a combination of several actuarial estimation methods, including Bornhuetter-Ferguson and chain-ladder methodologies. Liability estimates for automobile liability coverages (such as bodily injury (“BI”), uninsured motorists, and personal injury protection) are more uncertain due to the longer claim-tails, so we establish additional case development estimates. As of December 31, 2016, case development liabilities averaged approximately 25% of the case reserves. We select case development factors through analysis of the overall adequacy of historical case liabilities. For unreported claims, IBNR liabilities are based on projections of the ultimate number of claims expected (reported and unreported) for each significant coverage. We use historical claim count data to develop age-to-age projections of the ultimate counts by quarterly accident period, from which we deduct reported claims to produce the number of unreported claims. We estimate the average costs per unreported claim and apply such estimates to the unreported claim counts, producing an IBNR liability estimate. We may record additional IBNR estimates when actuarial techniques are difficult to apply. For significant coverages, we test the adequacy of the aggregate liabilities for unpaid losses using one or more actuarial projections based on claim closure models, and paid and incurred loss triangles. Each type of projection analyzes loss occurrence data for claims occurring in a given period and projects the ultimate cost. Unpaid loss and loss adjustment expense liability estimates recorded at the end of 2015 developed downward by $61 million when reevaluated through December 31, 2016, which produced a corresponding increase to pre-tax earnings in 2016. We modified the assumptions used to estimate liabilities at December 31, 2016 as appropriate to reflect the most recent frequency and severity results. Future development of recorded liabilities will depend on whether actual frequency and severity are more or less than anticipated.   53 Table of Contents Management’s Discussion and Analysis (Continued)   Property and casualty losses (Continued) GEICO (Continued)   With respect to liabilities for BI claims, our most significant claim category, we believe it is reasonably possible that average severities will change by at least one percentage point from the severities used in establishing the recorded liabilities at December 31, 2016. We estimate that a one percentage point increase or decrease in BI severities would produce a $240 million increase or decrease in recorded liabilities, with a corresponding decrease or increase in pre-tax earnings. Many of the same economic forces that would likely cause BI severity to differ from expectations would likely also cause severities for other injury coverages to differ in the same direction. General Re and BHRG Liabilities for unpaid property and casualty losses and loss adjustment expenses of General Re and BHRG derive primarily from reinsurance contracts. In connection with reinsurance contracts, the nature, extent, timing and perceived reliability of information received from ceding companies varies widely depending on the type of coverage and the contractual reporting terms. Contract terms, conditions and coverages also tend to lack standardization and may evolve more rapidly than primary insurance policies. The nature and extent of loss information provided under many facultative (individual risk), per occurrence excess or retroactive reinsurance contracts may not differ significantly from the information received under a primary insurance contract if reinsurer personnel either work closely with the ceding company in settling individual claims or manage the claims themselves. However, loss information is often less detailed with respect to aggregate excess-of-loss and quota-share contracts. Additionally, loss information we receive through periodic reports is often in a summary format rather than on an individual claim basis. Loss data includes recoverable paid losses, as well as case loss estimates. Ceding companies infrequently provide IBNR estimates to reinsurers. Loss reporting to reinsurers is typically slower in comparison to primary insurers. Periodic premium and claims reports are required from ceding companies. In the U.S., such reports are generally required at quarterly intervals ranging from 30 to 90 days after the end of the accounting period. Outside of the U.S., reinsurance reporting practices may vary further. In certain countries, clients report annually, often 90 to 180 days after the end of the annual period. In some instances, reinsurers assume and cede underlying risks thereby creating multiple contractual intermediaries between us and the primary insured potentially compounding the claim reporting delays. The relative impact of reporting delays on the reinsurer may vary depending on the type of coverage, contractual reporting terms and the magnitude of the claim relative to the attachment point of the reinsurance contract and for other reasons. The premium and loss data we receive is through at least one intermediary (the primary insurer), so there is a risk that the loss data reported is incomplete, inaccurate or the claim is outside the coverage terms. When received, we review the information for completeness and compliance with the contract terms. Generally, our reinsurance contracts permit us to access the ceding company’s books and records with respect to the subject business, thus providing the ability to audit the reported information. In the normal course of business, disputes occasionally arise concerning whether claims are covered by our reinsurance policies. We resolve most coverage disputes through negotiation with the client. If disputes cannot be resolved, our contracts generally provide arbitration, litigation or alternative dispute resolution processes. There are no coverage disputes at this time for which an adverse resolution would likely have a material impact on our consolidated results of operations or financial condition. General Re Information concerning General Re’s gross and net unpaid losses and loss adjustment expenses as of December 31, 2016 follows (in millions).   Type          Line of business        Reported case liabilities    $ 6,536     Liability and workers’ compensation (1)    $ 11,408   IBNR liabilities      6,884     Property      2,012                       Gross unpaid losses and loss adjustment expenses      13,420     Total    $ 13,420                 Reinsurance recoverable and deferred charges      (693 )                     Net unpaid losses and loss adjustment expenses    $ 12,727                        (1)  Net of discounts of approximately $1.4 billion.   54 Table of Contents Management’s Discussion and Analysis (Continued)   Property and casualty losses (Continued) General Re (Continued)   For General Re, the critical processes involved in estimating unpaid losses and loss adjustment expenses include the establishment of case liability estimates, the determination of expected loss ratios, which drive IBNR liability estimates, and the comparison of reported loss trends to the expected loss reporting patterns. Recorded liabilities are subject to “tail risk” where reported losses are beyond the expected loss emergence period. Our process for estimating unpaid losses and loss adjustment expenses begins with case loss estimates made by the ceding company. Upon notification of a reinsurance claim from a ceding company, we independently evaluate the case losses reported and if appropriate, we use our own case liability estimate. As of December 31, 2016, our case loss estimates exceeded ceding company estimates by approximately $2.2 billion, which were concentrated in the workers’ compensation line. We also periodically conduct detailed reviews of individual client claims, which may cause us to adjust our case estimates. In estimating IBNR liabilities, we consider expected case loss emergence and development patterns, together with expected loss ratios by year. In this process, we classify all loss and premium data into segments (“cells”) based primarily on product type (e.g., treaty, facultative and program), line of business (e.g., auto liability, property and workers’ compensation) and geographic jurisdiction. For each cell, we aggregate premiums and losses by accident year, policy year or underwriting year and analyze the data over time. There are several hundred cells. We use loss triangles to determine the expected development of reported claims for most coverages, which, together with the expected loss ratios, are used to calculate IBNR liability estimates. We select expected loss ratios by cell and by year based upon indicated ultimate loss ratios and forecasted losses obtained from pricing statistics. Indicated ultimate loss ratios are determined from the selected loss emergence pattern, reported losses and earned premiums. Factors affecting our loss development triangles include, but are not limited to, changes in the following: client claims practices; the frequency of client company claim reviews; policy terms and coverage (such as loss retention levels and occurrence and aggregate policy limits); loss trends, and legal trends that result in unanticipated losses. Collectively, these factors influence our selections of expected loss emergence patterns. Once the IBNR liabilities are determined, we estimate the expected case loss emergence for the upcoming calendar year, based on the prior year-end expected loss emergence patterns and expected loss ratios. We allocate the expected losses into interim estimates, which we compare to actual reported losses. This comparison provides a test of the adequacy of prior year-end IBNR liabilities and forms the basis for possibly changing IBNR liability assumptions during the course of the year. During 2016, we reduced net losses for prior years’ occurrences by $280 million in the aggregate. This reduction produced a corresponding increase in pre-tax earnings. Reported claims for prior years’ property loss events were less than expected and we reduced our estimated ultimate liabilities by $157 million. However, property losses incurred during any given period may be more volatile because of the effect of catastrophe and large individual property loss events. In 2016, reported nominal losses for prior years’ workers’ compensation were less than expected, which after reevaluating expected remaining IBNR estimates, resulted in a reduction of nominal liabilities by $165 million. However, we discount workers’ compensation liabilities and after adjusting for changes in discounts, workers’ compensation losses for prior years’ occurrences had a minimal impact on pre-tax earnings. An increase of ten percent in the tail of the expected loss emergence pattern and an increase of ten percent in the expected loss ratios would produce a net increase in discounted workers’ compensation IBNR liabilities of approximately $889 million, producing a corresponding decrease in pre-tax earnings. We believe it is reasonably possible for these assumptions to increase at these rates. Other casualty and general liability reported losses (excluding mass tort losses) were less than expected in 2016, resulting in a $205 million increase in pre-tax earnings. However, casualty losses tend to be long-tailed and it should not be assumed that favorable loss experience in a given period will continue in the future. For our significant casualty and general liability cells, we estimate that an increase of five percent in the claim-tails of the expected loss emergence patterns and a five percent increase in expected loss ratios would produce a net increase in our nominal IBNR liabilities and a corresponding reduction in pre-tax earnings of approximately $900 million. While we believe it is reasonably possible for these assumptions to increase at these rates, more likely outcomes are less than $900 million given the diversification in worldwide business.   55 Table of Contents Management’s Discussion and Analysis (Continued)   Property and casualty losses (Continued) General Re (Continued)   Overall industry-wide loss experience data and informed judgment are used when internal loss data is of limited reliability, such as for mass tort, asbestos and hazardous waste (collectively, “mass tort”) liability estimates. General Re’s net liability for such losses at December 31, 2016, was approximately $1.2 billion, which included an increase in estimated ultimate losses of $98 million during 2016, which produced a corresponding reduction in pre-tax earnings. Mass tort loss estimations are difficult to determine due to the changing legal environment, and increases may be required in the future if new exposures or claimants are identified, new claims are reported or new theories of liability emerge. In addition to the previously described methodologies, we consider “survival ratios”, which is the average net claim payments in recent years in relation to net unpaid losses, as a rough guide to reserve adequacy. General Re’s survival ratio was approximately 15 years as of December 31, 2016. BHRG A summary of BHRG’s unpaid losses and loss adjustment expenses as of December 31, 2016 follows (in millions).        Property      Casualty      Total   Reported case liabilities    $ 1,556      $ 2,399      $ 3,955   IBNR liabilities      2,904        4,831        7,735   Retroactive reinsurance liabilities      —          24,675        24,675                              Gross unpaid losses and loss adjustment expenses    $ 4,460      $ 31,905        36,365                        Deferred charges and reinsurance recoverable            (8,509 )                 Net unpaid losses and loss adjustment expenses          $ 27,856                  We use a variety of actuarial methodologies to establish unpaid losses and loss adjustment expenses. Certain methodologies, such as paid and incurred loss development techniques, incurred and paid loss Bornhuetter-Ferguson techniques and frequency and severity techniques, are utilized, as well as ground-up techniques when appropriate. A large percentage of BHRG’s unpaid losses and loss adjustment expenses derive from retroactive reinsurance contracts, which relate to loss events occurring before the contract inception date. Gross liabilities with respect to such contracts were approximately $24.7 billion at December 31, 2016, and were predominately for casualty and liability coverages. We expect the claim-tail related to certain of these contracts to be very long. We establish aggregate liability estimates by individual contract, considering exposure and development trends. In establishing retroactive reinsurance liabilities, we often analyze historical aggregate loss payment patterns and project expected losses under various scenarios. We assign judgmental probability factors to these scenarios and an expected outcome is determined. We then monitor loss payment activity and review ceding company reports and other information concerning the underlying losses, and we re-estimate expected ultimate losses when significant events are reported or revealed. Certain of our contracts include significant exposures to asbestos, environmental and other latent injury claims. We estimate that our liabilities for such claims were approximately $13.7 billion at December 31, 2016. We do not receive consistently reliable information regarding asbestos, environmental and latent injury claims data from all ceding companies, particularly with respect to multi-line or aggregate excess-of-loss policies. Periodically, we conduct a detailed analysis of the underlying loss data to make an estimate of ultimate reinsured losses. When detailed loss information is unavailable, we develop estimates by applying recent industry trends and projections to aggregate client data. Judgments in these areas necessarily consider the stability of the legal and regulatory environment under which we expect these claims will be adjudicated. Legal reform and legislation could also have a significant impact on our ultimate liabilities. Changes in ultimate estimated liabilities for prior years’ retroactive reinsurance contracts were relatively insignificant in 2016, as were changes in the estimated timing and amount of remaining unpaid losses. In 2016, we paid losses and loss adjustment expenses of approximately $1.1 billion with respect to these contracts.   56 Table of Contents Management’s Discussion and Analysis (Continued)   Property and casualty losses (Continued) BHRG (Continued)   We currently believe that maximum losses payable under our retroactive policies will not exceed $40 billion due to the aggregate contract limits that are applicable to most of these contracts. Absent significant judicial or legislative changes affecting asbestos, environmental or latent injury exposures, we also currently believe it unlikely that losses will develop upward to the maximum loss payable or downward by more than 15% of our year-end estimate. We also record deferred charges with respect to our retroactive reinsurance contracts, which at contract inception represents the excess, if any, of the estimated ultimate liability for unpaid losses over premiums. Unamortized deferred charges were approximately $8.0 billion at December 31, 2016, which will be amortized and charged to pre-tax earnings in the future based on the expected timing and amount of loss payments. Significant changes in such estimates may have a significant effect on unamortized deferred charges and the amount of periodic amortization. Based on the contracts in effect as of December 31, 2016, and the new AIG contract we currently estimate that amortization expense in 2017 will approximate $950 million. Gross unpaid losses and loss adjustment expense liabilities related to property and casualty contracts, other than retroactive reinsurance, were approximately $11.7 billion as of December 31, 2016 and consisted primarily of traditional property and casualty coverages written primarily under excess-of-loss and quota-share treaties. These coverages included catastrophe and aviation contracts that tend to generate low frequency/high severity losses, although such liabilities have diminished in recent years due to declines in business written. Reserving techniques for catastrophe and individual risk contracts generally rely more on a per-policy assessment of the ultimate cost associated with the individual loss event rather than with an analysis of the historical development patterns of past losses. We generally establish liabilities for unpaid losses and loss adjustments expenses for these contracts based upon loss estimates reported by ceding companies and IBNR reserves that are primarily a function of reported losses from ceding companies and anticipated loss ratios established on a portfolio basis, supplemented by management’s estimates of the impact of major catastrophe events as they become known. In 2016, we decreased estimated ultimate losses for prior years’ occurrences by approximately $585 million, which primarily derived from lower than expected losses reported by ceding companies. The decrease produced a corresponding increase in pre-tax earnings. Derivative contract liabilities We measure derivative contract liabilities at fair value. Our most significant derivative contract exposures relate to equity index put option contracts written between 2004 and 2008. We believe that the fair values produced for long-duration options are inherently subjective. Actual values in an exchange may differ significantly from the values produced by any mathematical model, as transaction values may also reflect perceptions of individual buyers and sellers as well as other changes in market conditions. We determine the fair value of equity index put option contracts using a Black-Scholes based option valuation model. Inputs to the model include the current index value, strike price, interest rate, dividend rate and contract expiration date. The weighted average interest and dividend rates used as of December 31, 2016 were 1.2% and 3.3%, respectively. The interest rates were approximately 57 basis points (on a weighted average basis) over benchmark interest rates at the end of 2016 and represented our estimate of our nonperformance risk. We believe that the most significant economic risks under these contracts relate to changes in the index value component and, to a lesser degree, the foreign currency component. The Black-Scholes based model also incorporates volatility estimates that measure potential price changes over time. Our contracts have an average remaining maturity of about four years. The weighted average volatility used as of December 31, 2016 was approximately 20.2%. We determine the weighted average volatilities based on the volatility input for each contract weighted by the contract’s notional value. The volatility input for each contract reflects our expectation of future price volatility. The potential impact from changes in our volatility assumptions are as follows. (Dollars in millions).   Fair value at December 31, 2016        $2,890   Hypothetical change in volatility    Hypothetical fair value Increase 2 percentage points      $ 3,098 Increase 4 percentage points        3,319 Decrease 2 percentage points        2,695 Decrease 4 percentage points        2,516   57 Table of Contents Management’s Discussion and Analysis (Continued)   Other Critical Accounting Policies Our Consolidated Balance Sheet at December 31, 2016 included goodwill of acquired businesses of $79.5 billion. We evaluate goodwill for impairment at least annually and we conducted our most recent annual review during the fourth quarter of 2016. Our review includes determining the estimated fair values of our reporting units. There are several methods of estimating a reporting unit’s fair value, including market quotations, underlying asset and liability fair value determinations and other valuation techniques, such as discounted projected future net earnings or net cash flows and multiples of earnings. We primarily use discounted projected future earnings or cash flow methods. The key assumptions and inputs used in such methods may include forecasting revenues and expenses, operating cash flows and capital expenditures, as well as an appropriate discount rate and other inputs. A significant amount of judgment is required in estimating the fair value of a reporting unit and in performing goodwill impairment tests. Due to the inherent uncertainty in forecasting cash flows and earnings, actual results may vary significantly from the forecasts. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, then, as required by GAAP, we estimate the fair values of the identifiable assets and liabilities of the reporting unit. The excess of the estimated fair value of the reporting unit over the estimated fair value of its net assets establishes the implied value of goodwill. The excess of the recorded amount of goodwill over the implied goodwill value is charged to earnings as an impairment loss. Market Risk Disclosures Our Consolidated Balance Sheets include substantial amounts of assets and liabilities whose fair values are subject to market risks. Our significant market risks are primarily associated with equity prices, interest rates, foreign currency exchange rates and commodity prices. The fair values of our investment portfolios and equity index put option contracts remain subject to considerable volatility. The following sections address the significant market risks associated with our business activities. Equity Price Risk Historically, equity securities have represented a significant portion of our investment portfolio. Strategically, we strive to invest in businesses that possess excellent economics and able and honest management and at sensible prices, and we prefer to invest a meaningful amount in each investee. Consequently, equity investments are concentrated in relatively few issuers. At December 31, 2016, approximately 60% of the total fair value of equity securities and other investments was concentrated in five issuers. We often hold our equity investments for long periods and short-term price volatility has and will occur. We are not necessarily disturbed by market price declines provided the underlying business, economic and management characteristics of the investees remain favorable. We strive to maintain significant levels of shareholder capital and ample liquidity to provide a margin of safety against short-term price volatility. Market prices for equity securities are subject to fluctuation and consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions. We are also subject to equity price risk with respect to our equity index put option contracts. While our ultimate liability with respect to these contracts is determined from the movement of the underlying stock index between the contract inception date and expiration date, fair values of these contracts are also affected by changes in other factors such as interest rates, expected dividend rates and the remaining duration of the contract.   58 Table of Contents Management’s Discussion and Analysis (Continued)   Equity Price Risk (Continued)   The following table summarizes our equity securities and other investments and derivative contract liabilities with significant equity price risk as of December 31, 2016 and 2015. We also show the effects of a hypothetical 30% increase and a 30% decrease in market prices as of those dates. The selected 30% hypothetical changes does not reflect the best or worst case scenarios. Indeed, results could be far worse due both to the nature of equity markets and the aforementioned concentrations existing in our equity investment portfolio. Dollar amounts are in millions.        Fair Value      HypotheticalPrice Change      EstimatedFair Value afterHypotheticalChange in Prices      HypotheticalPercentageIncrease (Decrease) inShareholders’ Equity December 31, 2016                           Assets:                           Equity securities      $ 122,032          30% increase          $ 158,642          8.4               30% decrease            85,422          (8.4 ) Other investments (1)        9,597          30% increase            13,699          0.9               30% decrease            5,677          (0.9 ) Liabilities:                           Equity index put option contracts        2,890          30% increase            1,602          0.3               30% decrease            5,572          (0.6 ) December 31, 2015                           Assets:                           Equity securities      $ 112,137          30% increase          $ 145,778          8.6               30% decrease            78,496          (8.6 ) Other investments (1)        13,839          30% increase            17,985          1.1               30% decrease            9,385          (1.1 ) Liabilities:                           Equity index put option contracts        3,552          30% increase            2,044          0.4               30% decrease            6,561          (0.8 )   (1)  Excludes other investments that do not possess significant equity price risk. Interest Rate Risk We regularly invest in bonds, loans or other interest rate sensitive instruments. Our strategy is to acquire securities that are attractively priced relative to the perceived credit risk. Our management recognizes and accepts that losses may occur. We also issue debt in the ordinary course of business to fund business operations, business acquisitions and for other general purposes. We strive to maintain high credit ratings so as to minimize the cost of our debt. We rarely utilize derivative products, such as interest rate swaps, to manage interest rate risks. The fair values of our fixed maturity investments and notes payable and other borrowings will fluctuate in response to changes in market interest rates. In addition, changes in interest rate assumptions used in our equity index put option contract models cause changes in reported liabilities with respect to those contracts. Increases and decreases in interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions. The fair values of fixed interest rate instruments are usually more sensitive to interest rate changes than variable rate instruments.   59 Table of Contents Management’s Discussion and Analysis (Continued)   Interest Rate Risk (Continued)   The following table summarizes the estimated effects of hypothetical changes in interest rates on our significant assets and liabilities that are subject to interest rate risk. We assumed that the interest rate changes occur immediately and uniformly to each category of instrument containing interest rate risk, and that there are no significant changes to other factors used to determine the value of the instrument. The hypothetical changes in interest rates do not reflect the best or worst case scenarios. Variations in interest rates could produce significant changes in the timing of repayments due to prepayment options available to the issuer. For these reasons, actual results might differ from those reflected in the table. Dollars are in millions.             Estimated Fair Value afterHypothetical Change in Interest Rates           (bp=basis points)       Fair Value       100 bp  decrease      100 bp  increase      200 bp  increase      300 bp  increase   December 31, 2016                          Assets:                          Investments in fixed maturity securities       $  23,465       $  24,120       $  22,893       $  22,428       $  21,985 Other investments (1)        7,659        8,095        7,213        6,780        6,367 Loans and finance receivables        13,717        14,230        13,237        12,790        12,370 Liabilities:                          Notes payable and other borrowings:                          Insurance and other        27,712        29,475        26,154        24,770        23,533 Railroad, utilities and energy        65,774        72,261        60,302        55,634        51,624 Finance and financial products        15,825        16,408        15,318        14,872        14,476 Equity index put option contracts        2,890        3,287        2,533        2,213        1,928 December 31, 2015                          Assets:                          Investments in fixed maturity securities       $ 26,027       $ 26,618       $ 25,351       $ 24,733       $ 24,164 Other investments (1)        11,394        11,571        10,664        10,228        9,814 Loans and finance receivables        13,112        13,594        12,661        12,240        11,844 Liabilities:                          Notes payable and other borrowings:                          Insurance and other        14,773        15,589        13,979        13,287        12,679 Railroad, utilities and energy        62,471        68,625        57,279        52,833        49,006 Finance and financial products        12,363        12,942        11,860        11,420        11,032 Equity index put option contracts        3,552        4,110        3,059        2,624        2,242   (1)  Excludes other investments that are not subject to a significant level of interest rate risk. Foreign Currency Risk Certain of our subsidiaries operate in foreign jurisdictions and we transact business in foreign currencies. In addition, we hold investments in common stocks of major multinational companies, such as The Coca-Cola Company, who have significant foreign business and foreign currency risk of their own. We generally do not attempt to match assets and liabilities by currency and do not use derivative contracts to hedge or manage foreign currency price changes in any meaningful way. Our net assets subject to financial statement translation into U.S. Dollars are primarily in our insurance, utilities and energy and certain manufacturing and services subsidiaries. This translation related impact may be offset by gains or losses related to net liabilities of Berkshire and certain of its U.S. subsidiaries that are denominated in foreign currencies, including gains and losses from the remeasurement of such liabilities due to changes in exchange rates.   60 Table of Contents Management’s Discussion and Analysis (Continued)   Commodity Price Risk Our subsidiaries use commodities in various ways in manufacturing and providing services. As such, we are subject to price risks related to various commodities. In most instances, we attempt to manage these risks through the pricing of our products and services to customers. To the extent that we are unable to sustain price increases in response to commodity price increases, our operating results will likely be adversely affected. We utilize derivative contracts to manage commodity price risks at BHE. BHE’s exposures to commodities include variations in the price of fuel required to generate electricity, wholesale electricity purchased and sold and natural gas supply for customers. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage and transmission and transportation constraints. To mitigate a portion of the price volatility, BHE uses derivative instruments, including forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. The settled cost of these contracts is generally recoverable from customers in regulated rates. Financial results would be negatively impacted if the costs of wholesale electricity, fuel or natural gas are greater than what is permitted to be recovered in rates. The table that follows summarizes commodity price risk on energy derivative contracts of BHE as of December 31, 2016 and 2015 and shows the effects of a hypothetical 10% increase and a 10% decrease in forward market prices by the expected volumes for these contracts as of each date. The selected hypothetical change does not reflect the best or worst case scenarios. Dollars are in millions.        Fair ValueNet Assets(Liabilities)      Hypothetical Price Change    Estimated Fair Value afterHypothetical Change inPrice December 31, 2016    $ (87)      10% increase    $(18)       10% decrease    (156) December 31, 2015    $ (233)      10% increase    $(152)       10% decrease    (313) FORWARD-LOOKING STATEMENTS Investors are cautioned that certain statements contained in this document as well as some statements in periodic press releases and some oral statements of Berkshire officials during presentations about Berkshire or its subsidiaries are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects and possible future Berkshire actions, which may be provided by management, are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about Berkshire and its subsidiaries, economic and market factors and the industries in which we do business, among other things. These statements are not guarantees of future performance and we have no specific intention to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changes in market prices of our investments in fixed maturity and equity securities, losses realized from derivative contracts, the occurrence of one or more catastrophic events, such as an earthquake, hurricane, act of terrorism or cyber attack that causes losses insured by our insurance subsidiaries and/or losses to our business operations, changes in laws or regulations affecting our insurance, railroad, utilities and energy and finance subsidiaries, changes in federal income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries in which we do business.     61 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk See “Market Risk Disclosures” contained in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Management’s Report on Internal Control Over Financial Reporting Management of Berkshire Hathaway Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2016. The effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears on page 63. Berkshire Hathaway Inc. February 24, 2017   62 Table of Contents Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Berkshire Hathaway Inc. Omaha, Nebraska We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. We also have audited the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Berkshire Hathaway Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. /s/ Deloitte & Touche LLP Omaha, Nebraska February 24, 2017   63 Table of Contents BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (dollars in millions)        December 31,      2016      2015   ASSETS       Insurance and Other:       Cash and cash equivalents and U.S. Treasury Bills:       Cash and cash equivalents    $ 23,581      $ 56,612   U.S. Treasury Bills      47,338        4,569                     Total cash, cash equivalents and U.S. Treasury Bills      70,919        61,181   Investments:       Fixed maturity securities      23,432        25,988   Equity securities      120,471        110,527   Other      14,364        15,683   Investments in The Kraft Heinz Company (Fair Value: 2016 – $28,418, 2015 – $32,042)      15,345        23,424   Receivables      27,097        23,303   Inventories      15,727        11,916   Property, plant and equipment      19,325        15,540   Goodwill      53,994        37,188   Other intangible assets      33,481        9,148   Deferred charges reinsurance assumed      8,047        7,687   Other      7,126        6,697                          409,328        348,282                     Railroad, Utilities and Energy:       Cash and cash equivalents      3,939        3,437   Property, plant and equipment      123,759        120,279   Goodwill      24,111        24,178   Regulatory assets      4,457        4,285   Other      13,550        12,833                          169,816        165,012                     Finance and Financial Products:       Cash and cash equivalents and U.S. Treasury Bills:       Cash and cash equivalents      528        7,112   U.S. Treasury Bills      10,984        —                       Total cash, cash equivalents and U.S. Treasury Bills      11,512        7,112   Investments in equity and fixed maturity securities      408        411   Other investments      2,892        5,719   Loans and finance receivables      13,300        12,772   Property, plant and equipment and assets held for lease      9,689        9,347   Goodwill      1,381        1,342   Other      2,528        2,260                          41,710        38,963                        $ 620,854      $ 552,257                       See accompanying Notes to Consolidated Financial Statements   64 Table of Contents BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (dollars in millions)        December 31,      2016     2015   LIABILITIES AND SHAREHOLDERS’ EQUITY      Insurance and Other:      Losses and loss adjustment expenses    $ 76,918     $ 73,144   Unearned premiums      14,245       13,311   Life, annuity and health insurance benefits      15,977       14,497   Other policyholder liabilities      6,714       7,123   Accounts payable, accruals and other liabilities      22,164       17,879   Notes payable and other borrowings      27,175       14,599                         163,193       140,553                    Railroad, Utilities and Energy:      Accounts payable, accruals and other liabilities      11,434       11,994   Regulatory liabilities      3,121       3,033   Notes payable and other borrowings      59,085       57,739                         73,640       72,766                    Finance and Financial Products:      Accounts payable, accruals and other liabilities      1,444       1,398   Derivative contract liabilities      2,890       3,836   Notes payable and other borrowings      15,384       11,951                         19,718       17,185                    Income taxes, principally deferred      77,944       63,126                    Total liabilities      334,495       293,630                    Shareholders’ equity:      Common stock      8       8   Capital in excess of par value      35,681       35,620   Accumulated other comprehensive income      37,298       33,982   Retained earnings      211,777       187,703   Treasury stock, at cost      (1,763 )      (1,763 )                   Berkshire Hathaway shareholders’ equity      283,001       255,550   Noncontrolling interests      3,358       3,077                    Total shareholders’ equity      286,359       258,627                       $ 620,854     $ 552,257                    See accompanying Notes to Consolidated Financial Statements   65 Table of Contents BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (dollars in millions except per-share amounts)        Year Ended December 31,      2016      2015     2014   Revenues:         Insurance and Other:         Insurance premiums earned    $ 45,881      $ 41,294     $ 41,253   Sales and service revenues      119,489        107,001       97,097   Interest, dividend and other investment income      4,725        5,357       5,052   Investment gains/losses      5,128        9,363       3,503                                  175,223        163,015       146,905                             Railroad, Utilities and Energy:         Revenues      37,542        40,004       40,690                             Finance and Financial Products:         Sales and service revenues      6,208        5,430       5,094   Interest, dividend and other investment income      1,455        1,510       1,432   Investment gains/losses      2,425        10       72   Derivative gains/losses      751        974       506                                  10,839        7,924       7,104                             Total revenues      223,604        210,943       194,699                             Costs and expenses:         Insurance and Other:         Insurance losses and loss adjustment expenses      30,906        26,527       26,406   Life, annuity and health insurance benefits      5,131        5,413       5,181   Insurance underwriting expenses      7,713        7,517       6,998   Cost of sales and services      95,754        87,029       78,873   Selling, general and administrative expenses      16,478        13,723       12,198   Interest expense      445        460       419                                  156,427        140,669       130,075                             Railroad, Utilities and Energy:         Cost of sales and operating expenses      26,194        27,650       29,378   Interest expense      2,642        2,653       2,378                                  28,836        30,303       31,756                             Finance and Financial Products:         Cost of sales and services      3,448        2,915       2,758   Selling, general and administrative expenses      1,739        1,586       1,523   Interest expense      410        402       456                                  5,597        4,903       4,737                             Total costs and expenses      190,860        175,875       166,568                             Earnings before income taxes and equity in earnings of Kraft Heinz Company      32,744        35,068       28,131   Equity in earnings (losses) of Kraft Heinz Company      923        (122 )      (26 )                            Earnings before income taxes      33,667        34,946       28,105   Income tax expense      9,240        10,532       7,935                             Net earnings      24,427        24,414       20,170   Less: Earnings attributable to noncontrolling interests      353        331       298                             Net earnings attributable to Berkshire Hathaway shareholders    $ 24,074      $ 24,083     $ 19,872                             Net earnings per equivalent Class A share outstanding*    $ 14,645      $ 14,656     $ 12,092   Average equivalent Class A shares outstanding*      1,643,826        1,643,183       1,643,456     * Equivalent Class B shares outstanding are 1,500 times the equivalent Class A amount. Net earnings per equivalent Class B share outstanding are one-fifteen-hundredth of the equivalent Class A amount or $9.76 for 2016, $9.77 for 2015 and $8.06 for 2014. See accompanying Notes to Consolidated Financial Statements   66 Table of Contents BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (dollars in millions)        Year Ended December 31,        2016     2015     2014   Net earnings    $ 24,427     $ 24,414     $ 20,170                            Other comprehensive income:        Net change in unrealized appreciation of investments      13,858       (8,520 )      5,831   Applicable income taxes      (4,846 )      3,014       (2,062 )  Reclassification of investment appreciation in net earnings      (6,820 )      (2,332 )      (3,360 )  Applicable income taxes      2,387       816       1,176   Foreign currency translation      (1,541 )      (1,931 )      (2,032 )  Applicable income taxes      66       (43 )      183   Prior service cost and actuarial gains/losses of defined benefit pension plans      354       424       (1,703 )  Applicable income taxes      (187 )      (140 )      624   Other, net      (17 )      (94 )      8                            Other comprehensive income, net      3,254       (8,806 )      (1,335 )                           Comprehensive income      27,681       15,608       18,835   Comprehensive income attributable to noncontrolling interests      291       275       256                            Comprehensive income attributable to Berkshire Hathaway shareholders    $ 27,390     $ 15,333     $ 18,579                            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (dollars in millions)        Berkshire Hathaway shareholders’ equity           Total      Common stockand capital inexcess of parvalue     Accumulatedothercomprehensiveincome     Retainedearnings      Treasurystock     Non-controllinginterests     Balance December 31, 2013    $ 35,480     $ 44,025     $ 143,748      $ (1,363 )    $ 2,595     $ 224,485   Net earnings      —         —         19,872        —         298       20,170   Other comprehensive income, net      —         (1,293 )      —          —         (42 )      (1,335 )  Issuance (acquisition) of common stock      118       —         —          (400 )      —         (282 )  Transactions with noncontrolling interests      (17 )      —         —          —         6       (11 )                                                    Balance December 31, 2014      35,581       42,732       163,620        (1,763 )      2,857       243,027   Net earnings      —         —         24,083        —         331       24,414   Other comprehensive income, net      —         (8,750 )      —          —         (56 )      (8,806 )  Issuance of common stock      53       —         —          —         —         53   Transactions with noncontrolling interests      (6 )      —         —          —         (55 )      (61 )                                                    Balance December 31, 2015      35,628       33,982       187,703        (1,763 )      3,077       258,627   Net earnings      —         —         24,074        —         353       24,427   Other comprehensive income, net      —         3,316       —          —         (62 )      3,254   Issuance of common stock      119       —         —          —         —         119   Transactions with noncontrolling interests      (58 )      —         —          —         (10 )      (68 )                                                    Balance December 31, 2016    $ 35,689     $ 37,298     $ 211,777      $ (1,763 )    $ 3,358     $ 286,359                                                     See accompanying Notes to Consolidated Financial Statements   67 Table of Contents BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in millions)        Year Ended December 31,      2016     2015     2014   Cash flows from operating activities:        Net earnings    $ 24,427     $ 24,414     $ 20,170   Adjustments to reconcile net earnings to operating cash flows:        Investment gains/losses      (7,553 )      (9,373 )      (3,575 )  Depreciation and amortization      8,901       7,779       7,370   Other      (161 )      751       (341 )  Changes in operating assets and liabilities:        Losses and loss adjustment expenses      4,372       2,262       7,404   Deferred charges reinsurance assumed      (360 )      84       (3,413 )  Unearned premiums      968       1,392       1,159   Receivables and originated loans      (3,302 )      (1,650 )      (1,890 )  Derivative contract assets and liabilities      (946 )      (974 )      (520 )  Income taxes      4,044       5,718       4,905   Other      2,145       1,088       741                            Net cash flows from operating activities      32,535       31,491       32,010                            Cash flows from investing activities:        Purchases of U.S. Treasury Bills and fixed maturity securities      (96,568 )      (17,891 )      (12,562 )  Purchases of equity securities      (16,508 )      (10,220 )      (10,014 )  Purchase of Kraft Heinz common stock      —         (5,258 )      —     Sales of U.S. Treasury Bills and fixed maturity securities      18,757       2,471       2,038   Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities      26,177       14,656       10,285   Sales and redemptions of equity securities      28,464       8,747       8,896   Purchases of loans and finance receivables      (307 )      (179 )      (181 )  Collections of loans and finance receivables      490       492       885   Acquisitions of businesses, net of cash acquired      (31,399 )      (4,902 )      (4,824 )  Purchases of property, plant and equipment      (12,954 )      (16,082 )      (15,185 )  Other      (419 )      165       336                            Net cash flows from investing activities      (84,267 )      (28,001 )      (20,326 )                           Cash flows from financing activities:        Proceeds from borrowings of insurance and other businesses      9,431       3,358       845   Proceeds from borrowings of railroad, utilities and energy businesses      3,077       5,479       5,765   Proceeds from borrowings of finance businesses      4,741       1,045       1,148   Repayments of borrowings of insurance and other businesses      (1,264 )      (1,916 )      (1,289 )  Repayments of borrowings of railroad, utilities and energy businesses      (2,123 )      (1,725 )      (1,862 )  Repayments of borrowings of finance businesses      (1,313 )      (1,827 )      (1,543 )  Changes in short term borrowings, net      130       (378 )      932   Acquisitions of noncontrolling interests and other      112       (233 )      (1,265 )                           Net cash flows from financing activities      12,791       3,803       2,731                            Effects of foreign currency exchange rate changes      (172 )      (165 )      (289 )                           Increase (decrease) in cash and cash equivalents      (39,113 )      7,128       14,126   Cash and cash equivalents at beginning of year      67,161       60,033       45,907                            Cash and cash equivalents at end of year *    $ 28,048     $ 67,161     $ 60,033                            * Cash and cash equivalents at end of year are comprised of the following:        Insurance and Other    $ 23,581     $ 56,612     $ 54,738   Railroad, Utilities and Energy      3,939       3,437       3,001   Finance and Financial Products      528       7,112       2,294                               $ 28,048     $ 67,161     $ 60,033                            See accompanying Notes to Consolidated Financial Statements   68 Table of Contents BERKSHIRE HATHAWAY INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2016   (1) Significant accounting policies and practices     (a) Nature of operations and basis of consolidation Berkshire Hathaway Inc. (“Berkshire”) is a holding company owning subsidiaries engaged in a number of diverse business activities, including insurance and reinsurance, freight rail transportation, utilities and energy, manufacturing, service, retailing and finance. In these notes the terms “us,” “we,” or “our” refer to Berkshire and its consolidated subsidiaries. Further information regarding our reportable business segments is contained in Note 23. Significant business acquisitions completed over the past three years are discussed in Note 2. The accompanying Consolidated Financial Statements include the accounts of Berkshire consolidated with the accounts of all subsidiaries and affiliates in which we hold a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. We consolidate a variable interest entity (“VIE”) when we possess both the power to direct the activities of the VIE that most significantly impact its economic performance and we are either obligated to absorb the losses that could potentially be significant to the VIE or we hold the right to receive benefits from the VIE that could potentially be significant to the VIE. Intercompany accounts and transactions have been eliminated.     (b) Use of estimates in preparation of financial statements The preparation of our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. In particular, estimates of unpaid losses and loss adjustment expenses and related reinsurance recoverable are subject to considerable estimation error due to the inherent uncertainty in projecting ultimate claim costs. In addition, estimates and assumptions associated with the amortization of deferred charges on retroactive reinsurance contracts, determinations of fair values of certain financial instruments and evaluations of goodwill and identifiable intangible assets for impairment require considerable judgment. Actual results may differ from the estimates used in preparing our Consolidated Financial Statements.     (c) Cash and cash equivalents and U.S Treasury Bills Cash equivalents consist of demand deposit and money market accounts, U.S. Treasury Bills with a maturity of three months or less when purchased and other investments with a maturity of three months or less when purchased. During 2016, we acquired significant amounts of U.S. Treasury Bills with maturity dates more than three months from their purchase dates. In prior years, such investments were not material and were classified as cash equivalents. We believe that in substance these U.S. Treasury Bills are like cash as they are readily convertible to known amounts of cash and present an insignificant risk of change in value because of changes in interest rates. In determining the appropriate accounting classification under GAAP, we considered the relevant accounting literature. We also consulted with our independent auditors who shared with us certain insights into commonly applied practice today. We have concluded that, notwithstanding our view of the substance of such instruments, these U.S. Treasury Bills technically do not meet a “bright line” definition of cash equivalents under GAAP. Accordingly, we are now presenting all U.S. Treasury Bills with maturity dates greater than three months from their purchase dates separately in the accompanying Consolidated Balance Sheets. Additionally, we have revised the 2014 and 2015 Consolidated Statements of Cash Flows to reflect this change. We believe that these changes have no effect whatsoever on our financial condition.     (d) Investments We determine the appropriate classification of investments in fixed maturity and equity securities at the acquisition date and re-evaluate the classification at each balance sheet date. Held-to-maturity investments are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Trading investments are securities acquired with the intent to sell in the near term and are carried at fair value. All other securities are classified as available-for-sale and are carried at fair value with net unrealized gains or losses reported as a component of accumulated other comprehensive income. Substantially all of our investments in equity and fixed maturity securities are classified as available-for-sale. We utilize the equity method to account for investments when we possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when an investor possesses more than 20% of the voting interests of the investee. This presumption may be   69 Table of Contents Notes to Consolidated Financial Statements (Continued)   (1) Significant accounting policies and practices (Continued)     (d) Investments (Continued)   overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. We apply the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock. In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee. We record dividends or other equity distributions as reductions in the carrying value of the investment. In the event that net losses of the investee reduce the carrying amount to zero, additional net losses may be recorded if other investments in the investee are at-risk, even if we have not committed to provide financial support to the investee. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value. Investment gains and losses arise when investments are sold (as determined on a specific identification basis) or are other-than-temporarily impaired. If a decline in the value of an investment below cost is deemed other than temporary, the cost of the investment is written down to fair value, with a corresponding charge to earnings. Factors considered in determining whether an impairment is other than temporary include: the financial condition, business prospects and creditworthiness of the issuer, the relative amount of the decline, our ability and intent to hold the investment until the fair value recovers and the length of time that fair value has been less than cost. With respect to an investment in a fixed maturity security, we recognize an other-than-temporary impairment if we (a) intend to sell or expect to be required to sell the security before its amortized cost is recovered or (b) do not expect to ultimately recover the amortized cost basis even if we do not intend to sell the security. Under scenario (a), we recognize losses in earnings and under scenario (b), we recognize the credit loss component in earnings and the difference between fair value and the amortized cost basis net of the credit loss in other comprehensive income.     (e) Receivables, loans and finance receivables Receivables of the insurance and other businesses are stated net of estimated allowances for uncollectible balances. Allowances for uncollectible balances are provided when it is probable counterparties or customers will be unable to pay all amounts due based on the contractual terms. Receivables are generally written off against allowances after all reasonable collection efforts are exhausted. Loans and finance receivables of the finance and financial products businesses are predominantly manufactured housing installment loans. These loans are stated at amortized cost based on our ability and intent to hold such loans to maturity and are stated net of allowances for uncollectible accounts. The carrying value of acquired loans represents acquisition costs, plus or minus origination and commitment costs paid or fees received, which together with acquisition premiums or discounts, are deferred and amortized as yield adjustments over the life of the loans. Substantially all loans are secured by real or personal property or other assets of the borrower. Allowances for credit losses on loans include estimates of losses on loans currently in foreclosure and losses on loans not currently in foreclosure. Estimates of losses on loans in foreclosure are based on historical experience and collateral recovery rates. Estimates of losses on loans not currently in foreclosure consider historical default rates, collateral recovery rates and prevailing economic conditions. Allowances for credit losses also incorporate the historical average time elapsed from the last payment until foreclosure. Loans are considered delinquent when payments are more than 30 days past due. Loans over 90 days past due are placed on nonaccrual status and accrued but uncollected interest is reversed. Subsequent collections on the loans are first applied to the principal and interest owed for the most delinquent amount. Interest income accruals resume once a loan is less than 90 days delinquent. Loans in the foreclosure process are considered non-performing. Once a loan is in foreclosure, interest income is not recognized unless the foreclosure is cured or the loan is modified. Once a modification is complete, interest income is recognized based on the terms of the new loan. Foreclosed loans are charged off when the collateral is sold. Loans not in foreclosure are evaluated for charge off based on individual circumstances concerning the future collectability of the loan and the condition of the collateral securing the loan.   70 Table of Contents Notes to Consolidated Financial Statements (Continued)   (1) Significant accounting policies and practices (Continued)     (f) Derivatives We carry derivative contracts in our Consolidated Balance Sheets at fair value, net of reductions permitted under master netting agreements with counterparties. The changes in fair value of derivative contracts that do not qualify as hedging instruments for financial reporting purposes are recorded in earnings or by our regulated utilities businesses as regulatory assets or liabilities when recovery through regulated rates is probable.     (g) Fair value measurements As defined under GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or in the most advantageous market when no principal market exists. Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value. Alternative valuation techniques may be appropriate under the circumstances to determine the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Our nonperformance or credit risk is considered in determining the fair value of liabilities. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange.     (h) Inventories Inventories consist of manufactured goods and goods acquired for resale. Manufactured inventory costs include raw materials, direct and indirect labor and factory overhead. Inventories are stated at the lower of cost or market. As of December 31, 2016, approximately 55% of our consolidated inventory cost was determined using the last-in-first-out (“LIFO”) method, 28% using the first-in-first-out (“FIFO”) method, and the remainder primarily using the average cost method. The difference between costs determined under LIFO and current costs was not significant as of December 31, 2016.     (i) Property, plant and equipment and leased assets Additions to property, plant and equipment used in operations and leased assets are recorded at cost and consist of major additions, improvements and betterments. With respect to constructed assets, all construction related material, direct labor and contract services as well as certain indirect costs are capitalized. Indirect costs include interest over the construction period. With respect to constructed assets of our regulated utility and energy subsidiaries that are subject to authoritative guidance for regulated operations, capitalized costs also include an equity allowance for funds used during construction, which represents the cost of equity funds used to finance the construction of the regulated facilities. Also see Note 1(q). Normal repairs and maintenance and other costs that do not improve the property, extend the useful life or otherwise do not meet capitalization criteria are charged to expense as incurred. Rail grinding costs related to our railroad properties are expensed as incurred. Property, plant and equipment and leased assets are depreciated to estimated salvage value primarily using the straight-line method over estimated useful lives or mandated recovery periods as prescribed by regulatory authorities. Depreciation of assets of our regulated utilities and railroad is generally determined using group depreciation methods where rates are based on periodic depreciation studies approved by the applicable regulator. Under group depreciation, a single depreciation rate is applied to the gross investment in a particular class of property, despite differences in the service life or salvage value of individual property units within the same class. When our regulated utilities or railroad retires or sells a component of the assets accounted for using group depreciation methods, no gain or loss is recognized. Gains or losses on disposals of all other assets are recorded through earnings. We evaluate property, plant and equipment for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable or when the assets are held for sale. Upon the occurrence of a triggering event, we assess whether the estimated undiscounted cash flows expected from the use of the asset and the residual value from the ultimate disposal of the asset exceeds the carrying value. If the carrying value exceeds the estimated recoverable amounts, we reduce the carrying value to fair value and record an impairment loss in earnings, except with respect to impairment of assets of our regulated utility and energy subsidiaries when the impacts of regulation are considered in evaluating the carrying value of regulated assets.   71 Table of Contents Notes to Consolidated Financial Statements (Continued)   (1) Significant accounting policies and practices (Continued)     (j) Goodwill and other intangible assets Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of that business. We evaluate goodwill for impairment at least annually. When evaluating goodwill for impairment, we estimate the fair value of the reporting unit. There are several methods that may be used to estimate a reporting unit’s fair value, including market quotations, asset and liability fair values and other valuation techniques, including, but not limited to, discounted projected future net earnings or net cash flows and multiples of earnings. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, then the identifiable assets and liabilities of the reporting unit are estimated at fair value as of the current testing date. The excess of the estimated fair value of the reporting unit over the current estimated fair value of net assets establishes the implied value of goodwill. The excess of the recorded goodwill over the implied goodwill value is charged to earnings as an impairment loss. Significant judgment is required in estimating the fair value of the reporting unit and performing goodwill impairment tests. Intangible assets with finite lives are amortized based on the estimated pattern in which the economic benefits are expected to be consumed or on a straight-line basis over their estimated economic lives. Intangible assets with finite lives are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets with indefinite lives are tested for impairment at least annually and when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.     (k) Revenue recognition Insurance premiums for prospective property/casualty insurance and reinsurance are earned over the loss exposure or coverage period in proportion to the level of protection provided. In most cases, premiums are recognized as revenues ratably over the term of the contract with unearned premiums computed on a monthly or daily pro-rata basis. Premiums for retroactive property/casualty reinsurance policies are earned at the inception of the contracts, as all of the underlying loss events covered by these policies occurred in the past. Premiums for life reinsurance and annuity contracts are earned when due. Premiums earned are stated net of amounts ceded to reinsurers. For contracts containing experience rating provisions, premiums earned reflect estimated loss experience under contracts. Sales revenues derive from the sales of manufactured products and goods acquired for resale. Revenues from sales are recognized upon passage of title to the customer, which generally coincides with customer pickup, product delivery or acceptance, depending on terms of the sales arrangement. Service revenues are recognized as the services are performed. Services provided pursuant to a contract are either recognized over the contract period or upon completion of the elements specified in the contract depending on the terms of the contract. Revenues related to the sales of fractional ownership interests in aircraft are recognized ratably over the term of the related management services agreement, as the transfer of ownership interest in the aircraft is inseparable from the management services agreement. Leasing revenue is generally recognized ratably over the term of the lease. A substantial portion of our leases are classified as operating leases. Operating revenues from the distribution and sale of electricity and natural gas to customers are recognized when the services are rendered or the energy is delivered. Revenues include unbilled as well as billed amounts. Rates charged are generally subject to federal and state regulation or established under contractual arrangements. When preliminary rates are permitted to be billed prior to final approval by the applicable regulator, certain revenue collected may be subject to refund and a liability for estimated refunds is recorded. Railroad transportation revenues are recognized based upon the proportion of service provided as of the balance sheet date. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specific locations, are recorded as pro-rata reductions to revenue based on actual or projected future customer shipments. When using projected shipments, we rely on historic trends as well as economic and other indicators to estimate the recorded liability for customer incentives.     (l) Losses and loss adjustment expenses Liabilities for losses and loss adjustment expenses are established under property/casualty insurance and reinsurance contracts issued by our insurance subsidiaries for loss events that have occurred as of the balance sheet date. The liabilities for losses and loss adjustment expenses are recorded at the estimated ultimate payment amounts, except that   72 Table of Contents Notes to Consolidated Financial Statements (Continued)   (1) Significant accounting policies and practices (Continued)     (l) Losses and loss adjustment expenses (Continued)   amounts arising from certain workers’ compensation reinsurance contracts are discounted. Estimated ultimate payment amounts are based upon (1) reports of losses from policyholders, (2) individual case estimates and (3) estimates of incurred but not reported losses. Provisions for losses and loss adjustment expenses are charged to earnings after deducting amounts recovered and estimates of recoverable amounts under ceded reinsurance contracts. Reinsurance contracts do not relieve the ceding company of its obligations to indemnify policyholders with respect to the underlying insurance and reinsurance contracts. The estimated liabilities of workers’ compensation claims assumed under certain reinsurance contracts are discounted based upon an annual discount rate of 4.5% for claims arising prior to January 1, 2003 and 1% for claims arising thereafter, consistent with insurance statutory accounting principles. The change in such discounts, including the periodic discount accretion is included in earnings as a component of losses and loss adjustment expenses.     (m) Deferred charges reinsurance assumed The excess, if any, of the estimated ultimate liabilities for claims and claim settlement costs over the premiums earned with respect to retroactive property/casualty reinsurance contracts is recorded as a deferred charge at inception of the contract. Deferred charges are subsequently amortized using the interest method over the expected claim settlement periods. Changes to the estimated timing or amount of future loss payments also produce changes in unamortized deferred charges. Changes in such estimates are applied retrospectively and the resulting changes in deferred charge balances are included in insurance losses and loss adjustment expenses in the period of the change.     (n) Insurance policy acquisition costs Incremental costs that are directly related to the successful acquisition of insurance contracts are capitalized, subject to ultimate recoverability, and are subsequently amortized to underwriting expenses as the related premiums are earned. Direct incremental acquisition costs include commissions, premium taxes, and certain other costs associated with successful efforts. All other underwriting costs are expensed as incurred. The recoverability of capitalized insurance policy acquisition costs generally reflects anticipation of investment income. The unamortized balances are included in other assets and were $1,991 million and $1,920 million at December 31, 2016 and 2015, respectively.     (p) Life and annuity insurance benefits Liabilities for insurance benefits under life contracts are computed based upon estimated future investment yields, expected mortality, morbidity, and lapse or withdrawal rates and reflect estimates for future premiums and expenses under the contracts. These assumptions, as applicable, also include a margin for adverse deviation and may vary with the characteristics of the contract’s date of issuance, policy duration and country of risk. The interest rate assumptions used may vary by contract or jurisdiction. Periodic payment annuity liabilities are discounted based on the implicit rate as of the inception of the contracts such that the present value of the liabilities equals the premiums. Discount rates range from less than 1% to 7%.     (q) Regulated utilities and energy businesses Certain energy subsidiaries prepare their financial statements in accordance with authoritative guidance for regulated operations, reflecting the economic effects of regulation from the ability to recover certain costs from customers and the requirement to return revenues to customers in the future through the regulated rate-setting process. Accordingly, certain costs are deferred as regulatory assets and certain income is accrued as regulatory liabilities. Regulatory assets and liabilities will be amortized into operating expenses and revenues over various future periods. Regulatory assets and liabilities are continually assessed for probable future inclusion in regulatory rates by considering factors such as applicable regulatory or legislative changes and recent rate orders received by other regulated entities. If future inclusion in regulatory rates ceases to be probable, the amount no longer probable of inclusion in regulatory rates is charged or credited to earnings (or other comprehensive income, if applicable) or returned to customers.     (r) Foreign currency The accounts of our non-U.S. based subsidiaries are measured, in most instances, using functional currencies other than the U.S. Dollar. Revenues and expenses of these subsidiaries are translated into U.S. Dollars at the average exchange rate for the period and assets and liabilities are translated at the exchange rate as of the end of the reporting   73 Table of Contents Notes to Consolidated Financial Statements (Continued)   (1) Significant accounting policies and practices (Continued)     (r) Foreign currency (Continued)   period. Gains or losses from translating the financial statements of these subsidiaries are included in shareholders’ equity as a component of accumulated other comprehensive income. Gains and losses arising from transactions denominated in a currency other than the functional currency of the reporting entity, including gains and losses from the remeasurement of assets and liabilities due to changes in exchange rates, are included in earnings.     (s) Income taxes Berkshire files a consolidated federal income tax return in the United States, which includes eligible subsidiaries. In addition, we file income tax returns in state, local and foreign jurisdictions as applicable. Provisions for current income tax liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings also include deferred income tax provisions. Deferred income tax assets and liabilities are computed on differences between the financial statement bases and tax bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities that are associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets when realization is not likely. Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in our judgment, do not meet a “more-likely-than-not” threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of income tax expense.     (t) New accounting pronouncements to be adopted subsequent to December 31, 2016 In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers.” ASU 2014-09 applies to contracts with customers, excluding, most notably, insurance and leasing contracts. ASU 2014-09 prescribes a framework in accounting for revenues from contracts within its scope, including (a) identifying the contract, (b) identifying the performance obligations under the contract, (c) determining the transaction price, (d) allocating the transaction price to the identified performance obligations and (e) recognizing revenues as the identified performance obligations are satisfied. ASU 2014-09 also prescribes additional financial statement presentations and disclosures. We currently expect to adopt ASU 2014-09 as of January 1, 2018, under the modified retrospective method where the cumulative effect is recognized at the date of initial application. Our evaluation of ASU 2014-09 is ongoing and not complete. The FASB has issued and may issue in the future, interpretative guidance, which may cause our evaluation to change. While we anticipate some changes to revenue recognition for certain customer contracts, we do not currently believe the adoption of ASU 2014-09 will have a material effect on our Consolidated Financial Statements. In January 2016, the FASB issued ASU 2016-01 “Financial Instruments—Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 generally requires that equity investments (excluding equity method investments) be measured at fair value with changes in fair value recognized in net income. Under existing GAAP, changes in fair value of available-for-sale equity investments are recorded in other comprehensive income. Given the current magnitude of our equity investments, the adoption of ASU 2016-01 will likely have a significant impact on the periodic net earnings reported in our Consolidated Statement of Earnings, although it will not significantly impact our comprehensive income or shareholders’ equity. ASU 2016-01 is effective for reporting periods beginning after December 15, 2017, with the cumulative effect of the adoption made to the balance sheet as of the date of adoption. Thus, the adoption will result in a reclassification of the related accumulated unrealized appreciation currently included in accumulated other comprehensive income to retained earnings, with no impact on Berkshire’s shareholders’ equity. In February 2016, the FASB issued ASU 2016-02 “Leases.” ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the effect this standard will have on our Consolidated Financial Statements.   74 Table of Contents Notes to Consolidated Financial Statements (Continued)   (1) Significant accounting policies and practices (Continued)     (t) New accounting pronouncements to be adopted subsequent to December 31, 2016 (Continued)   In June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses,” which provides for the recognition and measurement at the reporting date of all expected credit losses for financial assets held at amortized cost and available-for-sale debt securities. Currently credit losses are recognized and measured when such losses become probable based on the prevailing facts and circumstances. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019. We are currently evaluating the effect this standard will have on our Consolidated Financial Statements. In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the requirement to determine implied goodwill in measuring an impairment loss. Upon adoption, a goodwill impairment will be measured as the excess of the reporting unit’s carrying value over fair value, limited to the amount of goodwill. ASU 2017-04 is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted. We are currently evaluating the effect this standard will have on our Consolidated Financial Statements.   (2) Significant business acquisitions Our long-held acquisition strategy is to acquire businesses at sensible prices that have consistent earning power, good returns on equity and able and honest management. Financial results attributable to business acquisitions are included in our Consolidated Financial Statements beginning on their respective acquisition dates. On January 29, 2016, Berkshire acquired all outstanding common stock of Precision Castparts Corp. (“PCC”) for $235 per share in cash pursuant to a definitive merger agreement dated August 8, 2015. The aggregate consideration paid was approximately $32.7 billion, which included the value of PCC shares we already owned. We funded the acquisition with a combination of existing cash balances and proceeds from a short-term credit facility. PCC is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power and general industrial markets. PCC is a market leader in manufacturing complex structural investment castings and forged components for aerospace markets, machined airframe components and highly engineered critical fasteners for aerospace applications, and in manufacturing airfoil castings for the aerospace and industrial gas turbine markets. PCC also is a leading producer of titanium and nickel superalloy melted and mill products for the aerospace, chemical processing, oil and gas and pollution control industries, and manufactures extruded seamless pipe, fittings and forgings for power generation and oil and gas applications. On February 29, 2016, we acquired the Duracell business from The Procter & Gamble Company (“P&G”) pursuant to a definitive agreement entered into in November 2014. Duracell is a leading manufacturer of high-performance alkaline batteries and is an innovator in wireless charging technologies. Pursuant to the agreement, we received a recapitalized Duracell Company in exchange for shares of P&G common stock held by Berkshire subsidiaries, which had a fair value of approximately $4.2 billion.   75 Table of Contents Notes to Consolidated Financial Statements (Continued)   (2) Significant business acquisitions (Continued)   During the fourth quarter of 2016, we revised the previously reported acquisition date fair values of certain identified assets and liabilities of PCC and Duracell, which primarily resulted in decreases in the amounts of identified intangible assets and deferred income tax liabilities, offset by increases in the amounts of goodwill. These revisions were immaterial to our Consolidated Financial Statements. Goodwill from these acquisitions is not amortizable for income tax purposes. The fair values of identified assets acquired and liabilities assumed and residual goodwill of PCC and Duracell at their respective acquisition dates are summarized as follows (in millions).        PCC      Duracell   Cash and cash equivalents    $ 250      $ 1,807   Inventories      3,430        319   Property, plant and equipment      2,765        359   Goodwill      16,011        866   Other intangible assets      23,527        1,550   Other assets      1,916        242                     Assets acquired    $ 47,899      $ 5,143                     Accounts payable, accruals and other liabilities    $ 2,442      $ 410   Notes payable and other borrowings      5,251        —     Income taxes, principally deferred      7,548        494                     Liabilities assumed    $ 15,241      $ 904                     Net assets    $ 32,658      $ 4,239                     The following table sets forth certain unaudited pro forma consolidated earnings data for the year ending December 31, 2015 as if the PCC and Duracell acquisitions were consummated on the same terms at the beginning of 2015 (in millions, except per share amount). Pro forma data for 2016 was not materially different from the amounts reflected in the accompanying Consolidated Financial Statements.        2015   Revenues    $ 221,897   Net earnings attributable to Berkshire Hathaway shareholders      24,575   Net earnings per equivalent Class A common share      14,956     In the first quarter of 2015, we acquired the Van Tuyl Group (now named Berkshire Hathaway Automotive), which included 81 automotive dealerships and two related insurance businesses, two auto auctions and a distributor of automotive fluid maintenance products. In addition to selling new and pre-owned automobiles, the Berkshire Hathaway Automotive group offers repair and other services and products, including extended warranty services and other automotive protection plans. Consideration paid for the acquisition was $4.1 billion. On December 1, 2014, we acquired AltaLink, L.P. (“AltaLink”) for a cash purchase price of C$3.1 billion (approximately $2.7 billion). AltaLink is a regulated electric transmission-only business, headquartered in Calgary, Alberta. The goodwill related to the AltaLink acquisition is not amortizable for income tax purposes, while substantially all of the goodwill related to Berkshire Hathaway Automotive is amortizable for income tax purposes. The fair values of identified assets acquired and liabilities assumed and residual goodwill of Berkshire Hathaway Automotive and AltaLink at their respective acquisition dates are summarized as follows (in millions).   76 Table of Contents Notes to Consolidated Financial Statements (Continued)   (2) Significant business acquisitions (Continued)        Berkshire HathawayAutomotive      AltaLink   Cash and investments    $ 1,274      $ 15   Property, plant and equipment      1,045        5,610   Goodwill      1,833        1,744   Other assets      2,488        300                     Assets acquired    $ 6,640      $ 7,669                     Accounts payable, accruals and other liabilities    $ 1,399      $ 1,090   Notes payable and other borrowings      1,129        3,851                     Liabilities assumed    $ 2,528      $ 4,941                     Net assets    $ 4,112      $ 2,728                     On January 1, 2014, we acquired the beverage dispensing equipment manufacturing and merchandising business of British engineering company, IMI plc for approximately $1.12 billion. On February 25, 2014, we acquired 100% of the outstanding common stock of Phillips Specialty Products Inc. (“PSPI”), a company providing oil flow improvement products to customers worldwide, from Phillips 66 (“PSX”) in exchange for 17,422,615 shares of PSX common stock with an aggregate fair value of $1.35 billion. On June 30, 2014, we acquired WPLG, Inc. (“WPLG”) from Graham Holding Company (“GHC”) in exchange for 1,620,190 shares of GHC common stock with an aggregate fair value of $1.13 billion. WPLG operates a Miami, Florida, ABC affiliated television station. At their respective acquisition dates, assets of PSPI and WPLG included cash of $778 million. WPLG assets also included 2,107 shares of Berkshire Hathaway Class A and 1,278 shares of Class B common stock. The aggregate fair value of the identified net assets related to these acquisitions was approximately $2.2 billion and the residual goodwill was approximately $1.4 billion. During the last three years, we also completed several smaller-sized business acquisitions, primarily “bolt-on” acquisitions by our existing business operations. Aggregate consideration paid for these other business acquisitions was approximately $1.4 billion in 2016, $1.1 billion in 2015 and $1.8 billion in 2014. We do not believe that these acquisitions were material to our Consolidated Financial Statements.   (3) Investments in fixed maturity securities Investments in securities with fixed maturities as of December 31, 2016 and 2015 are summarized by type below (in millions).        AmortizedCost      UnrealizedGains      UnrealizedLosses     FairValue   December 31, 2016            U.S. Treasury, U.S. government corporations and agencies    $ 4,519      $ 16      $ (8 )    $ 4,527   States, municipalities and political subdivisions      1,159        58        (1 )      1,216   Foreign governments      8,860        207        (66 )      9,001   Corporate bonds      6,899        714        (9 )      7,604   Mortgage-backed securities      997        126        (6 )      1,117                                         $ 22,434      $ 1,121      $ (90 )    $ 23,465                                      December 31, 2015            U.S. Treasury, U.S. government corporations and agencies    $ 3,425      $ 10      $ (8 )    $ 3,427   States, municipalities and political subdivisions      1,695        71        (2 )      1,764   Foreign governments      11,327        226        (85 )      11,468   Corporate bonds      7,323        632        (29 )      7,926   Mortgage-backed securities      1,279        168        (5 )      1,442                                         $ 25,049      $ 1,107      $ (129 )    $ 26,027                                        77 Table of Contents Notes to Consolidated Financial Statements (Continued)   (3) Investments in fixed maturity securities (Continued)   Investments in fixed maturity securities are reflected in our Consolidated Balance Sheets as follows (in millions).        December 31,        2016      2015   Insurance and other    $ 23,432      $ 25,988   Finance and financial products      33        39                        $ 23,465      $ 26,027                     Investments in foreign government securities include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of December 31, 2016, approximately 92% of foreign government holdings were rated AA or higher by at least one of the major rating agencies. Approximately 81% of foreign government holdings were issued or guaranteed by the United Kingdom, Germany, Australia or Canada. The amortized cost and estimated fair value of securities with fixed maturities at December 31, 2016 are summarized below by contractual maturity dates. Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers. Amounts are in millions.        Due in oneyear or less      Due after oneyear throughfive years      Due after fiveyears throughten years      Due afterten years      Mortgage-backedsecurities      Total   Amortized cost    $ 8,508      $ 9,886      $ 805      $ 2,238      $ 997      $ 22,434   Fair value      8,573        10,219        872        2,684        1,117        23,465     (4) Investments in equity securities Investments in equity securities as of December 31, 2016 and 2015 are summarized based on the primary industry of the investee in the table below (in millions).        Cost Basis      UnrealizedGains      UnrealizedLosses     FairValue   December 31, 2016*            Banks, insurance and finance    $ 19,852      $ 30,572      $ —       $ 50,424   Consumer products      10,657        16,760        (9 )      27,408   Commercial, industrial and other      35,868        9,033        (701 )      44,200                                         $ 66,377      $ 56,365      $ (710 )    $ 122,032                                        * Approximately 56% of the aggregate fair value was concentrated in the equity securities of four companies (American Express Company—$11.2 billion; Wells Fargo & Company—$27.6 billion; International Business Machines Corporation (“IBM”)—$13.5 billion; and The Coca-Cola Company—$16.6 billion).        Cost Basis      UnrealizedGains      UnrealizedLosses     FairValue   December 31, 2015*            Banks, insurance and finance    $ 20,026      $ 27,965      $ (21 )    $ 47,970   Consumer products      7,147        18,057        (1 )      25,203   Commercial, industrial and other      35,417        6,785        (3,238 )      38,964                                         $ 62,590      $ 52,807      $ (3,260 )    $ 112,137                                        * Approximately 59% of the aggregate fair value was concentrated in the equity securities of four companies (American Express Company—$10.5 billion; Wells Fargo & Company—$27.2 billion; IBM—$11.2 billion; and The Coca-Cola Company—$17.2 billion). As of December 31, 2016 and 2015, we concluded that the unrealized losses shown in the tables above were temporary. Our conclusions were based on: (a) our ability and intent to hold the securities to recovery; (b) our assessment that the   78 Table of Contents Notes to Consolidated Financial Statements (Continued)   (4) Investments in equity securities (Continued)   underlying business and financial condition of each of these issuers was favorable; (c) our opinion that the relative price declines were not significant; and (d) our belief that market prices will increase to and exceed our cost. As of December 31, 2016 and 2015, unrealized losses on equity securities in a continuous unrealized loss position for more than twelve consecutive months were $551 million and $989 million, respectively. Investments in equity securities are reflected in our Consolidated Balance Sheets as follows (in millions).        December 31,        2016      2015   Insurance and other    $ 120,471      $ 110,527   Railroad, utilities and energy *      1,186        1,238   Finance and financial products      375        372                        $ 122,032      $ 112,137                       * Included in other assets.     (5) Other investments Other investments include preferred stock of Bank of America Corporation (“BAC”), warrants to purchase common stock of BAC and preferred stock of Restaurant Brands International, Inc. (“RBI”) and in 2015 also included preferred stock of Wm. Wrigley Jr. Company (“Wrigley”) and The Dow Chemical Company (“Dow”). Other investments are classified as available-for-sale and carried at fair value and are shown in our Consolidated Balance Sheets as follows (in millions).        Cost      Fair Value        December 31,      December 31,        2016      2015      2016      2015   Insurance and other    $ 6,720      $ 9,690      $ 14,364      $ 15,683   Finance and financial products      1,000        3,052        2,892        5,719                                          $ 7,720      $ 12,742      $ 17,256      $ 21,402                                       In 2008, we purchased $2.1 billion of Wrigley preferred stock pursuant to a shareholder agreement in conjunction with Mars Incorporated’s (“Mars”) acquisition of Wrigley. Pursuant to certain put and call provisions in the shareholder agreement, up to 50% of our original investment was redeemable over a 90-day period scheduled to begin on October 6, 2016. In September 2016, pursuant to an agreement entered into in August 2016, Mars acquired all of our Wrigley preferred stock for approximately $4.56 billion, which included a prorated dividend that would have otherwise been payable in October 2016. In 2009, we acquired 3,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock of Dow (“Dow Preferred”) for approximately $3 billion. In December 2016, Dow exercised its option to convert the Dow Preferred into 72.6 million shares of common stock. As of December 31, 2016, all shares of common stock received upon the conversion had been sold. The Dow Preferred was entitled to dividends at a rate of 8.5% per annum. We currently own 50,000 shares of 6% Non-Cumulative Perpetual Preferred Stock of BAC (“BAC Preferred”) with a liquidation value of $100,000 per share and warrants to purchase 700,000,000 shares of common stock of BAC (“BAC Warrants”). The BAC Preferred is redeemable at the option of BAC beginning on May 7, 2019 at a redemption price of $105,000 per share (or $5.25 billion in aggregate). The BAC Warrants expire in 2021 and are exercisable for an additional aggregate cost of $5 billion ($7.142857/share). We currently own Class A 9% Cumulative Compounding Perpetual Preferred Shares of RBI (“RBI Preferred”) having a stated value of $3 billion. RBI, domiciled in Canada, is the ultimate parent company of Burger King and Tim Hortons. The RBI Preferred is entitled to dividends on a cumulative basis of 9% per annum plus an additional amount, if necessary, to produce an after-tax yield to Berkshire as if the dividends were paid by a U.S.-based company. The RBI Preferred is redeemable at the option of RBI beginning on December 12, 2017. If not redeemed prior to December 12, 2024, we can cause RBI to redeem the RBI Preferred. In either case, the redemption price will be 109.9% of the stated value of such shares.   79 Table of Contents Notes to Consolidated Financial Statements (Continued)   (6) Investments in The Kraft Heinz Company On June 7, 2013, Berkshire and an affiliate of the global investment firm 3G Capital (such affiliate, “3G”), each made equity investments in H.J. Heinz Holding Corporation (“Heinz Holding”), which, together with debt financing obtained by Heinz Holding, was used to acquire H. J. Heinz Company (“Heinz”). Berkshire’s initial investments consisted of 425 million shares of Heinz Holding common stock; warrants, which we exercised in June 2015, to acquire approximately 46 million additional shares of common stock at one cent per share; and cumulative compounding preferred stock (“Preferred Stock”) with a liquidation preference of $8 billion. The aggregate cost of our investments was $12.25 billion. 3G also acquired 425 million shares of Heinz Holding common stock for $4.25 billion. On June 7, 2016, our Preferred Stock investment was redeemed for cash of $8.32 billion. Prior to its redemption, the Preferred Stock was entitled to dividends at 9% per annum. Dividends earned on the Preferred Stock were $180 million in 2016, $852 million in 2015 and $720 million in 2014 and are included in interest, dividends and other investment income. On July 1, 2015, Berkshire acquired 262.9 million shares of newly issued common stock of Heinz Holding for $5.26 billion and 3G acquired 237.1 million shares of newly issued common stock of Heinz Holding for $4.74 billion. Immediately thereafter, Heinz Holding executed a reverse stock split at a rate of 0.443332 of a share for each share. As of that date, Berkshire owned 52.5% of Heinz Holding’s outstanding common stock. On July 2, 2015, Heinz Holding acquired Kraft Foods Group, Inc. (“Kraft”). Upon completion of the acquisition, Heinz Holding was renamed The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy products, meats, refreshment beverages, coffee, and other grocery products. Kraft Heinz’s leading brands include Kraft, Heinz, ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta. In connection with the acquisition of Kraft, its shareholders received one share of newly issued Kraft Heinz common stock for each share of Kraft common stock and a special cash dividend of $16.50 per share. Following the issuance of these additional shares, Berkshire and 3G together owned approximately 51% of the outstanding Kraft Heinz common stock, with Berkshire owning approximately 26.8% and 3G owning 24.2%. We accounted for our investment in Heinz Holding common stock and continue to account for our investment in Kraft Heinz common stock on the equity method. In applying the equity method, the investor treats an investee’s issuance of shares as if the investor had sold a proportionate share of its investment. As a result, we recorded a non-cash pre-tax holding gain of approximately $6.8 billion in 2015, representing the excess of the fair value of Kraft Heinz common stock at the date of the merger over the carrying value associated with the reduction in our ownership. A summary of our investments in Kraft Heinz follows (in millions).        Carrying Value        December 31,2016      December 31,2015   Common stock    $ 15,345      $ 15,714   Preferred Stock      —          7,710                        $ 15,345      $ 23,424                     Our equity method earnings (losses) on the common stock were $923 million in 2016, $(122) million in 2015 and $(26) million in 2014. Common stock dividends received were $952 million in 2016 and $366 million in 2015. Summarized consolidated financial information of Kraft Heinz follows (in millions).        December 31, 2016      January 3, 2016   Assets    $ 120,480      $ 122,973   Liabilities      62,906        56,737          Year endingDecember 31, 2016      Year endingJanuary 3, 2016      Year endingDecember 28, 2014   Sales    $ 26,487      $ 18,338      $ 10,922                              Net earnings    $ 3,632      $ 634      $ 657                              Net earnings (loss) attributable to common shareholders    $ 3,452      $ (266 )     $ (63 )                               80 Table of Contents Notes to Consolidated Financial Statements (Continued)   (7) Investment gains/losses Investment gains/losses, including other-than-temporary impairment (“OTTI”) losses, for each of the three years ending December 31, 2016 are summarized below (in millions).        2016     2015     2014   Fixed maturity securities—        Gross gains from sales and other disposals    $ 58     $ 104     $ 360   Gross losses from sales and other disposals      (50 )      (171 )      (89 )  Equity securities—        Gross gains from sales and redemptions      7,853       9,526       4,016   Gross losses from sales and redemptions      (334 )      (103 )      (125 )  OTTI losses      (82 )      (26 )      (697 )  Other      108       43       110                               $ 7,553     $ 9,373     $ 3,575                            Gains from sales and redemptions of equity securities in 2016 included approximately $2.4 billion from the disposition of our investment in Wrigley preferred stock, $610 million from the redemption of our investment in Kraft Heinz Preferred Stock, $1.2 billion upon the conversion of our investment in Dow Preferred and a non-cash holding gain of approximately $1.1 billion from the exchange of our P&G common stock in the acquisition of Duracell. The non-cash gain from the P&G/Duracell exchange represented the excess of the fair value of net assets of Duracell over the cost basis of the P&G stock exchanged. Gains from sales and redemptions of equity securities in 2015 included a non-cash holding gain of approximately $6.8 billion in connection with our investment in Kraft Heinz common stock (see Note 6). Gains from sales and redemptions of equity securities during 2014 included non-cash holding gains of approximately $2.1 billion from the exchange of Phillips 66 (“PSX”) common stock in connection with the acquisition of Phillips Specialty Products Inc. (currently named LiquidPower Specialty Products Inc. (“LSPI”)) and the exchange of Graham Holding Company (“GHC”) common stock for WPLG, Inc. (“WPLG”). These holding gains represented the excess of the respective fair value of the net assets of LSPI and WPLG received over the respective cost basis of the PSX and GHC shares exchanged. We record investments in equity and fixed maturity securities classified as available-for-sale at fair value and record the difference between fair value and cost in other comprehensive income. OTTI losses recognized in earnings represent reductions in the cost basis of the investment, but not the fair value. Accordingly, such losses that are included in earnings are generally offset by a credit to other comprehensive income, producing no net effect on shareholders’ equity as of the balance sheet date. In 2014, we recorded an OTTI charge of $678 million related to our investment in equity securities of Tesco PLC.   (8) Inventories Inventories are comprised of the following (in millions).        December 31,        2016      2015   Raw materials    $ 2,789      $ 1,852   Work in process and other      2,506        778   Finished manufactured goods      4,033        3,369   Goods acquired for resale      6,399        5,917                        $ 15,727      $ 11,916                     Inventories at December 31, 2016 included approximately $3.5 billion related to PCC and Duracell.   81 Table of Contents Notes to Consolidated Financial Statements (Continued)   (9) Receivables Receivables of insurance and other businesses are comprised of the following (in millions).        December 31,        2016     2015   Insurance premiums receivable    $ 10,462     $ 8,843   Reinsurance recoverable on unpaid losses      3,338       3,307   Trade and other receivables      13,630       11,521   Allowances for uncollectible accounts      (333 )      (368 )                      $ 27,097     $ 23,303                    Trade and other receivables at December 31, 2016 included approximately $1.8 billion related to PCC and Duracell. Loans and finance receivables of finance and financial products businesses are summarized as follows (in millions).        December 31,        2016     2015   Loans and finance receivables before allowances and discounts    $ 13,728     $ 13,186   Allowances for uncollectible loans      (182 )      (182 )  Unamortized acquisition discounts      (246 )      (232 )                      $ 13,300     $ 12,772                    Loans and finance receivables are predominantly installment loans originated or acquired by our manufactured housing business. Provisions for loan losses for 2016 and 2015 were $144 million and $148 million, respectively. Loan charge-offs, net of recoveries, were $144 million in 2016 and $177 million in 2015. At December 31, 2016, approximately 98% of the loan balances were evaluated collectively for impairment. As part of the evaluation process, credit quality indicators are reviewed and loans are designated as performing or non-performing. At December 31, 2016, approximately 98% of the loan balances were determined to be performing and approximately 94% of the loan balances were current as to payment status.   (10) Property, plant and equipment and assets held for lease A summary of property, plant and equipment of our insurance and other businesses follows (in millions).        Ranges ofestimated useful life      December 31,           2016     2015   Land      —        $ 2,108     $ 1,689   Buildings and improvements      5 – 40 years        8,360       7,329   Machinery and equipment      3 – 25 years        20,463       17,054   Furniture, fixtures and other      2 – 15 years        4,080       3,545                               35,011       29,617   Accumulated depreciation         (15,686 )      (14,077 )                            $ 19,325     $ 15,540                       Property, plant and equipment at December 31, 2016 included approximately $3.3 billion related to PCC and Duracell.   82 Table of Contents Notes to Consolidated Financial Statements (Continued)   (10) Property, plant and equipment and assets held for lease (Continued)   A summary of property, plant and equipment of our railroad and our utilities and energy businesses follows (in millions).        Ranges ofestimated useful life      December 31,         2016     2015   Railroad:         Land      —        $ 6,063     $ 6,037   Track structure and other roadway      7 – 100 years        48,277       45,967   Locomotives, freight cars and other equipment      6 – 40 years        12,075       11,320   Construction in progress      —          965       1,031                               67,380       64,355   Accumulated depreciation         (6,130 )      (4,845 )                              61,250       59,510                       Utilities and energy:         Utility generation, transmission and distribution systems      5 – 80 years        71,536       69,248   Interstate natural gas pipeline assets      3 – 80 years        6,942       6,755   Independent power plants and other assets      3 – 30 years        6,596       5,626   Construction in progress      —          2,098       2,627                               87,172       84,256   Accumulated depreciation         (24,663 )      (23,487 )                              62,509       60,769                             $ 123,759     $ 120,279                       The utility generation, transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries. Assets held for lease and property, plant and equipment of our finance and financial products businesses are summarized below (in millions).        Ranges ofestimated useful life      December 31,         2016     2015   Assets held for lease      5 – 35 years      $ 11,902     $ 11,317   Land      —          224       220   Buildings, machinery and other      3 – 50 years        1,302       1,207                               13,428       12,744   Accumulated depreciation         (3,739 )      (3,397 )                            $ 9,689     $ 9,347                       Assets held for lease includes railcars, intermodal tank containers, cranes, over-the-road trailers, storage units and furniture. As of December 31, 2016, the minimum future lease rentals to be received on assets held for lease (including rail cars leased from others) were as follows (in millions): 2017 – $1,251; 2018 – $992; 2019 – $744; 2020 – $543; 2021 – $358; and thereafter – $525. Depreciation expense for each of the three years ending December 31, 2016 is summarized below (in millions).        2016      2015      2014   Insurance and other    $ 2,148      $ 1,680      $ 1,632   Railroad, utilities and energy      4,639        4,383        3,981   Finance and financial products      624        610        602                                 $ 7,411      $ 6,673      $ 6,215                                83 Table of Contents Notes to Consolidated Financial Statements (Continued)   (11) Goodwill and other intangible assets A reconciliation of the change in the carrying value of goodwill is as follows (in millions).        December 31,        2016     2015   Balance at beginning of year    $ 62,708     $ 60,714   Acquisitions of businesses      17,650       2,563   Other, including foreign currency translation      (872 )      (569 )                   Balance at end of year    $ 79,486     $ 62,708                    Other intangible assets are summarized as follows (in millions).        December 31, 2016      December 31, 2015        Gross carryingamount      Accumulatedamortization      Gross carryingamount      Accumulatedamortization   Insurance and other    $ 39,976      $ 6,495      $ 14,610      $ 5,462   Railroad, utilities and energy      898        293        888        239                                          $ 40,874      $ 6,788      $ 15,498      $ 5,701                                       Trademarks and trade names    $ 5,175      $ 616      $ 3,041      $ 765   Patents and technology      4,341        2,328        4,252        2,050   Customer relationships      28,243        2,879        5,474        2,131   Other      3,115        965        2,731        755                                          $ 40,874      $ 6,788      $ 15,498      $ 5,701                                       Amortization expense was $1,490 million in 2016, $1,106 million in 2015 and $1,155 million in 2014. Estimated amortization expense over the next five years is as follows (in millions): 2017 – $1,383; 2018 – $1,349; 2019 – $1,229; 2020 – $1,131 and 2021 – $1,042. Intangible assets with indefinite lives as of December 31, 2016 and 2015 were $18,705 million and $2,964 million, respectively. Other intangible assets at December 31, 2016 included assets of PCC and Duracell of approximately $24.8 billion, which included approximately $13.6 billion in customer relationships and $2.3 billion in trade names that were determined to have indefinite lives.   (12) Derivative contracts Derivative contracts have been entered into primarily through our finance and financial products and our utilities and energy businesses. A summary of the liabilities and related notional values of derivative contracts of our finance and financial products businesses follows (in millions).        December 31, 2016     December 31, 2015         Liabilities      NotionalValue     Liabilities      NotionalValue   Equity index put options    $ 2,890      $ 26,497 (1)    $ 3,552      $ 27,722 (1)  Credit default (2)      —          —         284        7,792                             $ 2,890        $ 3,836                               (1)  Represents the aggregate undiscounted amounts payable assuming that the value of each index is zero at each contract’s expiration date. Certain of these contracts are denominated in foreign currencies. Notional amounts are based on the foreign currency exchange rates as of each balance sheet date.   (2)  In July 2016, our remaining credit default contract was terminated by mutual agreement with the counterparty. We no longer have any exposure to losses under credit default contracts. The derivative contract liabilities of our finance and financial products businesses are recorded at fair value and the changes in the fair values of such contracts are reported in earnings as derivative gains/losses. We entered into these contracts   84 Table of Contents Notes to Consolidated Financial Statements (Continued)   (12) Derivative contracts (Continued)   with the expectation that the premiums received would exceed the amounts ultimately paid to counterparties. A summary of the derivative gains/losses included in our Consolidated Statements of Earnings in each of the three years ending December 31, 2016 follows (in millions).        2016      2015     2014   Equity index put options    $ 662      $ 1,008     $ 108   Credit default and other      89        (34 )      398                                $ 751      $ 974     $ 506                             The equity index put option contracts are European style options written between 2004 and 2008 on four major equity indexes. These contracts expire between June 2018 and January 2026. Future payments, if any, under any given contract will be required if the prevailing index value is below the contract strike price at the expiration date. We received the premiums on these contracts at the inception dates and therefore we have no counterparty credit risk. The aggregate intrinsic value (the undiscounted liability assuming the contracts are settled based on the index values and foreign currency exchange rates as of the balance sheet date) of our equity index put option contracts was approximately $1.0 billion at December 31, 2016 and $1.1 billion at December 31, 2015. However, these contracts may not be unilaterally terminated or fully settled before the expiration dates. Therefore, the ultimate amount of cash basis gains or losses on these contracts will not be determined for several years. The remaining weighted average life of all contracts was approximately four years at December 31, 2016. A limited number of our equity index put option contracts contain collateral posting requirements with respect to changes in the fair value or intrinsic value of the contracts and/or a downgrade of Berkshire’s credit ratings. As of December 31, 2016, we did not have any collateral posting requirements. If Berkshire’s credit ratings (currently AA from Standard & Poor’s and Aa2 from Moody’s) are downgraded below either A- by Standard & Poor’s or A3 by Moody’s, collateral of up to $1.1 billion could be required to be posted. Our regulated utility subsidiaries are exposed to variations in the prices of fuel required to generate electricity, wholesale electricity purchased and sold and natural gas supplied for customers. Derivative instruments, including forward purchases and sales, futures, swaps and options, are used to manage a portion of these price risks. Derivative contract assets are included in other assets and were $142 million as of December 31, 2016 and $103 million as of December 31, 2015. Derivative contract liabilities are included in accounts payable, accruals and other liabilities and were $145 million as of December 31, 2016 and $237 million as of December 31, 2015. Net derivative contract assets or liabilities of our regulated utilities that are probable of recovery through rates, are offset by regulatory liabilities or assets. Unrealized gains or losses on contracts accounted for as cash flow or fair value hedges are recorded in other comprehensive income or in net earnings, as appropriate.   (13) Supplemental cash flow information A summary of supplemental cash flow information for each of the three years ending December 31, 2016 is presented in the following table (in millions).        2016      2015      2014   Cash paid during the period for:          Income taxes    $ 4,719      $ 4,535      $ 4,014   Interest:          Insurance and other businesses      555        346        360   Railroad, utilities and energy businesses      2,788        2,717        2,487   Finance and financial products businesses      389        403        465   Non-cash investing and financing activities:          Liabilities assumed in connection with business acquisitions      16,555        2,812        6,334   Equity securities exchanged in connection with business acquisitions      4,239        —          2,478   Treasury stock acquired in connection with business acquisition      —          —          400   Conversions and other exchanges of investments      4,154        1,597        —       85 Table of Contents Notes to Consolidated Financial Statements (Continued)   (14) Unpaid losses and loss adjustment expenses The liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under our short duration property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of the changes in claim liabilities for each of the three years ending December 31, 2016 is as follows (in millions).        2016     2015     2014   Unpaid losses and loss adjustment expenses—beginning of year:        Gross liabilities    $ 73,144     $ 71,477     $ 64,866   Reinsurance recoverable and deferred charges      (10,994 )      (10,888 )      (7,414 )                           Net balance      62,150       60,589       57,452                            Incurred losses and loss adjustment expenses recorded during the year:        Current accident year events      30,636       27,829       24,335   Prior accident years’ events      (1,512 )      (2,014 )      (2,280 )  Retroactive reinsurance and discount accretion      1,782       712       4,351                            Total incurred losses and loss adjustment expenses      30,906       26,527       26,406                            Paid losses and loss adjustment expenses during the year with respect to:        Current accident year events      (14,898 )      (13,070 )      (11,291 )  Prior accident years’ events      (10,958 )      (10,268 )      (10,297 )  Retroactive reinsurance      (1,130 )      (1,151 )      (1,082 )                           Total payments      (26,986 )      (24,489 )      (22,670 )                           Foreign currency translation adjustment      (537 )      (545 )      (666 )  Business acquisitions      —         68       67                            Unpaid losses and loss adjustment expenses—end of year:        Net balance      65,533       62,150       60,589   Reinsurance recoverable and deferred charges      11,385       10,994       10,888                            Gross liabilities    $ 76,918     $ 73,144     $ 71,477                            Incurred losses and loss adjustment expenses in the preceding table reflect the losses and loss adjustment expenses recorded in earnings in each year related to insured events occurring in the current year and in prior years. We present incurred and paid losses under retroactive reinsurance contracts and discount accretion separately. Such amounts relate to prior years’ underlying loss events. Additionally, we discount unpaid losses from certain workers’ compensation reinsurance contracts. Discounted workers’ compensation liabilities at December 31, 2016 and 2015 were approximately $1.9 billion and $2.0 billion, respectively, reflecting net discounts of $1.4 billion and $1.6 billion. Incurred losses and loss adjustment expenses reflected reductions for prior years’ insured events of approximately $1.5 billion in 2016, $2.0 billion in 2015 and $2.3 billion in 2014. In each year, these reductions derived from our direct insurance business (including private passenger automobile and medical malpractice and workers’ compensation coverages), as well as from reinsurance business. The reductions for our reinsurance business were primarily attributable to lower than expected reported losses from ceding companies with respect to property coverages. Estimated claim liabilities for environmental, asbestos and other latent injury exposures, net of reinsurance recoverables, were approximately $15.3 billion at December 31, 2016 and $14.0 billion at December 31, 2015, and included approximately $13.7 billion at December 31, 2016 and $12.4 billion at December 31, 2015 from retroactive reinsurance contracts. Retroactive reinsurance contracts are generally subject to aggregate policy limits and thus, our exposure to such claims under these contracts is likewise limited. We monitor evolving case law and its effect on environmental and other 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 increases in these liabilities. Such development could be material to our results of operations. We are unable to reliably estimate the amount of additional net loss or the range of net loss that is reasonably possible.   86 Table of Contents Notes to Consolidated Financial Statements (Continued)   (14) Unpaid losses and loss adjustment expenses (Continued)   A reconciliation of certain net unpaid losses and allocated loss adjustment expenses (the latter referred to as “ALAE”) of GEICO, General Re, Berkshire Hathaway Reinsurance Group (“BHRG”) and Berkshire Hathaway Primary Group (“BH Primary”) to our consolidated unpaid losses and loss adjustment expenses as of December 31, 2016, along with a discussion regarding each group’s liability estimation processes, follows.        December 31, 2016               (in millions)          Unpaid losses and ALAE, net of reinsurance recoverable:       GEICO    $ 12,981      General Re      13,973      BHRG      10,172      BH Primary      10,173      $ 47,299               Reinsurance recoverable:       GEICO      1,084      General Re      611      BHRG      121      BH Primary      1,099        2,915               Retroactive reinsurance, unpaid losses and loss adjustment expenses         24,675   Other short-duration contracts, unpaid losses and loss adjustment expenses         1,390   Discount on workers’ compensation reinsurance liabilities         (1,433 )  Unpaid unallocated loss adjustment expenses         2,072               Unpaid losses and loss adjustment expenses       $ 76,918               GEICO For GEICO, we establish and evaluate unpaid claim liabilities using standard actuarial loss development methods and techniques. The actuarial methods utilize historical claims data, adjusted when deemed appropriate to reflect perceived changes in loss patterns. We establish average liabilities based on expected severities for newly reported physical damage and liability claims prior to establishing an individual case reserve when we have insufficient time and information to make specific claim estimates and for a large number of minor physical damage claims that are paid shortly after being reported. We establish liability case loss estimates, which includes loss adjustment expenses, once the facts and merits of the claim are evaluated. Estimates for liability coverages are more uncertain primarily due to the longer claim-tails, the greater chance of protracted litigation and the incompleteness of facts at the time the case estimate is first established. The “claim-tail” is the time period between the claim occurrence date and settlement date. As a result, we establish additional case development liabilities, which are usually percentages of the case liabilities. For unreported claims, IBNR liabilities are estimated by projecting the ultimate number of claims expected (reported and unreported) for each significant coverage and deducting reported claims to produce estimated unreported claims. The product of the average cost per unreported claim and the number of unreported claims produces the IBNR liability estimate. We may record supplemental IBNR liabilities in certain situations when actuarial techniques are difficult to apply. GEICO’s claims are counted when accidents that may result in a liability are reported and are based on policy coverage. Each claim event may generate claims under multiple coverages, and thus may result in multiple counts. The “Cumulative Number of Reported Claims” in the table which follows includes the combined number of reported claims for all policy coverages and excludes projected IBNR claims.   87 Table of Contents Notes to Consolidated Financial Statements (Continued)   (14) Unpaid losses and loss adjustment expenses (Continued)   GEICO’s claim liabilities predominantly relate to various types of private passenger auto liability and physical damage claims. Aggregate incurred and paid loss and ALAE data by accident year for these claims, net of reinsurance, follows. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.   Accident Year    Incurred Losses and ALAE through December 31,      IBNR and CaseDevelopmentLiabilities      CumulativeNumber ofReported Claims(in thousands)      2012*      2013*      2014*      2015*      2016         2012    $ 12,034      $ 11,904      $ 11,893      $ 11,906      $ 11,900      $ 79        6,459   2013         12,990        12,815        12,859        12,837        184        7,102   2014            14,597        14,488        14,477        539        7,965   2015               16,807        16,798        1,394        8,891   2016                  18,982        3,132        9,336                                   Incurred losses and ALAE      $ 74,994                             Accident Year    Cumulative Paid Losses and ALAE through December 31,          2012*              2013*              2014*              2015*              2016       2012    $ 7,550      $ 9,832      $ 10,744      $ 11,311      $ 11,609   2013         7,944        10,494        11,569        12,174   2014            9,133        11,956        13,060   2015               10,543        13,785   2016                  11,927                             Paid losses and ALAE        62,555               Net unpaid losses and ALAE for 2012—2016 accident years        12,439   Net unpaid losses and ALAE for accident years before 2012*        542            Net unpaid losses and ALAE      $ 12,981              * Unaudited supplemental information General Re General Re’s liabilities for unpaid losses and loss adjustment expenses include case and IBNR estimates and primarily relate to casualty and workers’ compensation coverages. Case losses are reported under reinsurance contracts either individually or in bulk as provided under the terms of the contracts. We independently evaluate reported loss amounts and if deemed appropriate, we establish case liabilities based on our estimates. We primarily use Bornhuetter—Ferguson methods to estimate IBNR amounts for claims liabilities. The expected case loss emergence patterns and expected loss ratios are the critical assumptions applicable to these estimates. Once the annual IBNR liabilities are determined, we estimate the expected case loss emergence for the next calendar year based on the prior year-end expected loss emergence patterns and expected loss ratios. Liability estimates also include estimates of the impact of major catastrophe events as they become known, which rely more on a per-policy assessment of the ultimate cost associated with the individual loss event. Claim count data is excluded, as such information is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable.   88 Table of Contents Notes to Consolidated Financial Statements (Continued)   (14) Unpaid losses and loss adjustment expenses (Continued)   General Re’s incurred and paid loss and ALAE data by accident year, net of reinsurance, is presented in the following tables. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.   Accident Year    Incurred Losses and ALAE through December 31,      IBNR and CaseDevelopmentLiabilities      2007*      2008*      2009*      2010*      2011*      2012*      2013*      2014*      2015*      2016      2007    $ 1,857      $ 1,915      $ 1,852      $ 1,746      $ 1,673      $ 1,619      $ 1,574      $ 1,559      $ 1,535      $ 1,512      $ 73   2008         1,920        2,011        1,903        1,818        1,746        1,713        1,669        1,648        1,635        93   2009            1,703        1,790        1,704        1,601        1,523        1,490        1,471        1,431        125   2010               1,881        2,055        1,939        1,845        1,757        1,712        1,674        156   2011                  2,102        2,126        1,897        1,792        1,744        1,669        208   2012                     1,810        1,850        1,707        1,603        1,535        335   2013                        1,945        2,095        1,994        1,854        417   2014                           1,740        1,843        1,794        578   2015                              1,811        1,999        777   2016                                 1,715        1,173                                                     Incurred losses and ALAE      $ 16,818                             Accident Year    Cumulative Paid Losses and ALAE through December 31,      2007*      2008*      2009*      2010*      2011*      2012*      2013*      2014*      2015*      2016   2007    $ 282      $ 821      $ 1,020      $ 1,132      $ 1,195      $ 1,238      $ 1,291      $ 1,309      $ 1,322      $ 1,335   2008         330        894        1,074        1,187        1,246        1,289        1,315        1,330        1,354   2009            264        734        897        994        1,065        1,115        1,145        1,161   2010               247        782        997        1,147        1,243        1,304        1,359   2011                  302        841        1,086        1,190        1,259        1,317   2012                     199        664        829        916        991   2013                        275        829        1,060        1,162   2014                           171        666        864   2015                              207        693   2016                                 171                                                  Paid losses and ALAE        10,407                             Net unpaid losses and ALAE for 2007—2016 accident years        6,411           Net unpaid losses and ALAE for accident years before 2007*        7,562                          Net unpaid losses and ALAE      $ 13,973                    * Unaudited supplemental information BHRG BHRG’s liabilities for losses and ALAE are principally a function of reported losses from ceding companies and IBNR and case development liability estimates which are based on expected loss ratios established on a portfolio basis. Liability estimates also include estimates of the impact of major catastrophe events, as they become known, which rely more on a per-policy assessment of the ultimate cost associated with the individual loss event. The expected loss ratios are based upon management’s judgment considering the type of business covered, analysis of each ceding company’s loss history and evaluation of the portion of the underlying contracts that we reinsure. Claim count data is excluded, as such information is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable.   89 Table of Contents Notes to Consolidated Financial Statements (Continued)   (14) Unpaid losses and loss adjustment expenses (Continued)   BHRG’s incurred and paid loss and ALAE data by accident year, net of reinsurance, is presented in the following tables. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.   Accident Year    Incurred Losses and ALAE through December 31,**      IBNR and CaseDevelopmentLiabilities      2007*      2008*      2009*      2010*      2011*      2012*      2013*      2014*      2015*      2016      2007    $ 1,810      $ 1,756      $ 1,659      $ 1,658      $ 1,652      $ 1,590      $ 1,583      $ 1,560      $ 1,500      $ 1,471      $ 133   2008         3,388        3,130        2,988        2,903        2,835        2,748        2,683        2,605        2,578        244   2009            2,974        2,858        2,989        2,926        2,847        2,759        2,691        2,668        215   2010               2,876        2,974        2,883        2,771        2,610        2,575        2,551        238   2011                  4,418        4,544        4,358        4,440        4,389        4,365        452   2012                     4,054        3,878        3,648        3,583        3,531        694   2013                        3,326        3,144        2,935        2,832        733   2014                           2,688        2,585        2,492        736   2015                              3,207        3,070        1,113   2016                                 3,390        1,907                                                     Incurred losses and ALAE      $ 28,948                             Accident Year    Cumulative Paid Losses and ALAE through December 31,**      2007*      2008*      2009*      2010*      2011*      2012*      2013*      2014*      2015*      2016   2007    $ 171      $ 677      $ 891      $ 993      $ 1,055      $ 1,120      $ 1,170      $ 1,196      $ 1,211      $ 1,221   2008         364        1,146        1,617        1,836        1,976        2,056        2,131        2,205        2,228   2009            372        1,182        1,605        1,937        2,147        2,306        2,336        2,363   2010               193        889        1,414        1,736        2,041        2,119        2,177   2011                  552        2,130        2,872        3,315        3,475        3,600   2012                     360        1,279        2,080        2,350        2,519   2013                        516        1,070        1,555        1,774   2014                           437        1,031        1,319   2015                              550        1,354   2016                                 778                                                  Paid losses and ALAE        19,333                             Net unpaid losses and ALAE for 2007—2016 accident years        9,615           Net unpaid losses and ALAE for accident years before 2007*        557                          Net unpaid losses and ALAE      $ 10,172                    * Unaudited supplemental information ** Excludes retroactive reinsurance losses and ALAE BH Primary BH Primary’s liabilities for unpaid losses and ALAE primarily derive from workers’ compensation, medical professional and other liability insurance. Other liability insurance includes commercial auto and general liability policies. We periodically evaluate ultimate unpaid loss and ALAE estimates for the workers’ compensation and general liability lines using a combination of commonly accepted actuarial methodologies, such as the Bornhuetter—Ferguson and chain-ladder approaches using paid and incurred loss data. Paid and incurred loss data is segregated into groups such as coverages, territories or other characteristics. We establish case liabilities for reported claims based upon the facts and circumstances of the claim. The excess of the ultimate projected losses, including the expected development of case estimates, and the case-basis liabilities is included in IBNR liabilities. For medical professional liabilities, we use a combination of the aforementioned methods, as well as other loss severity based methods. From these estimates, we determine our best estimate. Periodically, we study developments in older accident years and adjust initial loss estimates to reflect recent development based upon claim age, coverage and litigation experience. The cumulative number of reported claims reflects the number of individual claimants, and includes claim that ultimately result in no liability or payment.   90 Table of Contents Notes to Consolidated Financial Statements (Continued)   (14) Unpaid losses and loss adjustment expenses (Continued)   BH Primary’s incurred and paid loss and ALAE data by accident year, net of reinsurance, is presented in the following tables. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.   Accident Year   Incurred Losses and ALAE through December 31,     IBNR andCaseDevelopmentLiabilities     CumulativeNumber ofReportedClaims(in thousands)     2007*     2008*     2009*     2010*     2011*     2012*     2013*     2014*     2015*     2016       2007   $ 1,328     $ 1,233     $ 1,174     $ 1,090     $ 955     $ 901     $ 852     $ 817     $ 788     $ 775     $ 46       137   2008       1,349       1,273       1,228       1,168       1,081       1,015       979       948       920       80       136   2009         1,298       1,211       1,180       1,159       1,068       1,020       966       936       99       117   2010           1,268       1,186       1,191       1,129       1,062       994       956       150       111   2011             1,888       1,633       1,605       1,452       1,375       1,297       223       109   2012               2,129       2,079       2,017       1,944       1,903       453       135   2013                 2,294       2,213       2,133       2,060       595       150   2014                   2,967       2,780       2,730       1,027       177   2015                     3,575       3,458       1,631       188   2016                       4,149       2,682       135                                         Incurred losses and ALAE     $ 19,184                           Accident Year   Cumulative Paid Losses and ALAE through December 31,     2007*     2008*     2009*     2010*     2011*     2012*     2013*     2014*     2015*     2016   2007   $ 128     $ 284     $ 409     $ 510     $ 578     $ 628     $ 660     $ 679     $ 696     $ 705   2008       174       333       464       578       662       728       772       795       810   2009         147       305       445       569       655       726       771       798   2010           146       313       458       570       657       722       758   2011             163       396       602       753       898       973   2012               211       598       844       1,053       1,208   2013                 350       706       985       1,197   2014                   453       896       1,247   2015                     502       1,078   2016                       634                                     Paid losses and ALAE       9,408                       Net unpaid losses and ALAE for 2007—2016 accident years       9,776         Net unpaid losses and ALAE for accident years before 2007*       397                     Net unpaid losses and ALAE     $ 10,173                 * Unaudited supplemental information Supplemental unaudited average historical claims duration information based on the net losses and ALAE incurred and paid accident year data in the preceding tables follows. The percentages show the average portions of net losses and ALAE paid by each succeeding year, with year 1 representing the current accident year.        Average Annual Percentage Payout of Incurred Losses by Age,  Net of Reinsurance   In Years        1             2             3             4             5             6             7             8             9             10       GEICO      62.2 %      19.6 %      8.0 %      4.8 %      2.7 %            Gen Re      14.8 %      31.0 %      12.2 %      6.8 %      4.6 %      3.2 %      2.6 %      1.1 %      1.2 %      0.9 %  BHRG      14.7 %      28.2 %      17.2 %      9.4 %      6.3 %      3.9 %      2.4 %      1.9 %      1.0 %      0.7 %  BH Primary      15.4 %      17.8 %      14.5 %      11.9 %      9.2 %      6.8 %      4.3 %      2.6 %      1.9 %      1.2 %  Retroactive Reinsurance BHRG’s retroactive reinsurance contracts cover underlying loss events that occurred prior to the contract inception date, which are paid immediately after the contract date or once a contractual retention amount has been reached. As of December 31, 2016 approximately 83% of gross unpaid losses pertained to underlying loss events that occurred prior to January 2007. We do   91 Table of Contents Notes to Consolidated Financial Statements (Continued)   (14) Unpaid losses and loss adjustment expenses (Continued)   not believe that analysis of losses incurred and paid by accident year of the underlying event is relevant or meaningful given that our exposure to losses incepts when the contract incepts. Further, we believe the classifications of reported claims and case development liabilities has no practical analytical value. In establishing retroactive reinsurance liabilities, we often analyze historical aggregate loss payment patterns and project losses into the future under various scenarios. We expect the claim-tail to be very long for many contracts, with some lasting several decades. We assign judgmental probability factors to these aggregate loss payment scenarios and an expectancy outcome is determined. We monitor claim payment activity and review ceding company reports and other information concerning the underlying losses. Since the expected claim-tails are often very long, we reassess and revise the expected timing and amounts of ultimate losses periodically or when significant events are revealed through our monitoring and review processes. Incurred losses and loss adjustment expenses attributable to retroactive reinsurance contracts included $1.26 billion in 2016 and $3.43 billion in 2014 from new contracts written in those years. Incurred losses related to retroactive reinsurance contracts written in prior years were $440 million in 2016, $631 million in 2015 and $831 million in 2014, which included recurring amortization of deferred charges and the effect of changes in the timing and amount of expected future loss payments.   (15) Notes payable and other borrowings Notes payable and other borrowings are summarized below (in millions). The weighted average interest rates and maturity date ranges shown in the following tables are based on borrowings as of December 31, 2016.        WeightedAverageInterest Rate     December 31,        2016      2015   Insurance and other:         Issued by Berkshire due 2017-2047      2.2 %    $ 17,703      $ 9,799   Short-term subsidiary borrowings      2.5 %      2,094        1,989   Other subsidiary borrowings due 2017-2045      4.0 %      7,378        2,811                            $ 27,175      $ 14,599                       In January 2016, Berkshire entered into a $10 billion 364-day revolving credit agreement and, in connection with the PCC acquisition, borrowed $10 billion. In March 2016, Berkshire issued €2.75 billion and $5.5 billion in senior unsecured notes. The notes consisted of €1.0 billion of 0.50% notes due in 2020, €1.0 billion of 1.30% notes due in 2024, €750 million of 2.15% notes due in 2028, $1.0 billion of 2.20% notes due in 2021, $2.0 billion of 2.75% notes due in 2023 and $2.5 billion of 3.125% notes due in 2026. The proceeds from these debt issues were used in the repayment of all outstanding borrowings under the aforementioned credit agreement, which was subsequently terminated. In August 2016, Berkshire issued $750 million in senior unsecured notes consisting of $500 million of 1.15% notes due in 2018 and $250 million of floating rate notes due in 2018, to replace $750 million of maturing debt. Other subsidiary borrowings at December 31, 2016 included $4.5 billion attributable to PCC.        WeightedAverageInterest Rate     December 31,        2016      2015   Railroad, utilities and energy:         Issued by Berkshire Hathaway Energy Company (“BHE”) and its subsidiaries:         BHE senior unsecured debt due 2017-2045      5.1 %    $ 7,818      $ 7,814   Subsidiary and other debt due 2017-2064      4.7 %      29,223        28,188   Issued by BNSF due 2017-2097      4.8 %      22,044        21,737                            $ 59,085      $ 57,739                       BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure debt. These borrowing arrangements generally contain various covenants including, but not limited to, leverage ratios, interest coverage ratios and debt   92 Table of Contents Notes to Consolidated Financial Statements (Continued)   (15) Notes payable and other borrowings (Continued)   service coverage ratios. In 2016, BHE subsidiaries issued approximately $1.8 billion of debt with maturity dates ranging from 2025 to 2046 and a weighted average interest rate of 3.0%. BNSF’s borrowings are primarily senior unsecured debentures. In 2016, BNSF issued $750 million of senior unsecured 3.9% debentures due in 2046. As of December 31, 2016, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.        WeightedAverageInterest Rate     December 31,        2016      2015   Finance and financial products:         Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2017-2043      2.5 %    $ 14,423      $ 10,679   Issued by other subsidiaries due 2017-2036      4.9 %      961        1,272                            $ 15,384      $ 11,951                       In March 2016, BHFC issued $3.5 billion of senior notes consisting of $750 million of 1.45% notes due in 2018, $1.0 billion of floating rate notes due in 2018, $1.25 billion of 1.70% notes due in 2019 and $500 million of floating rate notes due in 2019. In August 2016, BHFC issued $1.25 billion of senior notes consisting of $1 billion of 1.30% notes due in 2019 and $250 million of floating rate notes due in 2019, primarily to replace $1 billion of maturing debt. The borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, are fully and unconditionally guaranteed by Berkshire. As of December 31, 2016, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $7.6 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit included about $4.0 billion related to BHE and its subsidiaries. In addition to BHFC’s borrowings, at December 31, 2016, Berkshire guaranteed approximately $3.3 billion of other subsidiary borrowings. 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 payment obligations. Principal repayments expected during each of the next five years are as follows (in millions).        2017      2018      2019      2020      2021   Insurance and other    $ 3,329      $ 3,022      $ 1,362      $ 1,650      $ 1,824   Railroad, utilities and energy      3,610        4,283        2,935        2,123        1,741   Finance and financial products      3,317        4,706        3,099        616        777                                                   $ 10,256      $ 12,011      $ 7,396      $ 4,389      $ 4,342                                                  (16) Income taxes The liabilities for income taxes reflected in our Consolidated Balance Sheets are as follows (in millions).        December 31,        2016      2015   Currently payable (receivable)    $ 500      $ (643 )  Deferred      76,959        63,199   Other      485        570                        $ 77,944      $ 63,126                       93 Table of Contents Notes to Consolidated Financial Statements (Continued)   (16) Income taxes (Continued)   The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are shown below (in millions).        December 31,        2016      2015   Deferred tax liabilities:       Investments—unrealized appreciation and cost basis differences    $ 27,669      $ 25,117   Deferred charges reinsurance assumed      2,876        2,798   Property, plant and equipment      39,345        36,770   Goodwill and other intangible assets      11,344        2,770   Other      5,550        4,555                          86,784        72,010                     Deferred tax assets:       Unpaid losses and loss adjustment expenses      (861 )       (887 )  Unearned premiums      (1,021 )       (927 )  Accrued liabilities      (3,821 )       (3,487 )  Other      (4,122 )       (3,510 )                         (9,825 )       (8,811 )                    Net deferred tax liability    $ 76,959      $ 63,199                     We have not established deferred income taxes on accumulated undistributed earnings of certain foreign subsidiaries. Such earnings were approximately $12.4 billion as of December 31, 2016 and are expected to remain reinvested indefinitely. Upon distribution as dividends or otherwise, such amounts would be subject to taxation in the U.S. and potentially in other countries. However, U.S. income tax liabilities would be offset, in whole or in part, by allowable tax credits deriving from income taxes previously paid to foreign jurisdictions. Further, repatriation of all accumulated earnings of foreign subsidiaries would be impracticable to the extent that such earnings represent capital needed to support normal business operations. As a result, we currently believe that any incremental U.S. income tax liabilities arising from the repatriation of distributable earnings of foreign subsidiaries would not be material. Income tax expense reflected in our Consolidated Statements of Earnings for each of the three years ending December 31, 2016 is as follows (in millions).        2016      2015      2014   Federal    $ 7,796      $ 9,253      $ 6,447   State      556        578        560   Foreign      888        701        928                                 $ 9,240      $ 10,532      $ 7,935                              Current    $ 6,565      $ 5,426      $ 3,302   Deferred      2,675        5,106        4,633                                 $ 9,240      $ 10,532      $ 7,935                                94 Table of Contents Notes to Consolidated Financial Statements (Continued)   (16) Income taxes (Continued)   Income tax expense is reconciled to hypothetical amounts computed at the U.S. federal statutory rate for each of the three years ending December 31, 2016 in the table below (in millions).        2016     2015     2014   Earnings before income taxes    $ 33,667     $ 34,946     $ 28,105                            Hypothetical income tax expense computed at the U.S. federal statutory rate    $ 11,783     $ 12,231     $ 9,837   Dividends received deduction and tax exempt interest      (789 )      (1,146 )      (820 )  State income taxes, less U.S. federal income tax benefit      361       374       364   Foreign tax rate differences      (421 )      (459 )      (252 )  U.S. income tax credits      (518 )      (461 )      (333 )  Non-taxable exchange of investments      (1,143 )      —         (679 )  Other differences, net      (33 )      (7 )      (182 )                              $ 9,240     $ 10,532     $ 7,935                            We file income tax returns in the United States and in state, local and foreign jurisdictions. We are under examination by the taxing authorities in many of these jurisdictions. We have settled income tax liabilities with U.S. federal taxing authorities for years before 2010. The IRS continues to audit Berkshire’s consolidated U.S. federal income tax returns for the 2010 through 2013 tax years. We are also under audit or subject to audit with respect to income taxes in many state and foreign jurisdictions. It is reasonably possible that certain income tax examinations will be settled within the next twelve months. We currently do not believe that the outcome of unresolved issues or claims will be material to our Consolidated Financial Statements. At December 31, 2016 and 2015, net unrecognized tax benefits were $485 million and $570 million, respectively. Included in the balance at December 31, 2016, were $369 million of tax positions that, if recognized, would impact the effective tax rate. The remaining balance in net unrecognized tax benefits principally relates to tax positions where the ultimate recognition is highly certain but there is uncertainty about the timing of such recognition. Because of the impact of deferred tax accounting, the differences in recognition periods would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. As of December 31, 2016, we do not expect any material changes to the estimated amount of unrecognized tax benefits in the next twelve months.   (17) Dividend restrictions—Insurance subsidiaries Payments of dividends by our insurance subsidiaries are restricted by insurance statutes and regulations. Without prior regulatory approval, our principal insurance subsidiaries may declare up to approximately $13 billion as ordinary dividends during 2017. Combined shareholders’ equity of U.S. based insurance subsidiaries determined pursuant to statutory accounting rules (Surplus as Regards Policyholders) was approximately $136 billion at December 31, 2016 and $124 billion at December 31, 2015. Statutory surplus differs from the corresponding amount based on GAAP due to differences in accounting for certain assets and liabilities. For instance, deferred charges reinsurance assumed, deferred policy acquisition costs, unrealized gains on certain investments and related deferred income taxes are recognized for GAAP but not for statutory reporting purposes. In addition, the carrying values of certain assets, such as goodwill and the values of non-insurance entities owned by our insurance subsidiaries, are not fully recognized for statutory reporting purposes.   95 Table of Contents Notes to Consolidated Financial Statements (Continued)   (18) Fair value measurements Our financial assets and liabilities are summarized below as of December 31, 2016 and December 31, 2015 with fair values shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills, receivables and accounts payable, accruals and other liabilities are considered to be reasonable estimates of their fair values.        CarryingValue      Fair Value      QuotedPrices(Level 1)      Significant OtherObservable Inputs(Level 2)      SignificantUnobservable Inputs(Level 3)   December 31, 2016                Investments in fixed maturity securities:                U.S. Treasury, U.S. government corporations and agencies    $ 4,527      $ 4,527      $ 3,099      $ 1,428      $ —     States, municipalities and political subdivisions      1,216        1,216        —          1,216        —     Foreign governments      9,001        9,001        7,237        1,764        —     Corporate bonds      7,604        7,604        —          7,540        64   Mortgage-backed securities      1,117        1,117        —          1,117        —     Investments in equity securities      122,032        122,032        122,031        —          1   Investment in Kraft Heinz common stock      15,345        28,418        28,418        —          —     Other investments      17,256        17,256        —          —          17,256   Loans and finance receivables      13,300        13,717        —          13        13,704   Derivative contract assets (1)      142        142        5        43        94   Derivative contract liabilities:                Railroad, utilities and energy (1)      145        145        3        114        28   Equity index put options      2,890        2,890        —          —          2,890   Notes payable and other borrowings:                Insurance and other      27,175        27,712        —          27,712        —     Railroad, utilities and energy      59,085        65,774        —          65,774        —     Finance and financial products      15,384        15,825        —          15,469        356   December 31, 2015                Investments in fixed maturity securities:                U.S. Treasury, U.S. government corporations and agencies    $ 3,427      $ 3,427      $ 2,485      $ 942      $ —     States, municipalities and political subdivisions      1,764        1,764        —          1,764        —     Foreign governments      11,468        11,468        9,188        2,280        —     Corporate bonds      7,926        7,926        —          7,826        100   Mortgage-backed securities      1,442        1,442        —          1,442        —     Investments in equity securities      112,137        112,137        112,101        35        1   Investment in Kraft Heinz common stock      15,714        23,679        23,679        —          —     Investment in Kraft Heinz Preferred Stock      7,710        8,363        —          —          8,363   Other investments      21,402        21,402        —          —          21,402   Loans and finance receivables      12,772        13,112        —          16        13,096   Derivative contract assets (1)      103        103        —          5        98   Derivative contract liabilities:                Railroad, utilities and energy (1)      237        237        13        177        47   Finance and financial products:                Equity index put options      3,552        3,552        —          —          3,552   Credit default      284        284        —          —          284   Notes payable and other borrowings:                Insurance and other      14,599        14,773        —          14,773        —     Railroad, utilities and energy      57,739        62,471        —          62,471        —     Finance and financial products      11,951        12,363        —          11,887        476     (1)  Assets are included in other assets and liabilities are included in accounts payable, accruals and other liabilities.   96 Table of Contents Notes to Consolidated Financial Statements (Continued)   (18) Fair value measurements (Continued)   The fair values of substantially all of our financial instruments were measured using market or income approaches. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the fair values presented are not necessarily indicative of the amounts that could be realized in an actual current market exchange. The use of alternative market assumptions and/or estimation methodologies may have a material effect on the estimated fair value. The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below. Level 1—Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets. Level 2—Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector. Level 3—Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities. Reconciliations of assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for each of the three years ending December 31, 2016 follow (in millions).        Investmentsin fixedmaturitysecurities     Investmentsin equitysecuritiesand otherinvestments     Netderivativecontractliabilities   Balance December 31, 2013    $ 372     $ 17,958     $ (5,255 )  Gains (losses) included in:        Earnings      —         —         524   Other comprehensive income      13       1,373       —     Regulatory assets and liabilities      —         —         5   Acquisitions      —         3,000       1   Dispositions and settlements      (2 )      —         1   Transfers into/out of Level 3      (375 )      (335 )      (35 )                           Balance December 31, 2014      8       21,996       (4,759 )  Gains (losses) included in:        Earnings      —         —         1,080   Other comprehensive income      (2 )      (593 )      (7 )  Regulatory assets and liabilities      —         —         (19 )  Acquisitions      101       —         —     Dispositions and settlements      (7 )      —         (83 )  Transfers into/out of Level 3      —         —         3                            Balance December 31, 2015      100       21,403       (3,785 )  Gains (losses) included in:        Earnings      —         3,593       880   Other comprehensive income      (4 )      876       (2 )  Regulatory assets and liabilities      —         —         (11 )  Acquisitions      10       —         —     Dispositions and settlements      (41 )      (8,615 )      (101 )  Transfers into/out of Level 3      (1 )      —         195                            Balance December 31, 2016    $ 64     $ 17,257     $ (2,824 )                             97 Table of Contents Notes to Consolidated Financial Statements (Continued)   (18) Fair value measurements (Continued)   Gains and losses included in earnings are included as components of investment gains/losses, derivative gains/losses and other revenues, as appropriate and are primarily related to changes in the values of derivative contracts and settlement transactions. Gains and losses included in other comprehensive income are primarily the net change in unrealized appreciation of investments and the reclassification of investment appreciation in net earnings, as appropriate in our Consolidated Statements of Comprehensive Income. In 2016, our Wrigley preferred stock investment was disposed and our Dow preferred stock investment was converted into Dow common stock. Quantitative information as of December 31, 2016, with respect to assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) follows (in millions).        FairValue      PrincipalValuation  Techniques      Unobservable Inputs      WeightedAverage   Other investments:             Preferred stocks    $ 7,659        Discounted cash flow        Expected duration        7 years              Discount for transferabilityrestrictions and subordination        145 basis points   Common stock warrants      9,597        Warrant pricing model        Discount for transferabilityand hedging restrictions        5%   Derivative liabilities:             Equity index put options      2,890        Option pricing model        Volatility        20%   Our other investments currently include preferred stocks and common stock warrants that we acquired in private placement transactions. These investments are subject to contractual restrictions on transferability and may contain provisions that prevent us from economically hedging our investments. In applying discounted estimated cash flow techniques in valuing the preferred stocks, we made assumptions regarding the expected durations of the investments, as the issuers may have redemption rights. We also made estimates regarding the impact of subordination, as the preferred stocks have a lower priority in liquidation than debt instruments of the issuers. In valuing the common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we are subject to the aforementioned contractual restrictions and we have applied discounts with respect to such restrictions. Increases or decreases to these inputs would result in decreases or increases to the fair values of the investments. Our equity index put option contracts are illiquid and contain contract terms that are not standard in derivatives markets. For example, we are not required to post collateral under most of our contracts and certain of the contracts have relatively long durations. For these and other reasons, we classified these contracts as Level 3. The methods we use to value these contracts are those that we believe market participants would use in determining exchange prices with respect to our contracts. We value equity index put option contracts based on the Black-Scholes option valuation model. Inputs to this model include index price, contract duration and dividend and interest rate inputs (including a Berkshire non-performance input) which are observable. However, we believe that the valuation of long-duration options using any model is inherently subjective and, given the lack of observable transactions and prices, acceptable values may be subject to wide ranges. Volatility inputs represent our expectations, which consider the remaining duration of each contract and assume that the contracts will remain outstanding until the expiration dates. Increases or decreases in the volatility inputs will produce increases or decreases in the fair values of the liabilities.   98 Table of Contents Notes to Consolidated Financial Statements (Continued)   (19) Common stock Changes in Berkshire’s issued, treasury and outstanding common stock during the three years ending December 31, 2016 are shown in the table below.        Class A, $5 Par Value(1,650,000 shares authorized)     Class B, $0.0033 Par Value(3,225,000,000 shares authorized)        Issued     Treasury     Outstanding     Issued      Treasury     Outstanding   Balance December 31, 2013      868,616       (9,573 )      859,043       1,178,775,092        (1,408,484 )      1,177,366,608   Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition      (30,597 )      —         (30,597 )      47,490,158        —         47,490,158   Treasury shares acquired      —         (2,107 )      (2,107 )      —          (1,278 )      (1,278 )                                                    Balance December 31, 2014      838,019       (11,680 )      826,339       1,226,265,250        (1,409,762 )      1,224,855,488   Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition      (17,917 )      —         (17,917 )      27,601,348        —         27,601,348                                                     Balance December 31, 2015      820,102       (11,680 )      808,422       1,253,866,598        (1,409,762 )      1,252,456,836   Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition      (32,044 )      —         (32,044 )      49,457,329        —         49,457,329                                                     Balance December 31, 2016      788,058       (11,680 )      776,378       1,303,323,927        (1,409,762 )      1,301,914,165                                                     Each Class A common share is entitled to one vote per share. Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth (1/1,500) of such rights of Class A common stock. Each Class B common share possesses voting rights equivalent to one-ten-thousandth (1/10,000) of the voting rights of a Class A share. Unless otherwise required under Delaware General Corporation Law, Class A and Class B common shares vote as a single class. Each share of Class A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock. On an equivalent Class A common stock basis, there were 1,644,321 shares outstanding as of December 31, 2016 and 1,643,393 shares outstanding as of December 31, 2015. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but none are issued. Berkshire’s Board of Directors (“Berkshire’s Board”) has approved a common stock repurchase program under which Berkshire may repurchase its Class A and Class B shares at prices no higher than a 20% premium over the book value of the shares. Berkshire may repurchase shares in the open market or through privately negotiated transactions. Berkshire’s Board authorization does not specify a maximum number of shares to be repurchased. However, repurchases will not be made if they would reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion. The repurchase program does not obligate Berkshire to repurchase any dollar amount or number of Class A or Class B shares and there is no expiration date to the program. There were no share repurchases under the program over the last three years. In 2014, we acquired WPLG, whose assets included 2,107 shares of Berkshire Hathaway Class A Common Stock and 1,278 shares of Class B Common Stock, which are included in treasury stock.   99 Table of Contents Notes to Consolidated Financial Statements (Continued)   (20) Accumulated other comprehensive income A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders and significant amounts reclassified out of accumulated other comprehensive income for each of the three years ending December 31, 2016 follows (in millions).       Unrealizedappreciation ofinvestments, net     Foreigncurrencytranslation     Prior serviceand actuarialgains/losses ofdefined benefitpension plans     Other     Accumulatedothercomprehensiveincome   Balance December 31, 2013   $ 44,042     $ (146 )    $ 46     $ 83     $ 44,025   Other comprehensive income, net before reclassifications     3,778       (1,877 )      (1,130 )      31       802   Reclassifications from accumulated other comprehensive income     (2,184 )      66       45       (22 )      (2,095 )                                          Balance December 31, 2014     45,636       (1,957 )      (1,039 )      92       42,732   Other comprehensive income, net before reclassifications     (5,522 )      (2,027 )      191       (112 )      (7,470 )  Reclassifications from accumulated other comprehensive income     (1,516 )      128       86       22       (1,280 )                                          Balance December 31, 2015     38,598       (3,856 )      (762 )      2       33,982   Other comprehensive income, net before reclassifications     9,011       (1,412 )      94       (48 )      7,645   Reclassifications from accumulated other comprehensive income     (4,433 )      —         75       29       (4,329 )                                          Balance December 31, 2016   $ 43,176     $ (5,268 )    $ (593 )    $ (17 )    $ 37,298                                           Reclassifications from other comprehensive income into net earnings:           Year ending December 31, 2014:           Investment gains/losses   $ (3,360 )    $ —       $ —       $ —       $ (3,360 )  Other     —         75       58       (39 )      94                                           Reclassifications before income taxes     (3,360 )      75       58       (39 )      (3,266 )  Applicable income taxes     (1,176 )      9       13       (17 )      (1,171 )                                            $ (2,184 )    $ 66     $ 45     $ (22 )    $ (2,095 )                                          Year ending December 31, 2015:           Investment gains/losses   $ (2,332 )    $ 197     $ —       $ —       $ (2,135 )  Other     —         —         129       35       164                                           Reclassifications before income taxes     (2,332 )      197       129       35       (1,971 )  Applicable income taxes     (816 )      69       43       13       (691 )                                            $ (1,516 )    $ 128     $ 86     $ 22     $ (1,280 )                                          Year ending December 31, 2016:           Investment gains/losses   $ (6,820 )    $ —       $ —       $ —       $ (6,820 )  Other     —         —         104       51       155                                           Reclassifications before income taxes     (6,820 )      —         104       51       (6,665 )  Applicable income taxes     (2,387 )      —         29       22       (2,336 )                                            $ (4,433 )    $ —       $ 75     $ 29     $ (4,329 )                                            (21) Pension plans Several of our subsidiaries sponsor defined benefit pension plans covering certain employees. Benefits under the plans are generally based on years of service and compensation, although benefits under certain plans are based on years of service and fixed benefit rates. Our subsidiaries may make contributions to the plans to meet regulatory requirements and may also make discretionary contributions.   100 Table of Contents Notes to Consolidated Financial Statements (Continued)   (21) Pension plans (Continued)   The components of net periodic pension expense for each of the three years ending December 31, 2016 are as follows (in millions).        2016     2015     2014   Service cost    $ 282     $ 266     $ 230   Interest cost      691       591       629   Expected return on plan assets      (908 )      (782 )      (772 )  Amortization of actuarial losses and other      148       179       102                            Net periodic pension expense    $ 213     $ 254     $ 189                            The accumulated benefit obligation is the actuarial present value of benefits earned based on service and compensation prior to the valuation date. The projected benefit obligation (“PBO”) is the actuarial present value of benefits earned based upon service and compensation prior to the valuation date and, if applicable, includes assumptions regarding future compensation levels. Benefit obligations under qualified U.S. defined benefit pension plans are funded through assets held in trusts. Pension obligations under certain non-U.S. plans and non-qualified U.S. plans are unfunded and the aggregate PBO of such plans was approximately $1.2 billion as of December 31, 2016 and 2015. Reconciliations of the changes in plan assets and PBOs related to BHE’s pension plans and all other pension plans for each of the two years ending December 31, 2016 are in the following tables (in millions). The costs of pension plans covering employees of certain regulated subsidiaries of BHE are generally recoverable through the regulated rate making process.        2016     2015        BHE     All other     Consolidated     BHE     All other     Consolidated   Benefit obligations              Accumulated benefit obligation end of year    $ 4,787     $ 11,912     $ 16,699     $ 4,797     $ 9,264     $ 14,061                                                    PBO beginning of year    $ 5,076     $ 10,183     $ 15,259     $ 5,398     $ 10,489     $ 15,887   Service cost      49       233       282       57       209       266   Interest cost      198       493       691       200       391       591   Benefits paid      (309 )      (705 )      (1,014 )      (316 )      (518 )      (834 )  Business acquisitions      —         2,684       2,684       —         165       165   Actuarial (gains) or losses and other      63       (215 )      (152 )      (263 )      (553 )      (816 )                                                   PBO end of year    $ 5,077     $ 12,673     $ 17,750     $ 5,076     $ 10,183     $ 15,259                                                    Plan assets              Plan assets beginning of year    $ 4,765     $ 8,066     $ 12,831     $ 5,086     $ 8,280     $ 13,366   Employer contributions      133       214       347       90       116       206   Benefits paid      (309 )      (705 )      (1,014 )      (316 )      (518 )      (834 )  Actual return on plan assets      512       1,083       1,595       31       80       111   Business acquisitions      —         2,314       2,314       —         167       167   Other      (407 )      (269 )      (676 )      (126 )      (59 )      (185 )                                                   Plan assets end of year    $ 4,694     $ 10,703     $ 15,397     $ 4,765     $ 8,066     $ 12,831                                                    Funded status—net liability    $ 383     $ 1,970     $ 2,353     $ 311     $ 2,117     $ 2,428                                                    The funded status of our defined benefit pension plans at December 31, 2016 was reflected in other assets ($644 million) and liabilities ($2,997 million). At December 31, 2015, the funded status was included in other assets ($456 million) and liabilities ($2,884 million).   101 Table of Contents Notes to Consolidated Financial Statements (Continued)   (21) Pension plans (Continued)   Weighted average interest rate assumptions used in determining PBOs and net periodic pension expense were as follows.        2016     2015     2014   Applicable to pension benefit obligations:        Discount rate      3.8 %      4.1 %      3.8 %  Expected long-term rate of return on plan assets      6.1       6.5       6.7   Rate of compensation increase      3.0       3.4       3.4   Discount rate applicable to net periodic pension expense      4.2       3.8       4.6   Benefits payments expected over the next ten years are as follows (in millions): 2017—$992; 2018—$1,007; 2019—$987; 2020—$1,003; 2021—$994; and 2022 to 2026—$5,043. Sponsoring subsidiaries expect to contribute $224 million to defined benefit pension plans in 2017. Fair value measurements of plan assets as of December 31, 2016 and 2015 follow (in millions).        Fair Value      Investment fundsand partnerships atnet asset value        Total      Level 1      Level 2      Level 3      December 31, 2016                Cash and equivalents    $ 847      $ 637      $ 210      $ —        $ —     Equity securities      8,645        8,476        27        142        —     Government obligations      1,291        1,076        215        —          —     Other fixed maturity securities      770        144        595        31        —     Investment funds and other      3,844        233        1,434        153        2,024                                                   $ 15,397      $ 10,566      $ 2,481      $ 326      $ 2,024                                                December 31, 2015                Cash and equivalents    $ 839      $ 544      $ 295      $ —        $ —     Equity securities      7,319        7,305        14        —          —     Government obligations      786        726        60        —          —     Other fixed maturity securities      990        87        903        —          —     Investment funds and other      2,897        272        1,446        228        951                                                   $ 12,831      $ 8,934      $ 2,718      $ 228      $ 951                                                Refer to Note 18 for a discussion of the three levels in the hierarchy of fair values. Plan assets are generally invested with the long-term objective of producing earnings to adequately cover expected benefit obligations, while assuming a prudent level of risk. Allocations may change as a result of changing market conditions and investment opportunities. The expected rates of return on plan assets reflect subjective assessments of expected invested asset returns over a period of several years. Generally, past investment returns are not given significant consideration when establishing assumptions for expected long-term rates of return on plan assets. Actual experience will differ from the assumed rates. A reconciliation of the pre-tax accumulated other comprehensive income (loss) related to defined benefit pension plans for each of the two years ending December 31, 2016 follows (in millions).        2016     2015   Balance beginning of year    $ (1,193 )    $ (1,617 )  Amount included in net periodic pension expense      101       129   Actuarial gains and other      253       295                    Balance end of year    $ (839 )    $ (1,193 )                   Several of our subsidiaries also sponsor defined contribution retirement plans, such as 401(k) or profit sharing plans. Employee contributions are subject to regulatory limitations and the specific plan provisions. Several plans provide for   102 Table of Contents Notes to Consolidated Financial Statements (Continued)   (21) Pension plans (Continued)   employer matching contributions up to levels specified in the plans and provide for additional discretionary contributions as determined by management. Employer contributions expensed with respect to our defined contribution plans were $944 million in 2016, $739 million in 2015 and $737 million in 2014.   (22) Contingencies and Commitments We are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. We do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations. We lease certain manufacturing, warehouse, retail and office facilities as well as certain equipment. Rent expense under operating leases was $1,573 million in 2016, $1,516 million in 2015 and $1,484 million in 2014. Future minimum rental payments for operating leases having non-cancellable terms in excess of one year are as follows (in millions).       2017           2018             2019             2020             2021         After    2021             Total       $1,337   $ 1,162     $ 1,005     $ 885     $ 725     $ 3,171     $ 8,285   Our subsidiaries regularly make commitments in the ordinary course of business to purchase goods and services used in their businesses. The most significant of these relate to our railroad, utilities and energy businesses and our fractional aircraft ownership business. As of December 31, 2016, estimated future payments under such arrangements are as follows: $11.1 billion in 2017, $4.1 billion in 2018, $3.5 billion in 2019, $2.9 billion in 2020, $2.0 billion in 2021 and $14.6 billion after 2021. We own a 50% interest in a joint venture, Berkadia Commercial Mortgage LLC (“Berkadia”), with Leucadia National Corporation (“Leucadia”) owning the other 50% interest. Berkadia is a servicer of commercial real estate loans in the U.S., performing primary, master and special servicing functions for U.S. government agency programs, commercial mortgage-backed securities transactions, banks, insurance companies and other financial institutions. A significant source of funding for Berkadia’s operations is through the issuance of commercial paper, which is supported by a surety policy issued by a Berkshire insurance subsidiary. Leucadia is obligated to indemnify us for one-half of any losses incurred under the policy. Berkadia’s maximum outstanding balance of commercial paper borrowings is currently limited to $1.5 billion. On December 31, 2016, Berkadia’s commercial paper outstanding was $1.47 billion. In the third quarter of 2016, our wholly-owned subsidiary, National Indemnity Company (“NICO”) entered into a definitive agreement to acquire Medical Liability Mutual Insurance Company (“MLMIC”), a writer of medical professional liability insurance domiciled in New York. MLMIC’s assets and policyholders’ surplus determined under statutory accounting principles as of June 30, 2016 were approximately $5.5 billion and $1.9 billion, respectively. The acquisition price will be an amount equal to the sum of: (i) the tangible book value of MLMIC at the closing date (determined under U.S. GAAP); plus (ii) $100 million. The acquisition will involve the conversion of MLMIC from a mutual company to a stock company. The closing of the transaction is subject to various regulatory approvals, customary closing conditions and the approval of the MLMIC policyholders eligible to vote on the proposed demutualization and sale. The transaction is expected to be completed in late 2017. Pursuant to the terms of agreements with noncontrolling shareholders in our less than wholly-owned subsidiaries, we may be obligated to acquire their equity ownership interests. If we had acquired all outstanding noncontrolling interests as of December 31, 2016, we estimate the cost would have been approximately $5.0 billion. However, the timing and the amount of any such future payments that might be required are contingent on future actions of the noncontrolling owners.   (23) Business segment data Our operating businesses include a large and diverse group of insurance, finance, manufacturing, service and retailing businesses. Our reportable business segments are organized in a manner that reflects how management views those business   103 Table of Contents Notes to Consolidated Financial Statements (Continued)   (23) Business segment data (Continued)   activities. Certain businesses have been grouped together for segment reporting based upon similar products or product lines, marketing, selling and distribution characteristics, even though those business units are operated under separate local management. The tabular information that follows shows data of reportable segments reconciled to amounts reflected in our Consolidated Financial Statements. Intersegment transactions are not eliminated from segment results when management considers those transactions in assessing the results of the respective segments. Furthermore, our management does not consider investment and derivative gains/losses or amortization of certain purchase accounting adjustments related to Berkshire’s business acquisitions in assessing the performance of reporting units. Collectively, these items are included in reconciliations of segment amounts to consolidated amounts.   Business Identity    Business Activity Insurance:    GEICO    Underwriting private passenger automobile insurance mainly by direct response methods Berkshire Hathaway Primary Group    Underwriting multiple lines of property and casualty insurance policies for primarily commercial accounts General Re    Underwriting excess-of-loss, quota-share and facultative reinsurance worldwide Berkshire Hathaway Reinsurance Group    Underwriting excess-of-loss and quota-share reinsurance for insurers and reinsurers worldwide BNSF    Operation of one of the largest railroad systems in North America Berkshire Hathaway Energy    Regulated electric and gas utility, including power generation and distribution activities and real estate brokerage activities Manufacturing    Manufacturers of numerous products including industrial, consumer and building products McLane Company    Wholesale distribution of groceries and non-food items Service and retailing    Providers of numerous services including fractional aircraft ownership programs, aviation pilot training, electronic components distribution and various retailing businesses, including automotive dealerships Finance and financial products    Manufactured housing and related consumer financing, transportation equipment, manufacturing and leasing, and furniture leasing   104 Table of Contents Notes to Consolidated Financial Statements (Continued)   (23) Business segment data (Continued)   A disaggregation of our consolidated data for each of the three most recent years is presented in the tables which follow (in millions).        Revenues     Earnings before income taxes      2016     2015     2014     2016     2015     2014   Operating Businesses:              Insurance:              Underwriting:              GEICO    $ 25,483     $ 22,718     $ 20,496     $ 462     $ 460     $ 1,159   BH Primary      6,257       5,394       4,377       657       824       626   General Re      5,637       5,975       6,264       190       132       277   BHRG      8,504       7,207       10,116       822       421       606                                                    Total underwriting      45,881       41,294       41,253       2,131       1,837       2,668                                                    Investment income      4,522       4,562       4,370       4,482       4,550       4,357                                                    Total insurance      50,403       45,856       45,623       6,613       6,387       7,025   BNSF      19,829       21,967       23,239       5,693       6,775       6,169   Berkshire Hathaway Energy      17,859       18,231       17,614       2,973       2,851       2,711   Manufacturing      46,506       36,136       36,773       6,211       4,893       4,811   McLane Company      48,075       48,223       46,640       431       502       435   Service and retailing      25,478       23,466       14,276       1,820       1,720       1,546   Finance and financial products      7,675       6,964       6,526       2,130       2,086       1,839                                                         215,825       200,843       190,691       25,871       25,214       24,536   Reconciliation to consolidated amount:              Investment and derivative gains/losses      8,304       10,347       4,081       8,304       10,347       4,081   Interest expense, not allocated to segments      —         —         —         (230 )      (374 )      (313 )  Investments in Kraft Heinz      180       852       720       1,103       730       694   Corporate, eliminations and other      (705 )      (1,099 )      (793 )      (1,381 )      (971 )      (893 )                                                      $ 223,604     $ 210,943     $ 194,699     $ 33,667     $ 34,946     $ 28,105                                                           Interest expense     Income tax expense      2016     2015     2014     2016     2015     2014   Operating Businesses:              Insurance    $ —       $ —       $ —       $ 1,585     $ 1,475     $ 1,768   BNSF      992       928       833       2,124       2,527       2,300   Berkshire Hathaway Energy      1,715       1,830       1,623       403       450       589   Manufacturing      164       50       69       1,945       1,548       1,544   McLane Company      —         13       14       169       195       169   Service and retailing      50       40       11       669       651       576   Finance and financial products      411       384       463       702       708       597                                                         3,332       3,245       3,013       7,597       7,554       7,543   Reconciliation to consolidated amount:              Investment and derivative gains/losses      —         —         —         1,807       3,622       760   Interest expense, not allocated to segments      230       374       313       (81 )      (131 )      (110 )  Investments in Kraft Heinz      —         —         —         397       (111 )      41   Corporate, eliminations and other      (65 )      (104 )      (73 )      (480 )      (402 )      (299 )                                                      $ 3,497     $ 3,515     $ 3,253     $ 9,240     $ 10,532     $ 7,935                                                      105 Table of Contents Notes to Consolidated Financial Statements (Continued)   (23) Business segment data (Continued)        Capital expenditures      Depreciation of tangible assets      2016      2015      2014      2016      2015      2014   Operating Businesses:                   Insurance    $ 128      $ 115      $ 94      $ 85      $ 77      $ 69   BNSF      3,819        5,651        5,243        2,079        1,932        1,804   Berkshire Hathaway Energy      5,090        5,875        6,555        2,560        2,451        2,177   Manufacturing      1,813        1,292        1,324        1,287        938        943   McLane Company      258        338        241        165        161        159   Service and retailing      804        574        591        611        504        461   Finance and financial products      1,042        2,237        1,137        624        610        602                                                            $ 12,954      $ 16,082      $ 15,185      $ 7,411      $ 6,673      $ 6,215                                                                Goodwillat year-end      Identifiable assetsat year-end      2016      2015      2016      2015      2014   Operating Businesses:                Insurance:                GEICO    $ 1,471      $ 1,471      $ 55,041      $ 48,291      $ 45,439   General Re      13,494        13,527        30,321        26,478        28,692   BHRG and BH Primary      509        538        148,675        144,682        151,301                                                Total insurance      15,474        15,536        234,037        219,451        225,432   BNSF      14,845        14,845        69,277        66,613        62,840   Berkshire Hathaway Energy      9,266        9,333        76,428        74,221        71,285   Manufacturing      32,041        14,833        69,900        34,141        34,509   McLane Company      734        656        5,896        5,871        5,419   Service and retailing      5,745        6,163        17,450        16,299        11,303   Finance and financial products      1,381        1,342        40,329        37,621        32,158                                                   $ 79,486      $ 62,708        513,317        454,217        442,946                              Reconciliation to consolidated amount:                Corporate and other            28,051        35,332        22,207   Goodwill            79,486        62,708        60,714                                             $ 620,854      $ 552,257      $ 525,867                                    Premiums written and earned by the property/casualty and life/health insurance businesses are summarized below (in millions).        Property/Casualty     Life/Health      2016     2015     2014     2016     2015     2014   Premiums Written:              Direct    $ 34,001     $ 30,544     $ 27,541     $ 1,060     $ 821     $ 879   Assumed      8,037       7,049       9,889       4,672       5,187       5,030   Ceded      (798 )      (877 )      (839 )      (62 )      (57 )      (67 )                                                      $ 41,240     $ 36,716     $ 36,591     $ 5,670     $ 5,951     $ 5,842                                                    Premiums Earned:              Direct    $ 33,207     $ 29,608     $ 26,389     $ 1,060     $ 821     $ 879   Assumed      7,848       6,584       9,872       4,671       5,192       5,030   Ceded      (843 )      (854 )      (850 )      (62 )      (57 )      (67 )                                                      $ 40,212     $ 35,338     $ 35,411     $ 5,669     $ 5,956     $ 5,842                                                      106 Table of Contents Notes to Consolidated Financial Statements (Continued)   (23) Business segment data (Continued)   Insurance premiums written by geographic region (based upon the domicile of the insured or reinsured) are summarized below. Dollars are in millions.        Property/Casualty      Life/Health      2016      2015      2014      2016      2015      2014   United States    $ 35,878      $ 31,171      $ 31,362      $ 3,473      $ 3,247      $ 3,402   Asia Pacific      3,616        3,472        1,953        715        673        651   Western Europe      1,406        1,638        2,424        822        1,263        1,135   All other      340        435        852        660        768        654                                                            $ 41,240      $ 36,716      $ 36,591      $ 5,670      $ 5,951      $ 5,842                                                         Consolidated sales and service revenues were $125.7 billion in 2016, $112.4 billion in 2015 and $102.2 billion in 2014. In 2016, 85% of such revenues were attributable to the United States compared to 87% in 2015 and 85% in 2014. The remainder of sales and service revenues were primarily in Europe, Canada and the Asia Pacific. Consolidated sales and service revenues included sales to Wal-Mart Stores, Inc. of approximately $14 billion in 2016 and $13 billion in 2015 and 2014. Approximately 95% of our revenues for each of the last three years from railroad, utilities and energy businesses were in the United States. At December 31, 2016, approximately 89% of our consolidated net property, plant and equipment was located in the United States with the remainder primarily in Canada and Europe.   (24) Quarterly data A summary of revenues and earnings by quarter for each of the last two years is presented in the following table. This information is unaudited. Dollars are in millions, except per share amounts.        1stQuarter      2ndQuarter      3rdQuarter      4thQuarter   2016             Revenues    $ 52,163      $ 54,254      $ 58,843      $ 58,344   Net earnings attributable to Berkshire shareholders *      5,589        5,001        7,198        6,286   Net earnings attributable to Berkshire shareholders per equivalent Class A common share      3,401        3,042        4,379        3,823   2015             Revenues    $ 48,593      $ 51,549      $ 59,070      $ 51,731   Net earnings attributable to Berkshire shareholders *      5,164        4,013        9,428        5,478   Net earnings attributable to Berkshire shareholders per equivalent Class A common share      3,143        2,442        5,737        3,333     * Includes investment and derivative gains/losses. After-tax investment and derivative gains/losses for the periods presented above are as follows (in millions):        1stQuarter      2ndQuarter      3rdQuarter      4thQuarter   Investment and derivative gains/losses—2016    $ 1,852      $ 394      $ 2,347      $ 1,904   Investment and derivative gains/losses—2015      920        123        4,877        805     (25) Subsequent event In January 2017, NICO entered into a retroactive reinsurance agreement with various subsidiaries of American International Group, Inc. (collectively, “AIG”). Under the agreement, NICO agreed to indemnify AIG for 80% of up to $25 billion, excess of $25 billion retained by AIG, of losses and allocated loss adjustment expenses with respect to certain commercial insurance loss events occurring in years prior to 2016 for a premium of about $10 billion. Berkshire has agreed to guarantee all amounts due to AIG under the agreement.   107 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None   Item 9A. Controls and Procedures At the end of the period covered by this Annual Report on Form 10-K, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer) concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s periodic SEC filings. The report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to Management’s Report on Internal Control Over Financial Reporting, included on page 62 of this report. The attestation report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to Report of Independent Registered Public Accounting Firm, included on page 63 of this report. There has been no change in the Corporation’s internal control over financial reporting during the quarter ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.   Item 9B. Other Information None   108 Table of Contents Part III Except for the information set forth under the caption “Executive Officers of the Registrant” in Part I hereof, information required by this Part (Items 10, 11, 12, 13 and 14) is incorporated by reference from the Registrant’s definitive proxy statement, filed pursuant to Regulation 14A, for the Annual Meeting of Shareholders of the Registrant to be held on May 6, 2017, which meeting will involve the election of directors. Part IV   Item 15. Exhibits and Financial Statement Schedules (a)1. Financial Statements The following Consolidated Financial Statements, as well as the Report of Independent Registered Public Accounting Firm, are included in Part II Item 8 of this report:        PAGE   Report of Independent Registered Public Accounting Firm      63   Consolidated Balance Sheets—December 31, 2016 and December 31, 2015      64   Consolidated Statements of Earnings—Years Ended December 31, 2016, December  31, 2015, and December 31, 2014      66   Consolidated Statements of Comprehensive Income—Years Ended December 31, 2016,  December 31, 2015, and December 31, 2014      67   Consolidated Statements of Changes in Shareholders’ Equity—Years Ended December  31, 2016, December 31, 2015, and December 31, 2014      67   Consolidated Statements of Cash Flows—Years Ended December 31, 2016, December  31, 2015, and December 31, 2014      68   Notes to Consolidated Financial Statements      69   2. Financial Statement Schedule    Report of Independent Registered Public Accounting Firm      111   Schedule I—Parent Company Condensed Financial Information    Balance Sheets as of December  31, 2016 and 2015, Statements of Earnings and Comprehensive Income and Cash Flows for the years ended December 31, 2016, December 31, 2015 and December 31, 2014 and Note to Condensed Financial Information      112   Other schedules are omitted because they are not required, information therein is not applicable, or is reflected in the Consolidated Financial Statements or notes thereto.    (b) Exhibits See the “Exhibit Index” at page 115.   109 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.       BERKSHIRE HATHAWAY INC. Date: February 24, 2017     /s/    MARC D. HAMBURG     Marc D. Hamburg     Senior Vice President and     Principal Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.   /S/    WARREN E. BUFFETT         Warren E. Buffett    Chairman of the Board of Directors—Chief Executive Officer   February 24, 2017 Date /S/    HOWARD G. BUFFETT         Howard G. Buffett    Director   February 24, 2017 Date /S/    STEPHEN B. BURKE         Stephen B. Burke    Director   February 24, 2017 Date /S/    SUSAN L. DECKER         Susan L. Decker    Director   February 24, 2017 Date /S/    WILLIAM H. GATES III         William H. Gates III    Director   February 24, 2017 Date /S/    DAVID S. GOTTESMAN         David S. Gottesman    Director   February 24, 2017 Date /S/    CHARLOTTE GUYMAN         Charlotte Guyman    Director   February 24, 2017 Date /S/    CHARLES T. MUNGER         Charles T. Munger    Vice Chairman of the Board of Directors   February 24, 2017 Date /S/    THOMAS S. MURPHY         Thomas S. Murphy    Director   February 24, 2017 Date /S/    RONALD L. OLSON         Ronald L. Olson    Director   February 24, 2017 Date /S/    WALTER SCOTT, JR.         Walter Scott, Jr.    Director   February 24, 2017 Date /S/    MERYL B. WITMER         Meryl B. Witmer    Director   February 24, 2017 Date /S/    MARC D. HAMBURG         Marc D. Hamburg    Senior Vice President—Principal Financial Officer   February 24, 2017 Date /S/    DANIEL J. JAKSICH         Daniel J. Jaksich    Vice President—Principal Accounting Officer   February 24, 2017 Date   110 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Berkshire Hathaway Inc. Omaha, Nebraska We have audited the consolidated financial statements of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and for each of the three years in the period ended December 31, 2016, and the Company’s internal control over financial reporting as of December 31, 2016, and have issued our report thereon dated February 24, 2017; such consolidated financial statements and report are included elsewhere in this Form 10-K. Our audits also included the financial statement schedule of the Company listed in Item 15. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ Deloitte & Touche LLP Omaha, Nebraska February 24, 2017   111 Table of Contents BERKSHIRE HATHAWAY INC. (Parent Company) Condensed Financial Information (Dollars in millions) Schedule I Balance Sheets        December 31,        2016      2015   Assets:       Cash and cash equivalents and U.S. Treasury Bills:       Cash and cash equivalents    $ 3,221      $ 10,609   U.S. Treasury Bills      8,220        —                       Total cash, cash equivalents and U.S. Treasury Bills      11,441        10,609   Investments in fixed maturity and equity securities and other assets      59        113   Investments in and advances to/from consolidated subsidiaries      277,398        233,977   Investments in The Kraft Heinz Company      15,345        23,424                        $ 304,243      $ 268,123                     Liabilities and Shareholders’ Equity:       Accounts payable, accrued interest and other liabilities    $ 182      $ 111   Income taxes, principally deferred      3,357        2,663   Notes payable and other borrowings      17,703        9,799                          21,242        12,573   Berkshire Hathaway shareholders’ equity      283,001        255,550                        $ 304,243      $ 268,123                     Statements of Earnings and Comprehensive Income        Year ended December 31,        2016      2015     2014   Income items:         From consolidated subsidiaries:         Dividends    $ 9,862      $ 10,519     $ 4,969   Undistributed earnings      13,264        8,508       14,496                                  23,126        19,027       19,465   Investment gains/losses      700        6,854       —     Equity in net earnings of The Kraft Heinz Company      923        (122 )      (26 )  Other income      262        963       784                                  25,011        26,722       20,223                             Cost and expense items:         General and administrative      80        73       (1 )  Interest expense      208        302       236   Income taxes      649        2,264       116                                  937        2,639       351                             Net earnings attributable to Berkshire Hathaway shareholders      24,074        24,083       19,872   Other comprehensive income attributable to Berkshire Hathaway shareholders      3,316        (8,750 )      (1,293 )                            Comprehensive income attributable to Berkshire Hathaway shareholders    $ 27,390      $ 15,333     $ 18,579                             See Note to Condensed Financial Information   112 Table of Contents BERKSHIRE HATHAWAY INC. (Parent Company) Condensed Financial Information (Dollars in millions) Schedule I (continued) Statements of Cash Flows        Year ended December 31,        2016     2015     2014   Cash flows from operating activities:        Net earnings attributable to Berkshire Hathaway shareholders    $ 24,074     $ 24,083     $ 19,872   Adjustments to reconcile net earnings to cash flows from operating activities:        Investment gains/losses      (700 )      (6,854 )      —     Undistributed earnings of subsidiaries      (13,264 )      (8,508 )      (14,496 )  Non-cash dividends from subsidiaries      —         (3,938 )      —     Income taxes payable      629       2,227       136   Other      (161 )      222       (75 )                           Net cash flows from operating activities      10,578       7,232       5,437                            Cash flows from investing activities:        Redemption (purchase) of Kraft Heinz investments      8,320       (5,258 )      —     Investments in and advances to/repayments from subsidiaries      (26,398 )      (2,274 )      1,673   Purchases of U.S. Treasury Bills      (9,350 )      —         —     Sales and maturities of U.S. Treasury Bills      1,145       —         —                              Net cash flows from investing activities      (26,283 )      (7,532 )      1,673                            Cash flows from financing activities:        Proceeds from borrowings      9,278       3,165       832   Repayments of borrowings      (1,125 )      (1,775 )      (792 )  Acquisitions of noncontrolling interests      (2 )      (10 )      (1,231 )  Other      166       80       118                            Net cash flows from financing activities      8,317       1,460       (1,073 )                           Increase (decrease) in cash and cash equivalents      (7,388 )      1,160       6,037   Cash and cash equivalents at beginning of year      10,609       9,449       3,412                            Cash and cash equivalents at end of year    $ 3,221     $ 10,609     $ 9,449                            Other cash flow information:        Income taxes paid    $ 3,583     $ 3,180     $ 2,512   Interest paid      307       206       233   Non-cash investments in subsidiaries      —         3,938       —     Note to Condensed Financial Information In 2013, Berkshire Hathaway Inc. (“Berkshire”) invested $12.25 billion in H.J. Heinz Holding Corporation (“Heinz Holding”), an entity formed to acquire H.J. Heinz Company. Berkshire’s investments included common stock and warrants and cumulative compounding preferred stock. In 2015, Berkshire exercised the common stock warrants and acquired additional shares of Kraft Heinz common stock for approximately $5.3 billion. Thereafter, Heinz Holding and Kraft Foods Group, Inc. completed a merger, and Heinz Holding was renamed The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz issued additional common stock to Kraft Food holders, reducing Berkshire’s ownership from 52.5% to 26.8%. Berkshire accounted for its investment in Heinz Holding common stock and continues to account for its investment in Kraft Heinz common stock under the equity method. In applying the equity method, the investor treats the issuance of shares by an investee as if the investor had sold a proportionate share of its investment. As a result, Berkshire recorded a non-cash pre-tax holding gain of approximately $6.8 billion in 2015. In 2016, Kraft Heinz redeemed the preferred stock for cash of $8.32 billion. On January 8, 2016, Berkshire entered into a $10 billion 364-day revolving credit agreement and Berkshire borrowed $10 billion under the agreement in connection with the acquisition of Precision Castparts Corp. on January 29. In March 2016, Berkshire issued €2.75 billion and $5.5 billion in senior unsecured notes. The notes consisted of €1.0 billion of 0.50% notes due in 2020, €1.0 billion of 1.30% notes due in 2024, €750 million of 2.15% notes due in 2028, $1.0 billion of 2.20% notes due in 2021, $2.0 billion of 2.75% notes due in 2023 and $2.5 billion of 3.125% notes due in 2026. The proceeds from these debt issues were used to repay all outstanding borrowings under the aforementioned credit agreement, which was subsequently terminated. In August 2016, Berkshire issued $750 million in senior unsecured notes consisting of $500 million of 1.15% notes due in 2018 and $250 million of floating rate notes due in 2018, to replace $750 million of maturing debt. Notes payable and borrowings at December 31, 2016 mature over the next five years as follows: 2017—$1,101 million; 2018—$1,551 million; 2019—$754 million; 2020—$1,054 million and 2021—$1,500 million.   113 Table of Contents Berkshire guarantees debt obligations of certain of its subsidiaries, which as of December 31, 2016, totaled approximately $17.7 billion. Berkshire’s guarantee of subsidiary debt is an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all present and future payment obligations. Berkshire also provides guarantees in connection with equity index put option contracts of a subsidiary. The estimated fair value of liabilities recorded under such contracts was approximately $2.9 billion as of December 31, 2016. The amount of subsidiary payments under these contracts, if any, is contingent upon future events.   114 Table of Contents EXHIBIT INDEX   Exhibit No.      2(i)   Agreement and Plan of Merger dated as of June 19, 1998 between Berkshire and General Re Corporation.   Incorporated by reference to Annex I to Registration Statement No. 333-61129 filed on Form S-4. 2(ii)   Agreement and Plan of Merger dated as of November 2, 2009 by and among Berkshire, R Acquisition Company, LLC and BNSF. Incorporated by reference to Annex A to Registration Statement No. 333-163343 on Form S-4. 2(iii)   Agreement and Plan of Merger dated August 8, 2015, by and among Berkshire, NW Merger Sub Inc. and Precision Castparts Corporation (“PCC”)   Incorporated by reference to Exhibit 2.1 to PCC’s Current Report on Form 8-K filed on August 10, 2015 (SEC File No. 001-10348) 3(i)   Restated Certificate of Incorporation   Incorporated by reference to Exhibit 3(i) to Form 10-K filed on March 2, 2015. 3(ii)   By-Laws   Incorporated by reference to Exhibit 3(ii) to Form 8-K filed on May 4, 2016. 4.1   Indenture, dated as of December 22, 2003, between Berkshire Hathaway Finance Corporation, Berkshire Hathaway Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association), as trustee.   Incorporated by reference to Exhibit 4.1 on Form S-4 of Berkshire Hathaway Finance Corporation and Berkshire Hathaway Inc. filed on February 4, 2004. SEC File No. 333-112486 4.2   Indenture, dated as of February 1, 2010, among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee.   Incorporated by reference to Exhibit 4.1 to Berkshire’s Registration Statement on Form S-3 filed on February 1, 2010. SEC File No. 333-164111 4.3   Indenture, dated as of January 26, 2016, by and among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee.   Incorporated by reference to Exhibit 4.1 to Berkshire’s Registration Statement on Form S-3 filed on January 26, 2016. SEC File No. 333-209122 4.4   Indenture, dated as of December 1, 1995, between BNSF and The First National Bank of Chicago, as trustee.   Incorporated by reference to Exhibit 4 on Form S-3 of BNSF filed on February 8, 1999. 4.5   Indenture, dated as of October 4, 2002, by and between MidAmerican Energy Holdings Company and The Bank of New York, Trustee.   Incorporated by reference to Exhibit 4.1 to the Berkshire Hathaway Energy Company Registration Statement No. 333-101699 dated December 6, 2002.   Other instruments defining the rights of holders of long-term debt of Registrant and its subsidiaries are not being filed since the total amount of securities authorized by all other such instruments does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis as of December 31, 2016. The Registrant hereby agrees to furnish to the Commission upon request a copy of any such debt instrument to which it is a party. 10.1   Equity Commitment Letter of Berkshire Hathaway Inc. with Hawk Acquisition Holding Corporation dated February 13, 2013. Incorporated by reference to Exhibit 10.1 on Form 8-K of Berkshire Hathaway Inc. filed on February 14, 2013. 12   Calculation of Ratio of Consolidated Earnings to Consolidated Fixed Charges 14   Code of Ethics   Berkshire’s Code of Business Conduct and Ethics is posted on its Internet website at www.berkshirehathaway.com 21   Subsidiaries of Registrant 23   Consent of Independent Registered Public Accounting Firm 31   Rule 13a—14(a)/15d-14(a) Certifications 32   Section 1350 Certifications   115 Table of Contents Exhibit No.       95    Mine Safety Disclosures 101    The following financial information from Berkshire Hathaway Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets as of December 31, 2016 and 2015, (ii) the Consolidated Statements of Earnings for each of the three years ended December 31, 2016, 2015 and 2014, (iii) Consolidated Statements of Comprehensive Income for each of the three years ended December 31, 2016, 2015 and 2014, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for each of the three years ended December 31, 2016, 2015 and 2014, (v) the Consolidated Statements of Cash Flows for each of the three years ended December 31, 2016, 2015 and 2014 and (vi) the Notes to Consolidated Financial Statements and Schedule I, tagged in summary and detail.   116
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of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549____________________________________________________________________________________________FORM 10-K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    For the fiscal year ended January 28, 2024 OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number: 0-23985   NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware94-3177549(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification No.)   2788 San Tomas Expressway, Santa Clara, California 95051  (Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code: (408) 486-2000 Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $0.001 par value per shareNVDAThe Nasdaq Global Select MarketSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer," “accelerated filer," “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐ No ☒ The aggregate market value of the voting stock held by non-affiliates of the registrant as of July 28, 2023 was approximately $1.1 trillion (based on the closing sales price of the registrant's common stock as reported by the Nasdaq Global Select Market on July 28, 2023). This calculation excludes 105 million shares held by directors and executive officers of the registrant. This calculation does not exclude shares held by such organizations whose ownership exceeds 5% of the registrant's outstanding common stock that have represented to the registrant that they are registered investment advisers or investment companies registered under section 8 of the Investment Company Act of 1940.The number of shares of common stock outstanding as of February 16, 2024 was 2.5 billion.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant's Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.Table of ContentsNVIDIA CorporationTable of Contents  Page  Part I Item 1.Business 4Item 1A.Risk Factors 13Item 1B.Unresolved Staff Comments 31Item 1CCybersecurity 31Item 2.Properties 32Item 3.Legal Proceedings 32Item 4.Mine Safety Disclosures 32 Part II  Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32Item 6.[Reserved]33Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations 34Item 7A.Quantitative and Qualitative Disclosures About Market Risk 43Item 8.Financial Statements and Supplementary Data 44Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 44Item 9A.Controls and Procedures 44Item 9B.Other Information 45Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections45 Part III Item 10.Directors, Executive Officers and Corporate Governance 45Item 11.Executive Compensation 46Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters46Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accountant Fees and Services 46  Part IV Item 15.Exhibit and Financial Statement Schedules 47Item 16.Form 10-K Summary 83Signatures  842Table of ContentsWhere You Can Find More InformationInvestors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We also use the following social media channels as a means of disclosing information about the company, our products, our planned financial and other announcements and attendance at upcoming investor and industry conferences, and other matters and for complying with our disclosure obligations under Regulation FD:NVIDIA X Account (https://twitter.com/nvidia)NVIDIA Corporate Blog (http://blogs.nvidia.com) NVIDIA Facebook Page (https://www.facebook.com/nvidia) NVIDIA LinkedIn Page (http://www.linkedin.com/company/nvidia)NVIDIA Instagram Page (https://www.instagram.com/nvidia)In addition, investors and others can view NVIDIA videos on YouTube (https://www.YouTube.com/nvidia).The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts and the blog, in addition to following our press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this Annual Report on Form 10-K. These channels may be updated from time to time on NVIDIA's investor relations website.Forward-Looking StatementsThis Annual Report on Form 10-K contains forward-looking statements which are based on our management's beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties, and other factors in this Annual Report on Form 10-K in greater detail under the heading “Risk Factors.” Given these risks, uncertainties, and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.All references to “NVIDIA,” “we,” “us,” “our,” or the “Company” mean NVIDIA Corporation and its subsidiaries.In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.© 2024 NVIDIA Corporation. All rights reserved.3Table of ContentsPart IItem 1. BusinessOur CompanyNVIDIA pioneered accelerated computing to help solve the most challenging computational problems. NVIDIA is now a full-stack computing infrastructure company with data-center-scale offerings that are reshaping industry.Our full-stack includes the foundational CUDA programming model that runs on all NVIDIA GPUs, as well as hundreds of domain-specific software libraries, software development kits, or SDKs, and Application Programming Interfaces, or APIs. This deep and broad software stack accelerates the performance and eases the deployment of NVIDIA accelerated computing for computationally intensive workloads such as artificial intelligence, or AI, model training and inference, data analytics, scientific computing, and 3D graphics, with vertical-specific optimizations to address industries ranging from healthcare and telecom to automotive and manufacturing.Our data-center-scale offerings are comprised of compute and networking solutions that can scale to tens of thousands of GPU-accelerated servers interconnected to function as a single giant computer; this type of data center architecture and scale is needed for the development and deployment of modern AI applications.The GPU was initially used to simulate human imagination, enabling the virtual worlds of video games and films. Today, it also simulates human intelligence, enabling a deeper understanding of the physical world. Its parallel processing capabilities, supported by thousands of computing cores, are essential for deep learning algorithms. This form of AI, in which software writes itself by learning from large amounts of data, can serve as the brain of computers, robots and self-driving cars that can perceive and understand the world. GPU-powered AI solutions are being developed by thousands of enterprises to deliver services and products that would have been immensely difficult or even impossible with traditional coding. Examples include generative AI, which can create new content such as text, code, images, audio, video, and molecule structures, and recommendation systems, which can recommend highly relevant content such as products, services, media or ads using deep neural networks trained on vast datasets that capture the user preferences.NVIDIA has a platform strategy, bringing together hardware, systems, software, algorithms, libraries, and services to create unique value for the markets we serve. While the computing requirements of these end markets are diverse, we address them with a unified underlying architecture leveraging our GPUs and networking and software stacks. The programmable nature of our architecture allows us to support several multi-billion-dollar end markets with the same underlying technology by using a variety of software stacks developed either internally or by third-party developers and partners. The large and growing number of developers and installed base across our platforms strengthens our ecosystem and increases the value of our platform to our customers.Innovation is at our core. We have invested over $45.3 billion in research and development since our inception, yielding inventions that are essential to modern computing. Our invention of the GPU in 1999 sparked the growth of the PC gaming market and redefined computer graphics. With our introduction of the CUDA programming model in 2006, we opened the parallel processing capabilities of our GPU to a broad range of compute-intensive applications, paving the way for the emergence of modern AI. In 2012, the AlexNet neural network, trained on NVIDIA GPUs, won the ImageNet computer image recognition competition, marking the “Big Bang” moment of AI. We introduced our first Tensor Core GPU in 2017, built from the ground-up for the new era of AI, and our first autonomous driving system-on-chips, or SoC, in 2018. Our acquisition of Mellanox in 2020 expanded our innovation canvas to include networking and led to the introduction of a new processor class – the data processing unit, or DPU. Over the past 5 years, we have built full software stacks that run on top of our GPUs and CUDA to bring AI to the world’s largest industries, including NVIDIA DRIVE stack for autonomous driving, Clara for healthcare, and Omniverse for industrial digitalization; and introduced the NVIDIA AI Enterprise software – essentially an operating system for enterprise AI applications. In 2023, we introduced our first data center CPU, Grace, built for giant-scale AI and high-performance computing. With a strong engineering culture, we drive fast, yet harmonized, product and technology innovations in all dimensions of computing including silicon, systems, networking, software and algorithms. More than half of our engineers work on software.The world’s leading cloud service providers, or CSPs, and consumer internet companies use our data center-scale accelerated computing platforms to enable, accelerate or enrich the services they deliver to billions of end users, including AI solutions and assistants, search, recommendations, social networking, online shopping, live video, and translation.Enterprises and startups across a broad range of industries use our accelerated computing platforms to build new generative AI-enabled products and services, or to dramatically accelerate and reduce the costs of their workloads and workflows. The enterprise software industry uses them for new AI assistants and chatbots; the transportation industry for autonomous driving; the healthcare industry for accelerated and computer-aided drug discovery; and the financial services industry for customer support and fraud detection.4Table of ContentsResearchers and developers use our computing solutions to accelerate a wide range of important applications, from simulating molecular dynamics to climate forecasting. With support for more than 3,500 applications, NVIDIA computing enables some of the most promising areas of discovery, from climate prediction to materials science and from wind tunnel simulation to genomics. Including GPUs and networking, NVIDIA powers over 75% of the supercomputers on the global TOP500 list, including 24 of the top 30 systems on the Green500 list. Gamers choose NVIDIA GPUs to enjoy immersive, increasingly cinematic virtual worlds. In addition to serving the growing number of gamers, the market for PC GPUs is expanding because of the burgeoning population of live streamers, broadcasters, artists, and creators. With the advent of generative AI, we expect a broader set of PC users to choose NVIDIA GPUs for running generative AI applications locally on their PC, which is critical for privacy, latency, and cost-sensitive AI applications.Professional artists, architects and designers use NVIDIA partner products accelerated with our GPUs and software platform for a range of creative and design use cases, such as creating visual effects in movies or designing buildings and products. In addition, generative AI is expanding the market for our workstation-class GPUs, as more enterprise customers develop and deploy AI applications with their data on-premises. Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998. Our BusinessesWe report our business results in two segments.The Compute & Networking segment is comprised of our Data Center accelerated computing platforms and end-to-end networking platforms including Quantum for InfiniBand and Spectrum for Ethernet; our NVIDIA DRIVE automated-driving platform and automotive development agreements; Jetson robotics and other embedded platforms; NVIDIA AI Enterprise and other software; and DGX Cloud software and services.The Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU, or vGPU, software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse Enterprise software for building and operating metaverse and 3D internet applications. Our MarketsWe specialize in markets where our computing platforms can provide tremendous acceleration for applications. These platforms incorporate processors, interconnects, software, algorithms, systems, and services to deliver unique value. Our platforms address four large markets where our expertise is critical: Data Center, Gaming, Professional Visualization, and Automotive.Data CenterThe NVIDIA Data Center platform is focused on accelerating the most compute-intensive workloads, such as AI, data analytics, graphics and scientific computing, delivering significantly better performance and power efficiency relative to conventional CPU-only approaches. It is deployed in cloud, hyperscale, on-premises and edge data centers. The platform consists of compute and networking offerings typically delivered to customers as systems, subsystems, or modules, along with software and services. Our compute offerings include supercomputing platforms and servers, bringing together our energy efficient GPUs, DPUs, interconnects, and fully optimized AI and high-performance computing, or HPC, software stacks. In addition, they include NVIDIA AI Enterprise software; our DGX Cloud service; and a growing body of acceleration libraries, APIs, SDKs, and domain-specific application frameworks.Our networking offerings include end-to-end platforms for InfiniBand and Ethernet, consisting of network adapters, cables, DPUs, and switch systems, as well as a full software stack. This has enabled us to architect data center-scale computing platforms that can interconnect thousands of compute nodes with high-performance networking. While historically the server was the unit of computing, as AI and HPC workloads have become extremely large spanning thousands of compute nodes, the data center has become the new unit of computing, with networking as an integral part.Our end customers include the world’s leading public cloud and consumer internet companies, thousands of enterprises and startups, and public sector entities. We work with industry leaders to help build or transform their applications and data center infrastructure. Our direct customers include original equipment manufacturers, or OEMs, original device manufacturers, or ODMs, system integrators and distributors which we partner with to help bring our products to market. We also have partnerships in automotive, healthcare, financial services, manufacturing, and retail among others, to accelerate the adoption of AI.5Table of ContentsAt the foundation of the NVIDIA accelerated computing platform are our GPUs, which excel at parallel workloads such as the training and inferencing of neural networks. They are available in the NVIDIA accelerated computing platform and in industry standard servers from every major cloud provider and server maker. Beyond GPUs, our data center platform expanded to include DPUs in fiscal year 2022 and CPUs in fiscal year 2024. We can optimize across the entire computing, networking and storage stack to deliver data center-scale computing solutions.While our approach starts with powerful chips, what makes it a full-stack computing platform is our large body of software, including the CUDA parallel programming model, the CUDA-X collection of acceleration libraries, APIs, SDKs, and domain-specific application frameworks.In addition to software delivered to customers as an integral part of our data center computing platform, we offer paid licenses to NVIDIA AI Enterprise, a comprehensive suite of enterprise-grade AI software and NVIDIA vGPU software for graphics-rich virtual desktops and workstations. In fiscal year 2024, we launched the NVIDIA DGX Cloud, an AI-training-as-a-service platform which includes cloud-based infrastructure and software for AI, customizable pretrained AI models, and access to NVIDIA experts. We have partnered with leading cloud service providers to host this service in their data centers.GamingGaming is the largest entertainment industry, with PC gaming as the predominant platform. Many factors propel its growth, including new high production value games and franchises, the continued rise of competitive gaming, or eSports, social connectivity and the increasing popularity of game streamers, modders, or gamers who remaster games, and creators.Our gaming platforms leverage our GPUs and sophisticated software to enhance the gaming experience with smoother, higher quality graphics. We developed NVIDIA RTX to bring next generation graphics and AI to games. NVIDIA RTX features ray tracing technology for real-time, cinematic-quality rendering. Ray tracing, which has long been used for special effects in the movie industry, is a computationally intensive technique that simulates the physical behavior of light to achieve greater realism in computer-generated scenes. NVIDIA RTX also features deep learning super sampling, or NVIDIA DLSS, our AI technology that boosts frame rates while generating beautiful, sharp images for games. RTX GPUs will also accelerate a new generation of AI applications. With an installed base of over 100 million AI capable PCs, more than 500 RTX AI-enabled applications and games, and a robust suite of development tools, RTX is already the AI PC leader.Our products for the gaming market include GeForce RTX and GeForce GTX GPUs for gaming desktop and laptop PCs, GeForce NOW cloud gaming for playing PC games on underpowered devices, as well as SoCs and development services for game consoles.Professional VisualizationWe serve the Professional Visualization market by working closely with independent software vendors, or ISVs, to optimize their offerings for NVIDIA GPUs. Our GPU computing platform enhances productivity and introduces new capabilities for critical workflows in many fields, such as design and manufacturing and digital content creation. Design and manufacturing encompass computer-aided design, architectural design, consumer-products manufacturing, medical instrumentation, and aerospace. Digital content creation includes professional video editing and post-production, special effects for films, and broadcast-television graphics.The NVIDIA RTX platform makes it possible to render film-quality, photorealistic objects and environments with physically accurate shadows, reflections and refractions using ray tracing in real-time. Many leading 3D design and content creation applications developed by our ecosystem partners now support RTX, allowing professionals to accelerate and transform their workflows with NVIDIA RTX GPUs and software.We offer NVIDIA Omniverse as a development platform and operating system for building virtual world simulation applications, available as a software subscription for enterprise use and free for individual use. Industrial enterprises are adopting Omniverse’s 3D and simulation technologies to digitalize their complex physical assets, processes, and environments – building digital twins of factories, real time 3D product configurators, testing and validating autonomous robots and vehicles, powered by NVIDIA accelerated computing infrastructure on-premises and in the cloud.AutomotiveAutomotive market is comprised of platform solutions for automated driving and in-vehicle cockpit computing. Leveraging our technology leadership in AI and building on our long-standing automotive relationships, we are delivering a complete end-to-end solution for the AV market under the DRIVE Hyperion brand. We have demonstrated multiple applications of AI within the car: AI can drive the car itself as a pilot in fully autonomous mode or it can also be a co-pilot, assisting the human driver while creating a safer driving experience.6Table of ContentsWe are working with several hundred partners in the automotive ecosystem including automakers, truck makers, tier-one suppliers, sensor manufacturers, automotive research institutions, HD mapping companies, and startups to develop and deploy AI systems for self-driving vehicles. Our unified AI computing architecture starts with training deep neural networks using our Data Center computing solutions, and then running a full perception, fusion, planning, and control stack within the vehicle on the NVIDIA DRIVE Hyperion platform. DRIVE Hyperion consists of the high-performance, energy efficient DRIVE AGX computing hardware, a reference sensor set that supports full self-driving capability as well as an open, modular DRIVE software platform for autonomous driving, mapping, and parking services, and intelligent in-vehicle experiences.In addition, we offer a scalable data center-based simulation solution, NVIDIA DRIVE Sim, based on NVIDIA Omniverse software, for digital cockpit development, as well as for testing and validating a self-driving platform. Our unique end-to-end, software-defined approach is designed for continuous innovation and continuous development, enabling cars to receive over-the-air updates to add new features and capabilities throughout the life of a vehicle.Business StrategiesNVIDIA’s key strategies that shape our overall business approach include:Advancing the NVIDIA accelerated computing platform. Our accelerated computing platform can solve complex problems in significantly less time and with lower power consumption than alternative computational approaches. Indeed, it can help solve problems that were previously deemed unsolvable. We work to deliver continued performance leaps that outpace Moore’s Law by leveraging innovation across the architecture, chip design, system, interconnect, and software layers. This full-stack innovation approach allows us to deliver order-of-magnitude performance advantages relative to legacy approaches in our target markets, which include Data Center, Gaming, Professional Visualization, and Automotive. While the computing requirements of these end markets are diverse, we address them with a unified underlying architecture leveraging our GPUs, CUDA and networking technologies as the fundamental building blocks. The programmable nature of our architecture allows us to make leveraged investments in research and development: we can support several multi-billion-dollar end markets with shared underlying technology by using a variety of software stacks developed either internally or by third-party developers and partners. We utilize this platform approach in each of our target markets. Extending our technology and platform leadership in AI. We provide a complete, end-to-end accelerated computing platform for AI, addressing both training and inferencing. This includes full-stack data center-scale compute and networking solutions across processing units, interconnects, systems, and software. Our compute solutions include all three major processing units in AI servers – GPUs, CPUs, and DPUs. GPUs are uniquely suited to AI, and we will continue to add AI-specific features to our GPU architecture to further extend our leadership position. In addition, we offer DGX Cloud, an AI-training-as-a-service platform, and NeMo – a complete solution for building enterprise-ready Large Language Models, or LLMs, using open source and proprietary LLMs created by NVIDIA and third parties. Our AI technology leadership is reinforced by our large and expanding ecosystem in a virtuous cycle. Our computing platforms are available from virtually every major server maker and CSP, as well as on our own AI supercomputers. There are over 4.7 million developers worldwide using CUDA and our other software tools to help deploy our technology in our target markets. We evangelize AI through partnerships with hundreds of universities and thousands of startups through our Inception program. Additionally, our Deep Learning Institute provides instruction on the latest techniques on how to design, train, and deploy neural networks in applications using our accelerated computing platform. Extending our technology and platform leadership in computer graphics. We believe that computer graphics infused with AI is fundamental to the continued expansion and evolution of computing. We apply our research and development resources to enhance the user experience for consumer entertainment and professional visualization applications and create new virtual world and simulation capabilities. Our technologies are instrumental in driving the gaming, design, and creative industries forward, as developers leverage our libraries and algorithms to deliver an optimized experience on our GeForce and NVIDIA RTX platforms. Our computer graphics platforms leverage AI end-to-end, from the developer tools and cloud services to the Tensor Cores included in all RTX-class GPUs. For example, NVIDIA Avatar Cloud Engine, or ACE, is a suite of technologies that help developers bring digital avatars to life with generative AI, running in the cloud or locally on the PC. GeForce Experience enhances each gamer’s experience by optimizing their PC’s settings, as well as enabling the recording and sharing of gameplay. Our Studio drivers enhance and accelerate a number of popular creative applications. Omniverse is real-time 3D design collaboration and virtual world simulation software that empowers artists, designers, and creators to connect and collaborate in leading design applications. We also enable interactive graphics applications - such as games, movie and photo editing and design software - to be accessed by almost any device, almost anywhere, through our cloud platforms such as vGPU for enterprise and GeForce NOW for gaming. Advancing the leading autonomous vehicle platform. We believe the advent of autonomous vehicles, or AV, and electric vehicles, or EV, is revolutionizing the transportation industry. The algorithms required for autonomous driving - such as perception, localization, and planning - are too complex for legacy hand-coded approaches and will use multiple neural networks instead. In addition, EV makers are looking for next-generation centralized car computers that integrate a wide range of intelligent functions into a single AI compute platform. Therefore, we provide an AI-based hardware and software solution, designed and implemented from the ground up based on automotive safety standards, for the AV and EV market under the DRIVE brand, which we are bringing to market through our partnerships with automotive OEMs, 7Table of Contentstier-1 suppliers, and start-ups. Our AV solution also includes the GPU-based hardware required to train the neural networks before their in-vehicle deployment, as well as to re-simulate their operation prior to any over-the-air software updates. We believe our comprehensive, top-to-bottom and end-to-end approach will enable the transportation industry to solve the complex problems arising from the shift to autonomous driving.Leveraging our intellectual property, or IP. We believe our IP is a valuable asset that can be accessed by our customers and partners through license and development agreements when they desire to build such capabilities directly into their own products or have us do so through a custom development. Such license and development arrangements can further enhance the reach of our technology.Sales and MarketingOur worldwide sales and marketing strategy is key to achieving our objective of providing markets with our high-performance and efficient computing platforms and software. Our sales and marketing teams, located across our global markets, work closely with end customers and various industry ecosystems through our partner network. Our partner network incorporates global, regional and specialized CSPs, OEMs, ODMs, system integrators, independent software vendors, or ISVs, add-in board manufacturers, or AIBs, distributors, automotive manufacturers and tier-1 automotive suppliers, and other ecosystem participants.Members of our sales team have technical expertise and product and industry knowledge. We also employ a team of application engineers and solution architects to provide pre-sales assistance to our partner network in designing, testing, and qualifying system designs that incorporate our platforms. For example, our solution architects work with CSPs to provide pre-sales assistance to optimize their hardware and software infrastructure for generative AI and LLM training and deployment. They also work with foundation model and enterprise software developers to optimize the training and fine-tuning of their models and services, and with enterprise end-users, often in collaboration with their global system integrator of choice, to fine-tune models and build AI applications. We believe that the depth and quality of our design support are key to improving our partner network’s time-to-market, maintaining a high level of customer satisfaction, and fostering relationships that encourage our end customers and partner network to use the next generation of our products within each platform.To encourage the development of applications optimized for our platforms and software, we seek to establish and maintain strong relationships in the software development community. Engineering and marketing personnel engage with key software developers to promote and discuss our platforms, as well as to ascertain individual product requirements and solve technical problems. Our developer program supports the development of AI frameworks, SDKs, and APIs for software applications and game titles that are optimized for our platforms. Our Deep Learning Institute provides in-person and online training for developers in industries and organizations around the world to build AI and accelerated computing applications that leverage our platforms.SeasonalityOur computing platforms serve a diverse set of markets such as data centers, gaming, professional visualization, and automotive. Our desktop gaming products typically see stronger revenue in the second half of our fiscal year. Historical seasonality trends may not repeat.Manufacturing We utilize a fabless and contracting manufacturing strategy, whereby we employ and partner with key suppliers for all phases of the manufacturing process, including wafer fabrication, assembly, testing, and packaging. We use the expertise of industry-leading suppliers that are certified by the International Organization for Standardization in such areas as fabrication, assembly, quality control and assurance, reliability, and testing. Additionally, we can avoid many of the significant costs and risks associated with owning and operating manufacturing operations. While we may directly procure certain raw materials used in the production of our products, such as memory, substrates, and a variety of components, our suppliers are responsible for procurement of most raw materials used in the production of our products. As a result, we can focus our resources on product design, quality assurance, marketing, and customer support. In periods of growth, we may place non-cancellable inventory orders for certain product components in advance of our historical lead times, pay premiums, or provide deposits to secure future supply and capacity and may need to continue to do so.We have expanded our supplier relationships to build redundancy and resilience in our operations to provide long-term manufacturing capacity aligned with growing customer demand. Our supply chain is concentrated in the Asia-Pacific region. We utilize foundries, such as Taiwan Semiconductor Manufacturing Company Limited, or TSMC, and Samsung Electronics Co., Ltd., or Samsung, to produce our semiconductor wafers. We purchase memory from Micron Technology, Inc., SK Hynix Inc., and Samsung. We utilize CoWoS technology for semiconductor packaging. We engage with independent subcontractors and contract manufacturers such as Hon Hai Precision Industry Co., Ltd., Wistron Corporation, and Fabrinet to perform assembly, testing and packaging of our final products.8Table of ContentsCompetition The market for our products is intensely competitive and is characterized by rapid technological change and evolving industry standards. We believe that the principal competitive factors in this market are performance, breadth of product offerings, access to customers and partners and distribution channels, software support, conformity to industry standard APIs, manufacturing capabilities, processor pricing, and total system costs. We believe that our ability to remain competitive will depend on how well we are able to anticipate the features and functions that customers and partners will demand and whether we are able to deliver consistent volumes of our products at acceptable levels of quality and at competitive prices. We expect competition to increase from both existing competitors and new market entrants with products that may be lower priced than ours or may provide better performance or additional features not provided by our products. In addition, it is possible that new competitors or alliances among competitors could emerge and acquire significant market share.A significant source of competition comes from companies that provide or intend to provide GPUs, CPUs, DPUs, embedded SoCs, and other accelerated, AI computing processor products, and providers of semiconductor-based high-performance interconnect products based on InfiniBand, Ethernet, Fibre Channel, and proprietary technologies. Some of our competitors may have greater marketing, financial, distribution and manufacturing resources than we do and may be more able to adapt to customers or technological changes. We expect an increasingly competitive environment in the future.Our current competitors include:•suppliers and licensors of hardware and software for discrete and integrated GPUs, custom chips and other accelerated computing solutions, including solutions offered for AI, such as Advanced Micro Devices, Inc., or AMD, Huawei Technologies Co. Ltd., or Huawei, and Intel Corporation, or Intel;•large cloud services companies with internal teams designing hardware and software that incorporate accelerated or AI computing functionality as part of their internal solutions or platforms, such as Alibaba Group, Alphabet Inc., Amazon, Inc., or Amazon, Baidu, Inc., Huawei, and Microsoft Corporation, or Microsoft;•suppliers of Arm-based CPUs and companies that incorporate hardware and software for CPUs as part of their internal solutions or platforms, such as Amazon, Huawei, and Microsoft;•suppliers of hardware and software for SoC products that are used in servers or embedded into automobiles, autonomous machines, and gaming devices, such as Ambarella, Inc., AMD, Broadcom Inc., or Broadcom, Intel, Qualcomm Incorporated, Renesas Electronics Corporation, and Samsung, or companies with internal teams designing SoC products for their own products and services, such as Tesla, Inc.; and•networking products consisting of switches, network adapters (including DPUs), and cable solutions (including optical modules) include such as AMD, Arista Networks, Broadcom, Cisco Systems, Inc., Hewlett Packard Enterprise Company, Huawei, Intel, Lumentum Holdings, and Marvell Technology Group as well as internal teams of system vendors and large cloud services companies.Patents and Proprietary RightsWe rely primarily on a combination of patents, trademarks, trade secrets, employee and third-party nondisclosure agreements, and licensing arrangements to protect our IP in the United States and internationally. Our currently issued patents have expiration dates from February 2024 to August 2043. We have numerous patents issued, allowed, and pending in the United States and in foreign jurisdictions. Our patents and pending patent applications primarily relate to our products and the technology used in connection with our products. We also rely on international treaties, organizations, and foreign laws to protect our IP. The laws of certain foreign countries in which our products are or may be manufactured or sold, including various countries in Asia, may not protect our products or IP rights to the same extent as the laws of the United States. This decreased protection makes the possibility of piracy of our technology and products more likely. We continuously assess whether and where to seek formal protection for innovations and technologies based on such factors as:•the location in which our products are manufactured;•our strategic technology or product directions in different countries;•the degree to which IP laws exist and are meaningfully enforced in different jurisdictions; and•the commercial significance of our operations and our competitors' operations in particular countries and regions.We have licensed technology from third parties and expect to continue entering such license agreements.9Table of ContentsGovernment RegulationsOur worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.During the third quarter of fiscal year 2023, the U.S. government, or the USG, announced licensing requirements that, with certain exceptions, impact exports to China (including Hong Kong and Macau) and Russia of our A100 and H100 integrated circuits, DGX or any other systems or boards which incorporate A100 or H100 integrated circuits.In July 2023, the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.In October 2023, the USG announced new and updated licensing requirements that became effective in our fourth quarter of fiscal year 2024 for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of our products exceeding certain performance thresholds, including A100, A800, H100, H800, L4, L40, L40S and RTX 4090. The licensing requirements also apply to the export of products exceeding certain performance thresholds to a party headquartered in, or with an ultimate parent headquartered in, Country Group D5, including China. On October 23, 2023, the USG informed us the licensing requirements were effective immediately for shipments of our A100, A800, H100, H800, and L40S products.Our competitive position has been harmed, and our competitive position and future results may be further harmed in the long term, if there are further changes in the USG’s export controls. Given the increasing strategic importance of AI and rising geopolitical tensions, the USG has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results. In the event of such change, we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements, effectively excluding us from all or part of the China market, as well as other impacted markets, including the Middle East.While we work to enhance the resiliency and redundancy of our supply chain, which is currently concentrated in the Asia-Pacific region, new and existing export controls or changes to existing export controls could limit alternative manufacturing locations and negatively impact our business. Refer to “Item 1A. Risk Factors – Risks Related to Regulatory, Legal, Our Stock and Other Matters” for a discussion of this potential impact.Compliance with laws, rules, and regulations has not otherwise had a material effect upon our capital expenditures, results of operations, or competitive position and we do not currently anticipate material capital expenditures for environmental control facilities. Compliance with existing or future governmental regulations, including, but not limited to, those pertaining to IP ownership and infringement, taxes, import and export requirements and tariffs, anti-corruption, business acquisitions, foreign exchange controls and cash repatriation restrictions, data privacy requirements, competition and antitrust, advertising, employment, product regulations, cybersecurity, environmental, health and safety requirements, the responsible use of AI, climate change, cryptocurrency, and consumer laws, could increase our costs, impact our competitive position, and otherwise may have a material adverse impact on our business, financial condition and results of operations in subsequent periods. Refer to “Item 1A. Risk Factors” for a discussion of these potential impacts.Sustainability and GovernanceNVIDIA invents computing technologies that improve lives and address global challenges. Our goal is to integrate sound environmental, social, and corporate governance principles and practices into every aspect of the Company. The Nominating and Corporate Governance Committee of our Board of Directors is responsible for reviewing and discussing with management our practices related to sustainability and corporate governance. We assess our programs annually in consideration of stakeholder expectations, market trends, and business risks and opportunities. These issues are important for our continued business success and reflect the topics of highest concern to NVIDIA and our stakeholders. The following section and the Human Capital Management Section below provide an overview of our principles and practices. More information can be found on our website and in our annual Sustainability Report. Information contained on our website or in our annual Sustainability Report is not incorporated by reference into this or any other report we file with the Securities and Exchange Commission, or the SEC. Refer to “Item 1A. Risk Factors” for a discussion of risks and uncertainties we face related to sustainability.Climate ChangeIn the area of environmental sustainability, we address our climate impacts across our product lifecycle and assess risks, including current and emerging regulations and market impacts. In May 2023, we published metrics related to our environmental impact for fiscal year 2023. Fiscal year 2024 metrics are expected to be published in the first half of fiscal year 2025. There has been no material impact to our capital expenditures, results of operations or competitive position associated with global environmental sustainability regulations, compliance, or costs from sourcing renewable energy. By the end of fiscal year 2025, our goal is to purchase 10Table of Contentsor generate enough renewable energy to match 100% of our global electricity usage for our offices and data centers. In fiscal year 2023, we increased the percentage of our total electricity use matched by renewable energy purchases to 44%. By fiscal year 2026, we aim to engage manufacturing suppliers comprising at least 67% of NVIDIA’s scope 3 category 1 GHG emissions with goal of effecting supplier adoption of science-based targets.Whether it is creation of technology to power next-generation laptops or designs to support high-performance supercomputers, improving energy efficiency is important in our research, development, and design processes. GPU-accelerated computing is inherently more energy efficient than traditional computing for many workloads because it is optimized for throughput, performance per watt, and certain AI workloads. The energy efficiency of our products is evidenced by our continued strong presence on the Green500 list of the most energy-efficient systems. We powered 24 of the top 30 most energy efficient systems, including the top supercomputer, on the Green500 list. We plan to build Earth-2, a digital twin of the Earth on NVIDIA AI and NVIDIA Omniverse platforms. Earth-2 will enable scientists, companies, and policy makers to do ultra-high-resolution predictions of the impact of climate change and explore mitigation and adaptation strategies.Human Capital ManagementWe believe that our employees are our greatest assets, and they play a key role in creating long-term value for our stakeholders. As of the end of fiscal year 2024, we had approximately 29,600 employees in 36 countries, 22,200 were engaged in research and development and 7,400 were engaged in sales, marketing, operations, and administrative positions. The Compensation Committee of our Board of Directors assists in the oversight of policies and strategies relating to human capital management.To be competitive and execute our business strategy successfully, we must recruit, develop, and retain talented employees, including qualified executives, scientists, engineers, and technical and non-technical staff. RecruitmentAs the demand for global technical talent continues to be competitive, we have grown our technical workforce and have been successful in attracting top talent to NVIDIA. We have attracted talent globally through our strong employer brand and differentiated hiring strategies for college, professional, and leadership talent. Our workforce is 83% technical and 49% hold advanced degrees. Additionally, we have increased focus on diversity recruiting, resulting in an increase in global female hiring in each channel. Our own employees help to surface top talent, with over 40% of our new hires in fiscal year 2024 coming from employee referrals. Development and RetentionTo support employee development, we provide opportunities to learn on-the-job through training courses, targeted development programs, mentoring and peer coaching and ongoing feedback. We have a library of live and on-demand learning experiences that include workshops, panel discussions, and speaker forums. We create learning paths focused on our most common development needs and constantly upgrade our offerings to ensure that our employees are exposed to the most current content and technologies available. We offer tuition reimbursement programs to subsidize educational programs and advanced certifications. We implemented a career coaching service to provide one-on-one guidance to employees, and encourage internal job mobility. We have implemented specifically designed mentoring and development programs for women and employees from traditionally underrepresented groups to ensure widespread readiness for future advancement.To evaluate employee sentiment and engagement, we use pulse surveys, a suggestion box, and an anonymous third-party platform. Pulse surveys help us gain insight into employee experience and provides employee-generated ideas so that we can take targeted action. The suggestion box is an always-on, interactive tool where employees share their thoughts about making our company a better place to work. The anonymous third-party platform is designed to protect the identity of the reporter and provide a mechanism for reporters to follow an investigation and receive responses.We want NVIDIA to be a place where people can build their careers over their lifetime. Our employees tend to come and stay. In fiscal year 2024, our overall turnover rate was 2.7%.Compensation, Benefits, and Well-BeingOur compensation program rewards performance and is structured to encourage employees to invest in the Company’s future. Employees receive equity, except where unavailable due to local regulations, that is tied to the value of our stock price and vests over time to retain employees while simultaneously aligning their interests with those of our shareholders. We offer comprehensive benefits to support our employees’ and their families’ physical health, well-being, and financial health. Programs include 401(k) programs in the U.S., statutory and supplemental pension programs outside the U.S., our employee stock purchase program, flexible work hours, and time off policies to address mental health, stress, and time-management challenges. We evaluate our benefit offerings globally and aim to provide comparable support across the regions where we operate. We are committed to providing tailored benefits based on the needs of our Community Resource Groups and continuing our support for parents, both new birth parents and those who wish to become parents. 11Table of ContentsOur support is enhanced during times of crisis, such as war or economic volatility, to take care of our existing team of world-class talent and their families.Diversity, Inclusion, and BelongingWe believe that diverse teams fuel innovation, and we are committed to creating an inclusive culture that supports all employees.When recruiting for new talent or developing our current employees, we strive to build a diverse talent pipeline that includes those underrepresented in the technology field, including women, Black/African American, and Hispanic/Latino candidates.To this end, we have been:•Partnering with institutions and professional organizations serving historically underrepresented communities; •Embedding dedicated recruiting teams to business areas to shepherd underrepresented candidates through the interview process and find internal opportunities;•Supporting the development of women employees through programs aimed at building a pipeline of future leaders; •Providing peer support and executive sponsors for our internal community resource groups;•Providing training and education to managers and peers on fostering supportive environments and recruiting for diversity;•Track equity and parity in retention, promotions, pay, and employee engagement scores; and•Measuring year over year progress and providing leadership visibility on diversity efforts. As of the end of fiscal year 2024, our global workforce was 79% male, 20% female, and 1% not declared, with 6% of our workforce in the United States composed of Black or African American and Hispanic or Latino employees.Flexible Working EnvironmentWe support a flexible work environment, understanding that many employees want the ability to work from home under certain conditions. This flexibility supports diverse hiring, retention, and employee engagement, which we believe makes NVIDIA a great place to work.During fiscal year 2025, we will continue to have a flexible work environment and maintain our company wide 2-days off a quarter for employees to rest and recharge.Information About Our Executive OfficersThe following sets forth certain information regarding our executive officers, their ages, and positions as of February 16, 2024:NameAgePositionJen-Hsun Huang60President and Chief Executive OfficerColette M. Kress56Executive Vice President and Chief Financial OfficerAjay K. Puri69Executive Vice President, Worldwide Field OperationsDebora Shoquist69Executive Vice President, OperationsTimothy S. Teter57Executive Vice President and General CounselJen-Hsun Huang co-founded NVIDIA in 1993 and has served as our President, Chief Executive Officer, and a member of the Board of Directors since our inception. From 1985 to 1993, Mr. Huang was employed at LSI Logic Corporation, a computer chip manufacturer, where he held a variety of positions including as Director of Coreware, the business unit responsible for LSI's SOC. From 1983 to 1985, Mr. Huang was a microprocessor designer for AMD, a semiconductor company. Mr. Huang holds a B.S.E.E. degree from Oregon State University and an M.S.E.E. degree from Stanford University.Colette M. Kress joined NVIDIA in 2013 as Executive Vice President and Chief Financial Officer. Prior to NVIDIA, Ms. Kress most recently served as Senior Vice President and Chief Financial Officer of the Business Technology and Operations Finance organization at Cisco Systems, Inc., a networking equipment company, since 2010. At Cisco, Ms. Kress was responsible for financial strategy, planning, reporting and business development for all business segments, engineering and operations. From 1997 to 2010 Ms. Kress held a variety of positions at Microsoft, a software company, including, beginning in 2006, Chief Financial Officer of the Server and Tools division, where Ms. Kress was responsible for financial 12Table of Contentsstrategy, planning, reporting and business development for the division. Prior to joining Microsoft, Ms. Kress spent eight years at Texas Instruments Incorporated, a semiconductor company, where she held a variety of finance positions. Ms. Kress holds a B.S. degree in Finance from University of Arizona and an M.B.A. degree from Southern Methodist University.Ajay K. Puri joined NVIDIA in 2005 as Senior Vice President, Worldwide Sales and became Executive Vice President, Worldwide Field Operations in 2009. Prior to NVIDIA, he held positions in sales, marketing, and general management over a 22-year career at Sun Microsystems, Inc., a computing systems company. Mr. Puri previously held marketing, management consulting, and product development positions at Hewlett-Packard, an information technology company, Booz Allen Hamilton Inc., a management and technology consulting company, and Texas Instruments Incorporated. Mr. Puri holds a B.S.E.E. degree from the University of Minnesota, an M.S.E.E. degree from the California Institute of Technology and an M.B.A. degree from Harvard Business School.Debora Shoquist joined NVIDIA in 2007 as Senior Vice President of Operations and in 2009 became Executive Vice President of Operations. Prior to NVIDIA, Ms. Shoquist served from 2004 to 2007 as Executive Vice President of Operations at JDS Uniphase Corp., a provider of communications test and measurement solutions and optical products for the telecommunications industry. She served from 2002 to 2004 as Senior Vice President and General Manager of the Electro-Optics business at Coherent, Inc., a manufacturer of commercial and scientific laser equipment. Previously, she worked at Quantum Corp., a data protection company, as President of the Personal Computer Hard Disk Drive Division, and at Hewlett-Packard. Ms. Shoquist holds a B.S. degree in Electrical Engineering from Kansas State University and a B.S. degree in Biology from Santa Clara University.Timothy S. Teter joined NVIDIA in 2017 as Senior Vice President, General Counsel and Secretary and became Executive Vice President, General Counsel and Secretary in February 2018. Prior to NVIDIA, Mr. Teter spent more than two decades at the law firm of Cooley LLP, where he focused on litigating patent and technology related matters. Prior to attending law school, he worked as an engineer at Lockheed Missiles and Space Company, an aerospace company. Mr. Teter holds a B.S. degree in Mechanical Engineering from the University of California at Davis and a J.D. degree from Stanford Law School.Available InformationOur annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available free of charge on or through our website, http://www.nvidia.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. The SEC’s website, http://www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our web site and the information on it or connected to it are not a part of this Annual Report on Form 10-K.Item 1A. Risk FactorsThe following risk factors should be considered in addition to the other information in this Annual Report on Form 10-K. The following risks could harm our business, financial condition, results of operations or reputation, which could cause our stock price to decline. Additional risks, trends and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business, financial condition, results of operations or reputation.Risk Factors SummaryRisks Related to Our Industry and Markets•Failure to meet the evolving needs of our industry may adversely impact our financial results.•Competition could adversely impact our market share and financial results.Risks Related to Demand, Supply and Manufacturing•Failure to estimate customer demand accurately has led and could lead to mismatches between supply and demand.•Dependency on third-party suppliers and their technology to manufacture, assemble, test, or package our products reduces our control over product quantity and quality, manufacturing yields, and product delivery schedules and could harm our business.•Defects in our products have caused and could cause us to incur significant expenses to remediate and could damage our business.Risks Related to Our Global Operating Business•Adverse economic conditions may harm our business.13Table of Contents•International sales and operations are a significant part of our business, which exposes us to risks that could harm our business.•Product, system security and data breaches and cyber-attacks could disrupt our operations and adversely affect our financial condition, stock price and reputation.•Business disruptions could harm our operations and financial results.•Climate change may have a long-term impact on our business.•We may not be able to realize the potential benefits of business investments or acquisitions, nor successfully integrate acquisition targets.•A significant amount of our revenue stems from a limited number of partners and distributors and we have a concentration of sales to end customers, and our revenue could be adversely affected if we lose or are prevented from selling to any of these end customers.•We may be unable to attract, retain and motivate our executives and key employees.•Modification or interruption of our business processes and information systems may disrupt our business, and internal controls.•Our operating results have in the past fluctuated and may in the future fluctuate, and if our operating results are below the expectations of securities analysts or investors, our stock price could decline.Risks Related to Regulatory, Legal, Our Stock and Other Matters•We are subject to complex laws, rules and regulations, and political and other actions, which may adversely impact our business.•Increased scrutiny from shareholders, regulators, and others regarding our corporate sustainability practices could result in financial, reputational, or operational harm and liability.•Issues relating to the responsible use of our technologies, including AI, may result in reputational or financial harm and liability.•Adequately protecting our IP rights could be costly, and our ability to compete could be harmed if we are unsuccessful or if we are prohibited from making or selling our products.•We are subject to stringent and changing data privacy and security laws, rules, regulations, and other obligations. These areas could damage our reputation, deter customers, affect product design, or result in legal or regulatory proceedings and liability.•Our operating results may be adversely impacted by additional tax liabilities, higher than expected tax rates, changes in tax laws, and other tax-related factors.•Our business is exposed to the risks associated with litigation, investigations, and regulatory proceedings.•Our indebtedness could adversely affect our financial position and cash flows from operations and prevent us from implementing our strategy or fulfilling our contractual obligations.•Delaware law, provisions in our governing documents and our agreement with Microsoft could delay or prevent a change in control.Risk FactorsRisks Related to Our Industry and MarketsFailure to meet the evolving needs of our industry and markets may adversely impact our financial results.Our accelerated computing platforms experience rapid changes in technology, customer requirements, competitive products, and industry standards.Our success depends on our ability to:•timely identify industry changes, adapt our strategies, and develop new or enhance and maintain existing products and technologies that meet the evolving needs of these markets, including due to unexpected changes in industry standards or disruptive technological innovation that could render our products incompatible with products developed by other companies;14Table of Contents•develop or acquire new products and technologies through investments in research and development;•launch new offerings with new business models including software, services, and cloud solutions, as well as software-, infrastructure-, or platform-as-a-service solutions;•expand the ecosystem for our products and technologies;•meet evolving and prevailing customer and industry safety, security, reliability expectations, and compliance standards;•manage product and software lifecycles to maintain customer and end-user satisfaction;•develop, acquire, maintain, and secure access to the internal and external infrastructure needed to scale our business, including sufficient energy for powering data centers using our products, acquisition integrations, customer support, e-commerce, IP licensing capabilities and cloud service capacity; and•complete technical, financial, operational, compliance, sales and marketing investments for the above activities.We have invested in research and development in markets where we have a limited operating history, which may not produce meaningful revenue for several years, if at all. If we fail to develop or monetize new products and technologies, or if they do not become widely adopted, our financial results could be adversely affected. Obtaining design wins may involve a lengthy process and depends on our ability to anticipate and provide features and functionality that customers will demand. They also do not guarantee revenue. Failure to obtain a design win may prevent us from obtaining future design wins in subsequent generations. We cannot ensure that the products and technologies we bring to market will provide value to our customers and partners. If we fail any of these key success criteria, our financial results may be harmed.We have begun offering enterprise customers NVIDIA DGX Cloud services directly and through our network of partners, which include cloud-based infrastructure, software and services for training and deploying AI models, and NVIDIA AI Foundations for customizable pretrained AI models. We have partnered with CSPs to host such software and services in their data centers, and we entered and may continue to enter into multi-year cloud service agreements to support these offerings and our research and development activities. The timing and availability of these cloud services has changed and may continue to change, impacting our revenue, expenses, and development timelines. NVIDIA DGX Cloud services may not be successful and will take time, resources, and investment. We also offer or plan to offer standalone software solutions, including NVIDIA AI Enterprise, NVIDIA Omniverse, NVIDIA DRIVE, and several other software solutions. These new business models or strategies may not be successful, and we may fail to sell any meaningful standalone software or services. We may incur significant costs and may not achieve any significant revenue from these offerings.Competition could adversely impact our market share and financial results.Our target markets remain competitive, and competition may intensify with expanding and changing product and service offerings, industry standards, customer needs, new entrants and consolidations. Our competitors’ products, services and technologies, including those mentioned above in this Annual Report on Form 10-K, may be cheaper or provide better functionality or features than ours, which has resulted and may in the future result in lower-than-expected selling prices for our products. Some of our competitors operate their own fabrication facilities, and have longer operating histories, larger customer bases, more comprehensive IP portfolios and patent protections, more design wins, and greater financial, sales, marketing and distribution resources than we do. These competitors may be able to acquire market share and/or prevent us from doing so, more effectively identify and capitalize upon opportunities in new markets and end-user trends, more quickly transition their products, and impinge on our ability to procure sufficient foundry capacity and scarce input materials during a supply-constrained environment, which could harm our business. Some of our customers have in-house expertise and internal development capabilities similar to some of ours and can use or develop their own solutions to replace those we are providing. For example, others may offer cloud-based services that compete with our AI cloud service offerings, and we may not be able to establish market share sufficient to achieve the scale necessary to meet our business objectives. If we are unable to successfully compete in this environment, demand for our products, services and technologies could decrease and we may not establish meaningful revenue.Risks Related to Demand, Supply and ManufacturingFailure to estimate customer demand accurately has led and could lead to mismatches between supply and demand.We use third parties to manufacture and assemble our products, and we have long manufacturing lead times. We are not provided guaranteed wafer, component and capacity supply, and our supply deliveries and production may be non-linear within a quarter or year. If our estimates of customer demand are inaccurate, as we have experienced in the past, there could be a significant mismatch between supply and demand. This mismatch has resulted in both product shortages and excess inventory, has varied across our market platforms, and has significantly harmed our financial results.We build finished products and maintain inventory in advance of anticipated demand. While we have in the past entered and may in the future enter into long-term supply and capacity commitments, we may not be able to secure sufficient 15Table of Contentscommitments for capacity to address our business needs, or our long-term demand expectations may change. These risks may increase as we shorten our product development cycles, enter new lines of business, or integrate new suppliers or components into our supply chain, creating additional supply chain complexity. Additionally, our ability to sell certain products has been and could be impeded if components necessary for the finished products are not available from third parties. This risk may increase as a result of our platform strategy. In periods of shortages impacting the semiconductor industry and/or limited supply or capacity in our supply chain, the lead times on our orders may be extended. We have previously experienced and may continue to experience extended lead times of more than 12 months. We have paid premiums and provided deposits to secure future supply and capacity, which have increased our product costs and may continue to do so. If our existing suppliers are unable to scale their capabilities to meet our supply needs, we may require additional sources of capacity, which may require additional deposits. We may not have the ability to reduce our supply commitments at the same rate or at all if our revenue declines.Many additional factors have caused and/or could in the future cause us to either underestimate or overestimate our customers’ future demand for our products, or otherwise cause a mismatch between supply and demand for our products and impact the timing and volume of our revenue, including:•changes in product development cycles and time to market;•competing technologies and competitor product releases and announcements;•changes in business and economic conditions resulting in decreased end demand;•sudden or sustained government lockdowns or actions to control case spread of global or local health issues;•rapidly changing technology or customer requirements;•the availability of sufficient data center capacity and energy for customers to procure;•new product introductions and transitions resulting in less demand for existing products;•new or unexpected end-use cases;•increase in demand for competitive products, including competitive actions;•business decisions made by third parties;•the demand for accelerated or AI-related cloud services, including our own software and NVIDIA DGX Cloud services;•changes that impact the ecosystem for the architectures underlying our products and technologies;•the demand for our products; or•government actions or changes in governmental policies, such as export controls or increased restrictions on gaming usage.Demand for our data center systems and products surged in fiscal year 2024. Entering fiscal year 2025, we are gathering customer demand indications across several product transitions. We have demand visibility for our new data center products ramping later in fiscal year 2025. We have increased our supply and capacity purchases with existing suppliers, added new vendors and entered into prepaid manufacturing and capacity agreements. These increased purchase volumes, the number of suppliers, and the integration of new vendors into our supply chain may create more complexity and execution risk. We may continue to enter into new supplier and capacity arrangements. Our purchase commitments and obligations for inventory and manufacturing capacity at the end of fiscal year 2024 were impacted by shortening lead times for certain components. Supply of Hopper architecture products is improving, and demand remains very strong. We expect our next-generation products to be supply-constrained based upon demand indications. We may incur inventory provisions or impairments if our inventory or supply or capacity commitments exceed demand for our products or demand declines.Our customer orders and longer-term demand estimates may change or may not be correct, as we have experienced in the past. Product transitions are complex and can impact our revenue as we often ship both new and prior architecture products simultaneously and we and our channel partners prepare to ship and support new products. Due to our product introduction cycles, we are almost always in various stages of transitioning the architecture of our Data Center, Professional Visualization, and Gaming products. We will have a broader and faster Data Center product launch cadence to meet a growing and diverse set of AI opportunities. The increased frequency of these transitions may magnify the challenges associated with managing our supply and demand due to long manufacturing lead times. Qualification time for new products, customers anticipating product transitions and channel partners reducing channel inventory of prior architectures ahead of new product introductions can create reductions or volatility in our revenue. We have experienced and may in the future experience reduced demand for current generation architectures when customers anticipate 16Table of Contentstransitions, and we may be unable to sell multiple product architectures at the same time for current and future architecture transitions. If we are unable to execute our architectural transitions as planned for any reason, our financial results may be negatively impacted. The increasing frequency and complexity of newly introduced products may result in unanticipated quality or production issues that could increase the magnitude of inventory provisions, warranty or other costs or result in product delays. Deployment of new products to customers creates additional challenges due to the complexity of our technologies, which has impacted and may in the future impact the timing of customer purchases or otherwise impact our demand. While we have managed prior product transitions and have previously sold multiple product architectures at the same time, these transitions are difficult, may impair our ability to predict demand and impact our supply mix, and we may incur additional costs.Many end customers often do not purchase directly from us but instead purchase indirectly through multiple OEMs, ODMs, system integrators, distributors, and other channel partners. As a result, the decisions made by our multiple OEMs, ODMs, system integrators, distributors, and other channel partners, and in response to changing market conditions and changes in end-user demand for our products, have impacted and could in the future continue to impact our ability to properly forecast demand, particularly as they are based on estimates provided by various downstream parties.If we underestimate our customers' future demand for our products, our foundry partners may not have adequate lead-time or capacity to increase production and we may not be able to obtain sufficient inventory to fill orders on a timely basis. Even if we are able to increase supply to meet customer demand, we may not be able to do so in a timely manner, or our contract manufacturers may experience supply constraints. If we cannot procure sufficient supply to meet demand or otherwise fail to fulfill our customers’ orders on a timely basis, or at all, our customer relationships could be damaged, we could lose revenue and market share and our reputation could be harmed. Additionally, since some of our products are part of a complex data center buildout, supply constraints or availability issues with respect to any one component have had and may have a broader revenue impact.If we overestimate our customers’ future demand for our products, or if customers cancel or defer orders or choose to purchase from our competitors, we may not be able to reduce our inventory or other contractual purchase commitments. In the past, we have experienced a reduction in average selling prices, including due to channel pricing programs that we have implemented and may continue to implement, as a result of our overestimation of future demand, and we may need to continue these reductions. We have had to increase prices for certain of our products as a result of our suppliers’ increase in prices, and we may need to continue to do so for other products in the future. We have also written down our inventory, incurred cancellation penalties, and recorded impairments and may have to do so in the future. These impacts were amplified by our placement of non-cancellable and non-returnable purchasing terms well in advance of our historical lead times and could be exacerbated if we need to make changes to the design of future products. The risk of these impacts has increased and may continue to increase as our purchase obligations and prepaids have grown and are expected to continue to grow and become a greater portion of our total supply. All of these factors may negatively impact our gross margins and financial results.We build technology and introduce products for new and innovative use cases and applications, such as NVIDIA DGX Cloud services, NVIDIA AI Foundations, Omniverse platform, LLMs, and generative AI models. Our demand estimates for new use cases, applications, and services can be incorrect and create volatility in our revenue or supply levels, and we may not be able to generate significant revenue from these use cases, applications, and services. Recent technologies, such as generative AI models, have emerged, and while they have driven increased demand for Data Center, the long-term trajectory is unknown. Because our products may be used in multiple use cases and applications, it is difficult for us to estimate with any reasonable degree of precision the impact of generative AI models on our reported revenue or forecasted demand. Additionally, we started shipping our CPU product offerings, the Grace CPU and Grace Hopper Superchips, in the third quarter of fiscal year 2024. Our ability to adequately predict our CPU demand may create volatility in our revenue or supply levels.Challenges in estimating demand could become more pronounced or volatile in the future on both a global and regional basis. Extended lead times may occur if we experience other supply constraints caused by natural disasters, pandemics or other events. In addition, geopolitical tensions, such as those involving Taiwan and China, which comprise a significant portion of our revenue and where we have suppliers, contract manufacturers, and assembly partners who are critical to our supply continuity, could have a material adverse impact on us.The use of our GPUs other than that for which they were designed and marketed, including new and unexpected use cases, has impacted and can in the future impact demand for our products, including by leading to inconsistent spikes and drops in demand. For example, several years ago, our Gaming GPUs began to be used for mining digital currencies, such as Ethereum. It is difficult for us to estimate with any reasonable degree of precision the past or current impact of cryptocurrency mining, or forecast the future impact of cryptocurrency mining, on demand for our products. Volatility in the cryptocurrency market, including new compute technologies, price changes in cryptocurrencies, government cryptocurrency policies and regulations, new cryptocurrency standards and changes in the method of verifying blockchain transactions, has impacted and can in the future impact cryptocurrency mining and demand for our products and can further impact our ability to estimate demand for our products. Changes to cryptocurrency standards and processes including, but not limited to, the Ethereum 2.0 merge in 2022, have reduced and may in the future decrease the usage of GPUs for Ethereum mining. This has created and may in the future create increased aftermarket sales of our 17Table of ContentsGPUs, which could negatively impact retail prices for our GPUs and reduce demand for our new GPUs. In general, our new products or previously sold products may be resold online or on the unauthorized “gray market,” which also makes demand forecasting difficult. Gray market products and reseller marketplaces compete with our new products and distribution channels.Additionally, we depend on developers, customers and other third parties to build, enhance, and maintain accelerated computing applications that leverage our platforms. We also rely on third-party content providers and publishers to make their content available on our platforms, such as GeForce NOW. Failure by developers, customers, and other third parties to build, enhance, and maintain applications that leverage our platforms, or failure by third-party content providers or publishers to make their content available on reasonable terms or at all for use by our customers or end users on our platforms, could adversely affect customer demand.Dependency on third-party suppliers and their technology to manufacture, assemble, test, or package our products reduces our control over product quantity and quality, manufacturing yields, and product delivery schedules and could harm our business.We depend on foundries to manufacture our semiconductor wafers using their fabrication equipment and techniques. We do not assemble, test, or package our products, but instead contract with independent subcontractors. These subcontractors assist with procuring components used in our systems, boards, and products. We face several risks which have adversely affected or could adversely affect our ability to meet customer demand and scale our supply chain, negatively impact longer-term demand for our products and services, and adversely affect our business operations, gross margin, revenue and/or financial results, including:•lack of guaranteed supply of wafer, component and capacity or decommitment and potential higher wafer and component prices, from incorrectly estimating demand and failing to place orders with our suppliers with sufficient quantities or in a timely manner;•failure by our foundries or contract manufacturers to procure raw materials or provide adequate levels of manufacturing or test capacity for our products;•failure by our foundries to develop, obtain or successfully implement high quality process technologies, including transitions to smaller geometry process technologies such as advanced process node technologies and memory designs needed to manufacture our products;•failure by our suppliers to comply with our policies and expectations and emerging regulatory requirements;•limited number and geographic concentration of global suppliers, foundries, contract manufacturers, assembly and test providers and memory manufacturers;•loss of a supplier and additional expense and/or production delays as a result of qualifying a new foundry or subcontractor and commencing volume production or testing in the event of a loss, addition or change of a supplier;•lack of direct control over product quantity, quality and delivery schedules;•suppliers or their suppliers failing to supply high quality products and/or making changes to their products without our qualification;•delays in product shipments, shortages, a decrease in product quality and/or higher expenses in the event our subcontractors or foundries prioritize our competitors’ or other customers’ orders over ours;•requirements to place orders that are not cancellable upon changes in demand or requirements to prepay for supply in advance;•low manufacturing yields resulting from a failure in our product design or a foundry’s proprietary process technology; and•disruptions in manufacturing, assembly and other processes due to closures related to heat waves, earthquakes, fires, or other natural disasters and electricity conservation efforts.Defects in our products have caused and could cause us to incur significant expenses to remediate, which can damage our reputation and cause us to lose market share.Our hardware and software product and service offerings are complex. They have in the past and may in the future contain defects or security vulnerabilities or experience failures or unsatisfactory performance due to any number of issues in design, fabrication, packaging, materials, bugs and/or use within a system. These risks may increase as our products are introduced into new devices, markets, technologies and applications or as new versions are released. These risks further increase when we rely on partners to supply and manufacture components that are used in our products, as these arrangements reduce our direct control over production. AI software products we or our partners offer rely on 18Table of Contentstraining data that may originate from third parties and new training methods, and the resulting products may contain unknown or undetected defects and errors, or reflect unintended bias. Although arrangements with component providers may contain provisions for product defect expense reimbursement, we generally remain responsible to the customer for warranty product defects that may occur from time to time. Some failures in our products or services have been in the past and may in the future be only discovered after a product or service has been shipped or used. Undiscovered vulnerabilities in our products or services could result in loss of data or intangible property, or expose our customers to unscrupulous third parties who develop and deploy malicious software programs that could attack our products or services. Defects or failure of our offerings to perform to specifications could lead to substantial damage to the products in which our offerings have been integrated by OEMs, ODMs, AIBs and automotive manufacturers and tier 1 automotive suppliers, and to the user of such end product. Any such defect may cause us to incur significant warranty, support and repair or replacement costs as part of a product recall or otherwise, write-off the value of related inventory, and divert the attention of our engineering and management personnel from our product development efforts to find and correct the issue. Our efforts to remedy these issues may not be timely or satisfactory to our customers. An error or defect in new products, releases or related software drivers after commencement of commercial shipments could result in failure to achieve market acceptance, loss of design wins, temporary or permanent withdrawal from a product or market and harm to our relationships with existing and prospective customers and partners and consumers’ perceptions of our brand, which would in turn negatively impact our business operations, gross margin, revenue and/or financial results. We may be required to reimburse our customers, partners or consumers, including for costs to repair or replace products in the field or in connection with indemnification obligations, or pay fines imposed by regulatory agencies.For example, in fiscal year 2023, a defect was identified in a third-party component embedded in certain Data Center products. This defect has had, and other defects may in the future have, an adverse effect on our cost and supply of components and finished goods. These costs could be significant in future periods. We recorded a net warranty liability during fiscal year 2023 primarily in connection with this defect. While we believe we have accurately recorded for warranty obligations, we may need to record additional amounts in the future if our estimate proves to be incorrect. In general, if a product liability claim regarding any of our products is brought against us, even if the alleged damage is due to the actions or inactions of a third party, such as within our supply chain, the cost of defending the claim could be significant and would divert the efforts of our technical and management personnel and harm our business. Further, our business liability insurance may be inadequate or future coverage may be unavailable on acceptable terms, which could adversely impact our financial results.Risks Related to Our Global Operating BusinessAdverse economic conditions may harm our business.Economic and industry uncertainty or changes, including recession or slowing growth, inflation, changes or uncertainty in fiscal, monetary or trade policy, disruptions to capital markets and the banking system, currency fluctuations, higher interest rates, tighter credit, lower capital expenditures by businesses, including on IT infrastructure, increases in unemployment, labor shortages, and lower consumer confidence and spending, global supply chain constraints and global economic and geopolitical developments have in the past and/or could in the future have adverse, wide-ranging effects on our business and financial results, including:•increased costs for wafers, components, logistics, and other supply chain expenses, which have negatively impacted our gross margin in the past and may do so in the future;•increased supply, employee, facilities and infrastructure costs and volatility in the financial markets, which have reduced and may in the future reduce our margins;•decrease in demand for our products, services and technologies and those of our customers, partners or licensees;•the inability of our suppliers to deliver on their supply commitments to us and our customers’ or our licensees’ inability to supply products to customers and/or end users;•limits on our ability to forecast operating results and make business decisions;•the insolvency of key suppliers, distributors, customers, cloud service providers, data center providers, licensing parties or other third parties we rely on;•reduced profitability of customers, which may cause them to scale back operations, exit businesses, file for bankruptcy protection and potentially cease operations, or lead to mergers, consolidations or strategic alliances among other companies, which could adversely affect our ability to compete effectively; and•increased credit and collectability risks, higher borrowing costs or reduced availability of capital markets, reduced liquidity, adverse impacts on our customers and suppliers, failures of counterparties, including financial institutions and insurers, asset impairments, and declines in the value of our financial instruments. 19Table of ContentsAdverse developments affecting financial institutions, such as bank failures or instability, or concerns or speculation about similar events or risks, could lead to market-wide liquidity problems and other disruptions, which could impact our customers’ ability to fulfill their payment obligations to us, our vendors’ ability to fulfill their contractual obligations to us, or our ability to fulfill our own obligations.Additionally, we maintain an investment portfolio of various holdings, types, and maturities. These investments are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by market downturns or events that affect global financial markets, as described above. A majority of our investment portfolio comprises USG securities. A decline in global financial markets for long periods or a downgrade of the USG credit rating due to an actual or threatened default on government debt could result in higher interest rates, a decline in the value of the U.S. dollar, reduced market liquidity or other adverse conditions. These factors could cause an unrealized or realized loss position in our investments or require us to record impairment charges.International sales and operations are a significant part of our business, which exposes us to risks that could harm our business.We sell our products internationally, and we also have operations and conduct business internationally. Our semiconductor wafers are manufactured, assembled, tested and packaged by third parties located outside of the United States, and we generated 56% of our revenue in fiscal year 2024 from sales outside of the United States. Our sales to China decreased as a percentage of total Data Center revenue from 19% in fiscal year 2023 to 14% in fiscal year 2024. Although we have not received licenses from the USG to ship restricted products to China, we have started to ship alternatives to the China market in small volumes. China represented a mid-single digit percentage of our Data Center revenue in the fourth quarter of fiscal year 2024 due to USG licensing requirements and we expect China to be in a similar range in the first quarter of fiscal year 2025. The global nature of our business subjects us to a number of risks and uncertainties, which have had in the past and could in the future have a material adverse effect on our business, financial condition and results of operations. These include domestic and international economic and political conditions in countries in which we and our suppliers and manufacturers do business, government lockdowns to control case spread of global or local health issues, differing legal standards with respect to protection of IP and employment practices, different domestic and international business and cultural practices, disruptions to capital markets, counter-inflation policies, currency fluctuations, natural disasters, acts of war or other military actions, terrorism, public health issues and other catastrophic events.Product, system security, and data protection breaches, as well as cyber-attacks, could disrupt our operations, reduce our expected revenue, increase our expenses, and significantly harm our business and reputation.Security breaches, computer malware, social-engineering attacks, denial-of-service attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, and other cyber-attacks are becoming increasingly sophisticated, making it more difficult to successfully detect, defend against them or implement adequate preventative measures.Cyber-attacks, including ransomware attacks by organized criminal threat actors, nation-states, and nation-state-supported actors, may become more prevalent and severe. Our ability to recover from ransomware attacks may be limited if our backups have been affected by the attack, or if restoring from backups is delayed or not feasible.Individuals, groups of hackers and sophisticated organizations, including nation-states and nation-state-supported actors, and other threat actors have engaged and are expected to continue to engage in cyber-attacks. Additionally, some actors are using AI technology to launch more automated, targeted and coordinated attacks. Due to geopolitical conflicts and during times of war or other major conflicts, we and the third parties we rely upon may be vulnerable to a heightened risk of cyber-attacks that could materially disrupt our ability to provide services and products. We may also face cybersecurity threats due to error or intentional misconduct by employees, contractors or other third-party service providers. Certain aspects of effective cybersecurity are dependent upon our employees, contractors and/or other third-party service providers safeguarding our sensitive information and adhering to our security policies and access control mechanisms. We have in the past experienced, and may in the future experience, security incidents arising from a failure to properly handle sensitive information or adhere to our security policies and access control mechanisms and, although no such events have had a material adverse effect on our business, there can be no assurance that an insider threat will not result in an incident that is material to us. Furthermore, we rely on products and services provided by third-party suppliers to operate certain critical business systems, including without limitation, cloud-based infrastructure, encryption and authentication technology, employee email and other functions, which exposes us to supply-chain attacks or other business disruptions. We cannot guarantee that third parties and infrastructure in our supply chain or our partners’ supply chains have not been compromised or that they do not contain exploitable vulnerabilities, defects or bugs that could result in a breach of or disruption to our information technology systems, including our products and services, or the third-party information technology systems that support our services. We may also incorporate third-party data into our AI algorithms or use open-source datasets to train our algorithms. These datasets may be flawed, insufficient, or contain certain biased information, and may otherwise be vulnerable to security incidents. We may have limited insight into the data privacy or security practices of third-party suppliers, including for our AI algorithms. Our ability to monitor these third parties’ information security practices is limited, and they may not have adequate information security measures in place. In addition, if one of our third-party suppliers suffers a security incident (which has happened in the 20Table of Contentspast and may happen in the future), our response may be limited or more difficult because we may not have direct access to their systems, logs and other information related to the security incident. Additionally, we are incorporated into the supply chain of a large number of entities worldwide and, as a result, if our products or services are compromised, a significant number of our customers and their data could be affected, which could result in potential liability and harm our business.To defend against security incidents, we must continuously engineer more secure products and enhance security and reliability features, which is expected to result in increased expenses. We must also continue to develop our security measures, including training programs and security awareness initiatives, designed to ensure our suppliers have appropriate security measures in place, and continue to meet the evolving security requirements of our customers, applicable industry standards, and government regulations. While we invest in training programs and security awareness initiatives and take steps to detect and remediate certain vulnerabilities that we have identified, we may not always be able to prevent threats or detect and mitigate all vulnerabilities in our security controls, systems or software, including third-party software we have installed, as such threats and techniques change frequently and may not be detected until after a security incident has occurred. Further, we may experience delays in developing and deploying remedial measures designed to address identified vulnerabilities. These vulnerabilities could result in reputational and financial harm, and if exploited, these vulnerabilities could result in a security incident.We hold confidential, sensitive, personal and proprietary information, including information from partners and customers. Breaches of our security measures, along with reported or perceived vulnerabilities or unapproved dissemination of proprietary information or sensitive or confidential data about us or third parties, could expose us and the parties affected to a risk of loss, or misuse of this information, potentially resulting in litigation and subsequent liability, regulatory inquiries or actions, damage to our brand and reputation or other harm, including financial, to our business. For example, we hold proprietary game source code from third-party partners in our GFN service. Breaches of our GFN security measures, which have happened in the past, could expose our partners to a risk of loss or misuse of this source code, damage both us and our partners, and expose NVIDIA to potential litigation and liability. If we or a third party we rely on experience a security incident, which has occurred in the past, or are perceived to have experienced a security incident, we may experience adverse consequences, including government enforcement actions, additional reporting requirements and/or oversight, restrictions on processing data, litigation, indemnification obligations, reputational harm, diversion of funds, diversion of management attention, financial loss, loss of data, material disruptions in our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services, and other similar harms. Inability to fulfill orders, delayed sales, lower margins or lost customers as a result of these disruptions could adversely affect our financial results, stock price and reputation. Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators and investors, of security incidents, and mandatory disclosure of such incidents could lead to negative publicity. In addition to experiencing a security incident, third parties may gather, collect or infer sensitive information about us from public sources, data brokers or other means that reveals competitively sensitive details about our organization and could be used to harm our business.Business disruptions could harm our operations, lead to a decline in revenue and increase our costs.Our worldwide operations could be disrupted by natural disasters and extreme weather conditions, power or water shortages, telecommunications failures, supplier disruptions, terrorist attacks, acts of violence, political and/or civil unrest, acts of war or other military actions, epidemics or pandemics, abrupt regulatory deterioration, and other natural or man-made disasters and catastrophic events. Our corporate headquarters, a large portion of our current data center capacity, and a portion of our research and development activities are located in California, and other critical business operations, finished goods inventory and some of our suppliers are located in Asia, making our operations vulnerable to natural disasters such as earthquakes, wildfires or other business disruptions occurring in these geographical areas. Catastrophic events can also have an impact on third-party vendors who provide us critical infrastructure services for IT and research and development systems and personnel. Our business continuity and disaster recovery planning may not be sufficient for all eventualities. Geopolitical and domestic political developments and other events beyond our control, can increase economic volatility globally. Political instability, changes in government or adverse political developments in or around any of the major countries in which we do business may harm our business, financial condition and results of operations. Worldwide geopolitical tensions and conflicts, including but not limited to China, Hong Kong, Israel, Korea and Taiwan where the manufacture of our product components and final assembly of our products are concentrated may result in changing regulatory requirements, and other disruptions that could impact our operations and operating strategies, product demand, access to global markets, hiring, and profitability. For example, other countries have restricted and may continue in the future to restrict business with the State of Israel, where we have engineering, sales support operations and manufacturing, and companies with Israeli operations, including by economic boycotts. Our operations could be harmed and our costs could increase if manufacturing, logistics or other operations are disrupted for any reason, including natural disasters, high heat events or water shortages, power shortages, information technology system failures or cyber-attacks, military actions or economic, business, labor, environmental, public health, or political issues. The ultimate impact on us, our third-party foundries and other suppliers of being located and consolidated in certain geographical areas is unknown. In the event a disaster, war or catastrophic event affects us, the third-party systems on which we rely, or our customers, our business could be harmed as a result of declines in revenue, increases in expenses, and substantial expenditures and time spent to fully resume operations. All of these risks and conditions could materially adversely affect our future sales and operating results.21Table of ContentsWe are monitoring the impact of the geopolitical conflict in and around Israel on our operations, including the health and safety of our approximately 3,700 employees in the region who primarily support the research and development, operations, and sales and marketing of our networking products. Our operating expenses in fiscal year 2024 include expenses for financial support to impacted employees and charitable activity. We believe our global supply chain for our networking products has not experienced any significant impact. Further, in connection with the conflict, a substantial number of our employees in the region have been called-up for active military duty in Israel. Accordingly, some of our employees in Israel have been absent for an extended period and they or others may continue to be absent, which may cause disruption to our product development or operations. We did not experience any significant impact or expense to our business; however, if the conflict is further extended, it could impact future product development, operations, and revenue or create other uncertainty for our business.Additionally, interruptions or delays in services from CSPs, data center co-location partners, and other third parties on which we rely, including due to the events described above or other events such as the insolvency of these parties, could impair our ability to provide our products and services and harm our business. As we increase our reliance on these third-party systems and services, our exposure to damage from service interruptions, defects, disruptions, outages, shortages and other performance and quality problems may increase. Data centers depend on access to clean water and predictable energy. Power or water shortages, or regulations that limit energy or water availability, could impair the ability of our customers to expand their data center capacity and consume our products and services.Climate change may have a long-term impact on our business.Climate change may have an increasingly adverse impact on our business and on our customers, partners and vendors. Water and energy availability and reliability in the regions where we conduct business is critical, and certain of our facilities may be vulnerable to the impacts of extreme weather events. Extreme heat and wind coupled with dry conditions in Northern California may lead to power safety shut offs due to wildfire risk, which can have adverse implications for our Santa Clara, California headquarter offices and data centers, including impairing the ability of our employees to work effectively. Climate change, its impact on our supply chain and critical infrastructure worldwide and its potential to increase political instability in regions where we, our customers, partners and our vendors do business, may disrupt our business and cause us to experience higher attrition, losses and costs to maintain or resume operations. Although we maintain insurance coverage for a variety of property, casualty, and other risks, the types and amounts of insurance we obtain vary depending on availability and cost. Some of our policies have large deductibles and broad exclusions, and our insurance providers may be unable or unwilling to pay a claim. Losses not covered by insurance may be large, which could harm our results of operations and financial condition.Our business and those of our suppliers and customers may also be subject to climate-related laws, regulations and lawsuits. New or proposed regulations relating to carbon taxes, fuel or energy taxes, pollution limits, sustainability-related disclosure and governance and supply chain governance could result in greater direct costs, including costs associated with changes to manufacturing processes or the procurement of raw materials used in manufacturing processes, increased capital expenditures to improve facilities and equipment, and higher compliance and energy costs to reduce emissions, other compliance costs, as well as greater indirect costs resulting from our customers and/or suppliers incurring additional compliance costs that are passed on to us. These costs and restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our operations and product design activities. Stakeholder groups may find us insufficiently responsive to the implications of climate change, and therefore we may face legal action or reputational harm. We may not achieve our stated sustainability-related goals, which could harm our reputation, or we may incur additional, unexpected costs to achieve such goals. We may also experience contractual disputes due to supply chain delays arising from climate change-related disruptions, which could result in increased litigation and costs.We also face risks related to business trends that may be influenced by climate change concerns. Our business could be negatively impacted by concerns around the high absolute energy requirements of our GPUs, despite their much more energy efficient design and operation relative to alternative computing platforms.We may not be able to realize the potential benefits of business investments or acquisitions, and we may not be able to successfully integrate acquired companies, which could hurt our ability to grow our business, develop new products or sell our products.We have acquired and invested and may continue to do so in businesses that offer products, services and technologies that we believe will help expand or enhance our strategic objectives. Acquisitions or investments involve significant challenges and risks and could impair our ability to grow our business, develop new products or sell our products and ultimately could have a negative impact on our financial results. If we pursue a particular transaction, we may limit our ability to enter into other transactions that could help us achieve our other strategic objectives. If we are unable to timely complete acquisitions, including due to delays and challenges in obtaining regulatory approvals, we may be unable to pursue other transactions, we may not be able to retain critical talent from the target company, technology may evolve and make the acquisition less attractive, and other changes can take place, which could reduce the anticipated benefits of the transaction and negatively impact our business. Regulators could also impose conditions that reduce the ultimate value of our acquisitions. In addition, to the extent that our perceived ability to consummate acquisitions has been 22Table of Contentsharmed, future acquisitions may be more difficult, complex or expensive. Further, our investments in publicly traded companies could create volatility in our results and may generate losses up to the value of the investment. In addition, we have invested and may continue to invest in private companies to further our strategic objectives and to support certain key business initiatives. These companies can include early-stage companies still defining their strategic direction. Many of the instruments in which we invest are non-marketable and illiquid at the time of our initial investment, and we are not always able to achieve a return. To the extent any of the companies in which we invest are not successful, we could recognize an impairment and/or lose all or part of our investment. Our investment portfolio contains industry sector concentration risks, and a decline in any one or multiple industry sectors could increase our impairment losses. We face additional risks related to acquisitions and strategic investments, including the diversion of capital and other resources, including management’s attention; difficulty in realizing a satisfactory return and uncertainties to realize the benefits of an acquisition or strategic investment, if at all; difficulty or inability in obtaining governmental, regulatory approval or restrictions or other consents and approvals or financing; legal proceedings initiated as a result of an acquisition or investment; and potential failure of our due diligence processes to identify significant issues with the assets or company in which we are investing or are acquiring.Additional risks related to acquisitions include, but are not limited to:•difficulty in integrating the technology, systems, products, policies, processes, or operations and integrating and retaining the employees, including key personnel, of the acquired business;•assumption of liabilities and incurring amortization expenses, impairment charges to goodwill or write-downs of acquired assets;•integrating accounting, forecasting and controls, procedures and reporting cycles;•coordinating and integrating operations, particularly in countries in which we do not currently operate;•stock price impact, fines, fees or reputation harm if we are unable to obtain regulatory approval for an acquisition or are otherwise unable to close an acquisition;•potential issuances of debt to finance our acquisitions, resulting in increased debt, increased interest expense, and compliance with debt covenants or other restrictions;•the potential for our acquisitions to result in dilutive issuances of our equity securities;•the potential variability of the amount and form of any performance-based consideration;•negative changes in general economic conditions in the regions or the industries in which we or our target operate;•exposure to additional cybersecurity risks and vulnerabilities; and•impairment of relationships with, or loss of our or our target’s employees, vendors and customers.For example, when integrating acquisition target systems into our own, we have experienced and may continue to experience challenges including lengthy and costly systems integration, delays in purchasing and shipping products, difficulties with system integration via electronic data interchange and other processes with our key suppliers and customers, and training and change management needs of integration personnel. These challenges have impacted our results of operations and may continue to do so in the future.We receive a significant amount of our revenue from a limited number of partners and distributors and we have a concentration of sales to customers who purchase directly or indirectly from us, and our revenue could be adversely affected if we lose or are prevented from selling to any of these customers.We receive a significant amount of our revenue from a limited number of customers within our distribution and partner network. Sales to one customer, Customer A, represented 13% of total revenue for fiscal year 2024, which was attributable to the Compute & Networking segment. With several of these channel partners, we are selling multiple products and systems in our portfolio through their channels. Our operating results depend on sales within our partner network, as well as the ability of these partners to sell products that incorporate our processors. In the future, these partners may decide to purchase fewer products, not to incorporate our products into their ecosystem, or to alter their purchasing patterns in some other way. Because most of our sales are made on a purchase order basis, our customers can generally cancel, change or delay product purchase commitments with little notice to us and without penalty. Our partners or customers may develop their own solutions; our customers may purchase products from our competitors; and our partners may discontinue sales or lose market share in the markets for which they purchase our products, all of which may alter partners’ or customers’ purchasing patterns. Many of our customers often do not purchase directly from us but purchase through multiple OEMs, ODMs, system integrators, distributors and other channel partners. One indirect customer which primarily purchases our products through system integrators and distributors, including through Customer A, is estimated to have represented approximately 19% of total revenue for fiscal year 2024, attributable to the 23Table of ContentsCompute & Networking segment. If end demand increases or our finished goods supply availability is concentrated near a quarter end, the system integrators, distributors and channel partners may have limited ability to increase their credit, which could impact the timing and amount of our revenue. The loss of any of our large customers, a significant reduction in purchases by them, our inability to sell to a customer due to U.S. or other countries’ trade restrictions or any difficulties in collecting accounts receivable would likely harm our financial condition and results of operations.If we are unable to attract, retain and motivate our executives and key employees, our business may be harmed.To be competitive and execute our business strategy successfully, we must attract, retain and motivate our executives and key employees and recruit and develop capable and diverse talent. Labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, cost inflation and workforce participation rates. Changes in immigration and work permit regulations or in their administration or interpretation could impair our ability to attract and retain qualified employees. Competition for personnel results in increased costs in the form of cash and stock-based compensation, and in times of stock price volatility, as we have experienced in the past and may experience in the future, the retentive value of our stock-based compensation may decrease. Additionally, we are highly dependent on the services of our longstanding executive team. Failure to ensure effective succession planning, transfer of knowledge and smooth transitions involving executives and key employees could hinder our strategic planning and execution and long-term success.Our business is dependent upon the proper functioning of our business processes and information systems and modification or interruption of such systems may disrupt our business, and internal controls.We rely upon internal processes and information systems to support key business functions, including our assessment of internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. The efficient operation and scalability of these processes and systems is critical to support our growth. We continue to design and implement updated accounting functionality related to a new enterprise resource planning, or ERP, system. Any ERP system implementation may introduce problems, such as quality issues or programming errors, that could have an impact on our continued ability to successfully operate our business or to timely and accurately report our financial results. These changes may be costly and disruptive to our operations and could impose substantial demands on management time. Failure to implement new or updated controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.Identification of material weaknesses in our internal controls, even if quickly remediated once disclosed, may cause investors to lose confidence in our financial statements and our stock price may decline. Remediation of any material weakness could require us to incur significant expenses, and if we fail to remediate any material weakness, our financial statements may be inaccurate, we may be required to restate our financial statements, our ability to report our financial results on a timely and accurate basis may be adversely affected, our access to the capital markets may be restricted, our stock price may decline, and we may be subject to sanctions or investigation by regulatory authorities.Our operating results have in the past fluctuated and may in the future fluctuate, and if our operating results are below the expectations of securities analysts or investors, our stock price could decline.Our operating results have in the past fluctuated and may continue to fluctuate due to numerous of these risk factors. Therefore, investors should not rely on our past results of operations as an indication of our future performance. Additional factors that could affect our results of operations include, but are not limited to:•our ability to adjust spending due to the multi-year development cycle for some of our products and services;•our ability to comply with our contractual obligations to customers;•our extended payment term arrangements with certain customers, the inability of some customers to make required payments, our ability to obtain credit insurance for customers with extended payment terms, and customer bad debt write-offs;•our vendors' payment requirements;•unanticipated costs associated with environmental liabilities; and•changes in financial accounting standards or interpretations of existing standards.Any of the factors discussed above could prevent us from achieving our anticipated financial results. For example, we have granted and may continue to grant extended payment terms to some customers, particularly during macroeconomic downturns, which could impact our ability to collect payment. Our vendors have requested and may continue to ask for shorter payment terms, which may impact our cash flow generation. These arrangements reduce the cash we have available for general business operations. In addition, the pace of growth in our operating expenses and investments may lag our revenue growth, creating volatility or periods where profitability levels may not be sustainable. Failure to meet our expectations or the expectations of our investors or security analysts is likely to cause our stock price to decline, as it has in the past, or experience substantial price volatility.24Table of ContentsRisks Related to Regulatory, Legal, Our Stock and Other MattersOur operations could be affected by the complex laws, rules and regulations to which our business is subject, and political and other actions may adversely impact our business.We are subject to laws and regulations domestically and worldwide, affecting our operations in areas including, but not limited to, IP ownership and infringement; taxes; import and export requirements and tariffs; anti-corruption, including the Foreign Corrupt Practices Act; business acquisitions; foreign exchange controls and cash repatriation restrictions; data privacy requirements; competition and antitrust; advertising; employment; product regulations; cybersecurity; environmental, health, and safety requirements; the responsible use of AI; sustainability; cryptocurrency; and consumer laws. Compliance with such requirements can be onerous and expensive, could impact our competitive position, and may negatively impact our business operations and ability to manufacture and ship our products. There can be no assurance that our employees, contractors, suppliers, customers or agents will not violate applicable laws or the policies, controls, and procedures that we have designed to help ensure compliance with such laws, and violations could result in fines, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business, and damage to our reputation. Changes to the laws, rules and regulations to which we are subject, or changes to their interpretation and enforcement, could lead to materially greater compliance and other costs and/or further restrictions on our ability to manufacture and supply our products and operate our business. For example, we may face increased compliance costs as a result of changes or increases in antitrust legislation, regulation, administrative rule making, increased focus from regulators on cybersecurity vulnerabilities and risks. Our position in markets relating to AI has led to increased interest in our business from regulators worldwide, including the European Union, the United States, the United Kingdom and China. For example, the French Competition Authority collected information from us regarding our business and competition in the graphics card and cloud service provider market as part of an ongoing inquiry into competition in those markets. We have also received requests for information from regulators in the European Union, the United Kingdom, and China regarding our sales of GPUs, our efforts to allocate supply, foundation models and our investments, partnerships and other agreements with companies developing foundation models, and we expect to receive additional requests for information in the future. Governments and regulators are considering imposing restrictions on the hardware, software, and systems used to develop frontier foundation models and generative AI. If implemented, such restrictions could increase the costs and burdens to us and our customers, delay or halt deployment of new systems using our products, and reduce the number of new entrants and customers, negatively impacting our business and financial results. Revisions to laws or regulations or their interpretation and enforcement could also result in increased taxation, trade sanctions, the imposition of or increase to import duties or tariffs, restrictions and controls on imports or exports, or other retaliatory actions, which could have an adverse effect on our business plans or impact the timing of our shipments. Additionally, changes in the public perception of governments in the regions where we operate or plan to operate could negatively impact our business and results of operations.Government actions, including trade protection and national and economic security policies of U.S. and foreign government bodies, such as tariffs, import or export regulations, including deemed export restrictions and restrictions on the activities of U.S. persons, trade and economic sanctions, decrees, quotas or other trade barriers and restrictions could affect our ability to ship products, provide services to our customers and employees, do business without an export license with entities on the U.S. Department of Commerce’s U.S. Entity List or other USG restricted parties lists (which is expected to change from time to time), and generally fulfill our contractual obligations and have a material adverse effect on our business. If we were ever found to have violated export control laws or sanctions of the U.S. or similar applicable non-U.S. laws, even if the violation occurred without our knowledge, we may be subject to various penalties available under the laws, any of which could have a material and adverse impact on our business, operating results and financial condition.For example, in response to the war in Ukraine, the United States and other jurisdictions imposed economic sanctions and export control measures which blocked the passage of our products, services and support into Russia, Belarus, and certain regions of Ukraine. In fiscal year 2023, we stopped direct sales to Russia and closed business operations in Russia. Concurrently, the war in Ukraine has impacted sales in EMEA and may continue to do so in the future.The increasing focus on the risks and strategic importance of AI technologies has resulted in regulatory restrictions that target products and services capable of enabling or facilitating AI and may in the future result in additional restrictions impacting some or all of our product and service offerings.Concerns regarding third-party use of AI for purposes contrary to local governmental interests, including concerns relating to the misuse of AI applications, models, and solutions, has resulted in and could in the future result in unilateral or multilateral restrictions on products that can be used for training, modifying, tuning, and deploying LLMs. Such restrictions have limited and could in the future limit the ability of downstream customers and users worldwide to acquire, deploy and use systems that include our products, software, and services, and negatively impact our business and financial results.Such restrictions could include additional unilateral or multilateral export controls on certain products or technology, including but not limited to AI technologies. As geopolitical tensions have increased, semiconductors associated with AI, including GPUs and associated products, are increasingly the focus of export control restrictions proposed by stakeholders in the U.S. and its allies. The United States has imposed unilateral controls restricting GPUs and associated 25Table of Contentsproducts, and it is likely that additional unilateral or multilateral controls will be adopted. Such controls have been and may again be very broad in scope and application, prohibit us from exporting our products to any or all customers in one or more markets, including but not limited to China, and could negatively impact our manufacturing, testing and warehousing locations and options, or could impose other conditions that limit our ability to serve demand abroad and could negatively and materially impact our business, revenue and financial results. Export controls targeting GPUs and semiconductors associated with AI, which have been imposed and are increasingly likely to be further tightened, would further restrict our ability to export our technology, products, or services even though competitors may not be subject to similar restrictions, creating a competitive disadvantage for us and negatively impacting our business and financial results. Export controls targeting GPUs and semiconductors associated with AI have subjected and may in the future subject downstream users of our products to additional restrictions on the use, resale, repair, or transfer of our products, negatively impacting our business and financial results. Controls could negatively impact our cost and/or ability to provide services such as NVIDIA AI cloud services and could impact the cost and/or ability for our cloud service providers and customers to provide services to their end customers, even outside China.Export controls could disrupt our supply chain and distribution channels, negatively impacting our ability to serve demand, including in markets outside China and for our gaming products. The possibility of additional export controls has negatively impacted and may in the future negatively impact demand for our products, benefiting competitors that offer alternatives less likely to be restricted by further controls. Repeated changes in the export control rules are likely to impose compliance burdens on our business and our customers, negatively and materially impacting our business.Increasing use of economic sanctions and export controls has impacted and may in the future impact demand for our products or services, negatively impacting our business and financial results. Reduced demand due to export controls could also lead to excess inventory or cause us to incur related supply charges. Additional unilateral or multilateral controls are also likely to include deemed export control limitations that negatively impact the ability of our research and development teams to execute our roadmap or other objectives in a timely manner. Additional export restrictions may not only impact our ability to serve overseas markets, but also provoke responses from foreign governments, including China, that negatively impact our supply chain or our ability to provide our products and services to customers in all markets worldwide, which could also substantially reduce our revenue. Regulators in China have inquired about our sales and efforts to supply the China market and our fulfillment of the commitments we entered at the close of our Mellanox acquisition. If the regulators conclude that we have failed to fulfill such commitments or we have violated any applicable law in China, we could be subject to various penalties or restrictions on our ability to conduct our business, any of which could have a material and adverse impact on our business, operating results and financial condition.During the third quarter of fiscal year 2023, the USG announced export restrictions and export licensing requirements targeting China’s semiconductor and supercomputing industries. These restrictions impact exports of certain chips, as well as software, hardware, equipment and technology used to develop, produce and manufacture certain chips to China (including Hong Kong and Macau) and Russia, and specifically impact our A100 and H100 integrated circuits, DGX or any other systems or boards which incorporate A100 or H100 integrated circuits. The licensing requirements also apply to any future NVIDIA integrated circuit achieving certain peak performance and chip-to-chip I/O performance thresholds, as well as any system or board that includes those circuits. There are also now licensing requirements to export a wide array of products, including networking products, destined for certain end users and for certain end uses in China. During the second quarter of fiscal year 2024, the USG also informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.In October 2023, the USG announced new and updated licensing requirements that became effective in our fourth quarter of fiscal year 2024 for exports to China and Country Groups D1, D4, and D5 (including but not limited to, Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of our products exceeding certain performance thresholds, including A100, A800, H100, H800, L4, L40, L40S and RTX 4090. The licensing requirements also apply to the export of products exceeding certain performance thresholds to a party headquartered in, or with an ultimate parent headquartered in, Country Group D5, including China. On October 23, 2023, the USG informed us that the licensing requirements were effective immediately for shipments of our A100, A800, H100, H800, and L40S products. We have not received licenses to ship these restricted products to China.Following these export controls, we transitioned some operations, including certain testing, validation, and supply and distribution operations out of China and Hong Kong. Any future transitions could be costly and time consuming, and adversely affect our research and development and supply and distribution operations, as well as our revenue, during any such transition period. We are working to expand our Data Center product portfolio to offer new solutions, including those for which the USG does not require a license or advance notice before each shipment. To the extent that a customer requires products covered by the licensing requirements, we may seek a license for the customer. However, the licensing process is time-consuming. We have no assurance that the USG will grant such a license or that the USG will act on the license application in a timely manner or at all. Even if a license is offered, it may impose burdensome conditions that we or our customer or end users cannot or decide not to accept. The USG is evaluating license requests in a closed process that does not have clear standards or an opportunity for review. For example, the Notified Advanced Computing, or “NAC,” process has not resulted in approvals for exports of products to customers in China. The license process for exports to D1 and D4 countries has been time-consuming and resulted in license conditions for countries outside China. The requirements have a disproportionate impact on NVIDIA and already have disadvantaged and may in the future 26Table of Contentsdisadvantage NVIDIA against certain of our competitors who sell products that are not subject to the new restrictions or may be able to acquire licenses for their products.Management of these new licenses and other requirements is complicated and time consuming. Our competitive position has been harmed, and our competitive position and future results may be further harmed, over the long-term, if there are further changes in the USG’s export controls, including further expansion of the geographic, customer, or product scope of the controls, if customers purchase product from competitors, if customers develop their own internal solution, if we are unable to provide contractual warranty or other extended service obligations, if the USG does not grant licenses in a timely manner or denies licenses to significant customers or if we incur significant transition costs. Even if the USG grants any requested licenses, the licenses may be temporary or impose burdensome conditions that we or our customers or end users cannot or choose not to fulfill. The licensing requirements may benefit certain of our competitors, as the licensing process will make our pre-sale and post-sale technical support efforts more cumbersome and less certain and encourage customers in China to pursue alternatives to our products, including semiconductor suppliers based in China, Europe, and Israel.Given the increasing strategic importance of AI and rising geopolitical tensions, the USG has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results. In the event of such change, we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements, effectively excluding us from all or part of the China market, as well as other impacted markets, including the Middle East. For example, the USG has already imposed conditions to limit the ability of foreign firms to create and offer as a service large-scale GPU clusters, for example by imposing license conditions on the use of products to be exported to certain countries, or by requiring chip tracking and throttling mechanisms that would disable or impair GPUs if certain system or use conditions are detected. The USG has already imposed export controls restricting certain gaming GPUs, and if the USG expands such controls to restrict additional gaming products, it may disrupt a significant portion of our supply and distribution chain and negatively impact sales of such products to markets outside China, including the U.S. and Europe. Export controls may disrupt our supply and distribution chain for a substantial portion of our products, which are warehoused in and distributed from Hong Kong. Export controls restricting our ability to sell datacenter GPUs may also negatively impact demand for our networking products used in servers containing our GPUs. The USG may also impose export controls on our networking products, such as high-speed network interconnects, to limit the ability of downstream parties to create large clusters for frontier model training. Any new control that impacts a wider range of our products would likely have a disproportionate impact on NVIDIA and may disadvantage us against certain of our competitors that sell chips that are outside the scope of such control. Excessive or shifting export controls have already and may in the future encourage customers outside China and other impacted regions to “design-out” certain U.S. semiconductors from their products to reduce the compliance burden and risk, and to ensure that they are able to serve markets worldwide. Excessive or shifting export controls have already encouraged and may in the future encourage overseas governments to request that our customers purchase from our competitors rather than NVIDIA or other U.S. firms, harming our business, market position, and financial results. As a result, excessive or shifting export controls may negatively impact demand for our products and services not only in China, but also in other markets, such as Europe, Latin America, and Southeast Asia. Excessive or shifting export controls increase the risk of investing in U.S. advanced semiconductor products, because by the time a new product is ready for market, it may be subject to new unilateral export controls restricting its sale. At the same time, such controls may increase investment in foreign competitors, which would be less likely to be restricted by U.S. controls.Additionally, restrictions imposed by the Chinese government on the duration of gaming activities and access to games may adversely affect our Gaming revenue, and increased oversight of digital platform companies may adversely affect our Data Center revenue. The Chinese government may impose restrictions on the sale to certain customers of our products, or any products containing components made by our partners and suppliers. For example, the Chinese government announced restrictions relating to certain sales of products containing certain products made by Micron, a supplier of ours. Further restrictions on our products or the products of our suppliers could negatively impact our business and financial results.Finally, our business depends on our ability to receive consistent and reliable supply from our overseas partners, especially in Taiwan. Any new restrictions that negatively impact our ability to receive supply of components, parts, or services from Taiwan, would negatively impact our business and financial results.Increased scrutiny from shareholders, regulators and others regarding our corporate sustainability practices could result in additional costs or risks and adversely impact our reputation and willingness of customers and suppliers to do business with us.Shareholder advocacy groups, certain investment funds, other market participants, shareholders, customers and government regulators have focused increasingly on corporate sustainability practices and disclosures, including those associated with climate change and human rights. Stakeholders may not be satisfied with our corporate sustainability practices and goals or the speed of their adoption. Further, there is an increasing number of state-level initiatives in the U.S. that may conflict with other regulatory requirements or our various stakeholders’ expectations. Additionally, our corporate sustainability practices, oversight of our practices or disclosure controls may not meet evolving shareholder, 27Table of Contentsregulator or other industry stakeholder expectations, or we may fail to meet corporate sustainability disclosure or reporting standards. We could also incur additional costs and require additional resources to monitor, report, and comply with various corporate sustainability practices, choose not to conduct business with potential customers, or discontinue or not expand business with existing customers due to our policies. These factors may negatively harm our brand, reputation and business activities or expose us to liability.Issues relating to the responsible use of our technologies, including AI in our offerings, may result in reputational or financial harm and liability.Concerns relating to the responsible use of new and evolving technologies, such as AI, in our products and services may result in reputational or financial harm and liability and may cause us to incur costs to resolve such issues. We are increasingly building AI capabilities and protections into many of our products and services, and we also offer stand-alone AI applications. AI poses emerging legal, social, and ethical issues and presents risks and challenges that could affect its adoption, and therefore our business. If we enable or offer solutions that draw controversy due to their perceived or actual impact on society, such as AI solutions that have unintended consequences, infringe copyright or rights of publicity, or are controversial because of their impact on human rights, privacy, employment or other social, economic or political issues, or if we are unable to develop effective internal policies and frameworks relating to the responsible development and use of AI models and systems offered through our sales channels, we may experience brand or reputational harm, competitive harm or legal liability. Complying with multiple regulations from different jurisdictions related to AI could increase our cost of doing business, may change the way that we operate in certain jurisdictions, or may impede our ability to offer certain products and services in certain jurisdictions if we are unable to comply with regulations. Compliance with existing and proposed government regulation of AI, including in jurisdictions such as the European Union as well as under any U.S. regulation adopted in response to the Biden administration’s Executive Order on AI, may also increase the cost of related research and development, and create additional reporting and/or transparency requirements. For example, regulation adopted in response to the Executive Order on AI could require us to notify the USG of certain safety test results and other information. Furthermore, changes in AI-related regulation could disproportionately impact and disadvantage us and require us to change our business practices, which may negatively impact our financial results. Our failure to adequately address concerns and regulations relating to the responsible use of AI by us or others could undermine public confidence in AI and slow adoption of AI in our products and services or cause reputational or financial harm.Actions to adequately protect our IP rights could result in substantial costs to us and our ability to compete could be harmed if we are unsuccessful or if we are prohibited from making or selling our products.From time to time, we are involved in lawsuits or other legal proceedings alleging patent infringement or other IP rights violations by us, our employees or parties that we have agreed to indemnify. An unfavorable ruling could include significant damages, invalidation of one or more patents, indemnification of third parties, payment of lost profits, or injunctive relief. Claims that our products or processes infringe the IP rights of others, regardless of their merit, could cause us to incur significant costs to respond to, defend, and resolve such claims, and they may also divert the efforts and attention of management and technical personnel.We may commence legal proceedings to protect our IP rights, which may increase our operating expenses. We could be subject to countersuits as a result. If infringement claims are made against us or our products are found to infringe a third party’s IP, we or one of our indemnitees may have to seek a license to the third party’s IP rights. If we or one of our indemnitees is unable to obtain such a license on acceptable terms or at all, we could be subject to substantial liabilities or have to suspend or discontinue the manufacture and sale of one or more of our products. We may also have to make royalty or other payments or cross license our technology. If these arrangements are not concluded on commercially reasonable terms, our business could be negatively impacted. Furthermore, the indemnification of a customer or other indemnitee may increase our operating expenses and negatively impact our operating results.We rely on patents, trademarks, trade secrets, employee and third-party nondisclosure agreements, licensing arrangements and the laws of the countries in which we operate to protect our IP. Foreign laws may not protect our products or IP rights to the same extent as United States law. This makes the possibility of piracy of our technology and products more likely. The theft or unauthorized use or publication of our trade secrets and other confidential information could harm our competitive position and reduce acceptance of our products; as a result, the value of our investment in research and development, product development and marketing could be reduced. We also may face risks to our IP if our employees are hired by competitors. We continuously assess whether and where to seek formal protection for existing and new innovations and technologies but cannot be certain whether our applications for such protections will be approved, and, if approved, whether they will be enforceable.We are subject to stringent and changing data privacy and security laws, rules, regulations and other obligations. These areas could damage our reputation, deter current and potential customers, affect our product design, or result in legal or regulatory proceedings and liability.We process sensitive, confidential or personal data or information that is subject to privacy and security laws, regulations, industry standards, external and internal policies, contracts and other obligations that govern the processing of such data by us and on our behalf. Concerns about our practices or the ultimate use of our products and services with regard 28Table of Contentsto the collection, use, retention, security or disclosure of personal information or other privacy-related matters, including for use in AI, even if unfounded, could damage our reputation and adversely affect our operating results. The theft, loss or misuse of personal data in our possession or by one of our partners could result in damage to our reputation, regulatory proceedings, disruption of our business activities or increased security costs and costs related to defending legal claims.In the United States, federal, state and local authorities have enacted numerous data privacy and security laws, including for data breach notification, personal data privacy and consumer protection. In the past few years, numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020, or CPRA, or collectively the CCPA, gives California residents the right to access, delete and opt-out of certain sharing of their personal information, and to receive detailed information about how it is used and shared. The CCPA provides for fines of up to $7,500 per intentional violation and the law created a private right of action for certain data breaches. Similar laws are being considered in several other states, as well as at the federal and local levels. Additionally, several states and localities have enacted measures related to the use of artificial intelligence and machine learning in products and services. If we become subject to additional data privacy laws, the risk of enforcement action against us could increase. Worldwide regulatory authorities are also considering and have approved various legislative proposals concerning data protection. The European Union adopted the General Data Protection Regulation, or GDPR, and the United Kingdom similarly adopted the U.K. GDPR, governing the strict handling of personal data of persons within the European Economic Area, or EEA, and the United Kingdom, respectively, including its use and protection and the ability of persons whose data is stored to access, correct, and delete such data about themselves. If we are found not to comply, we could be subject to penalties of up to €20 million or 4% of worldwide revenue, whichever is greater, and classes of individuals or consumer protection organizations may initiate litigation related to our processing of their personal data. Furthermore, the EU AI Act could impose onerous obligations that may disproportionately impact and disadvantage us and require us to change our business practices.In the ordinary course of business, we may transfer personal data from Europe, China, and other jurisdictions to the United States or other countries. Certain jurisdictions have enacted data localization laws and cross-border personal data transfer laws. For example, the GDPR generally restricts the transfer of personal data to countries outside of the EEA. The European Commission released a set of “Standard Contractual Clauses” designed for entities to validly transfer personal data out of the EEA to jurisdictions that the European Commission has not found to provide an adequate level of protection, including the United States. Additionally, the U.K.’s International Data Transfer Agreement / Addendum, as well as the EU-U.S. Data Privacy Framework and the U.K. extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework) are mechanisms that may be used to transfer personal data from the EEA and U.K. to the United States. However, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. Other jurisdictions have enacted or are considering similar cross-border personal data transfer laws and local personal data residency laws, any of which would increase the cost and complexity of doing business and could result in fines from regulators. For example, China’s law imposes various requirements relating to data processing and data localization. Data broadly defined as important under China’s law, including personal data, may not be transferable outside of China without prior assessment and approval by the Cyberspace Administration of China, or CAC. Compliance with these requirements, including CAC assessments and any deemed failures of such assessments, could cause us to incur liability, prevent us from using data collected in China or impact our ability to transfer data outside of China. The inability to import personal data to the United States could significantly and negatively impact our business operations, limit our ability to collaborate with parties that are subject to European, China and other data privacy and security laws, or require us to increase our personal data processing capabilities in Europe and/or elsewhere at significant expense. Some European regulators have prevented companies from transferring personal data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations, which could negatively impact our business.We may also be bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful or may be claimed to be non-compliant. For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers. We sometimes host personal data in collaboration with our customers, and if a breach exposed or altered that personal data, it could harm those customer relationships and subject us to litigation, regulatory action, or fines. We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.29Table of ContentsData protection laws around the world are quickly changing and may be interpreted and applied in an increasingly stringent fashion and in a manner that is inconsistent with our data practices. These obligations may affect our product design and necessitate changes to our information technologies, systems and practices and to those of any third parties that process personal data on our behalf. Despite our efforts, we or third parties we rely upon may fail to comply with such obligations. If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences, including but not limited to, government enforcement actions, litigation, additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal data. Any of these events could have a material adverse effect on our reputation, business, or financial condition.We may have exposure to additional tax liabilities and our operating results may be adversely impacted by changes in tax laws, higher than expected tax rates and other tax-related factors.We are subject to complex income tax laws and regulations, as well as non-income-based taxes, in various jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. We are regularly under audit by tax authorities in different jurisdictions. Although we believe our tax estimates are reasonable, any adverse outcome could increase our worldwide effective tax rate, increase the amount of non-income taxes imposed on our business, and harm our financial position, results of operations, net income, and cash flows.Further, changes in tax laws or their interpretation by tax authorities in the U.S. or foreign jurisdictions could increase our future tax liability or cause other adverse tax impacts, which may materially impact our results of operations, or the way we conduct our business. Most of our income is taxable in the United States, with a significant portion qualifying for preferential treatment as foreign-derived intangible income, or FDII. If U.S. tax rates increase or the FDII deduction is reduced, our provision for income taxes, results of operations, net income and cash flows would be adversely affected. In addition, changes in the tax laws of foreign jurisdictions could arise as a result of global implementation of the Inclusive Framework on Base Erosion and Profit Shifting and Pillar Two Model Rules announced by The Organization for Economic Cooperation and Development, or OECD. These and other changes in the foreign tax laws, as adopted by countries, may increase tax uncertainty and adversely affect our provision for income taxes, results of operations, and financial condition.Our future effective tax rate may also be affected by a variety of factors, including changes in our business or statutory rates, the mix of earnings in countries with differing statutory tax rates, available tax incentives, credits and deductions, the expiration of statutes of limitations, changes in accounting principles, adjustments to income taxes upon finalization of tax returns, increases in expenses not deductible for tax purposes, the estimates of our deferred tax assets and liabilities and deferred tax asset valuation allowances, changing interpretation of existing laws or regulations, the impact of accounting for business combinations, as well as changes in the domestic or international organization of our business and structure. Furthermore, the tax effects of accounting for stock-based compensation and volatility in our stock price may significantly impact our effective tax rate in the period in which they occur. A decline in our stock price may result in reduced future tax benefits from stock-based compensation, increase our effective tax rate and adversely affect our financial results.Our business is exposed to the risks associated with litigation, investigations and regulatory proceedings.We currently and will likely continue to face legal, administrative and regulatory proceedings, claims, demands and/or investigations involving shareholder, consumer, competition and/or other issues relating to our business. For example, we are defending a securities class action lawsuit from multiple shareholders asserting claims that we and certain of our officers made false and/or misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand in 2017 and 2018. Litigation and regulatory proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages or fines, or an injunction stopping us from manufacturing or selling certain products, engaging in certain business practices, or requiring other remedies, such as compulsory licensing of patents. An unfavorable outcome or settlement may result in a material adverse impact. Regardless of the outcome, litigation can be costly, time-consuming, and disruptive to our operations.Our indebtedness could adversely affect our financial position and cash flows from operations, and prevent us from implementing our strategy or fulfilling our contractual obligations.As of January 28, 2024, we had net outstanding a total of $9.7 billion in notes due by 2060. As each series of senior notes matures, unless redeemed or repurchased, we must repay or refinance the notes. If we decide to refinance, we may receive less favorable terms, or we may be unable to refinance at all, which may adversely affect our financial condition. We also have a $575 million commercial paper program.Maintenance of our current and future indebtedness and contractual restrictions could cause us to dedicate a substantial portion of our cash flows from operations towards debt service obligations and principal repayments; increase our vulnerability to adverse changes in general economic, industry and competitive conditions; limit our flexibility regarding changes in our business and our industry; impair our ability to obtain future financing; and restrict our ability to grant liens on property, enter into certain mergers, dispose of our assets, or materially change our business.Our ability to comply with the covenants in our indenture may be affected by events beyond our control. If we breach any of the covenants without a waiver from the note holders or lenders, then any outstanding indebtedness may be declared 30Table of Contentsimmediately due and payable. Changes to our credit rating may negatively impact the value and liquidity of our securities, restrict our ability to obtain future financing and affect the terms of any such financing.Delaware law and our certificate of incorporation, bylaws and agreement with Microsoft could delay or prevent a change in control.The anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control. Provisions in our certificate of incorporation and bylaws could make it more difficult for a third party to acquire a majority of our outstanding stock. These provisions include the ability of our Board of Directors to create and issue preferred stock, change the number of directors, and to make, amend or repeal our bylaws without prior shareholder approval; the inability of our shareholders to act by written consent or call special meetings; advance notice requirements for director nominations and shareholder proposals; and a super-majority voting requirement to amend some provisions in our certificate of incorporation and bylaws. Under our agreement with Microsoft for the Xbox, if someone makes an offer to purchase at least 30% of our outstanding common stock, Microsoft may have first and last rights of refusal to purchase the stock. These provisions could delay or prevent a change in control of NVIDIA, discourage proxy contests, and make it more difficult for shareholders to elect directors of their choosing and to cause us to take other corporate actions they desire.Item 1B. Unresolved Staff CommentsNot applicable.Item 1C. CybersecurityRisk management and strategyWe have in place certain infrastructure, systems, policies, and procedures that are designed to proactively and reactively address circumstances that arise when unexpected events such as a cybersecurity incident occur. These include processes for assessing, identifying, and managing material risks from cybersecurity threats. Our information security management program generally follows processes outlined in frameworks such as the ISO 27001 international standard for Information Security and we evaluate and evolve our security measures as appropriate. We consult with external parties, such as cybersecurity firms and risk management and governance experts, on risk management and strategy.Identifying, assessing, and managing cybersecurity risk is integrated into our overall risk management systems and processes, and we have in place cybersecurity and data privacy training and policies designed to (a) respond to new requirements in global privacy laws and (b) prevent, detect, respond to, mitigate and recover from identified and significant cybersecurity threats.We also have a vendor risk assessment process consisting of the distribution and review of supplier questionnaires designed to help us evaluate cybersecurity risks that we may encounter when working with third parties that have access to confidential and other sensitive company information. We take steps designed to ensure that such vendors have implemented data privacy and security controls that help mitigate the cybersecurity risks associated with these vendors. We routinely assess our high-risk suppliers’ conformance to industry standards (e.g., ISO 27001, ISO 28001, and C-TPAT), and we evaluate them for additional information, product, and physical security requirements.Refer to “Item 1A. Risk factors” in this annual report on Form 10-K for additional information about cybersecurity-related risks.GovernanceInformation security matters, including managing and assessing risks from cybersecurity threats, remain under the oversight of the Company’s Board of Directors, or the Board. The Audit Committee of the Board, or the Audit Committee, also reviews the adequacy and effectiveness of the Company’s information security policies and practices and the internal controls regarding information security risks. The Audit Committee receives regular information security updates from management, including our Chief Security Officer and members of our security team. The Board also receives annual reports on information security matters from our Chief Security Officer and members of our security team.Our security efforts are managed by a team of executive cybersecurity, IT, engineering, operations, and legal professionals. We have established a cross-functional leadership team, consisting of executive-level leaders, that meets regularly to review cybersecurity matters and evaluate emerging threats. With oversight and guidance provided by the cross-functional leadership team, our information security teams refine our practices to address emerging security risks and changes in regulations. Our executive-level leadership team also participates in cybersecurity incident response efforts by engaging with the incident response team and helping direct the company’s response to and assessment of certain cybersecurity incidents.We have designated a Chief Security Officer that reports to our Senior Vice President of Software Engineering to manage our assessment and management of material risks from cybersecurity threats. Our Chief Security Officer’s cybersecurity expertise includes over 17 years of combined government and private sector assignments. 31Table of ContentsItem 2. PropertiesOur headquarters is in Santa Clara, California. We own and lease approximately 3 million square feet of office and building space for our corporate headquarters. In addition, we lease data center space in Santa Clara, California. We also own and lease facilities for data centers, research and development, and/or sales and administrative purposes throughout the U.S. and in various international locations, primarily in China, India, Israel, and Taiwan. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business. We do not identify or allocate assets by operating segment. For additional information regarding obligations under leases, refer to Note 3 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K, which information is hereby incorporated by reference.Item 3. Legal ProceedingsPlease see Note 13 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a discussion of our legal proceedings.Item 4. Mine Safety DisclosuresNot applicable.Part IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock is traded on the Nasdaq Global Select Market under the symbol NVDA. Public trading of our common stock began on January 22, 1999. Prior to that, there was no public market for our common stock. As of February 16, 2024, we had approximately 382 registered shareholders, not including those shares held in street or nominee name. Issuer Purchases of Equity SecuritiesIn August 2023, our Board of Directors approved an increase to our share repurchase program of an additional $25.0 billion, without expiration. During fiscal year 2024, we repurchased 21 million shares of our common stock for $9.7 billion. As of January 28, 2024, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $22.5 billion.The repurchases can be made in the open market, in privately negotiated transactions, pursuant to a Rule 10b5-1 trading plan or in structured share repurchase programs, and can be made in one or more larger repurchases, in compliance with Rule 10b-18 of the Exchange Act, subject to market conditions, applicable legal requirements, and other factors. The program does not obligate NVIDIA to acquire any particular amount of common stock and the program may be suspended at any time at our discretion.In fiscal year 2024, we paid $395 million in quarterly cash dividends. Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors' continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.The following table presents details of our share repurchase transactions during the fourth quarter of fiscal year 2024:PeriodTotal Number of Shares Purchased (In millions)Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Program (In millions)Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In billions)October 30, 2023 - November 26, 20230.9 $464.39 0.9 $24.8 November 27, 2023 - December 24, 20231.1 $477.26 1.1 $24.3 December 25, 2023 - January 28, 20243.3 $540.85 3.3 $22.5 Total5.3 5.3 From January 29, 2024 to February 16, 2024, we repurchased 2.8 million shares for $1.9 billion pursuant to a Rule 10b5-1 trading plan.Restricted Stock Unit Share WithholdingWe withhold common stock shares associated with net share settlements to cover tax withholding obligations upon the vesting of RSU awards under our employee equity incentive program. During fiscal year 2024, we withheld 32Table of Contentsapproximately 7 million shares for a total value of $2.8 billion through net share settlements. Refer to Note 4 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for further discussion regarding our equity incentive plans.Stock Performance Graphs The following graph compares the cumulative total shareholder return for our common stock, the S&P 500 Index, and the Nasdaq 100 Index for the five years ended January 28, 2024. The graph assumes that $100 was invested on January 27, 2019 in our common stock and in each of the S&P 500 Index and the Nasdaq 100 Index. Our common stock is a component of each of the presented indices. Total return assumes reinvestment of dividends in each of the indices indicated. Total return is based on historical results and is not intended to indicate future performance.*$100 invested on 1/27/19 in stock and in indices, including reinvestment of dividends. Source: FactSet financial data and analytics. 1/27/20191/26/20201/31/20211/30/20221/29/20231/28/2024NVIDIA Corporation$100.00 $157.02 $326.26 $574.15 $512.40 $1,536.28 S&P 500$100.00 $126.17 $144.83 $175.25 $163.63 $199.83 Nasdaq 100$100.00 $136.15 $194.20 $218.68 $185.67 $268.13 Item 6. [Reserved]33Table of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Item 1A. Risk Factors”, our Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Annual Report on Form 10-K, before deciding to purchase, hold or sell shares of our common stock. OverviewOur Company and Our BusinessesNVIDIA pioneered accelerated computing to help solve the most challenging computational problems. Since our original focus on PC graphics, we have expanded to several other large and important computationally intensive fields. NVIDIA has leveraged its GPU architecture to create platforms for accelerated computing, AI solutions, scientific computing, data science, AV, robotics, metaverse and 3D internet applications.Our two operating segments are "Compute & Networking" and "Graphics." Refer to Note 17 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998. Recent Developments, Future Objectives and ChallengesDemand and Supply, Product Transitions, and New Products and Business ModelsDemand for our data center systems and products surged in fiscal year 2024. Entering fiscal year 2025, we are gathering customer demand indications across several product transitions. We have demand visibility for our new data center products ramping later in fiscal year 2025. We have increased our supply and capacity purchases with existing suppliers, added new vendors and entered into prepaid manufacturing and capacity agreements. These increased purchase volumes, the number of suppliers, and the integration of new vendors into our supply chain may create more complexity and execution risk. Our purchase commitments and obligations for inventory and manufacturing capacity at the end of fiscal year 2024 were impacted by shortening lead times for certain components. We may continue to enter into new supplier and capacity arrangements. Supply of Hopper architecture products is improving, and demand remains very strong. We expect our next-generation products to be supply-constrained based upon demand indications. We may incur inventory provisions or impairments if our inventory or supply or capacity commitments exceed demand for our products or demand declines.We build finished products and maintain inventory in advance of anticipated demand. While we have entered into long-term supply and capacity commitments, we may not be able to secure sufficient commitments for capacity to address our business needs, or our long-term demand expectations may change. These risks may increase as we shorten our product development cycles, enter new lines of business, or integrate new suppliers or components into our supply chain, creating additional supply chain complexity.Product transitions are complex as we often ship both new and prior architecture products simultaneously and we and our channel partners prepare to ship and support new products. Due to our product introduction cycles, we are almost always in various stages of transitioning the architecture of our Data Center, Professional Visualization, and Gaming products. We will have a broader and faster Data Center product launch cadence to meet a growing and diverse set of AI opportunities. The increased frequency of these transitions may magnify the challenges associated with managing our supply and demand due to manufacturing lead times. Qualification time for new products, customers anticipating product transitions and channel partners reducing channel inventory of prior architectures ahead of new product introductions can create reductions or volatility in our revenue. The increasing frequency and complexity of newly introduced products could result in quality or production issues that could increase inventory provisions, warranty or other costs or result in product delays. Deployment of new products to customers creates additional challenges due to the complexity of our technologies, which has impacted and may in the future impact the timing of customer purchases or otherwise impact our demand. While we have managed prior product transitions and have previously sold multiple product architectures at the same time, these transitions are difficult, may impair our ability to predict demand and impact our supply mix, and we may incur additional costs.We build technology and introduce products for new and innovative use cases and applications such as our NVIDIA DGX Cloud services, Omniverse platform, LLMs, and generative AI models. Our demand estimates for new use cases, applications, and services can be incorrect and create volatility in our revenue or supply levels, and we may not be able to generate significant revenue from these use cases, applications, and services. Recent technologies, such as generative AI models, have emerged, and while they have driven increased demand for Data Center, the long-term trajectory is unknown.34Table of ContentsGlobal TradeDuring the third quarter of fiscal year 2023, the USG, announced licensing requirements that, with certain exceptions, impact exports to China (including Hong Kong and Macau) and Russia of our A100 and H100 integrated circuits, DGX or any other systems or boards which incorporate A100 or H100 integrated circuits.In July 2023, the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.In October 2023, the USG announced new and updated licensing requirements that became effective in our fourth quarter of fiscal year 2024 for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of our products exceeding certain performance thresholds, including A100, A800, H100, H800, L4, L40, L40S and RTX 4090. The licensing requirements also apply to the export of products exceeding certain performance thresholds to a party headquartered in, or with an ultimate parent headquartered in, Country Group D5, including China. On October 23, 2023, the USG informed us the licensing requirements were effective immediately for shipments of our A100, A800, H100, H800, and L40S products. Our sales to China decreased as a percentage of total Data Center revenue from 19% in fiscal year 2023 to 14% in fiscal year 2024.We have not received licenses to ship these restricted products to China. We are working to expand our Data Center product portfolio to offer new solutions, including those for which the USG does not require a license or advance notice before each shipment. We have started to ship alternatives to the China market in small volumes. China represented a mid-single digit percentage of our Data Center revenue in the fourth quarter of fiscal year 2024 due to USG licensing requirements and we expect China to be in a similar range in the first quarter of fiscal year 2025. To the extent that a customer requires products covered by the licensing requirements, we may seek a license for the customer but have no assurance that the USG will grant such a license, or that the USG will act on the license application in a timely manner or at all.Our competitive position has been harmed, and our competitive position and future results may be further harmed in the long term, if there are further changes in the USG’s export controls. Given the increasing strategic importance of AI and rising geopolitical tensions, the USG has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results. In the event of such change, we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements, effectively excluding us from all or part of the China market, as well as other impacted markets, including the Middle East.While we work to enhance the resiliency and redundancy of our supply chain, which is currently concentrated in the Asia-Pacific region, new and existing export controls or changes to existing export controls could limit alternative manufacturing locations and negatively impact our business. Refer to “Item 1A. Risk Factors – Risks Related to Regulatory, Legal, Our Stock and Other Matters” for a discussion of this potential impact.Macroeconomic FactorsMacroeconomic factors, including inflation, increased interest rates, capital market volatility, global supply chain constraints and global economic and geopolitical developments, may have direct and indirect impacts on our results of operations, particularly demand for our products. While difficult to isolate and quantify, these macroeconomic factors can also impact our supply chain and manufacturing costs, employee wages, costs for capital equipment and value of our investments. Our product and solution pricing generally does not fluctuate with short-term changes in our costs. Within our supply chain, we continuously manage product availability and costs with our vendors. Israel and Hamas ConflictWe are monitoring the impact of the geopolitical conflict in and around Israel on our operations, including the health and safety of our approximately 3,700 employees in the region who primarily support the research and development, operations, and sales and marketing of our networking products. Our operating expenses in fiscal year 2024 include expenses for financial support to impacted employees and charitable activity. We believe our global supply chain for our networking products has not experienced any significant impact. Further, in connection with the conflict, a substantial number of our employees in the region have been called-up for active military duty in Israel. Accordingly, some of our employees in Israel have been absent for an extended period and they or others may continue to be absent, which may cause disruption to our product development or operations. We did not experience any significant impact or expense to our business; however, if the conflict is further extended, it could impact future product development, operations, and revenue or create other uncertainty for our business.35Table of ContentsFiscal Year 2024 Summary Year Ended Jan 28, 2024Jan 29, 2023Change($ in millions, except per share data)Revenue$60,922 $26,974 Up 126%Gross margin72.7 %56.9 %Up 15.8 ptsOperating expenses$11,329 $11,132 Up 2%Operating income$32,972 $4,224 Up 681%Net income$29,760 $4,368 Up 581%Net income per diluted share$11.93 $1.74 Up 586%We specialize in markets where our computing platforms can provide tremendous acceleration for applications. These platforms incorporate processors, interconnects, software, algorithms, systems, and services to deliver unique value. Our platforms address four large markets where our expertise is critical: Data Center, Gaming, Professional Visualization, and Automotive.Revenue for fiscal year 2024 was $60.9 billion, up 126% from a year ago.Data Center revenue for fiscal year 2024 was up 217%. Strong demand was driven by enterprise software and consumer internet applications, and multiple industry verticals including automotive, financial services, and healthcare. Customers across industry verticals access NVIDIA AI infrastructure both through the cloud and on-premises. Data Center compute revenue was up 244% in the fiscal year. Networking revenue was up 133% in the fiscal year. Gaming revenue for fiscal year 2024 was up 15%. The increase reflects higher sell-in to partners following the normalization of channel inventory levels and growing demand. Professional Visualization revenue for fiscal year 2024 was up 1%.Automotive revenue for the fiscal year 2024 was up 21%. The increase primarily reflected growth in self-driving platforms.Gross margin increased in fiscal year 2024, primarily driven by Data Center revenue growth and lower net inventory provisions as a percentage of revenue.Operating expenses increased for fiscal year 2024, driven by growth in employees and compensation increases. Fiscal year 2023 also included a $1.4 billion acquisition termination charge related to the proposed Arm transaction.Market Platform HighlightsData Center revenue for fiscal year 2024 was $47.5 billion, up 217% from fiscal year 2023. In Data Center, we launched AI inference platforms that combine our full-stack inference software with NVIDIA Ada, NVIDIA Hopper and NVIDIA Grace Hopper processors optimized for generative AI, LLMs and other AI workloads. We introduced NVIDIA DGX Cloud and AI Foundations to help businesses create and operate custom large language models and generative AI models. As AV algorithms move to video transformers, and more cars are equipped with cameras, we expect NVIDIA’s automotive data center processing demand to grow significantly. We estimate that in fiscal year 2024, approximately 40% of Data Center revenue was for AI inference. In the fourth quarter of fiscal year 2024, large cloud providers represented more than half of our Data Center revenue, supporting both internal workloads and external customers. We announced NVIDIA Spectrum-X, an accelerated networking platform for AI.Gaming revenue for fiscal year 2024 was $10.4 billion, up 15% from fiscal year 2023. In Gaming, we launched the GeForce RTX 4060 and 4070 GPUs based on the NVIDIA Ada Lovelace architecture. We announced NVIDIA Avatar Cloud Engine for Games, a custom AI model foundry service using AI-powered natural language interactions to transform games and launched DLSS 3.5 Ray Reconstruction. Additionally, we released TensorRT-LLM for Windows and launched GeForce RTX 40-Series SUPER GPUs. Gaming reached a milestone of 500 AI-powered RTX games and applications utilizing NVIDIA DLSS, ray tracing and other NVIDIA RTX technologies.Professional Visualization revenue for fiscal year 2024 was $1.6 billion, up 1% from fiscal year 2023. In Professional Visualization, we announced new GPUs based on the NVIDIA RTX Ada Lovelace architecture, and announced NVIDIA Omniverse Cloud, a fully managed service running in Microsoft Azure, for the development and deployment of industrial metaverse applications.Automotive revenue for fiscal year 2024 was $1.1 billion, up 21% from fiscal year 2023. In Automotive, we announced a partnership with MediaTek, which will develop mainstream automotive systems on chips for global OEMs integrating a new NVIDIA GPU chiplet IP for AI and graphics. We furthered our collaboration with Foxconn to develop next-generation 36Table of Contentselectric vehicles, and announced further adoption of NVIDIA DRIVE platform with BYD, XPENG, GWM, Li Auto, ZEEKR and Xiaomi.Critical Accounting EstimatesOur consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, cost of revenue, expenses and related disclosure of contingencies. Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations. We have critical accounting estimates in the areas of inventories, revenue recognition, and income taxes. Refer to Note 1 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a summary of significant accounting policies.InventoriesWe charge cost of sales for inventory provisions to write-down our inventory to the lower of cost or net realizable value or for obsolete or excess inventory, and for excess product purchase commitments. Most of our inventory provisions relate to excess quantities of products or components, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions, which requires management judgment.Situations that may result in excess or obsolete inventory or excess product purchase commitments include changes in business and economic conditions, changes in market conditions, sudden and significant decreases in demand for our products, inventory obsolescence because of changing technology and customer requirements, new product introductions resulting in less demand for existing products or inconsistent spikes in demand, failure to estimate customer demand properly, ordering in advance of historical lead-times, government regulations and the impact of changes in future demand, or increase in demand for competitive products, including competitive actions. Cancellation or deferral of customer purchase orders could result in our holding excess inventory.The net effect on our gross margin from inventory provisions and sales of items previously written down was an unfavorable impact of 2.7% in fiscal year 2024 and 7.5% in fiscal year 2023. Our inventory and capacity purchase commitments are based on forecasts of future customer demand. We account for our third-party manufacturers' lead times and constraints. Our manufacturing lead times can be and have been long, and in some cases, extended beyond twelve months for some products. We may place non-cancellable inventory orders for certain product components in advance of our historical lead times, pay premiums and provide deposits to secure future supply and capacity. We also adjust to other market factors, such as product offerings and pricing actions by our competitors, new product transitions, and macroeconomic conditions - all of which may impact demand for our products.Refer to the Gross Profit and Gross Margin discussion below in this Management's Discussion and Analysis for further discussion.Income TaxesWe are subject to income taxes in the U.S. and foreign jurisdictions. Our calculation of deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the U.S. or foreign jurisdictions where we operate, or changes in other facts or circumstances. In addition, we recognize liabilities for potential U.S. and foreign income tax contingencies based on our estimate of whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit or additional income tax expense in our financial statements accordingly.As of the end of fiscal years 2024 and 2023, we had a valuation allowance of $1.6 billion and $1.5 billion, respectively, related to capital loss carryforwards, and certain state and other deferred tax assets that management determined are not likely to be realized due, in part, to jurisdictional projections of future taxable income, including capital gains. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax assets as income tax benefits during the period.We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.37Table of ContentsRevenue RecognitionRevenue AllowancesFor products sold with a right of return, we record a reduction to revenue by establishing a sales return allowance for estimated product returns at the time revenue is recognized, based primarily on historical return rates. However, if product returns for a fiscal period are anticipated to exceed historical return rates, we may determine that additional sales return allowances are required to reflect our estimated exposure for product returns. Return rights for certain stocking distributors for specific products are contractually limited based on a percentage of prior quarter shipments. For shipments to other customers, we do not allow returns, although we may approve returns for credit or refund based on applicable facts and circumstances.We account for customer programs, which involve rebates and marketing development funds, as a reduction in revenue and accrue for such programs based on the amount we expect to be claimed by customers. Certain customer programs include distributor price incentives or other channel programs for specific products and customer classes which require judgement as to whether the applicable incentives will be attained. Estimates for customer program accruals include a combination of historical attainment and claim rates and may be adjusted based on relevant internal and external factors.License and Development ArrangementsRevenue from License and Development Arrangements is recognized over the period in which the development services are performed. Each fiscal reporting period, we measure progress to completion based on actual cost incurred to date as a percentage of the estimated total cost required to complete each project. Estimated total cost for each project includes a forecast of internal engineer personnel time expected to be incurred and other third-party costs as applicable.Contracts with Multiple Performance ObligationsOur contracts may contain more than one performance obligation. Judgement is required in determining whether each performance obligation within a customer contract is distinct. Except for License and Development Arrangements, NVIDIA products and services function on a standalone basis and do not require a significant amount of integration or interdependency. Therefore, multiple performance obligations contained within a customer contract are considered distinct and are not combined for revenue recognition purposes.We allocate the total transaction price to each distinct performance obligation in a multiple performance obligations arrangement on a relative standalone selling price basis. In certain cases, we can establish standalone selling price based on directly observable prices of products or services sold separately in comparable circumstances to similar customers. If standalone selling price is not directly observable, such as when we do not sell a product or service separately, we determine standalone selling price based on market data and other observable inputs.Change in Accounting EstimateIn February 2023, we assessed the useful lives of our property, plant, and equipment. Based on advances in technology and usage rate, we increased the estimated useful life of a majority of the server, storage, and network equipment from three years to a range of four to five years, and assembly and test equipment from five years to seven years. The estimated effect of this change for fiscal year 2024 was a benefit of $33 million and $102 million for cost of revenue and operating expenses, respectively, which resulted in an increase in operating income of $135 million and net income of $114 million after tax, or $0.05 per both basic and diluted share. Results of OperationsA discussion regarding our financial condition and results of operations for fiscal year 2024 compared to fiscal year 2023 is presented below. A discussion regarding our financial condition and results of operations for fiscal year 2023 compared to fiscal year 2022 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended January 29, 2023, filed with the SEC on February 24, 2023, which is available free of charge on the SEC’s website at http://www.sec.gov and at our investor relations website, http://investor.nvidia.com.38Table of ContentsThe following table sets forth, for the periods indicated, certain items in our Consolidated Statements of Income expressed as a percentage of revenue.   Year Ended Jan 28, 2024Jan 29, 2023Revenue100.0 %100.0 %Cost of revenue27.3 43.1 Gross profit72.7 56.9 Operating expenses Research and development14.2 27.2 Sales, general and administrative4.4 9.1 Acquisition termination cost— 5.0 Total operating expenses18.6 41.3 Operating income54.1 15.6 Interest income1.4 1.0 Interest expense(0.4)(1.0)Other, net0.4 (0.1)Other income (expense), net1.4 (0.1)Income before income tax55.5 15.5 Income tax expense (benefit)6.6 (0.7)Net income48.9 %16.2 %Reportable SegmentsRevenue by Reportable SegmentsYear EndedJan 28, 2024Jan 29, 2023$Change%Change($ in millions)Compute & Networking$47,405 $15,068 $32,337 215 %Graphics13,517 11,906 1,611 14 %Total$60,922 $26,974 $33,948 126 %Operating Income by Reportable SegmentsYear EndedJan 28, 2024Jan 29, 2023$Change%Change($ in millions)Compute & Networking$32,016 $5,083 $26,933 530 %Graphics5,846 4,552 1,294 28 %All Other(4,890)(5,411)521 (10)%Total$32,972 $4,224 $28,748 681 %Compute & Networking revenue – The year-on-year increase was due to higher Data Center revenue. Compute grew 266% due to higher shipments of the NVIDIA Hopper GPU computing platform for the training and inference of LLMs, recommendation engines and generative AI applications. Networking was up 133% due to higher shipments of InfiniBand.Graphics revenue – The year-on-year increase was led by growth in Gaming of 15% driven by higher sell-in to partners following the normalization of channel inventory levels.Reportable segment operating income – The year-on-year increase in Compute & Networking and Graphics operating income was driven by higher revenue.39Table of ContentsAll Other operating loss - The year-on-year decrease was due to the $1.4 billion Arm acquisition termination cost in fiscal year 2023, partially offset by a $839 million increase in stock-based compensation expense in fiscal year 2024.Concentration of RevenueRevenue by geographic region is designated based on the billing location even if the revenue may be attributable to end customers, such as enterprises and gamers in a different location. Revenue from sales to customers outside of the United States accounted for 56% and 69% of total revenue for fiscal years 2024 and 2023, respectively.Our direct and indirect customers include public cloud, consumer internet companies, enterprises, startups, public sector entities, OEMs, ODMs, system integrators, AIB, and distributors.Sales to one customer, Customer A, represented 13% of total revenue for fiscal year 2024, which was attributable to the Compute & Networking segment.One indirect customer which primarily purchases our products through system integrators and distributors, including through Customer A, is estimated to have represented approximately 19% of total revenue for fiscal year 2024, attributable to the Compute & Networking segment.Our estimated Compute & Networking demand is expected to remain concentrated.There were no customers with 10% or more of total revenue for fiscal years 2023 and 2022.Gross Profit and Gross MarginGross profit consists of total revenue, net of allowances, less cost of revenue. Cost of revenue consists primarily of the cost of semiconductors, including wafer fabrication, assembly, testing and packaging, board and device costs, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory and warranty provisions, memory and component costs, tariffs, and shipping costs. Cost of revenue also includes acquisition-related costs, development costs for license and service arrangements, IP-related costs, and stock-based compensation related to personnel associated with manufacturing operations.Our overall gross margin increased to 72.7% in fiscal year 2024 from 56.9% in fiscal year 2023. The year over year increase was primarily due to strong Data Center revenue growth of 217% and lower net inventory provisions as a percentage of revenue.Provisions for inventory and excess inventory purchase obligations totaled $2.2 billion for both fiscal years 2024 and 2023. Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of $540 million and $137 million for fiscal years 2024 and 2023, respectively. The net effect on our gross margin was an unfavorable impact of 2.7% and 7.5% in fiscal years 2024 and 2023, respectively.Operating Expenses Year Ended Jan 28, 2024Jan 29, 2023$Change%Change ($ in millions)Research and development expenses$8,675 $7,339 $1,336 18 %% of net revenue14.2 %27.2 %  Sales, general and administrative expenses2,654 2,440 214 9 %% of net revenue4.4 %9.1 %  Acquisition termination cost— 1,353 (1,353)(100)%% of net revenue— %5.0 %Total operating expenses$11,329 $11,132 $197 2 %% of net revenue18.6 %41.3 %The increase in research and development expenses and sales, general and administrative expenses for fiscal year 2024 was primarily driven by compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases.Acquisition Termination CostWe recorded an acquisition termination cost related to the Arm transaction of $1.4 billion in fiscal year 2023 reflecting the write-off of the prepayment provided at signing.40Table of ContentsOther Income (Expense), Net Year Ended Jan 28, 2024Jan 29, 2023$Change ($ in millions)Interest income$866 $267 $599 Interest expense(257)(262)5 Other, net237 (48)285 Other income (expense), net$846 $(43)$889 Interest income consists of interest earned on cash, cash equivalents and marketable securities. The increase in interest income was due to higher yields on higher cash balances.Interest expense is comprised of coupon interest and debt discount amortization related to our notes.Other, net, consists of realized or unrealized gains and losses from investments in non-affiliated entities and the impact of changes in foreign currency rates. Change in Other, net, compared to fiscal year 2023 was driven by changes in value from our non-affiliated investments. Refer to Note 9 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information regarding our investments in non-affiliated entities.Income TaxesWe recognized income tax expense of $4.1 billion for fiscal year 2024 and income tax benefit of $187 million for fiscal year 2023. Income tax as a percentage of income before income tax was an expense of 12.0% for fiscal year 2024 and a benefit of 4.5% for fiscal year 2023.During the third quarter of fiscal year 2024, the Internal Revenue Service, or IRS, audit of our federal income tax returns for fiscal years 2018 and 2019 was resolved. We recognized a non-cash net benefit of $145 million, related to this IRS audit resolution, for effectively settled positions. This benefit consists of a reduction in unrecognized tax benefits of $236 million and related accrued interest of $17 million, net of federal benefit, partially offset by additional cash tax payments and reductions in tax attribute carryforwards of $108 million.The effective tax rate increased due to a decreased impact of tax benefits from the FDII deduction, stock-based compensation, and the U.S. federal research tax credit, relative to the increase in income before income tax. The increase in the effective tax rate was partially offset by a benefit due to the IRS audit resolution.Our effective tax rates for fiscal years 2024 and 2023 were lower than the U.S. federal statutory rate of 21% due primarily to tax benefits from the FDII deduction, stock-based compensation and the U.S. federal research tax credit. Our effective tax rate for fiscal year 2024 was additionally benefited by the IRS audit resolution.The OECD has announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules for a new 15% global minimum tax applicable to large multinational corporations. Certain jurisdictions, including European Union member states and the United Kingdom, have enacted Pillar Two legislation that will start to become effective for our fiscal year 2025. The OECD, and its member countries, continue to release new guidance and legislation on Pillar Two and we continue to evaluate the impact on our financial position of the global implementation of these rules. Based on enacted laws, Pillar Two is not expected to materially impact our effective tax rate or cash flows in the next fiscal year. New legislation or guidance could change our current assessment.Refer to Note 14 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.41Table of ContentsLiquidity and Capital Resources Jan 28, 2024Jan 29, 2023 (In millions)Cash and cash equivalents$7,280 $3,389 Marketable securities18,704 9,907 Cash, cash equivalents, and marketable securities$25,984 $13,296  Year EndedJan 28, 2024Jan 29, 2023 (In millions)Net cash provided by operating activities$28,090 $5,641 Net cash provided by (used in) investing activities$(10,566)$7,375 Net cash used in financing activities$(13,633)$(11,617)Our investment policy requires the purchase of highly rated fixed income securities, the diversification of investment types and credit exposures, and certain maturity limits on our portfolio.Cash provided by operating activities increased in fiscal year 2024 compared to fiscal year 2023, due to growth in revenue. Accounts receivable balance in fiscal year 2024 reflected $557 million from customer payments received ahead of the invoice due date.Cash provided by investing activities decreased in fiscal year 2024 compared to fiscal year 2023, primarily driven by lower marketable securities maturities and higher purchases of marketable securities.Cash used in financing activities increased in fiscal year 2024 compared to fiscal year 2023, due to a debt repayment and higher tax payments related to RSUs, partially offset by lower share repurchases.LiquidityOur primary sources of liquidity are our cash, cash equivalents, and marketable securities, and the cash generated by our operations. At the end of fiscal year 2024, we had $26.0 billion in cash, cash equivalents and marketable securities. We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months, and for the foreseeable future, including our future supply obligations and $1.3 billion of debt repayment due in fiscal year 2025 and share purchases. We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance future capital requirements.Our marketable securities consist of debt securities issued by the U.S. government and its agencies, highly rated corporations and financial institutions, and foreign government entities, as well as certificates of deposit issued by highly rated financial institutions. These marketable securities are primarily denominated in U.S. dollars. Refer to Note 8 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.During fiscal year 2025, we expect to use our existing cash, cash equivalents, and marketable securities, and the cash generated by our operations to fund our capital investments of approximately $3.5 billion to $4.0 billion related to property and equipment.Except for approximately $1.4 billion of cash, cash equivalents, and marketable securities held outside the U.S. for which we have not accrued any related foreign or state taxes if we repatriate these amounts to the U.S., substantially all of our cash, cash equivalents and marketable securities held outside of the U.S. at the end of fiscal year 2024 are available for use in the U.S. without incurring additional U.S. federal income taxes.Capital Return to ShareholdersDuring fiscal year 2024, we paid $395 million in quarterly cash dividends. Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors' continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.In August 2023, our Board of Directors approved an increase to our share repurchase program of an additional $25.0 billion, without expiration. During fiscal year 2024, we repurchased 21 million shares of our common stock for $9.7 billion. As of January 28, 2024, we were authorized, subject to certain specifications, to repurchase additional shares of our 42Table of Contentscommon stock up to $22.5 billion. From January 29, 2024 through February 16, 2024, we repurchased 2.8 million shares for $1.9 billion pursuant to a Rule 10b5-1 trading plan. Our share repurchase program aims to offset dilution from shares issued to employees. We may pursue additional share repurchases as we weigh market factors and other investment opportunities. We plan to continue share repurchases this fiscal year.The U.S. Inflation Reduction Act of 2022 requires a 1% excise tax on certain share repurchases in excess of shares issued for employee compensation made after December 31, 2022 which was not material for fiscal year 2024.Outstanding Indebtedness and Commercial Paper ProgramOur aggregate debt maturities as of January 28, 2024, by year payable, are as follows: Jan 28, 2024 (In millions)Due in one year$1,250 Due in one to five years2,250 Due in five to ten years2,750 Due in greater than ten years3,500 Unamortized debt discount and issuance costs(41)Net carrying amount9,709 Less short-term portion(1,250)Total long-term portion$8,459 We have a $575 million commercial paper program to support general corporate purposes. As of the end of fiscal year 2024, we had no commercial paper outstanding.Refer to Note 12 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for further discussion.Material Cash Requirements and Other ObligationsFor a description of our long-term debt, purchase obligations, and operating lease obligations, refer to Note 12, Note 13, and Note 3 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K, respectively.We have unrecognized tax benefits of $1.3 billion, which includes related interest and penalties of $140 million, recorded in non-current income tax payable at the end of fiscal year 2024. We are unable to estimate the timing of any potential tax liability, interest payments, or penalties in individual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions. Refer to Note 14 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for further information.Climate ChangeTo date, there has been no material impact to our results of operations associated with global sustainability regulations, compliance, costs from sourcing renewable energy or climate-related business trends.Adoption of New and Recently Issued Accounting PronouncementsRefer to Note 1 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a discussion of adoption of new and recently issued accounting pronouncements.Item 7A. Quantitative and Qualitative Disclosures about Market RiskInvestment and Interest Rate RiskWe are exposed to interest rate risk related to our fixed-rate investment portfolio and outstanding debt. The investment portfolio is managed consistent with our overall liquidity strategy in support of both working capital needs and growth of our businesses.As of the end of fiscal year 2024, we performed a sensitivity analysis on our investment portfolio. According to our analysis, parallel shifts in the yield curve of plus or minus 0.5% would result in a change in fair value for these investments of $93 million.As of the end of fiscal year 2024, we had $9.7 billion of senior Notes net outstanding. We carry the Notes at face value less unamortized discount on our Consolidated Balance Sheets. As the Notes bear interest at a fixed rate, we have no 43Table of Contentsfinancial statement risk associated with changes in interest rates. Refer to Note 12 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information. Foreign Exchange Rate RiskWe consider our direct exposure to foreign exchange rate fluctuations to be minimal as our sales are in United States dollars and foreign currency forward contracts are used to offset movements of foreign currency exchange rate movements. Gains or losses from foreign currency remeasurement are included in other income or expenses. The impact of foreign currency transaction gain or loss included in determining net income was not significant for fiscal years 2024 and 2023.Sales and arrangements with third-party manufacturers provide for pricing and payment in United States dollars, and, therefore, are not subject to exchange rate fluctuations. Increases in the value of the United States’ dollar relative to other currencies would make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the United States’ dollar relative to other currencies could result in our suppliers raising their manufacturing costs.If the U.S. dollar strengthened by 10% as of January 28, 2024 and January 29, 2023, the amount recorded in accumulated other comprehensive income (loss) related to our foreign exchange contracts before tax effect would have been $116 million and $112 million lower, respectively. Change in value recorded in accumulated other comprehensive income (loss) would be expected to offset a corresponding change in hedged forecasted foreign currency expenses when recognized.If an adverse 10% foreign exchange rate change was applied to our balance sheet hedging contracts, it would have resulted in an adverse impact on income before taxes of $60 million and $36 million as of January 28, 2024 and January 29, 2023, respectively. These changes in fair values would be offset in other income (expense), net by corresponding change in fair values of the foreign currency denominated monetary assets and liabilities, assuming the hedge contracts fully cover the foreign currency denominated monetary assets and liabilities balances.Refer to Note 11 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information. Item 8. Financial Statements and Supplementary DataThe information required by this Item is set forth in our Consolidated Financial Statements and Notes thereto included in this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A. Controls and ProceduresControls and ProceduresDisclosure Controls and ProceduresBased on their evaluation as of January 28, 2024, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective to provide reasonable assurance.Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 28, 2024 based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the criteria set forth in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of January 28, 2024.The effectiveness of our internal control over financial reporting as of January 28, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which is included herein.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting during the quarter ended January 28, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In fiscal year 2022, we began an upgrade of our enterprise resource planning, or ERP, system, which will update much of our 44Table of Contentsexisting core financial systems. The ERP system is designed to accurately maintain our financial records used to report operating results. The upgrade will occur in phases. We will continue to evaluate each quarter whether there are changes that materially affect our internal control over financial reporting.Inherent Limitations on Effectiveness of ControlsOur management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within NVIDIA have been detected.Item 9B.  Other InformationOn December 18, 2023, John O. Dabiri, a member of our Board of Directors, adopted a trading arrangement that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) for the sale through December 2, 2024 of an estimated 553 shares of our common stock, assuming our closing stock price as of January 26, 2024. The number of shares is based on an estimate because the plan specifies a formulaic dollar amount of shares to be sold.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsNot Applicable.Part III Certain information required by Part III is omitted from this report because we will file with the SEC a definitive proxy statement pursuant to Regulation 14A, or the 2024 Proxy Statement, no later than 120 days after the end of fiscal year 2024, and certain information included therein is incorporated herein by reference.Item 10. Directors, Executive Officers and Corporate GovernanceIdentification of DirectorsInformation regarding directors required by this item will be contained in our 2024 Proxy Statement under the caption “Proposal 1 - Election of Directors,” and is hereby incorporated by reference.Identification of Executive OfficersReference is made to the information regarding executive officers appearing under the heading “Information About Our Executive Officers” in Part I of this Annual Report on Form 10-K, which information is hereby incorporated by reference.Identification of Audit Committee and Financial ExpertsInformation regarding our Audit Committee required by this item will be contained in our 2024 Proxy Statement under the captions “Report of the Audit Committee of the Board of Directors” and “Information About the Board of Directors and Corporate Governance,” and is hereby incorporated by reference.Material Changes to Procedures for Recommending DirectorsInformation regarding procedures for recommending directors required by this item will be contained in our 2024 Proxy Statement under the caption “Information About the Board of Directors and Corporate Governance,” and is hereby incorporated by reference.Delinquent Section 16(a) ReportsInformation regarding compliance with Section 16(a) of the Exchange Act required by this item will be contained in our 2024 Proxy Statement under the caption “Delinquent Section 16(a) Reports,” and is hereby incorporated by reference.Code of ConductInformation regarding our Code of Conduct required by this item will be contained in our 2024 Proxy Statement under the caption “Information About the Board of Directors and Corporate Governance - Code of Conduct,” and is hereby incorporated by reference. The full text of our Code of Conduct and Financial Team Code of Conduct are published on the Investor Relations portion of our website, under Governance, at www.nvidia.com. If we make any amendments to either code, or grant any waiver from a provision of either code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website or in a report on Form 8-K. The contents of our website are not a part of this Annual Report on Form 10-K. 45Table of ContentsItem 11. Executive CompensationInformation regarding our executive compensation required by this item will be contained in our 2024 Proxy Statement under the captions “Executive Compensation”, “Compensation Committee Interlocks and Insider Participation”, “Director Compensation” and “Compensation Committee Report,” and is hereby incorporated by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersOwnership of NVIDIA SecuritiesInformation regarding ownership of NVIDIA securities required by this item will be contained in our 2024 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management,” and is hereby incorporated by reference.Equity Compensation Plan InformationInformation regarding our equity compensation plans required by this item will be contained in our 2024 Proxy Statement under the caption "Equity Compensation Plan Information," and is hereby incorporated by reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation regarding related transactions and director independence required by this item will be contained in our 2024 Proxy Statement under the captions “Review of Transactions with Related Persons” and “Information About the Board of Directors and Corporate Governance - Independence of the Members of the Board of Directors,” and is hereby incorporated by reference.Item 14. Principal Accountant Fees and ServicesInformation regarding accounting fees and services required by this item will be contained in our 2024 Proxy Statement under the caption “Fees Billed by the Independent Registered Public Accounting Firm,” and is hereby incorporated by reference. 46Table of ContentsPart IVItem 15. Exhibit and Financial Statement Schedules  Page(a)1.Financial Statements  Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)48 Consolidated Statements of Income for the years ended January 28, 2024, January 29, 2023, and January 30, 202250Consolidated Statements of Comprehensive Income for the years ended January 28, 2024, January 29, 2023, and January 30, 202251 Consolidated Balance Sheets as of January 28, 2024 and January 29, 202352 Consolidated Statements of Shareholders’ Equity for the years ended January 28, 2024, January 29, 2023, and January 30, 202253 Consolidated Statements of Cash Flows for the years ended January 28, 2024, January 29, 2023, and January 30, 202254 Notes to the Consolidated Financial Statements552.Financial Statement Schedule  Schedule II Valuation and Qualifying Accounts for the years ended January 28, 2024, January 29, 2023, and January 30, 2022813.Exhibits  The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as a part of this Annual Report on Form 10-K.8247Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of NVIDIA CorporationOpinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of NVIDIA Corporation and its subsidiaries (the “Company”) as of January 28, 2024 and January 29, 2023, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended January 28, 2024, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of January 28, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 28, 2024 and January 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended January 28, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.48Table of ContentsCritical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.Valuation of Inventories - Provisions for Excess or Obsolete Inventories and Excess Product Purchase CommitmentsAs described in Notes 1, 10 and 13 to the consolidated financial statements, the Company charges cost of sales for inventory provisions to write-down inventory for excess or obsolete inventory and for excess product purchase commitments. Most of the Company’s inventory provisions relate to excess quantities of products, based on the Company’s inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions. As of January 28, 2024, the Company’s consolidated inventories balance was $5.3 billion and the Company’s consolidated outstanding inventory purchase and long-term supply and capacity obligations balance was $16.1 billion, of which a significant portion relates to inventory purchase obligations. The principal considerations for our determination that performing procedures relating to the valuation of inventories, specifically the provisions for excess or obsolete inventories and excess product purchase commitments, is a critical audit matter are the significant judgment by management when developing provisions for excess or obsolete inventories and excess product purchase commitments, including developing assumptions related to future demand and market conditions. This in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assumptions related to future demand and market conditions. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s provisions for excess or obsolete inventories and excess product purchase commitments, including controls over management’s assumptions related to future demand and market conditions. These procedures also included, among others, testing management’s process for developing the provisions for excess or obsolete inventories and excess product purchase commitments; evaluating the appropriateness of management’s approach; testing the completeness and accuracy of underlying data used in the approach; and evaluating the reasonableness of management’s assumptions related to future demand and market conditions. Evaluating management’s assumptions related to future demand and market conditions involved evaluating whether the assumptions used by management were reasonable considering (i) current and past results, including historical product life cycle, (ii) the consistency with external market and industry data, and (iii) changes in technology. /s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaFebruary 21, 2024We have served as the Company’s auditor since 2004. 49Table of ContentsNVIDIA Corporation and SubsidiariesConsolidated Statements of Income(In millions, except per share data)Year EndedJan 28, 2024Jan 29, 2023Jan 30, 2022Revenue$60,922 $26,974 $26,914 Cost of revenue16,621 11,618 9,439 Gross profit44,301 15,356 17,475 Operating expenses   Research and development8,675 7,339 5,268 Sales, general and administrative2,654 2,440 2,166 Acquisition termination cost— 1,353 — Total operating expenses11,329 11,132 7,434 Operating income32,972 4,224 10,041 Interest income866 267 29 Interest expense(257)(262)(236)Other, net237 (48)107 Other income (expense), net846 (43)(100)Income before income tax33,818 4,181 9,941 Income tax expense (benefit)4,058 (187)189 Net income$29,760 $4,368 $9,752 Net income per share:Basic$12.05 $1.76 $3.91 Diluted$11.93 $1.74 $3.85 Weighted average shares used in per share computation:Basic2,469 2,487 2,496 Diluted2,494 2,507 2,535 See accompanying notes to the consolidated financial statements.50Table of ContentsNVIDIA Corporation and SubsidiariesConsolidated Statements of Comprehensive Income(In millions)Year EndedJan 28, 2024Jan 29, 2023Jan 30, 2022Net income$29,760 $4,368 $9,752 Other comprehensive income (loss), net of taxAvailable-for-sale securities:Net change in unrealized gain (loss)80 (31)(16)Reclassification adjustments for net realized gain included in net income— 1 — Net change in unrealized gain (loss)80 (30)(16)Cash flow hedges:Net change in unrealized gain (loss)38 47 (43)Reclassification adjustments for net realized gain (loss) included in net income(48)(49)29 Net change in unrealized loss(10)(2)(14)Other comprehensive income (loss), net of tax70 (32)(30)Total comprehensive income$29,830 $4,336 $9,722 See accompanying notes to the consolidated financial statements.51Table of ContentsNVIDIA Corporation and SubsidiariesConsolidated Balance Sheets(In millions, except par value) Jan 28, 2024Jan 29, 2023Assets  Current assets:  Cash and cash equivalents$7,280 $3,389 Marketable securities18,704 9,907 Accounts receivable, net9,999 3,827 Inventories5,282 5,159 Prepaid expenses and other current assets3,080 791 Total current assets44,345 23,073 Property and equipment, net3,914 3,807 Operating lease assets1,346 1,038 Goodwill4,430 4,372 Intangible assets, net1,112 1,676 Deferred income tax assets6,081 3,396 Other assets4,500 3,820 Total assets$65,728 $41,182 Liabilities and Shareholders' EquityCurrent liabilities:  Accounts payable$2,699 $1,193 Accrued and other current liabilities6,682 4,120 Short-term debt1,250 1,250 Total current liabilities10,631 6,563 Long-term debt8,459 9,703 Long-term operating lease liabilities 1,119 902 Other long-term liabilities2,541 1,913 Total liabilities22,750 19,081 Commitments and contingencies - see Note 13Shareholders’ equity:  Preferred stock, $0.001 par value; 2 shares authorized; none issued— — Common stock, $0.001 par value; 8,000 shares authorized; 2,464 shares issued and outstanding as of January 28, 2024; 2,466 shares issued and outstanding as of January 29, 20232 2 Additional paid-in capital13,132 11,971  Accumulated other comprehensive income (loss)27 (43)Retained earnings29,817 10,171 Total shareholders' equity42,978 22,101 Total liabilities and shareholders' equity$65,728 $41,182 See accompanying notes to the consolidated financial statements.52Table of ContentsNVIDIA Corporation and SubsidiariesConsolidated Statements of Shareholders' EquityCommon StockOutstandingAdditional Paid-inTreasuryAccumulated Other ComprehensiveRetainedTotal Shareholders'SharesAmountCapital Stock Income (Loss) Earnings Equity(In millions, except per share data)Balances, Jan 31, 20212,479 $3 $8,719 $(10,756)$19 $18,908 $16,893 Net income— — — — — 9,752 9,752 Other comprehensive loss— — — — (30)— (30)Issuance of common stock from stock plans35 — 281 — — — 281 Tax withholding related to vesting of restricted stock units(8)— (614)(1,290)— — (1,904)Cash dividends declared and paid ($0.16 per common share)— — — — — (399)(399)Fair value of partially vested equity awards assumed in connection with acquisitions— — 18 — — — 18 Stock-based compensation— — 2,001 — — — 2,001 Retirement of Treasury Stock— — (20)12,046 — (12,026)— Balances, Jan 30, 20222,506 3 10,385 — (11)16,235 26,612 Net income— — — — — 4,368 4,368 Other comprehensive loss— — — — (32)— (32)Issuance of common stock from stock plans31 — 355 — — — 355 Tax withholding related to vesting of restricted stock units(8)— (1,475)— — — (1,475)Shares repurchased(63)(1)(4)— — (10,034)(10,039)Cash dividends declared and paid ($0.16 per common share)— — — — — (398)(398)Stock-based compensation— — 2,710 — — — 2,710 Balances, Jan 29, 20232,466 2 11,971 — (43)10,171 22,101 Net income— — — — — 29,760 29,760 Other comprehensive income— — — — 70 70 Issuance of common stock from stock plans26 — 403 — — — 403 Tax withholding related to vesting of restricted stock units(7)— (2,783)— — — (2,783)Shares repurchased(21)— (27)— — (9,719)(9,746)Cash dividends declared and paid ($0.16 per common share)— — — — — (395)(395)Stock-based compensation— — 3,568 — — — 3,568 Balances, Jan 28, 20242,464 $2 $13,132 $— $27 $29,817 $42,978 See accompanying notes to the consolidated financial statements.53Table of ContentsNVIDIA Corporation and SubsidiariesConsolidated Statements of Cash Flows(In millions)Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022Cash flows from operating activities:  Net income$29,760 $4,368 $9,752 Adjustments to reconcile net income to net cash provided by operating activities:  Stock-based compensation expense3,549 2,709 2,004 Depreciation and amortization1,508 1,544 1,174 Deferred income taxes(2,489)(2,164)(406)(Gains) losses on investments in non-affiliated entities, net(238)45 (100)Acquisition termination cost— 1,353 — Other(278)(7)47 Changes in operating assets and liabilities, net of acquisitions:  Accounts receivable(6,172)822 (2,215)Inventories(98)(2,554)(774)Prepaid expenses and other assets(1,522)(1,517)(1,715)Accounts payable1,531 (551)568 Accrued and other current liabilities2,025 1,341 581 Other long-term liabilities514 252 192 Net cash provided by operating activities28,090 5,641 9,108 Cash flows from investing activities:  Proceeds from maturities of marketable securities9,732 19,425 15,197 Proceeds from sales of marketable securities50 1,806 1,023 Purchases of marketable securities(18,211)(11,897)(24,787)Purchases related to property and equipment and intangible assets(1,069)(1,833)(976)Acquisitions, net of cash acquired(83)(49)(263)Investments in non-affiliated entities and other, net(985)(77)(24)Net cash provided by (used in) investing activities(10,566)7,375 (9,830)Cash flows from financing activities:  Proceeds related to employee stock plans403 355 281 Payments related to repurchases of common stock(9,533)(10,039)— Payments related to tax on restricted stock units(2,783)(1,475)(1,904)Repayment of debt(1,250)— (1,000)Dividends paid(395)(398)(399)Principal payments on property and equipment and intangible assets(74)(58)(83)Issuance of debt, net of issuance costs— — 4,977 Other(1)(2)(7)Net cash provided by (used in) financing activities(13,633)(11,617)1,865 Change in cash and cash equivalents3,891 1,399 1,143 Cash and cash equivalents at beginning of period3,389 1,990 847 Cash and cash equivalents at end of period$7,280 $3,389 $1,990 Supplemental disclosures of cash flow information:Cash paid for income taxes, net$6,549 $1,404 $396 Cash paid for interest$252 $254 $246 See accompanying notes to the consolidated financial statements.54Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial StatementsNote 1 - Organization and Summary of Significant Accounting PoliciesOur CompanyHeadquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998. All references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean NVIDIA Corporation and its subsidiaries.Fiscal YearWe operate on a 52- or 53-week year, ending on the last Sunday in January. Fiscal years 2024, 2023 and 2022 were all 52-week years.Principles of ConsolidationOur consolidated financial statements include the accounts of NVIDIA Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from our estimates. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, cash equivalents and marketable securities, accounts receivable, inventories and product purchase commitments, income taxes, goodwill, stock-based compensation, litigation, investigation and settlement costs, restructuring and other charges, property, plant, and equipment, and other contingencies. These estimates are based on historical facts and various other assumptions that we believe are reasonable.In February 2023, we assessed the useful lives of our property, plant, and equipment. Based on advances in technology and usage rate, we increased the estimated useful life of most of our server, storage, and network equipment from three to four or five years, and our assembly and test equipment from five to seven years. The effect of this change for the fiscal year ended January 28, 2024 was a benefit of $33 million and $102 million for cost of revenue and operating expenses, respectively, which resulted in an increase in operating income of $135 million and net income of $114 million after tax, or $0.05 per both basic and diluted share.Revenue RecognitionWe derive our revenue from product sales, including hardware and systems, license and development arrangements, software licensing, and cloud services. We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract (where revenue is allocated on a relative standalone selling price basis by maximizing the use of observable inputs to determine the standalone selling price for each performance obligation); and (5) recognition of revenue when, or as, we satisfy a performance obligation.Product Sales RevenueRevenue from product sales is recognized upon transfer of control of products to customers in an amount that reflects the consideration we expect to receive in exchange for those products. Certain products are sold with support or an extended warranty for the incorporated system, hardware, and/or software. Support and extended warranty revenue are recognized ratably over the service period, or as services are performed. Revenue is recognized net of allowances for returns, customer programs and any taxes collected from customers.For products sold with a right of return, we record a reduction to revenue by establishing a sales return allowance for estimated product returns at the time revenue is recognized, based primarily on historical return rates. However, if product returns for a fiscal period are anticipated to exceed historical return rates, we may determine that additional sales return allowances are required to accurately reflect our estimated exposure for product returns.Our customer programs involve rebates, which are designed to serve as sales incentives to resellers of our products in various target markets, and marketing development funds, or MDFs, which represent monies paid to our partners that are earmarked for market segment development and are designed to support our partners’ activities while also promoting NVIDIA products. We account for customer programs as a reduction to revenue and accrue for such programs for potential rebates and MDFs based on the amount we expect to be claimed by customers.55Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)License and Development ArrangementsOur license and development arrangements with customers typically require significant customization of our IP components. As a result, we recognize the revenue from the license and the revenue from the development services as a single performance obligation over the period in which the development services are performed. We measure progress to completion based on actual cost incurred to date as a percentage of the estimated total cost required to complete each project. If a loss on an arrangement becomes probable during a period, we record a provision for such loss in that period.Software LicensingOur software licenses provide our customers with a right to use the software when it is made available to the customer. Customers may purchase either perpetual licenses or subscriptions to licenses, which differ mainly in the duration over which the customer benefits from the software. Software licenses are frequently sold along with the right to receive, on a when-and-if available basis, future unspecified software updates and upgrades. Revenue from software licenses is recognized up front when the software is made available to the customer. Software support revenue is recognized ratably over the service period, or as services are performed.Cloud ServicesCloud services, which allow customers to use hosted software and hardware infrastructure without taking possession of the software or hardware, are provided on a subscription basis or a combination of subscription plus usage. Revenue related to subscription-based cloud services is recognized ratably over the contract period. Revenue related to cloud services based on usage is recognized as usage occurs. Cloud services are typically sold on a standalone basis, but certain offerings may be sold with hardware and/or software and related support. Contracts with Multiple Performance ObligationsOur contracts may contain more than one of the products and services listed above, each of which is separately accounted for as a distinct performance obligation. We account for multiple agreements with a single customer as a single contract if the contractual terms and/or substance of those agreements indicate that they may be so closely related that they are, in effect, parts of a single contract.We allocate the total transaction price to each distinct performance obligation in a multiple performance obligations arrangement on a relative standalone selling price basis. The standalone selling price reflects the price we would charge for a specific product or service if it were sold separately in similar circumstances and to similar customers. When determining standalone selling price, we maximize the use of observable inputs. If a contract contains a single performance obligation, no allocation is required.Product WarrantiesWe offer a limited warranty to end-users ranging from one to three years for products to repair or replace products for manufacturing defects or hardware component failures. Cost of revenue includes the estimated cost of product warranties that are calculated at the point of revenue recognition. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. We also accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated.Stock-based CompensationWe use the closing trading price of our common stock on the date of grant, minus a dividend yield discount, as the fair value of awards of restricted stock units, or RSUs, and performance stock units that are based on our corporate financial performance targets, or PSUs. We use a Monte Carlo simulation on the date of grant to estimate the fair value of performance stock units that are based on market conditions, or market-based PSUs. The compensation expense for RSUs and market-based PSUs is recognized using a straight-line attribution method over the requisite employee service period while compensation expense for PSUs is recognized using an accelerated amortization model. We estimate the fair value of shares to be issued under our employee stock purchase plan, or ESPP, using the Black-Scholes model at the commencement of an offering period in March and September of each year. Stock-based compensation for our ESPP is expensed using an accelerated amortization model. Additionally, for RSU, PSU, and market-based PSU awards, we estimate forfeitures semi-annually and revise the estimates of forfeiture in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience.Litigation, Investigation and Settlement CostsWe currently, are, and will likely continue to be subject to claims, litigation, and other actions, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, commercial disputes, goods and services offered by us and by third parties, and other matters. There are many uncertainties associated with any litigation or investigation, and we cannot be certain that these actions 56Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)or other third-party claims against us will be resolved without litigation, fines and/or substantial settlement payments or judgments. If information becomes available that causes us to determine that a loss in any of our pending litigation, investigations or settlements is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with U.S. GAAP. However, the actual liability in any such litigation or investigation may be materially different from our estimates, which could require us to record additional costs.Foreign Currency RemeasurementWe use the U.S. dollar as our functional currency for our subsidiaries. Foreign currency monetary assets and liabilities are remeasured into United States dollars at end-of-period exchange rates. Non-monetary assets and liabilities such as property and equipment and equity are remeasured at historical exchange rates. Revenue and expenses are remeasured at exchange rates in effect during each period, except for those expenses related to non-monetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in earnings in our Consolidated Statements of Income and to date have not been significant.Income TaxesWe recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. We recognize federal, state and foreign deferred tax assets or liabilities, as appropriate, for our estimate of future tax effects attributable to temporary differences and carryforwards; and we record a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized.Our calculation of deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the U.S., or foreign jurisdictions where we operate, or changes in other facts or circumstances. In addition, we recognize liabilities for potential U.S. and foreign income tax contingencies based on our estimate of whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit or additional income tax expense in our financial statements accordingly.As of January 28, 2024, we had a valuation allowance of $1.6 billion related to capital loss carryforwards, and certain state and other deferred tax assets that management determined are not likely to be realized due, in part, to jurisdictional projections of future taxable income, including capital gains. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax assets as income tax benefits during the period.We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.Net Income Per ShareBasic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common and potentially dilutive shares outstanding during the period, using the treasury stock method. Any anti-dilutive effect of equity awards outstanding is not included in the computation of diluted net income per share.Cash and Cash Equivalents and Marketable SecuritiesWe consider all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. Marketable securities consist of highly liquid debt investments with maturities of greater than three months when purchased. We currently classify our investments as current based on the nature of the investments and their availability for use in current operations.We classify our cash equivalents and marketable securities related to debt securities at the date of acquisition as available-for-sale. These available-for-sale debt securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income or loss, a component of shareholders’ equity, net of tax. The fair value of interest-bearing debt securities includes accrued interest. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in the other income (expense), net, section of our Consolidated Statements of Income.Available-for-sale debt investments are subject to a periodic impairment review. If the estimated fair value of available-for-sale debt securities is less than its amortized cost basis, we determine if the difference, if any, is caused by expected credit losses and write-down the amortized cost basis of the securities if it is more likely than not we will be required or 57Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)we intend to sell the securities before recovery of its amortized cost basis. Allowances for credit losses and write-downs are recognized in the other income (expense), net section of our Consolidated Statements of Income.Fair Value of Financial InstrumentsThe carrying value of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their relatively short maturities as of January 28, 2024 and January 29, 2023. Marketable securities are comprised of available-for-sale securities that are reported at fair value with the related unrealized gains or losses included in accumulated other comprehensive income or loss, a component of shareholders’ equity, net of tax. Fair value of the marketable securities is determined based on quoted market prices. Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as fair value hedges, the gains or losses are recognized in earnings in the periods of change together with the offsetting losses or gains on the hedged items attributed to the risk being hedged. For derivative instruments designated as cash-flow hedges, the effective portion of the gains or losses on the derivatives is initially reported as a component of other comprehensive income or loss and is subsequently recognized in earnings when the hedged exposure is recognized in earnings. For derivative instruments not designated for hedge accounting, changes in fair value are recognized in earnings.Concentration of Credit RiskFinancial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities, and accounts receivable. Our investment policy requires the purchase of highly-rated fixed income securities, the diversification of investment type and credit exposures, and includes certain limits on our portfolio duration. We perform ongoing credit evaluations of our customers’ financial condition and maintain an allowance for potential credit losses. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. Our overall estimated exposure excludes amounts covered by credit insurance and letters of credit.InventoriesInventory cost is computed on an adjusted standard basis, which approximates actual cost on an average or first-in, first-out basis. Inventory costs consist primarily of the cost of semiconductors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, and shipping costs, as well as the cost of purchased memory products and other component parts. We charge cost of sales for inventory provisions to write-down our inventory to the lower of cost or net realizable value or for obsolete or excess inventory, and for excess product purchase commitments. Most of our inventory provisions relate to excess quantities of products, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions. Once inventory has been written-off or written-down, it creates a new cost basis for the inventory that is not subsequently written-up. We record a liability for noncancelable purchase commitments with suppliers for quantities in excess of our future demand forecasts consistent with our valuation of obsolete or excess inventory.Property and EquipmentProperty and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method based on the estimated useful lives of the assets of three to seven years. Once an asset is identified for retirement or disposition, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is recorded. The estimated useful lives of our buildings are up to thirty years. Depreciation expense includes the amortization of assets recorded under finance leases. Leasehold improvements and assets recorded under finance leases are amortized over the shorter of the expected lease term or the estimated useful life of the asset.LeasesWe determine if an arrangement is or contains a lease at inception. Operating leases with lease terms of more than 12 months are included in operating lease assets, accrued and other current liabilities, and long-term operating lease liabilities on our consolidated balance sheet. Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term.Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using our incremental borrowing rate. Operating lease assets also include initial direct costs incurred and prepaid lease payments, minus any lease incentives. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.We combine the lease and non-lease components in determining the operating lease assets and liabilities.58Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)GoodwillGoodwill is subject to our annual impairment test during the fourth quarter of our fiscal year, or earlier if indicators of potential impairment exist. In completing our impairment test, we perform either a qualitative or a quantitative analysis on a reporting unit basis. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting units. The quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit’s fair value. The income and market valuation approaches consider factors that include, but are not limited to, prospective financial information, growth rates, residual values, discount rates and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and the future profitability of our business. Intangible Assets and Other Long-Lived AssetsIntangible assets primarily represent acquired intangible assets including developed technology and customer relationships, as well as rights acquired under technology licenses, patents, and acquired IP. We currently amortize our intangible assets with finite lives over periods ranging from one to twenty years using a method that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up or, if that pattern cannot be reliably determined, using a straight-line amortization method. Long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The recoverability of assets or asset groups to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset or asset group. Assets and liabilities to be disposed of would be separately presented in the Consolidated Balance Sheet and the assets would be reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated.Business CombinationWe allocate the fair value of the purchase price of an acquisition to the tangible assets acquired, liabilities assumed, and intangible assets acquired, based on their estimated fair values. The excess of the fair value of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but our estimates and assumptions are inherently uncertain and subject to refinement. The estimates and assumptions used in valuing intangible assets include, but are not limited to, the amount and timing of projected future cash flows, discount rate used to determine the present value of these cash flows and asset lives. These estimates are inherently uncertain and, therefore, actual results may differ from the estimates made. As a result, during the measurement period of up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the measurement period's conclusion or final determination of the fair value of the purchase price of an acquisition, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Income.Acquisition-related expenses are recognized separately from the business combination and expensed as incurred.Investments in Non-Affiliated EntitiesOur investment in non-affiliates consists of marketable equity securities, which are publicly traded, and non-marketable equity securities, which are investments in privately held companies. Marketable equity securities have readily determinable fair values with changes in fair value recorded in other income (expense), net. Non-marketable equity securities include investments that do not have a readily determinable fair value. The investments that do not have readily determinable fair value are measured at cost minus impairment, if any, and are adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer, or the measurement alternative. Fair value is based upon observable inputs in an inactive market and the valuation requires our judgment due to the absence of market prices and inherent lack of liquidity. All gains and losses on these investments, realized and unrealized, are recognized in other income (expense), net on our Consolidated Statements of Income. We assess whether an impairment loss has occurred on our investments in non-marketable equity securities, accounted for under the measurement alternative based on quantitative and qualitative factors. If any impairment is identified for non-marketable equity securities, we write down the investment to its fair value and record the corresponding charge through other income (expense), net on our Consolidated Statements of Income.59Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Recently Issued Accounting PronouncementsRecent Accounting Pronouncements Not Yet AdoptedIn November 2023, the Financial Accounting Standards Board, or FASB, issued a new accounting standard to provide for additional disclosures about significant expenses in operating segments. The standard is effective for our annual reporting for fiscal year 2025 and for interim period reporting starting in fiscal year 2026 retrospectively. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.In December 2023, the FASB issued a new accounting standard which provides for new and changes to income tax disclosures including disaggregation of the rate reconciliation and income taxes paid disclosures. The amendments in the standard are effective for annual periods beginning after December 15, 2024. Early adoption is permitted and should be applied prospectively, with retrospective application permitted. We expect to adopt this standard in our annual period beginning fiscal year 2026. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.Note 2 - Business CombinationTermination of the Arm Share Purchase AgreementIn February 2022, NVIDIA and SoftBank Group Corp, or SoftBank, announced the termination of the Share Purchase Agreement whereby NVIDIA would have acquired Arm from SoftBank. The parties agreed to terminate it due to significant regulatory challenges preventing the completion of the transaction. We recorded an acquisition termination cost of $1.4 billion in fiscal year 2023 reflecting the write-off of the prepayment provided at signing.Note 3 - LeasesOur lease obligations primarily consist of operating leases for our headquarters complex, domestic and international office facilities, and data center space, with lease periods expiring between fiscal years 2025 and 2035.Future minimum lease payments under our non-cancelable operating leases as of January 28, 2024, are as follows: Operating Lease Obligations (In millions)Fiscal Year: 2025$290 2026270 2027253 2028236 2029202 2030 and thereafter288 Total1,539 Less imputed interest192 Present value of net future minimum lease payments1,347 Less short-term operating lease liabilities228 Long-term operating lease liabilities$1,119 In addition, we have operating leases, primarily for our data centers, that are expected to commence within fiscal year 2025 with lease terms of 1 to 10 years for $1.1 billion.Operating lease expenses for fiscal years 2024, 2023, and 2022 were $269 million, $193 million, $168 million, respectively. Short-term and variable lease expenses for fiscal years 2024, 2023, and 2022 were not significant. 60Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Other information related to leases was as follows:Year EndedJan 28, 2024Jan 29, 2023Jan 30, 2022 (In millions)Supplemental cash flows information Operating cash flows used for operating leases$286 $184 $154 Operating lease assets obtained in exchange for lease obligations$531 $358 $266 As of January 28, 2024, our operating leases had a weighted average remaining lease term of 6.1 years and a weighted average discount rate of 3.76%. As of January 29, 2023, our operating leases had a weighted average remaining lease term of 6.8 years and a weighted average discount rate of 3.21%.Note 4 - Stock-Based CompensationOur stock-based compensation expense is associated with RSUs, performance stock units based on our corporate financial performance targets, or PSUs, performance stock units based on market conditions, or market-based PSUs, and our ESPP.Our Consolidated Statements of Income include stock-based compensation expense, net of amounts allocated to inventory, as follows: Year EndedJan 28, 2024Jan 29, 2023Jan 30, 2022 (In millions)Cost of revenue$141 $138 $141 Research and development2,532 1,892 1,298 Sales, general and administrative876 680 565 Total$3,549 $2,710 $2,004 Stock-based compensation capitalized in inventories was not significant during fiscal years 2024, 2023, and 2022. The following is a summary of equity awards granted under our equity incentive plans:Year EndedJan 28, 2024Jan 29, 2023Jan 30, 2022(In millions, except per share data)RSUs, PSUs and Market-based PSUsAwards granted14 25 18 Estimated total grant-date fair value$5,316 $4,505 $3,492 Weighted average grant-date fair value per share$374.08 $183.72 $190.69 ESPPShares purchased3 3 5 Weighted average price per share$158.07 $122.54 $56.36 Weighted average grant-date fair value per share$69.90 $51.87 $23.24 As of January 28, 2024, there was $8.6 billion of aggregate unearned stock-based compensation expense. This amount is expected to be recognized over a weighted average period of 2.5 years for RSUs, PSUs, and market-based PSUs, and 0.8 years for ESPP.61Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)The fair value of shares issued under our ESPP have been estimated with the following assumptions: Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022(Using the Black-Scholes model)ESPPWeighted average expected life (in years)0.1-2.00.1-2.00.1-2.0Risk-free interest rate3.9%-5.5%—%-4.6%—%-0.5%Volatility31%-67%43%-72%20%-58%Dividend yield0.1%0.1%0.1%For ESPP shares, the expected term represents the average term from the first day of the offering period to the purchase date. The risk-free interest rate assumption used to value ESPP shares is based upon observed interest rates on Treasury bills appropriate for the expected term. Our expected stock price volatility assumption for ESPP is estimated using historical volatility. For awards granted, we use the dividend yield at grant date. Our RSU, PSU, and market-based PSU awards are not eligible for cash dividends prior to vesting; therefore, the fair values of RSUs, PSUs, and market-based PSUs are discounted for the dividend yield.Additionally, for RSU, PSU, and market-based PSU awards, we estimate forfeitures semi-annually and revise the estimates of forfeiture in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience.Equity Incentive ProgramWe grant or have granted stock options, RSUs, PSUs, market-based PSUs, and stock purchase rights under the following equity incentive plans. In addition, in connection with our acquisitions of various companies, we have assumed certain stock-based awards granted under their stock incentive plans and converted them into our RSUs.Amended and Restated 2007 Equity Incentive PlanIn 2007, our shareholders approved the NVIDIA Corporation 2007 Equity Incentive Plan, or as most recently amended and restated, the 2007 Plan.The 2007 Plan authorizes the issuance of incentive stock options, non-statutory stock options, restricted stock, RSUs, stock appreciation rights, performance stock awards, performance cash awards, and other stock-based awards to employees, directors and consultants. Only our employees may receive incentive stock options. As of January 28, 2024, up to 37 million shares of our common stock could be issued pursuant to stock awards granted under the 2007 Plan. Currently, we grant RSUs, PSUs and market-based PSUs under the 2007 Plan, under which, as of January 28, 2024, there were 147 million shares available for future grants.Subject to certain exceptions, RSUs granted to employees vest (A) over a four-year period, subject to continued service, with 25% vesting on a pre-determined date that is close to the anniversary of the date of grant and 6.25% vesting quarterly thereafter, (B) over a three-year period, subject to continued service, with 40% vesting on a pre-determined date that is close to the anniversary of the date of grant and 7.5% vesting quarterly thereafter, or (C) over a four-year period, subject to continued service, with 6.25% vesting quarterly. PSUs vest over a four-year period, subject to continued service, with 25% vesting on a pre-determined date that is close to the anniversary of the date of grant and 6.25% vesting quarterly thereafter. Market-based PSUs vest 100% on about the three-year anniversary of the date of grant. However, the number of shares subject to both PSUs and market-based PSUs that are eligible to vest is determined by the Compensation Committee based on achievement of pre-determined criteria.Amended and Restated 2012 Employee Stock Purchase PlanIn 2012, our shareholders approved the NVIDIA Corporation 2012 Employee Stock Purchase Plan, or as most recently amended and restated, the 2012 Plan.Employees who participate in the 2012 Plan may have up to 15% of their earnings withheld to purchase shares of common stock. The Board may decrease this percentage at its discretion. Each offering period is about 24 months, divided into four purchase periods of six months. The price of common stock purchased under our 2012 Plan will be equal to 85% of the lower of the fair market value of the common stock on the commencement date of each offering period or the fair market value of the common stock on each purchase date within the offering. As of January 28, 2024, we had 227 million shares reserved for future issuance under the 2012 Plan.62Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Equity Award ActivityThe following is a summary of our equity award transactions under our equity incentive plans: RSUs, PSUs and Market-based PSUs Outstanding Number of SharesWeighted Average Grant-Date Fair Value(In millions, except per share data)Balances, Jan 29, 202345 $158.45 Granted14 $374.08 Vested restricted stock(21)$148.56 Canceled and forfeited(1)$206.35 Balances, Jan 28, 202437 $245.94 Vested and expected to vest after Jan 28, 202437 $245.49 As of January 28, 2024 and January 29, 2023, there were 147 million and 160 million shares, respectively, of common stock available for future grants under our equity incentive plans. The total fair value of RSUs and PSUs, as of their respective vesting dates, during the years ended January 28, 2024, January 29, 2023, and January 30, 2022, was $8.2 billion, $4.3 billion, and $5.6 billion, respectively.Note 5 - Net Income Per ShareThe following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented: Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022 (In millions, except per share data)Numerator:   Net income$29,760 $4,368 $9,752 Denominator:   Basic weighted average shares2,469 2,487 2,496 Dilutive impact of outstanding equity awards25 20 39 Diluted weighted average shares2,494 2,507 2,535 Net income per share:   Basic (1)$12.05 $1.76 $3.91 Diluted (2)$11.93 $1.74 $3.85 Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive15 40 21 (1)    Calculated as net income divided by basic weighted average shares.(2)    Calculated as net income divided by diluted weighted average shares.Note 6 - GoodwillAs of January 28, 2024, the total carrying amount of goodwill was $4.4 billion, consisting of goodwill balances allocated to our Compute & Networking and Graphics reporting units of $4.1 billion and $370 million, respectively. As of January 29, 2023, the total carrying amount of goodwill was $4.4 billion, consisting of goodwill balances allocated to our Compute & Networking and Graphics reporting units of $4.0 billion and $370 million, respectively. Goodwill increased by $59 million in fiscal year 2024 from an immaterial acquisition and was allocated to our Compute & Networking reporting unit. During the fourth quarters of fiscal years 2024, 2023, and 2022, we completed our annual qualitative impairment tests and concluded that goodwill was not impaired. 63Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Note 7 - Amortizable Intangible AssetsThe components of our amortizable intangible assets are as follows: Jan 28, 2024Jan 29, 2023 Gross CarryingAmountAccumulatedAmortizationNet CarryingAmountGross CarryingAmountAccumulatedAmortizationNet CarryingAmount (In millions)Acquisition-related intangible assets (1)$2,642 $(1,720)$922 $3,093 $(1,614)$1,479 Patents and licensed technology449 (259)190 446 (249)197 Total intangible assets$3,091 $(1,979)$1,112 $3,539 $(1,863)$1,676 (1)    During the first quarter of fiscal year 2023, we commenced amortization of a $630 million in-process research and development intangible asset related to our acquisition of Mellanox.Amortization expense associated with intangible assets for fiscal years 2024, 2023, and 2022 was $614 million, $699 million, and $563 million, respectively.The following table outlines the estimated future amortization expense related to the net carrying amount of intangible assets as of January 28, 2024:Future Amortization Expense (In millions)Fiscal Year: 2025$555 2026261 2027150 202837 20299 2030 and thereafter100 Total$1,112 64Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Note 8 - Cash Equivalents and Marketable Securities Our cash equivalents and marketable securities related to debt securities are classified as “available-for-sale” debt securities.The following is a summary of cash equivalents and marketable securities: Jan 28, 2024AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as Cash EquivalentsMarketable Securities (In millions)Corporate debt securities$10,126 $31 $(5)$10,152 $2,231 $7,921 Debt securities issued by the U.S. Treasury9,517 17 (10)9,524 1,315 8,209 Debt securities issued by U.S. government agencies2,326 8 (1)2,333 89 2,244 Money market funds3,031 — — 3,031 3,031 — Certificates of deposit510 — — 510 294 216 Foreign government bonds174 — — 174 60 114 Total$25,684 $56 $(16)$25,724 $7,020 $18,704  Jan 29, 2023AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as Cash EquivalentsMarketable Securities (In millions)Corporate debt securities$4,809 $— $(12)$4,797 $1,087 $3,710 Debt securities issued by the U.S. Treasury4,185 1 (44)4,142 — 4,142 Debt securities issued by U.S. government agencies1,836 — (2)1,834 50 1,784 Money market funds1,777 — — 1,777 1,777 — Certificates of deposit365 — — 365 134 231 Foreign government bonds140 — — 140 100 40 Total$13,112 $1 $(58)$13,055 $3,148 $9,907 65Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)The following tables provide the breakdown of unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position:Jan 28, 2024 Less than 12 Months12 Months or GreaterTotal Estimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized Loss (In millions)Debt securities issued by the U.S. Treasury$3,343 $(5)$1,078 $(5)$4,421 $(10)Corporate debt securities1,306 (3)618 (2)1,924 (5)Debt securities issued by U.S. government agencies670 (1)— — 670 (1)Total$5,319 $(9)$1,696 $(7)$7,015 $(16)Jan 29, 2023 Less than 12 Months12 Months or GreaterTotal Estimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized Loss (In millions)Debt securities issued by the U.S. Treasury$2,444 $(21)$1,172 $(23)$3,616 $(44)Corporate debt securities1,188 (7)696 (5)1,884 (12)Debt securities issued by U.S. government agencies1,307 (2)— — 1,307 (2)Total$4,939 $(30)$1,868 $(28)$6,807 $(58)The gross unrealized losses are related to fixed income securities, driven primarily by changes in interest rates. Net realized gains and losses were not significant for all periods presented. The amortized cost and estimated fair value of cash equivalents and marketable securities are shown below by contractual maturity. Jan 28, 2024Jan 29, 2023 AmortizedCostEstimatedFair ValueAmortizedCostEstimatedFair Value (In millions)Less than one year$16,336 $16,329 $9,738 $9,708 Due in 1 - 5 years9,348 9,395 3,374 3,347 Total$25,684 $25,724 $13,112 $13,055 66Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Note 9 - Fair Value of Financial Assets and Liabilities and Investments in Non-Affiliated EntitiesThe fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or quoted market prices of similar assets from active markets. We review fair value hierarchy classification on a quarterly basis.Fair Value atPricing CategoryJan 28, 2024Jan 29, 2023(In millions)AssetsCash equivalents and marketable securities:Money market fundsLevel 1$3,031 $1,777 Corporate debt securitiesLevel 2$10,152 $4,797 Debt securities issued by the U.S. TreasuryLevel 2$9,524 $4,142 Debt securities issued by U.S. government agenciesLevel 2$2,333 $1,834 Certificates of depositLevel 2$510 $365 Foreign government bondsLevel 2$174 $140 Other assets (Investment in non-affiliated entities):Publicly-held equity securitiesLevel 1$225 $11 Liabilities (1)0.309% Notes Due 2023Level 2$— $1,230 0.584% Notes Due 2024Level 2$1,228 $1,185 3.20% Notes Due 2026Level 2$970 $966 1.55% Notes Due 2028Level 2$1,115 $1,099 2.85% Notes Due 2030Level 2$1,367 $1,364 2.00% Notes Due 2031Level 2$1,057 $1,044 3.50% Notes Due 2040Level 2$851 $870 3.50% Notes Due 2050Level 2$1,604 $1,637 3.70% Notes Due 2060Level 2$403 $410 (1)    These liabilities are carried on our Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount and issuance costs.Investments in Non-Affiliated EntitiesOur investments in non-affiliated entities include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies. Our marketable equity securities have readily determinable fair values and are recorded as long-term other assets on our Consolidated Balance Sheets at fair value with changes in fair value recorded in Other income and expense, net on our Consolidated Statements of Income. Marketable equity securities totaled $225 million and $11 million as of January 28, 2024 and January 29, 2023, respectively. The net unrealized and realized gains and losses of investments in marketable securities net were not significant for fiscal years 2024, 2023 and 2022.Our non-marketable equity securities are recorded in long-term other assets on our Consolidated Balance Sheets. The carrying value of our non-marketable equity securities totaled $1.3 billion and $288 million as of January 28, 2024 and January 29, 2023, respectively. Gains and losses on these investments, realized and unrealized, are recognized in Other income and expense, net on our Consolidated Statements of Income.67Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Adjustments to the carrying value of our non-marketable equity securities accounted for under the measurement alternative were as follows:Year EndedJan 28, 2024(In millions)Carrying amount as of Jan 29, 2023$288 Adjustments related to non-marketable equity securities:Net additions859 Unrealized gains194 Impairments and unrealized losses(20)Carrying amount as of Jan 28, 2024$1,321 In the fourth quarter of fiscal year 2024, one of our private company investments completed a secondary equity raise that resulted in an unrealized gain of $178 million.Net unrealized gains recognized for the year ended January 28, 2024 for non-marketable investments in non-affiliated entities still held as of January 28, 2024 were $174 million. Net unrealized and realized gains related to non-marketable equity securities were not significant for fiscal years 2023 and 2022.The following table summarizes the cumulative gross unrealized gains and cumulative gross unrealized losses and impairments related to non-marketable equity securities accounted for under the measurement alternative:Jan 28, 2024(In millions)Cumulative gross unrealized gains$270 Cumulative gross unrealized losses and impairments(45)Note 10 - Balance Sheet ComponentsTwo customers accounted for 24% and 11% of our accounts receivable balance as of January 28, 2024. Two customers accounted for 14% and 11% of our accounts receivable balance as of January 29, 2023.Certain balance sheet components are as follows: Jan 28, 2024Jan 29, 2023(In millions)Inventories (1):Raw materials$1,719 $2,430 Work in-process1,505 466 Finished goods2,058 2,263 Total inventories$5,282 $5,159 (1) In fiscal years 2024 and 2023, we recorded an inventory provision of $774 million and $1.0 billion, respectively, in cost of revenue.68Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued) Jan 28, 2024Jan 29, 2023EstimatedUseful Life(In millions)(In years)Property and Equipment:Land$218 $218 (A)Buildings, leasehold improvements, and furniture1,816 1,598 (B)Equipment, compute hardware, and software5,200 4,303 3-7Construction in process189 382 (C)Total property and equipment, gross7,423 6,501  Accumulated depreciation and amortization(3,509)(2,694) Total property and equipment, net$3,914 $3,807  (A)Land is a non-depreciable asset.(B)The estimated useful lives of our buildings are up to thirty years. Leasehold improvements and finance leases are amortized based on the lesser of either the asset’s estimated useful life or the expected remaining lease term.(C)Construction in process represents assets that are not available for their intended use as of the balance sheet date.Depreciation expense for fiscal years 2024, 2023, and 2022 was $894 million, $844 million, and $611 million, respectively.Accumulated amortization of leasehold improvements and finance leases was $400 million and $327 million as of January 28, 2024 and January 29, 2023, respectively. Property, equipment and intangible assets acquired by assuming related liabilities during fiscal years 2024, 2023, and 2022 were $170 million, $374 million, and $258 million, respectively.  Jan 28, 2024Jan 29, 2023Other assets:(In millions)Prepaid supply and capacity agreements (1)$2,458 $2,989 Investments in non-affiliated entities1,546 299 Prepaid royalties364 387 Other132 145 Total other assets$4,500 $3,820 (1)As of January 28, 2024 and January 29, 2023, there was an additional $2.5 billion and $458 million of short-term prepaid supply and capacity agreements included in Prepaid expenses and other current assets, respectively.69Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued) Jan 28, 2024Jan 29, 2023(In millions)Accrued and Other Current Liabilities:Customer program accruals$2,081 $1,196 Excess inventory purchase obligations (1)1,655 954 Deferred revenue (2)764 354 Accrued payroll and related expenses675 530 Product warranty and return provisions415 108 Taxes payable296 467 Operating leases228 176 Unsettled share repurchases187 117 Licenses and royalties182 149 Other199 69 Total accrued and other current liabilities$6,682 $4,120 (1)In fiscal years 2024 and 2023, we recorded an expense of approximately $1.4 billion and $1.1 billion, respectively, in cost of revenue for inventory purchase obligations in excess of our current demand projections, supplier charges and for penalties related to cancellations and underutilization.(2)Deferred revenue primarily includes customer advances and deferrals related to support for hardware and software, license and development arrangements, and cloud services. $233 million and $35 million of the balance in fiscal 2024 and 2023 respectively, related to customer advances. Jan 28, 2024Jan 29, 2023(In millions)Other Long-Term Liabilities:Income tax payable (1)$1,361 $1,204 Deferred income tax462 247 Deferred revenue (2)573 218 Licenses payable80 181 Other65 63 Total other long-term liabilities$2,541 $1,913 (1)Income tax payable is comprised of the long-term portion of the one-time transition tax payable, unrecognized tax benefits, and related interest and penalties.(2)Deferred revenue primarily includes deferrals related to support for hardware and software.Deferred RevenueThe following table shows the changes in deferred revenue during fiscal years 2024 and 2023. Jan 28, 2024Jan 29, 2023(In millions)Balance at beginning of period$572 $502 Deferred revenue additions during the period2,038 830 Revenue recognized during the period(1,273)(760)Balance at end of period$1,337 $572 Revenue recognized during fiscal year 2024 that was included in deferred revenue as of January 29, 2023 was $338 million. Revenue recognized during fiscal year 2023 that was included in deferred revenue as of January 30, 2022 was $282 million.Revenue related to remaining performance obligations represents the contracted license and development arrangements and support for hardware and software. This includes deferred revenue currently recorded and amounts that will be 70Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)invoiced in future periods. Revenue allocated to remaining performance obligations, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods, was $1.1 billion as of January 28, 2024. We expect to recognize approximately 40% of this revenue over the next twelve months and the remainder thereafter. This excludes revenue related to performance obligations for contracts with a length of one year or less.Note 11 - Derivative Financial InstrumentsWe enter into foreign currency forward contracts to mitigate the impact of foreign currency exchange rate movements on our operating expenses. These contracts are designated as cash flow hedges for hedge accounting treatment. Gains or losses on the contracts are recorded in accumulated other comprehensive income or loss and reclassified to operating expense when the related operating expenses are recognized in earnings or ineffectiveness should occur. We also enter into foreign currency forward contracts to mitigate the impact of foreign currency movements on monetary assets and liabilities that are denominated in currencies other than the U.S. dollar. These forward contracts were not designated for hedge accounting treatment. Therefore, the change in fair value of these contracts is recorded in other income or expense and offsets the change in fair value of the hedged foreign currency denominated monetary assets and liabilities, which is also recorded in other income or expense.The table below presents the notional value of our foreign currency forward contracts outstanding:Jan 28, 2024Jan 29, 2023 (In millions)Designated as cash flow hedges$1,168 $1,128 Non-designated hedges$597 $366 The unrealized gains and losses or fair value of our foreign currency forward contracts was not significant as of January 28, 2024 and January 29, 2023.As of January 28, 2024, all designated foreign currency forward contracts mature within 18 months. The expected realized gains and losses deferred into accumulated other comprehensive income or loss related to foreign currency forward contracts within the next twelve months was not significant.During fiscal years 2024 and 2023, the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant and all such instruments were determined to be highly effective.71Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Note 12 - DebtLong-Term DebtThe carrying value of our outstanding notes, the calendar year of maturity, and the associated interest rates were as follows:  ExpectedRemaining Term (years)EffectiveInterest RateJan 28, 2024Jan 29, 2023   (In millions)0.309% Notes Due 2023 (1)—0.41%$— $1,250 0.584% Notes Due 20240.40.66%1,250 1,250 3.20% Notes Due 20262.63.31%1,000 1,000 1.55% Notes Due 20284.41.64%1,250 1,250 2.85% Notes Due 20306.22.93%1,500 1,500 2.00% Notes Due 20317.42.09%1,250 1,250 3.50% Notes Due 204016.23.54%1,000 1,000 3.50% Notes Due 205026.23.54%2,000 2,000 3.70% Notes Due 206036.23.73%500 500 Unamortized debt discount and issuance costs  (41)(47)Net carrying amount  9,709 10,953 Less short-term portion(1,250)(1,250)Total long-term portion$8,459 $9,703 (1) In fiscal year 2024, we repaid the 0.309% Notes Due 2023.All our notes are unsecured senior obligations. All existing and future liabilities of our subsidiaries will be effectively senior to the notes. Our notes pay interest semi-annually. We may redeem each of our notes prior to maturity, subject to a make-whole premium as defined in the applicable form of note.As of January 28, 2024, we were in compliance with the required covenants, which are non-financial in nature, under the outstanding notes.Commercial PaperWe have a $575 million commercial paper program to support general corporate purposes. As of January 28, 2024, we had no commercial paper outstanding.Note 13 - Commitments and ContingenciesPurchase ObligationsOur purchase obligations reflect our commitments to purchase components used to manufacture our products, including long-term supply and capacity agreements, certain software and technology licenses, other goods and services and long-lived assets.As of January 28, 2024, we had outstanding inventory purchase and long-term supply and capacity obligations totaling $16.1 billion. We enter into agreements with contract manufacturers that allow them to procure inventory based upon criteria as defined by us, and in certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed, but these changes may result in the payment of costs incurred through the date of cancellation. Other non-inventory purchase obligations were $4.6 billion, which includes $3.5 billion of multi-year cloud service agreements, primarily to support our research and development efforts.72Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Total future purchase commitments as of January 28, 2024 are as follows:Commitments (In millions)Fiscal Year: 2025$17,316 20261,143 20271,060 2028770 2029 and thereafter418 Total$20,707 Accrual for Product Warranty LiabilitiesThe estimated amount of product warranty liabilities was $306 million and $82 million as of January 28, 2024 and January 29, 2023, respectively. The estimated product returns and estimated product warranty activity consisted of the following:Year EndedJan 28, 2024Jan 29, 2023Jan 30, 2022(In millions)Balance at beginning of period$82 $46 $22 Additions278 14540Utilization(54)(109)(16)Balance at end of period$306 $82 $46 In fiscal years 2024 and 2023, the additions in product warranty liabilities primarily related to Compute & Networking segment.We have provided indemnities for matters such as tax, product, and employee liabilities. We have included intellectual property indemnification provisions in our technology-related agreements with third parties. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. We have not recorded any liability in our Consolidated Financial Statements for such indemnifications.LitigationSecurities Class Action and Derivative Lawsuits The plaintiffs in the putative securities class action lawsuit, captioned 4:18-cv-07669-HSG, initially filed on December 21, 2018 in the United States District Court for the Northern District of California, and titled In Re NVIDIA Corporation Securities Litigation, filed an amended complaint on May 13, 2020. The amended complaint asserted that NVIDIA and certain NVIDIA executives violated Section 10(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and SEC Rule 10b-5, by making materially false or misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand between May 10, 2017 and November 14, 2018. Plaintiffs also alleged that the NVIDIA executives who they named as defendants violated Section 20(a) of the Exchange Act. Plaintiffs sought class certification, an award of unspecified compensatory damages, an award of reasonable costs and expenses, including attorneys’ fees and expert fees, and further relief as the Court may deem just and proper. On March 2, 2021, the district court granted NVIDIA’s motion to dismiss the complaint without leave to amend, entered judgment in favor of NVIDIA and closed the case. On March 30, 2021, plaintiffs filed an appeal from judgment in the United States Court of Appeals for the Ninth Circuit, case number 21-15604. On August 25, 2023, a majority of a three-judge Ninth Circuit panel affirmed in part and reversed in part the district court’s dismissal of the case, with a third judge dissenting on the basis that the district court did not err in dismissing the case. On November 15, 2023, the Ninth Circuit denied NVIDIA’s petition for rehearing en banc of the Ninth Circuit panel’s majority decision to reverse in part the dismissal of the case, which NVIDIA had filed on October 10, 2023. On November 21, 2023, NVIDIA filed a motion with the Ninth Circuit for a stay of the mandate pending NVIDIA’s petition for a writ of certiorari in the Supreme Court of the United States and the Supreme Court’s 73Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)resolution of the matter. On December 5, 2023, the Ninth Circuit granted NVIDIA’s motion to stay the mandate. NVIDIA’s deadline to file a petition for a writ of certiorari is March 4, 2024.The putative derivative lawsuit pending in the United States District Court for the Northern District of California, captioned 4:19-cv-00341-HSG, initially filed January 18, 2019 and titled In re NVIDIA Corporation Consolidated Derivative Litigation, was stayed pending resolution of the plaintiffs’ appeal in the In Re NVIDIA Corporation Securities Litigation action. On February 22, 2022, the court administratively closed the case, but stated that it would reopen the case once the appeal in the In Re NVIDIA Corporation Securities Litigation action is resolved. Following the Ninth Circuit’s denial of NVIDIA’s petition for rehearing on November 15, 2023, the parties are conferring regarding the next steps in this derivative matter. The lawsuit asserts claims, purportedly on behalf of us, against certain officers and directors of the Company for breach of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of Sections 14(a), 10(b), and 20(a) of the Exchange Act based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand. The plaintiffs are seeking unspecified damages and other relief, including reforms and improvements to NVIDIA’s corporate governance and internal procedures.The putative derivative actions initially filed September 24, 2019 and pending in the United States District Court for the District of Delaware, Lipchitz v. Huang, et al. (Case No. 1:19-cv-01795-UNA) and Nelson v. Huang, et. al. (Case No. 1:19-cv-01798- UNA), remain stayed pending resolution of the plaintiffs’ appeal in the In Re NVIDIA Corporation Securities Litigation action. Following the Ninth Circuit’s denial of NVIDIA’s petition for rehearing on November 15, 2023, the parties are conferring regarding the next steps in these derivative matters. The lawsuits assert claims, purportedly on behalf of us, against certain officers and directors of the Company for breach of fiduciary duty, unjust enrichment, insider trading, misappropriation of information, corporate waste and violations of Sections 14(a), 10(b), and 20(a) of the Exchange Act based on the dissemination of allegedly false, and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand. The plaintiffs seek unspecified damages and other relief, including disgorgement of profits from the sale of NVIDIA stock and unspecified corporate governance measures.Another putative derivative action was filed on October 30, 2023 in the Court of Chancery of the State of Delaware, captioned Horanic v. Huang, et al. (Case No. 2023-1096-KSJM). This lawsuit asserts claims, purportedly on behalf of us, against certain officers and directors of the Company for breach of fiduciary duty and insider trading based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand. The plaintiffs seek unspecified damages and other relief, including disgorgement of profits from the sale of NVIDIA stock and reform of unspecified corporate governance measures. This derivative matter is stayed pending the final resolution of In Re NVIDIA Corporation Securities Litigation action.Accounting for Loss Contingencies As of January 28, 2024, we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on our belief that liabilities, while possible, are not probable. Further, except as specifically described above, any possible loss or range of loss in these matters cannot be reasonably estimated at this time. We are engaged in legal actions not described above arising in the ordinary course of business and, while there can be no assurance of favorable outcomes, we believe that the ultimate outcome of these actions will not have a material adverse effect on our operating results, liquidity or financial position.74Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Note 14 - Income TaxesThe income tax expense (benefit) applicable to income before income taxes consists of the following: Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022 (In millions)Current income taxes:   Federal$5,710 $1,703 $482 State335 46 42 Foreign502 228 71 Total current6,547 1,977 595 Deferred income taxes:   Federal(2,499)(2,165)(420)State(206)— — Foreign216 1 14 Total deferred(2,489)(2,164)(406)Income tax expense (benefit)$4,058 $(187)$189 Income before income tax consists of the following: Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022 (In millions)U.S.$29,495 $3,477 $8,446 Foreign4,323 704 1,495 Income before income tax$33,818 $4,181 $9,941 The income tax expense (benefit) differs from the amount computed by applying the U.S. federal statutory rate of 21% to income before income taxes as follows: Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022 (In millions, except percentages)Tax expense computed at federal statutory rate$7,102 21.0 %$878 21.0 %$2,088 21.0 %Expense (benefit) resulting from:State income taxes, net of federal tax effect120 0.4 %50 1.2 %42 0.4 %Foreign-derived intangible income(1,408)(4.2)%(739)(17.7)%(520)(5.2)%Stock-based compensation(741)(2.2)%(309)(7.4)%(337)(3.4)%Foreign tax rate differential(467)(1.4)%(83)(2.0)%(497)(5.0)%U.S. federal research and development tax credit(431)(1.3)%(278)(6.6)%(289)(2.9)%Acquisition termination cost— — %261 6.2 %— — %IP domestication— — %— — %(244)(2.5)%Other(117)(0.3)%33 0.8 %(54)(0.5)%Income tax expense (benefit)$4,058 12.0 %$(187)(4.5)%$189 1.9 % 75Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)The tax effect of temporary differences that gives rise to significant portions of the deferred tax assets and liabilities are presented below: Jan 28, 2024Jan 29, 2023 (In millions)Deferred tax assets: Capitalized research and development expenditure$3,376 $1,859 GILTI deferred tax assets1,576 800 Accruals and reserves, not currently deductible for tax purposes1,121 686 Research and other tax credit carryforwards936 951 Net operating loss and capital loss carryforwards439 409 Operating lease liabilities263 193 Stock-based compensation106 99 Property, equipment and intangible assets4 66 Other deferred tax assets179 91 Gross deferred tax assets8,000 5,154 Less valuation allowance(1,552)(1,484)Total deferred tax assets6,448 3,670 Deferred tax liabilities:  Unremitted earnings of foreign subsidiaries(502)(228)Operating lease assets(255)(179)Acquired intangibles(74)(115)Gross deferred tax liabilities(831)(522)Net deferred tax asset (1)$5,617 $3,148 (1) Net deferred tax asset includes long-term deferred tax assets of $6.1 billion and $3.4 billion and long-term deferred tax liabilities of $462 million and $247 million for fiscal years 2024 and 2023, respectively. Long-term deferred tax liabilities are included in other long-term liabilities on our Consolidated Balance Sheets.As of January 28, 2024, we intend to indefinitely reinvest approximately $1.1 billion and $250 million of cumulative undistributed earnings held by certain subsidiaries in Israel and the United Kingdom, respectively. We have not provided the amount of unrecognized deferred tax liabilities for temporary differences related to these investments as the determination of such amount is not practicable.As of January 28, 2024 and January 29, 2023, we had a valuation allowance of $1.6 billion and $1.5 billion, respectively, related to capital loss carryforwards, and certain state and other deferred tax assets that management determined are not likely to be realized due, in part, to jurisdictional projections of future taxable income, including capital gains. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax assets as income tax benefits during the period.As of January 28, 2024, we had U.S. federal, state and foreign net operating loss carryforwards of $315 million, $342 million and $361 million, respectively. The federal and state carryforwards will begin to expire in fiscal years 2026 and 2025, respectively. The foreign net operating loss carryforwards of $361 million may be carried forward indefinitely. As of January 28, 2024, we had federal research tax credit carryforwards of $31 million, before the impact of uncertain tax positions, that will begin to expire in fiscal year 2025. We have state research tax credit carryforwards of $1.6 billion, before the impact of uncertain tax positions. $1.5 billion is attributable to the State of California and may be carried over indefinitely and $75 million is attributable to various other states and will begin to expire in fiscal year 2025. As of January 28, 2024, we had federal capital loss carryforwards of $1.4 billion that will begin to expire in fiscal year 2025.Our tax attributes remain subject to audit and may be adjusted for changes or modification in tax laws, other authoritative interpretations thereof, or other facts and circumstances. Utilization of tax attributes may also be subject to limitations due to ownership changes and other limitations provided by the Internal Revenue Code and similar state and foreign tax provisions. If any such limitations apply, the tax attributes may expire or be denied before utilization.76Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)A reconciliation of gross unrecognized tax benefits is as follows: Jan 28, 2024Jan 29, 2023Jan 30, 2022 (In millions)Balance at beginning of period$1,238 $1,013 $776 Increases in tax positions for current year616 268 246 Increases in tax positions for prior years87 1 14 Decreases in tax positions for prior years(148)(15)(4)Settlements(104)(9)(8)Lapse in statute of limitations(19)(20)(11)Balance at end of period$1,670 $1,238 $1,013 Included in the balance of unrecognized tax benefits as of January 28, 2024 are $1.0 billion of tax benefits that would affect our effective tax rate if recognized.We classify an unrecognized tax benefit as a current liability, or amount refundable, to the extent that we anticipate payment or receipt of cash for income taxes within one year. The amount is classified as a long-term liability, or reduction of long-term amount refundable, if we anticipate payment or receipt of cash for income taxes during a period beyond a year.We include interest and penalties related to unrecognized tax benefits as a component of income tax expense. We recognized net interest and penalties related to unrecognized tax benefits in the income tax expense line of our consolidated statements of income of $42 million, $33 million, and $14 million during fiscal years 2024, 2023 and 2022, respectively. As of January 28, 2024 and January 29, 2023, we have accrued $140 million and $95 million, respectively, for the payment of interest and penalties related to unrecognized tax benefits, which is not included as a component of our gross unrecognized tax benefits.While we believe that we have adequately provided for all tax positions, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax-related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved. As of January 28, 2024, we have not identified any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.We are subject to taxation by taxing authorities both in the United States and other countries. As of January 28, 2024, the significant tax jurisdictions that may be subject to examination include the United States for fiscal years after 2020, as well as China, Germany, Hong Kong, India, Israel, Taiwan, and the United Kingdom for fiscal years 2005 through 2023. As of January 28, 2024, the significant tax jurisdictions for which we are currently under examination include Germany, India, Israel, and Taiwan for fiscal years 2005 through 2023.Note 15 - Shareholders’ EquityCapital Return ProgramIn August 2023, our Board of Directors approved an increase to our share repurchase program of an additional $25.0 billion, without expiration. During fiscal year 2024, we repurchased 21 million shares of our common stock for $9.7 billion. As of January 28, 2024, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $22.5 billion. From January 29, 2024 through February 16, 2024, we repurchased 2.8 million shares for $1.9 billion pursuant to a Rule 10b5-1 trading plan. Our share repurchase program aims to offset dilution from shares issued to employees. We may pursue additional share repurchases as we weigh market factors and other investment opportunities.During fiscal years 2024, 2023, and 2022, we paid $395 million, $398 million, and $399 million in cash dividends to our shareholders, respectively. Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors' continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.In fiscal year 2022, we retired our existing 349 million treasury shares. These shares assumed the status of authorized and unissued shares upon retirement. The excess of repurchase price over par value was allocated between additional paid-in capital and retained earnings, resulting in a reduction in additional paid-in capital by $20 million and retained earnings by $12.0 billion. Any future repurchased shares will assume the status of authorized and unissued shares.77Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Note 16 - Employee Retirement PlansWe provide tax-qualified defined contribution plans to eligible employees in the U.S. and certain other countries. Our contribution expense for fiscal years 2024, 2023, and 2022 was $255 million, $227 million, and $168 million, respectively.Note 17 - Segment Information Our Chief Executive Officer, who is considered to be our chief operating decision maker, or CODM, reviews financial information presented on an operating segment basis for purposes of making decisions and assessing financial performance.The Compute & Networking segment includes our Data Center accelerated computing platform; networking; automotive artificial intelligence, or AI, Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; electric vehicle computing platforms; Jetson for robotics and other embedded platforms; NVIDIA AI Enterprise and other software; and DGX Cloud.The Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse Enterprise software for building and operating 3D internet applications.Operating results by segment include costs or expenses that are directly attributable to each segment, and costs or expenses that are leveraged across our unified architecture and therefore allocated between our two segments.The “All Other” category includes the expenses that our CODM does not assign to either Compute & Networking or Graphics for purposes of making operating decisions or assessing financial performance. The expenses include stock-based compensation expense, corporate infrastructure and support costs, acquisition-related and other costs, intellectual property related, or IP-related costs, acquisition termination cost, and other non-recurring charges and benefits that our CODM deems to be enterprise in nature.Our CODM does not review any information regarding total assets on a reportable segment basis. Depreciation and amortization expense directly attributable to each reportable segment is included in operating results for each segment. However, our CODM does not evaluate depreciation and amortization expense by operating segment and, therefore, it is not separately presented. There is no intersegment revenue. The accounting policies for segment reporting are the same as for our consolidated financial statements. The table below presents details of our reportable segments and the “All Other” category. Compute & NetworkingGraphicsAll OtherConsolidated(In millions)Year Ended Jan 28, 2024:   Revenue$47,405 $13,517 $— $60,922 Operating income (loss)$32,016 $5,846 $(4,890)$32,972 Year Ended Jan 29, 2023:   Revenue$15,068 $11,906 $— $26,974 Operating income (loss)$5,083 $4,552 $(5,411)$4,224 Year Ended Jan 30, 2022:   Revenue$11,046 $15,868 $— $26,914 Operating income (loss)$4,598 $8,492 $(3,049)$10,041 78Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)Year EndedJan 28, 2024Jan 29, 2023Jan 30, 2022(In millions)Reconciling items included in "All Other" category:Stock-based compensation expense$(3,549)$(2,710)$(2,004)Unallocated cost of revenue and operating expenses(728)(595)(399)Acquisition-related and other costs(583)(674)(636)IP-related and legal settlement costs(40)(23)(10)Restructuring costs and other— (54)— Acquisition termination cost— (1,353)— Other10 (2)— Total$(4,890)$(5,411)$(3,049)Revenue by geographic areas is designated based upon the billing location of the customer. End customer location may be different than our customer’s billing location. Revenue by geographic areas was as follows:  Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022Revenue:(In millions)United States$26,966 $8,292 $4,349 Taiwan13,405 6,986 8,544 China (including Hong Kong)10,306 5,785 7,111 Other countries10,245 5,911 6,910 Total revenue$60,922 $26,974 $26,914 Revenue from sales to customers outside of the United States accounted for 56%, 69%, and 84% of total revenue for fiscal years 2024, 2023, and 2022, respectively. The increase in revenue to the United States for fiscal year 2024 was primarily due to higher U.S.-based Compute & Networking segment demand.Sales to one customer represented 13% of total revenue for fiscal year 2024, which was attributable to the Compute & Networking segment. No customer represented 10% or more of total revenue for fiscal years 2023 and 2022.The following table summarizes information pertaining to our revenue by each of the specialized markets we serve: Year Ended Jan 28, 2024Jan 29, 2023Jan 30, 2022Revenue:(In millions)Data Center$47,525 $15,005 $10,613 Gaming10,447 9,067 12,462 Professional Visualization1,553 1,544 2,111 Automotive1,091 903 566 OEM and Other306 455 1,162 Total revenue$60,922 $26,974 $26,914 79Table of ContentsNVIDIA Corporation and SubsidiariesNotes to the Consolidated Financial Statements(Continued)The following table presents summarized information for long-lived assets by country. Long-lived assets consist of property and equipment and exclude other assets, operating lease assets, goodwill, and intangible assets. Jan 28, 2024Jan 29, 2023Long-lived assets:(In millions)United States$2,595 $2,587 Taiwan773 702 Israel325 283 Other countries221 235 Total long-lived assets$3,914 $3,807 80NVIDIA Corporation and SubsidiariesSchedule II – Valuation and Qualifying AccountsDescriptionBalance atBeginning of PeriodAdditions Deductions Balance atEnd of Period (In millions)Fiscal year 2024      Allowance for doubtful accounts$4 $— (1)$— (1)$4 Sales return allowance$26 $213 (2)$(130)(4)$109 Deferred tax valuation allowance$1,484 $162 (3)$(94)(3)$1,552 Fiscal year 2023      Allowance for doubtful accounts$4 $— (1)$— (1)$4 Sales return allowance$13 $104 (2)$(91)(4)$26 Deferred tax valuation allowance$907 $577 (3)$— $1,484 Fiscal year 2022      Allowance for doubtful accounts$4 $— (1)$— (1)$4 Sales return allowance$17 $19 (2)$(23)(4)$13 Deferred tax valuation allowance$728 $179 (3)$— $907 (1)Additions represent either expense or acquired balances and deductions represent write-offs.(2)Additions represent estimated product returns charged as a reduction to revenue or an acquired balance.(3)Additional valuation allowance on deferred tax assets not likely to be realized. Additions represent additional valuation allowance on capital loss carryforwards, and certain state and other deferred tax assets. Deductions represent the release of valuation allowance on certain state deferred tax assets. Refer to Note 14 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information. (4)Represents sales returns.81Exhibit IndexIncorporated by ReferenceExhibit No.Exhibit DescriptionSchedule/FormExhibitFiling Date2.1Agreement and Plan of Merger, dated March 10, 2019, by and among NVIDIA Corporation, NVIDIA International Holdings Inc., Mellanox Technologies Ltd. and Teal Barvaz Ltd.8-K2.13/11/20192.2^Share Purchase Agreement, dated September 13, 2020, by and among NVIDIA, NVIDIA Holdings, Arm, SoftBank, and Vision Fund8-K2.19/14/20203.1Restated Certificate of Incorporation10-K3.13/18/20223.2Amendment to Restated Certificate of Incorporation of NVIDIA Corporation8-K3.16/6/20223.3Bylaws of NVIDIA Corporation, Amended and Restated as of March 2, 20238-K3.13/8/20234.1Reference is made to Exhibits 3.1, 3.2 and 3.34.2Specimen Stock CertificateS-1/A4.24/24/19984.3Indenture, dated as of September 16, 2016, by and between the Company and Computershare Trust Company, N.A., as successor to Wells Fargo Bank, National Association, as Trustee8-K4.19/16/20164.4Officers’ Certificate, dated as of September 16, 20168-K4.29/16/20164.5Form of 2026 Note8-KAnnex B-1 to Exhibit 4.29/16/20164.6Description of Securities10-K4.62/24/20234.7Officers’ Certificate, dated as of March 31, 20208-K4.23/31/20204.8Form of 2030 Note8-KAnnex A-1 to Exhibit 4.23/31/20204.9Form of 2040 Note8-KAnnex B-1 to Exhibit 4.23/31/20204.10Form of 2050 Note8-KAnnex C-1 to Exhibit 4.23/31/20204.11Form of 2060 Note8-KAnnex D-1 to Exhibit 4.23/31/20204.12Officers' Certificate, dated as of June 16, 20218-K4.26/16/20214.13Form of 2023 Note8-KAnnex A-1 to Exhibit 4.26/16/20214.14Form of 2024 Note8-KAnnex B-1 to Exhibit 4.26/16/20214.15Form of 2028 Note8-KAnnex C-1 to Exhibit 4.26/16/20214.16Form of 2031 Note8-KAnnex D-1 to Exhibit 4.26/16/202110.1Form of Indemnity Agreement between NVIDIA Corporation and each of its directors and officers8-K10.13/7/200610.2+Amended and Restated 2007 Equity Incentive Plan10-K10.22/24/202310.3+Amended and Restated 2007 Equity Incentive Plan - Non-Employee Director Deferred Restricted Stock Unit Grant Notice and Deferred Restricted Stock Unit Agreement (2016)10-K10.263/12/201510.4+Amended and Restated 2007 Equity Incentive Plan - Non-Employee Director Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (2016)10-K10.273/12/201510.5+Amended and Restated 2007 Equity Incentive Plan - Global Performance-Based Restricted Stock Unit Grant Notice and Performance-Based Restricted Stock Unit Agreement (2019)8-K10.13/11/201910.6+Amended and Restated 2007 Equity Incentive Plan – Global Restricted Stock Unit Grant Notice and Global Restricted Stock Unit Agreement (2020)10-Q10.25/21/20208210.7+Amended and Restated 2007 Equity Incentive Plan – Global Restricted Stock Unit Grant Notice and Global Restricted Stock Unit Agreement (2021)10-Q10.25/26/202110.8+Amended and Restated 2007 Equity Incentive Plan – Global Restricted Stock Unit Grant Notice and Global Restricted Stock Unit Agreement (2022)10-K10.163/18/202210.9+Amended and Restated 2007 Equity Incentive Plan – Global Restricted Stock Unit Grant Notice and Global Restricted Stock Unit Agreement (2023)10-K10.142/24/202310.10+Amended and Restated 2012 Employee Stock Purchase Plan10-Q10.28/20/202110.11+Variable Compensation Plan - Fiscal Year 2023 8-K10.13/9/202210.12+Variable Compensation Plan - Fiscal Year 20248-K10.13/8/202310.13Form of Commercial Paper Dealer Agreement between NVIDIA Corporation, as Issuer, and the Dealer party thereto8-K10.112/15/201721.1*Subsidiaries of Registrant23.1*Consent of PricewaterhouseCoopers LLP24.1*Power of Attorney (included in signature page)31.1*Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 193431.2*Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 193432.1#*Certification of Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 193432.2#*Certification of Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 193497.1+*Compensation Recovery Policy, as amended and restated November 30, 2023101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Extension Schema Document101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document101.DEF*XBRL Taxonomy Extension Definition Linkbase Document101.LAB*XBRL Taxonomy Extension Labels Linkbase Document101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document104Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*  Filed herewith.+  Management contract or compensatory plan or arrangement.# In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management's Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.^ Certain exhibits and schedules have been omitted in accordance with Regulation S-K Item 601(a)(5). Copies of above exhibits not contained herein are available to any shareholder upon written request to:Investor Relations: NVIDIA Corporation, 2788 San Tomas Expressway, Santa Clara, CA 95051Item 16. Form 10-K SummaryNot Applicable.83 SignaturesPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 21, 2024.NVIDIA CorporationBy:/s/ Jen-Hsun Huang  Jen-Hsun Huang President and Chief Executive OfficerPower of AttorneyKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jen-Hsun Huang and Colette M. Kress, and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-facts and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitutes, may lawfully do or cause to be done by virtue hereof.84Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ JEN-HSUN HUANG President, Chief Executive Officer and Director(Principal Executive Officer)February 21, 2024Jen-Hsun Huang /s/ COLETTE M. KRESS Executive Vice President and Chief Financial Officer(Principal Financial Officer)February 21, 2024Colette M. Kress /s/ DONALD ROBERTSONVice President and Chief Accounting Officer(Principal Accounting Officer)February 21, 2024Donald Robertson/s/ ROBERT BURGESSDirectorFebruary 21, 2024Robert Burgess/s/ TENCH COXE  DirectorFebruary 21, 2024Tench Coxe  /s/ JOHN O. DABIRIDirectorFebruary 21, 2024John O. Dabiri /s/ PERSIS DRELLDirectorFebruary 21, 2024Persis Drell/s/ DAWN HUDSONDirectorFebruary 21, 2024Dawn Hudson/s/ HARVEY C. JONES DirectorFebruary 21, 2024Harvey C. Jones /s/ MELISSA B. LORADirectorFebruary 21, 2024Melissa B. Lora/s/ MICHAEL MCCAFFERYDirectorFebruary 21, 2024Michael McCaffery/s/ STEPHEN C. NEALDirectorFebruary 21, 2024Stephen C. Neal/s/ MARK L. PERRY DirectorFebruary 21, 2024Mark L. Perry  /s/ A. BROOKE SEAWELLDirectorFebruary 21, 2024A. Brooke Seawell /s/ AARTI SHAHDirectorFebruary 21, 2024Aarti Shah/s/ MARK STEVENSDirectorFebruary 21, 2024Mark Stevens  85
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StatesSecurities and Exchange CommissionWashington, D.C. 20549Form 10-K Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for the fiscal year ended December 31, 2020Commission file number 001-06351ELI LILLY AND COMPANY (Exact name of Registrant as specified in its charter)Indiana 35-0470950(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification No.)Lilly Corporate Center, Indianapolis, Indiana 46285(Address and zip code of principal executive offices)Registrant’s telephone number, including area code (317) 276-2000 Securities registered pursuant to Section 12(b) of the Exchange Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange On Which RegisteredCommon Stock (no par value)LLYNew York Stock Exchange1.000% Notes due 2022LLY22New York Stock Exchange7 1/8% Notes due 2025LLY25New York Stock Exchange1.625% Notes due 2026LLY26New York Stock Exchange2.125% Notes due 2030LLY30New York Stock Exchange0.625% Notes due 2031LLY31New York Stock Exchange6.77% Notes due 2036LLY36New York Stock Exchange1.700% Notes due 2049LLY49ANew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Exchange Act: NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes  ☐ No ☒Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐   Emerging growth company☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒Aggregate market value of the common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the Registrant’s most recently completed second fiscal quarter: approximately $138,907,000,000.Number of shares of common stock outstanding as of February 12, 2021: 958,425,693Portions of the Registrant’s Proxy Statement for the 2021 Annual Meeting of Shareholders have been incorporated by reference into Part III of this report.1Eli Lilly and CompanyForm 10-KFor the Year Ended December 31, 2020 Table of ContentsPagePart IItem 1.Business5Item 1A.Risk Factors23Item 1B.Unresolved Staff Comments31Item 2.Properties31Item 3.Legal Proceedings31Item 4.Mine Safety Disclosures31Part IIItem 5.Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities32Item 6.[Reserved]34Item 7.Management's Discussion and Analysis of Results of Operations and Financial Condition34Item 7A.Quantitative and Qualitative Disclosures About Market Risk56Item 8.Financial Statements and Supplementary Data57Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure120Item 9A.Controls and Procedures120Item 9B.Other Information120Part IIIItem 10.Directors, Executive Officers, and Corporate Governance121Item 11.Executive Compensation121Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters122Item 13.Certain Relationships and Related Transactions, and Director Independence122Item 14.Principal Accountant Fees and Services122Item 15.Exhibits and Financial Statement Schedules123Item 16.Form 10-K Summary1252Forward-Looking StatementsThis Annual Report on Form 10-K and our other publicly available documents include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act), and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. In particular, information appearing under “Business,” “Risk Factors,” and “Management's Discussion and Analysis of Results of Operations and Financial Condition” includes forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, and generally can be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue,” or similar expressions or future or conditional verbs. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those expressed in forward-looking statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, it is based on management's current plans and expectations, expressed in good faith and believed to have a reasonable basis. However, we can give no assurance that any such expectation or belief will result or will be achieved or accomplished. Investors therefore should not place undue reliance on forward-looking statements. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:•the impact of the evolving COVID-19 pandemic and the global response thereto;•uncertainties related to our efforts to develop potential treatments for COVID-19;•the significant costs and uncertainties in the pharmaceutical research and development process, including with respect to the timing and process of obtaining regulatory approvals;•the impact of acquisitions and business development transactions and related integration costs;•the expiration of intellectual property protection for certain of our products and competition from generic and/or biosimilar products;•our ability to protect and enforce patents and other intellectual property;•changes in patent law or regulations related to data package exclusivity;•competitive developments affecting current products and our pipeline;•market uptake of recently launched products;•information technology system inadequacies, breaches, or operating failures;•unauthorized access, disclosure, misappropriation, or compromise of confidential information or other data stored in our IT systems, networks, and facilities, or those of third parties with whom we share our data;•unexpected safety or efficacy concerns associated with our products;•litigation, investigations, or other similar proceedings involving past, current, or future products or commercial activities as we are largely self-insured;•issues with product supply stemming from manufacturing difficulties or disruptions;•reliance on third-party relationships and outsourcing arrangements;•regulatory changes or other developments;•regulatory actions regarding currently marketed products; •continued pricing pressures and the impact of actions of governmental and private payers affecting pricing of, reimbursement for, and access to pharmaceuticals;•devaluations in foreign currency exchange rates or changes in interest rates, and inflation;•changes in tax law, tax rates, or events that differ from our assumptions related to tax positions; •asset impairments and restructuring charges;•the impact of global macroeconomic conditions and trade disruptions or disputes; •changes in accounting and reporting standards promulgated by the Financial Accounting Standards Board and the Securities and Exchange Commission (SEC); and•regulatory compliance problems or government investigations.3Investors should also carefully read the factors described under Item 1A, “Risk Factors” in this Annual Report on Form 10-K for a description of certain risks that could, among other things, cause our actual results to differ from those expressed in forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and under Item 1A, “Risk Factors” to be a complete statement of all potential risks and uncertainties.All forward-looking statements speak only as of the date of this Annual Report and are expressly qualified in their entirety by the risk factors and cautionary statements included in this Annual Report. Except as is required by law, we expressly disclaim any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this Annual Report.4Part IItem 1.BusinessEli Lilly and Company (referred to as the company, Lilly, we, or us) was incorporated in 1901 in Indiana to succeed to the drug manufacturing business founded in Indianapolis, Indiana, in 1876 by Colonel Eli Lilly. We discover, develop, manufacture, and market products in a single business segment—human pharmaceutical products. In March 2019, we completed the disposition of our ownership in Elanco Animal Health Incorporated (Elanco), an animal health business.Our purpose is to unite caring with discovery to create medicines that make life better for people around the world. Most of the products we sell today were discovered or developed by our own scientists, and our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines.We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and 8 other countries. Our products are sold in approximately 120 countries.ProductsOur products include:Diabetes products, including:•Baqsimi®, a nasal powder formulation for the treatment of severe hypoglycemia in patients with diabetes•Basaglar®, a long-acting human insulin analog for the treatment of diabetes•Humalog®, Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, insulin lispro protamine, and insulin lispro mix 75/25, human insulin analogs for the treatment of diabetes •Humulin®, Humulin 70/30, Humulin N, Humulin R, and Humulin U-500, human insulins of recombinant DNA origin for the treatment of diabetes•Jardiance®, for the treatment of type 2 diabetes and to reduce the risk of cardiovascular death in adult patients with type 2 diabetes and established cardiovascular disease •Lyumjev®, a rapid-acting human insulin analog for the treatment of diabetes•Trajenta®, for the treatment of type 2 diabetes•Trulicity®, for the treatment of type 2 diabetes and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factorsOncology products, including:•Alimta®, for the first-line treatment, in combination with two other agents, of advanced non-small cell lung cancer (NSCLC) for patients with non-squamous cell histology and no EGFR or ALK genomic tumor aberrations; for the first-line treatment, in combination with another agent, of advanced non-squamous NSCLC; for the second-line treatment of advanced non-squamous NSCLC; as monotherapy for the maintenance treatment of advanced non-squamous NSCLC in patients whose disease has not progressed immediately following chemotherapy treatment; and in combination with another agent for the treatment of malignant pleural mesothelioma•Cyramza®, for use as monotherapy or in combination with another agent as a second-line treatment of advanced or metastatic gastric cancer or gastro-esophageal junction adenocarcinoma; in combination with another agent as a second-line treatment of metastatic NSCLC; in combination with another agent as a second-line treatment of metastatic colorectal cancer; as a monotherapy as a second-line treatment of hepatocellular carcinoma; and in combination with another agent as a first-line treatment of adult patients with metastatic NSCLC with activating epidermal growth factor receptor mutations •Erbitux®, indicated both as monotherapy and in combination with another agent for the treatment of certain types of colorectal cancers; and as monotherapy, in combination with chemotherapy, or in combination with radiation therapy for the treatment of certain types of head and neck cancers5•Retevmo®, for the treatment of metastatic NSCLC in adult patients; for the treatment of advanced metastatic medullary thyroid cancer who require systemic therapy in adult and pediatric patients; and for the treatment of advanced metastatic thyroid cancer in adult and pediatric patients who require systemic therapy and are radioactive iodin-refractory•Tyvyt®, for the treatment of relapsed or refractory classic Hodgkin’s lymphoma and for the first-line treatment of non-squamous NSCLC in combination with Alimta and another agent in China•Verzenio®, for use as monotherapy or in combination with endocrine therapy for the treatment of HR+, HER2- metastatic breast cancer Immunology products, including:•Olumiant®, for the treatment of adults with moderately-to-severely active rheumatoid arthritis◦Baricitinib was granted Emergency Use Authorization (EUA) in 2020 for the treatment of suspected or laboratory confirmed COVID-19, in combination with remdesivir, in hospitalized adults and pediatric patients •Taltz®, for the treatment of adults and pediatric patients aged 6 years or older with moderate-to-severe plaque psoriasis, adults with active psoriatic arthritis, adults with ankylosing spondylitis, and adults with active non-radiographic axial spondyloarthritisNeuroscience products, including:•Cymbalta®, for the treatment of major depressive disorder, diabetic peripheral neuropathic pain, generalized anxiety disorder, fibromyalgia, and chronic musculoskeletal pain due to chronic low back pain or chronic pain due to osteoarthritis•Emgality®, for migraine prevention and the treatment of episodic cluster headache in adults•Reyvow®, for the acute treatment of migraine, with or without aura, in adults•Zyprexa®, for the treatment of schizophrenia, acute mixed or manic episodes associated with bipolar I disorder, and bipolar maintenanceOther therapies, including:•Bamlanivimab, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients with positive results of direct SARS-CoV-2 viral testing (EUA granted in 2020)•Bamlanivimab and etesevimab, administered together, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients with positive results of direct SARS-CoV-2 viral testing (EUA granted in 2021)•Cialis®, for the treatment of erectile dysfunction and benign prostatic hyperplasia•Forteo®, for the treatment of osteoporosis in postmenopausal women and men at high risk for fracture and for glucocorticoid-induced osteoporosis in men and postmenopausal womenMarketing and DistributionWe sell most of our products worldwide. We adapt our marketing methods and product emphasis in various countries to meet local customer needs and comply with local regulations.U.S.We promote our major products in the U.S. through sales representatives who call upon physicians and other health care professionals. We also promote to healthcare providers in medical journals and online health care channels, distribute literature and samples of certain products to physicians, and exhibit at medical meetings. In addition, we advertise certain products directly to consumers in the U.S. and we maintain websites with information about our major products. We supplement our employee sales force with contract sales organizations to leverage our resources and reach additional patients in need.We maintain special business groups to service wholesalers, pharmacy benefit managers, managed care organizations, group purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies. We enter into arrangements with these organizations providing for discounts or rebates on our products.6In the U.S., most of our products are distributed through wholesalers that serve pharmacies, physicians and other health care professionals, and hospitals. In 2020, 2019, and 2018, three wholesale distributors in the U.S.—McKesson Corporation, AmerisourceBergen Corporation, and Cardinal Health, Inc.—each accounted for between 15 percent and 20 percent of our consolidated revenue. No other customer accounted for more than 10 percent of our consolidated revenue in any of these years.Outside the U.S.Outside the U.S., we promote our products to healthcare providers primarily through sales representatives and online health care channels. While the products we market vary from country to country, diabetes products constitute the largest single group of our consolidated revenue. Distribution patterns for our products also vary from country to country. In most countries in which we operate, we maintain our own sales organizations, but in some smaller countries we market our products through independent distributors.Marketing CollaborationsCertain of our products are marketed in arrangements with other pharmaceutical companies. For example, we and Boehringer Ingelheim have a global agreement to develop and commercialize a portfolio of diabetes products, including Trajenta, Jentadueto®, Jardiance, Glyxambi®, Synjardy®, Trijardy® XR, and Basaglar. For additional information, see Item 8, "Financial Statements and Supplementary Data - Note 4, Collaborations and Other Arrangements."CompetitionOur products compete globally with many other pharmaceutical products in highly competitive markets. Important competitive factors include effectiveness, safety, and ease of use; formulary placement, price, and demonstrated cost-effectiveness; marketing effectiveness; and research and development of new products, processes, modalities, and uses. Most new products that we introduce must compete with other branded or generic products already on the market or products that are later developed by competitors. When competitors introduce new products or delivery systems with therapeutic or cost advantages, including by developing new modalities, our products become subject to decreased sales, progressive price reductions, or both. We believe our long-term competitive success depends on discovering and developing (either alone or in collaboration with others) or acquiring innovative, cost-effective products that provide improved outcomes for patients and deliver value to payers, and continuously improving the productivity of our operations in a highly competitive environment. There can be no assurance that our efforts will result in commercially successful products, and it is possible that our products will be, or will become, uncompetitive from time to time as a result of products developed by our competitors.Generic PharmaceuticalsOne of the biggest competitive challenges we face is from generic pharmaceuticals. In the U.S. and Europe, the regulatory approval process for pharmaceuticals (other than biological products (biologics)) exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing generic manufacturers to rely on the safety and efficacy of the innovator product. As a result, generic manufacturers generally invest far fewer resources than we do in research and development and can price their products significantly lower than our branded products. Accordingly, when a branded non-biologic pharmaceutical loses its market exclusivity, it normally faces intense price competition from generic forms of the product, which can cause us to lose a significant portion of the product’s revenue in a very short period of time.Further, public and private payers typically encourage the use of generics as alternatives to brand-name drugs in their healthcare programs. Laws in the U.S. generally allow, and in many cases require, pharmacists to substitute generic drugs that have been rated under government procedures to be essentially equivalent to a brand-name drug. Where substitution is mandatory, it must be made unless the prescribing physician expressly forbids it. In many countries outside the U.S., intellectual property protection is weak, and we must compete with generic or counterfeit versions of our products. 7BiosimilarsSeveral of our products and approximately half of the potential new medicines in our clinical-stage pipeline are biologics. In the U.S., the U.S. Food and Drug Administration (FDA) regulates biologics under the Federal Food, Drug and Cosmetic Act, the Public Health Service Act, and implementing regulations. Competition for Lilly’s biologics may be affected by the approval of follow-on biologics, also known as biosimilars. A biosimilar is a subsequent version of an approved innovator biologic that, due to its analytical and clinical similarity to the innovator biologic, may be approved based on an abbreviated data package that relies in part on the full testing required of the innovator biologic. Approval by the FDA ultimately depends on many factors, including a showing that the biosimilar is “highly similar” to the original product and has no clinically meaningful differences from the original product in terms of safety, purity, and potency.Globally, most governments have developed abbreviated regulatory pathways to approve biosimilars as follow-ons to innovator-developed biologics, including the Biologics Price Competition and Innovation Act of 2009 (the BPCIA) in the U.S., and a number of biosimilars have been licensed under the BPCIA and in Europe. The patent and regulatory exclusivity for the existing innovator biologic generally must expire in a given market before biosimilars may enter that market. However, in the U.S., the product exclusivity period under the BPCIA could be affected by recent government proposals and litigation. See “- Patents, Trademarks, and Other Intellectual Property Rights.” In addition, the extent to which a biosimilar, once approved, will be substituted for the innovator biologic in a way that is similar to traditional generic substitution for non-biologic products is not yet entirely clear, and will depend on a number of regulatory and marketplace factors that are still developing. In the U.S., currently only a biosimilar product that is determined to be “interchangeable” will be considered substitutable for the original biologic product without the intervention of the health care provider who prescribed the original biologic product. To prove that a biosimilar product is interchangeable, the applicant must demonstrate that the product can be expected to produce the same clinical results as the original biologic product in any given patient, and if the product is administered more than once in a patient, that safety risks and potential for diminished efficacy of alternating or switching between the use of the interchangeable biosimilar biologic product and the original biologic product is no greater than the risk of using the original biologic product without switching. Biosimilars may present both competitive challenges and opportunities. For example, a competitor company has developed a version of insulin lispro that competes with our product Humalog. On the other hand, in collaboration with Boehringer Ingelheim, we developed Basaglar, a new insulin glargine product, which has the same amino acid sequence as a product currently marketed by a competitor and has launched as a follow-on biologic in the U.S., and as a biosimilar in Europe and Japan. However, in March 2020, the FDA began regulating all of our insulin products as “biologics” rather than “drugs.” Based on FDA draft guidance, this change may lower the requirements for competitor biosimilar products to enter the market, some of which could be designated as interchangeable and therefore substituted for our insulin products at U.S. pharmacies. As such, in June 2020, Mylan N.V. announced that the FDA approved its New Drug Application (NDA) for Semglee, a new insulin glargine product, which it launched as a follow-on biologic in the U.S. that competes with Basaglar. The laws regulating biosimilars continue to be interpreted and implemented by the FDA and remain subject to substantial uncertainty, including with respect to their impact on our business.U.S. Private Sector DynamicsIn the U.S. private sector, consolidation and integration among healthcare providers significantly affects the competitive marketplace for pharmaceuticals. Health plans, pharmacy benefit managers, wholesalers, and other supply chain stakeholders have been consolidating into fewer, larger entities, thus enhancing their purchasing strength and importance. Private third-party insurers, as well as governments, typically maintain formularies that specify coverage (the conditions under which drugs are included on a plan's formulary) and reimbursement (the associated out-of-pocket cost to the consumer) to control costs by negotiating discounted prices in exchange for formulary inclusion. 8Formulary placement can lead to reduced usage of a drug for the relevant patient population due to coverage restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations that result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and higher deductibles. Consequently, pharmaceutical companies compete for formulary placement not only on the basis of product attributes such as efficacy, safety profile, or patient ease of use, but also by providing rebates. Value-based agreements, where pricing is based on achievement (or not) of specified outcomes, are another tool that may be utilized between payers and pharmaceutical companies as formulary placement and pricing are negotiated. Price is an increasingly important factor in formulary decisions, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable. We expect these downward pricing pressures will continue to negatively affect our consolidated results of operations. In addition to formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing through high deductible plans and higher co-insurance or co-pays. For additional information on pricing and reimbursement for our pharmaceutical products, see “- Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access - U.S.”Patents, Trademarks, and Other Intellectual Property RightsOverviewIntellectual property protection is critical to our ability to successfully commercialize our life sciences innovations and invest in the search for new medicines. We own, have applied for, or are licensed under, a large number of patents in the U.S. and many other countries relating to products, product uses, formulations, and manufacturing processes. In addition, as discussed below, for some products we have effective intellectual property protection in the form of data protection under pharmaceutical regulatory laws.The patent protection anticipated to be of most relevance to pharmaceuticals is provided by national patents claiming the active ingredient (the compound patent), particularly those in major markets such as the U.S., various European countries, and Japan. These patents may be issued based upon the filing of international patent applications, usually filed under the Patent Cooperation Treaty (PCT). Patent applications covering compounds are generally filed during the Discovery Phase of the drug discovery process, which is described in the “Research and Development” section below. In general, national patents in each relevant country are available for a period of 20 years from the filing date of the PCT application, which is often years prior to the launch of a commercial product. Further patent term adjustments and restorations may extend the original patent term:•Patent term adjustment is a statutory right available to all U.S. patent applicants to provide relief in the event that a patent grant is delayed during examination by the United States Patent and Trademark Office (USPTO).•Patent term restoration is a statutory right provided to U.S. patent holders that claim inventions subject to review by the FDA. To make up for a portion of the time invested in clinical trials and the FDA review process, a single patent for a pharmaceutical product may be eligible for patent term restoration. Patent term restoration is limited by a formula and cannot be calculated until product approval due to uncertainty about the duration of clinical trials and the time it takes the FDA to review an application. There is a five-year cap on any restoration, and no patent's expiration date may be extended beyond 14 years from FDA approval. Some countries outside the U.S. also offer forms of patent term restoration. For example, Supplementary Protection Certificates are available to extend the life of a European patent up to an additional five years (subject to a 15-year cap from European Medicines Agency (EMA) approval). Similarly, in Japan, South Korea, and Australia, patent terms can be extended up to five years, depending on the length of regulatory review and other factors.Loss of effective patent protection for pharmaceuticals, especially for non-biologic products, typically results in the loss of effective market exclusivity for the product, which often results in severe and rapid decline in revenues for the product. However, in some cases the innovator company may retain exclusivity despite approval of the generic, biosimilar, or other follow-on versions of a new medicine beyond the expiration of the compound patent through manufacturing trade secrets, later-expiring patents on manufacturing processes, methods of use or formulations, or data protection that may be available under pharmaceutical regulatory laws. Changes to the laws and regulations governing these protections could result in earlier loss of effective market exclusivity. The primary forms of data protection are as follows:9•Regulatory authorities in major markets generally grant data package protection for a period of years following new drug approvals in recognition of the substantial investment required to complete clinical trials. Data package protection prohibits other manufacturers from submitting regulatory applications for marketing approval based on the innovator company’s regulatory submission data for the drug. The base period of data package protection depends on the country. For example, the period is generally five years in the U.S. (12 years for new biologics as described below), effectively 10 years in Europe, and eight years in Japan. The period begins on the date of product approval and runs concurrently with the patent term for any relevant patent.•Under the BPCIA, the FDA has the authority to approve biosimilars. A competitor seeking approval of a biosimilar must file an application to show its molecule is highly similar to an approved innovator biologic and include a certain amount of safety and efficacy data that the FDA will consider on a case-by-case basis. Under the data protection provisions of this law, the FDA cannot approve a biosimilar application until 12 years after initial marketing approval of the innovator biologic, subject to certain conditions. The BPCIA is part of the Affordable Care Act, the constitutionality of which is currently being litigated. •In the U.S., the FDA has the authority to grant additional data protection for approved drugs where the sponsor conducts specified testing in pediatric or adolescent populations within a specified time period. If granted, this “pediatric exclusivity” provides an additional six months of exclusivity, which is added to the term of data protection as well as to the term of any relevant patents, to the extent these protections have not already expired. While the term of the pediatric exclusivity attaches to the term of any relevant patent, pediatric exclusivity is a regulatory exclusivity—i.e., a bar to generic approval, not a patent right.•Under the U.S. orphan drug law, a specific use of a drug or biologic can receive "orphan" designation if it is intended to treat a disease or condition affecting fewer than 200,000 people in the U.S., or affecting more than 200,000 people but not reasonably expected to recover its development and marketing costs through U.S. sales. Among other benefits, orphan designation entitles the particular use of the drug to seven years of market exclusivity, meaning that the FDA cannot (with limited exceptions) approve another marketing application for the same drug for the same indication until expiration of the seven-year period. Unlike pediatric exclusivity, the orphan exclusivity period is independent of and runs in parallel with any applicable patents.Outside the major markets, the adequacy and effectiveness of intellectual property protection for pharmaceuticals varies widely, and in a number of these markets we are unable to patent our products or to enforce the patents we receive for our products. Under the Trade-Related Aspects of Intellectual Property Agreement (TRIPs) administered by the World Trade Organization, more than 140 countries have agreed to provide non-discriminatory protection for most pharmaceutical inventions and to assure that adequate and effective rights are available to patent owners. Certain developing countries limit protection for biopharmaceutical products under their interpretation of “flexibilities” allowed under the agreement. Thus, some types of patents, such as those on new uses of compounds or new forms of molecules, are not available in certain developing countries. Further, many developing countries, and some developed countries, do not provide effective data package protection even though it is specified in TRIPs. Our Intellectual Property PortfolioWe consider intellectual property protection for certain products, processes, uses, and formulations—particularly with respect to those products discussed below—to be important to our operations. In addition to the data protection and patents identified below, we may hold patents on manufacturing processes, formulations, devices, or uses that extend exclusivity beyond the dates shown below.The most relevant U.S. patent protection or data protection and associated expiry dates for our top-selling or recently launched patent-protected marketed products are as follows:•Alimta is protected by a vitamin regimen patent (2021) plus pediatric exclusivity (May 2022). See Item 8, “Financial Statements and Supplementary Data - Note 16, Contingencies,” for information regarding our settlement agreement with Eagle Pharmaceuticals, Inc. (Eagle) and its impact on our exclusivity for Alimta.•Baqsimi is protected by data protection (July 2022).•Cyramza is protected by a compound patent and biologics data protection (2026).•Emgality is protected by a compound patent (2033) and biologics data protection (2030).•Jardiance, and the related combination product Glyxambi, is protected by a compound patent (2028). 10•Olumiant is protected by a compound patent (2032). •Retevmo is protected by a compound patent (2037) and by data protection (2025).•Reyvow is protected by a compound patent (2025, not including possible patent extension).•Taltz is protected by a compound patent (2030) and by biologics data protection (2028).•Trulicity is protected by a compound patent (2027) and by biologics data protection (2026).•Verzenio is protected by a compound patent (2031) and by data protection (2022).Outside the U.S., important patent protection or data protection includes: •Alimta is protected by patents covering its use to treat cancer in major European countries and in Japan (June 2021).•Baqsimi is protected by data protection in Japan (2026).•Cyramza is protected by a compound patent (2028) and by data protection (2024) in major European countries. Additionally, Cyramza is protected by a compound patent (2026) and by data protection (2023) in Japan.•Emgality is protected by a compound patent (2033) and by data protection (2028) in major European countries, and by a compound patent (2031, not including possible patent extension) and by data protection (2029) in Japan.•Jardiance is protected by a compound patent in major European countries (2029) and Japan (2030).•Olumiant is protected by a compound patent (2032) and by data protection (2027) in major European countries, and by a compound patent (2033) and by data protection (2025) in Japan.•Reyvow is protected by a compound patent (2023, not including possible patent extension) in major European countries. Reyvow is also protected by a compound patent (2023, not including possible patent extension) in Japan.•Retsevmo® is protected by a compound patent (2037) and by data protection (2031) in major European countries. Retevmo is protected by a compound patent in Japan (2037, not including possible patent extension).•Taltz is protected by a compound patent (2031) and data protection (2027) in major European countries and a compound patent (2030) and data protection (2024) in Japan.•Trulicity is protected by a compound patent (2029) and by data protection (2024) in major European countries and by a compound patent (2029) and by data protection (2023) in Japan.•Verzenio is protected by a compound patent (2033) and data protection (2028) in major European countries and by a compound patent (2034) and data protection (2026) in Japan.Reyvow has been submitted for regulatory review in certain major European countries for the acute treatment of migraine, where it is expected to be protected by data protection upon approval (10 years). Additionally, Reyvow has been submitted for regulatory review in Japan for the acute treatment of migraine, where it is expected to be protected by data protection upon approval (8 years).Retevmo has been submitted for regulatory review in Japan for the treatment of lung cancer, where it is expected to be protected by data protection upon approval (8 years).Tanezumab is protected by a compound patent (2023, not including possible patent extension) in the U.S. Additionally, tanezumab has been submitted for regulatory review in the U.S. for the treatment of osteoarthritis pain, where it is expected to be protected by data protection upon approval (12 years). Worldwide, we sell all of our major products under trademarks consisting of our product names, logos, and unique product appearances (e.g., the appearance of our Trulicity autoinjector) which we consider in the aggregate to be important to our operations. Trademark protection varies throughout the world, with protection continuing in some countries as long as the mark is used, and in other countries as long as it is registered. Registrations are normally for fixed but renewable terms. Trademark protection often extends beyond the patent and data protection for a product. 11Patent Licenses and CollaborationsMost of our major products are not subject to significant license and collaboration agreements. For information on our license and collaboration agreements, including our agreement with Incyte Corporation related to Olumiant, see Item 8, "Financial Statements and Supplementary Data - Note 4, Collaborations and Other Arrangements." Patent Challenges In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, authorizes the FDA to approve generic versions of innovative pharmaceuticals (other than biologics, which are discussed below in more detail) when the generic manufacturer has not conducted safety and efficacy studies but files an Abbreviated New Drug Application (ANDA). In an ANDA, the generic manufacturer must demonstrate only “bioequivalence” between the generic version and the NDA-approved drug—not safety and efficacy. Establishing bioequivalence is generally straightforward and inexpensive for the generic company.Absent a patent challenge, the FDA cannot approve an ANDA until after certain of the innovator’s patents expire. However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA alleging that one or more or all of the patents listed in the innovator’s NDA are invalid or not infringed. This allegation is commonly known as a “Paragraph IV certification.” If the innovator responds by filing suit against the generic manufacturer, the FDA is then prohibited from approving the generic company’s application for a 30-month period (which can be shortened or extended by the trial court judge hearing the patent challenge). If one or more of the NDA-listed patents are challenged, the first filer(s) of a Paragraph IV certification may be entitled to a 180-day period of market exclusivity over all other generic manufacturers.Generic manufacturers use Paragraph IV certifications extensively to challenge patents on innovative pharmaceuticals. In addition, generic companies have shown willingness to launch “at risk,” i.e., after receiving ANDA approval but before final resolution of their patent challenge. We are currently in Hatch-Waxman litigation involving Alimta with a single generic manufacturer. For more information on Hatch-Waxman litigation involving the company, see Item 8, “Financial Statements and Supplementary Data - Note 16, Contingencies.”Under the BPCIA, the FDA cannot approve an application for a biosimilar product until data protection expires, 12 years after initial marketing approval of the innovator biologic, and an application may not be submitted until four years following the date the innovator biologic was first approved. However, the BPCIA does provide a mechanism for a competitor to challenge the validity of an innovator’s patents as early as four years after initial marketing approval of the innovator biologic. The patent litigation scheme under the BPCIA, and the BPCIA itself, is complex and continues to be interpreted and implemented by the FDA as well as courts. Courts have held that biosimilar applicants are not required to engage in the BPCIA patent litigation scheme and patent holders retain the right to bring suit under normal patent law procedures if a biosimilar applicant attempts to commercialize a product prior to patent expiration. Further, in the U.S., the increased likelihood of generic and biosimilar challenges to innovators’ intellectual property has increased the risk of loss of innovators’ market exclusivity. See also “- Competition - Biosimilars.”In addition, there is a procedure in U.S. patent law, known as inter partes review (IPR), which allows any member of the public to file a petition with the USPTO seeking the review of any issued U.S. patent for validity. IPRs are conducted before Administrative Patent Judges in the USPTO using a lower standard of proof than used in federal district court. In addition, the challenged patents are not accorded the presumption of validity as they are in federal district court. Generic drug companies and even some investment firms have engaged in the IPR process in attempts to invalidate our patents.Outside the U.S., the legal doctrines and processes by which pharmaceutical patents can be challenged vary widely. In recent years, we have experienced an increase in patent challenges from generic manufacturers in many countries outside the U.S.For more information on administrative challenges and litigation involving our intellectual property rights, see Item 8, “Financial Statements and Supplementary Data - Note 16, Contingencies.” 12Government Regulation of Our OperationsOur operations are regulated extensively by numerous national, state, and local agencies. Regulation of Products The lengthy process of laboratory and clinical testing, data analysis, manufacturing development, and regulatory review necessary for governmental approvals of our products is extremely costly and can significantly delay product introductions and revenue generation. In addition, our operations are subject to complex federal, state, local, and foreign laws and regulations concerning relationships with healthcare providers and suppliers, the environment, occupational health and safety, and data privacy. Compliance with the laws and regulations affecting the manufacture and sale of current products and the discovery, development, and introduction of new products will continue to require substantial effort, expense, and capital investment.Of particular importance to our business is regulation by the FDA in the U.S. Pursuant to laws and regulations that include the Federal Food, Drug, and Cosmetic Act, the FDA has jurisdiction over all of our products and devices in the U.S. and administers requirements covering the testing, safety, effectiveness, manufacturing, quality control, distribution, labeling, marketing, promotion, advertising, dissemination of information, and post-marketing surveillance of those products.Following approval, our products remain subject to regulation by various agencies in connection with labeling, import, export, storage, recordkeeping, advertising, promotion, and safety reporting. We conduct extensive post-marketing surveillance of the safety of the products we sell. The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after a product reaches the market. The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Pharmaceutical products may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. The FDA extensively regulates all aspects of manufacturing quality for pharmaceuticals under its current Good Manufacturing Practices (cGMP) regulations. Outside the U.S., our products and operations are subject to similar regulatory requirements, notably by the EMA in Europe and the Ministry of Health, Labor and Welfare in Japan. Specific regulatory requirements vary from country to country. Regulatory requirements and approval processes outside the U.S. may differ from those in the U.S. and may involve additional costs and uncertainties.We make substantial investments of capital and operating expenses to implement comprehensive, company-wide quality systems and controls in our manufacturing, product development, and process development operations in an effort to ensure sustained compliance with cGMP and similar regulations. However, in the event we fail to adhere to these requirements, we become subject to potential government investigations, interruptions in production, fines and penalties, delays in new product approvals, and reputational harm. Certain of our products are manufactured by third parties, and their failure to comply with these regulations could adversely affect us through failure to supply product to us or delays in new product approvals. Any determination by the FDA or other regulatory authorities of manufacturing or other deficiencies could adversely affect our business. We are also subject to a variety of federal, state, and local environmental, health and safety, and other laws and regulations that may affect our research, development or production efforts. 13Emergency Use AuthorizationsThe Secretary of Health and Human Services may authorize unapproved medical products to be manufactured, marketed, and sold in the context of an actual or potential emergency that has been designated by the government. After an emergency has been announced, the Secretary of Health and Human Services may authorize EUAs for the use of specific products based on criteria established by statute, including that the product at issue may be effective in diagnosing, treating, or preventing serious or life-threatening diseases when there are no adequate, approved, and available alternatives. An EUA is subject to additional conditions and restrictions, such as the obligation to provide facts sheets for healthcare providers administering the product and those to whom it is administered, adverse event monitoring and reporting, and recordkeeping and reporting requirements by product manufacturers. The FDA may also establish additional discretionary conditions of authorization that the FDA deems necessary or appropriate to protect the public health, including conditions related to product distribution, product administration and data collection and analysis concerning the safety and effectiveness of the product. In issuing an EUA, the FDA considers the totality of available scientific evidence regarding quality, safety and efficacy, including the known and potential risks of such products and the adequacy and availability of approved alternatives, among other factors. An EUA is not a substitute for obtaining FDA approval, licensure, or clearance for use of a product. An EUA terminates when the emergency determination underlying the EUA terminates, and EUAs can be revoked under other circumstances, the timing of which may occur unexpectedly or be difficult to predict.Outside the U.S., the emergency use of medical products is subject to regulatory processes and requirements that differ from those in the U.S.The COVID-19 pandemic has been designated as a national emergency in the U.S. On the basis of such determination, the Secretary of Health and Human Services declared that circumstances exist justifying the authorization of emergency use of drugs and biologics during the COVID-19 pandemic. The FDA has granted EUAs for bamlanivimab, bamlanivimab and etesevimab administered together, and baricitinib in combination with remdesivir, and similar actions have been taken by other regulators in certain jurisdictions outside the U.S. We intend to submit bamlanivimab and etesevimab administered together to the FDA for approval in the second half of 2021.Other Laws and RegulationsThe marketing, promotional, and pricing practices of pharmaceutical manufacturers, as well as the manner in which manufacturers interact with purchasers, prescribers, and patients, are subject to various other U.S. federal and state laws, as well as analogous foreign laws and regulations, including the federal anti-kickback statute, the False Claims Act, and state laws governing kickbacks, false claims, unfair trade practices, and consumer protection. These laws are administered by, among others, the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, the Federal Trade Commission, the Office of Personnel Management, and state attorneys general. Over the past several years, state and federal governments have increased their oversight, enforcement activities, and intra-agency coordination with respect to pharmaceutical companies. Further, several claims brought by these agencies against us and other companies under these and other laws have resulted in corporate criminal sanctions and very substantial civil settlements. In December 2020, the Office of Inspector General of the U.S. Department of Health and Human Services and the Centers for Medicare & Medicaid Services issued final rules expanding and modifying existing, and adding new, regulatory “safe harbors” and exceptions, respectively, under the anti-kickback statute and the Ethics in Patient Referrals Act. We are currently evaluating the impact, if any, these regulatory amendments will have upon becoming effective on our consolidated results of operations, liquidity, and financial position, which is uncertain at this time. The U.S. Foreign Corrupt Practices Act of 1977 (FCPA) prohibits certain individuals and entities, including U.S. publicly traded companies, from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the company obtain or retain business or gain any improper advantage. The FCPA also imposes specific recordkeeping and internal controls requirements on U.S. publicly traded companies. As noted above, outside the U.S., our business is heavily regulated and therefore involves significant interaction with foreign officials. Additionally, in many countries outside the U.S., healthcare providers who prescribe pharmaceuticals are employed by the government and purchasers of pharmaceuticals are government entities; therefore, our interactions with these prescribers and purchasers are subject to regulation under the FCPA. 14In addition to the U.S. application and enforcement of the FCPA, the various jurisdictions in which we operate and supply our products have laws and regulations aimed at preventing and penalizing corrupt and anticompetitive behavior. In recent years, several jurisdictions have enhanced their laws and regulations in this area, increased their enforcement activities, and/or increased the level of cross-border coordination and information sharing.We are and could in the future become subject to administrative and legal proceedings and actions, which could include claims for civil penalties (including treble damages under the False Claims Act), criminal sanctions, and administrative remedies, including exclusion from U.S. federal and other health care programs. It is possible that an adverse outcome in future actions could have a material adverse impact on our consolidated results of operations, liquidity, and financial position.We are also subject to a variety of federal, state, and local environmental, health and safety, and other laws and regulations that may affect our research, development or production efforts. Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access U.S.There continues to be considerable public and government scrutiny of pharmaceutical pricing, and measures to address the perceived high cost of pharmaceuticals are being considered at various levels of state and federal government. In addition, U.S. government action to reduce federal spending on entitlement programs, including Medicare and Medicaid, may affect payment for our products or services associated with the provision of our products. Additionally, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products. The regulatory priorities of the current U.S. presidential administration could further intensify these efforts, which could have a material adverse impact on our business.In the U.S., we are required to provide rebates to the federal government and respective state governments on their purchases of our pharmaceuticals under various federal and state healthcare programs, including state Medicaid and Medicaid Managed Care programs (minimum of 23.1 percent plus adjustments for price increases over time) and discounts to private entities who treat patients in certain types of health care facilities intended to serve low-income and uninsured patients (known as 340B facilities). No rebates are required at this time in the Medicare Part B (physician and hospital outpatient) program where reimbursement is set on an “average sales price plus 4.3 percent” formula. Additionally, an annual fee is imposed on pharmaceutical manufacturers and importers that sell branded prescription drugs to specified government programs. Since 2019, the Bipartisan Budget Act has required manufacturers of brand-name drugs, biologics, and biosimilars to provide a discount of 70 percent of the cost of branded prescription drugs for Medicare Part D participants who are in the “doughnut hole” (the coverage gap in Medicare prescription drug coverage), an increase from the previous 50 percent discount.Rebates are also negotiated in the private sector. We pay rebates to private payers who provide prescription drug benefits to seniors covered by Medicare and to private payers who provide prescription drug benefits to their customers. These rebates are affected by the introduction of competitive products and generics in the same class. Our approach to the rebates we offer to private payers who provide prescription drug benefits to seniors covered by Medicare may be impacted by recent regulatory amendments included in the anti-kickback statute final rule that will become effective on January 1, 2023.15Outside the U.S.Globally, public and private payers are increasingly restricting access to pharmaceuticals based on assessments of comparative effectiveness and value, including through the establishment of formal health technology assessment processes. In addition, third-party organizations, including professional associations, academic institutions, and non-profit entities associated with payers, are conducting and publishing comparative effectiveness and cost/benefit analyses on medicines, the impact of which are uncertain at this time. In most international markets, we operate in an environment of government-mandated cost-containment programs, which may include price controls, international reference pricing (to other countries’ prices), discounts and rebates, therapeutic reference pricing (to other, often generic, pharmaceutical choices), restrictions on physician prescription levels, and mandatory generic substitution. We may experience additional pricing pressures resulting from the financial strain of the COVID-19 pandemic on government-funded healthcare systems around the world.We cannot predict the extent to which our business may be affected by these or other potential future legislative, regulatory, or payer developments. However, in general we expect to see continued focus on regulating pricing resulting in additional state, federal, and international legislative and regulatory developments that could have further negative effects on pricing and reimbursement for our products.See Item 7, “Management's Discussion and Analysis - Results of Operations - Executive Overview - Other Matters - Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access” for additional information regarding recent legislative, administrative, and other pricing initiatives and their impact on our results.Research and DevelopmentOur commitment to research and development dates back more than 140 years. We invest heavily in research and development because we believe it is critical to our long-term competitiveness. At the end of 2020, we employed approximately 7,600 people in pharmaceutical research and development activities, including a substantial number of physicians, scientists holding graduate or postgraduate degrees, and highly skilled technical personnel. Our internal pharmaceutical research focuses primarily on the areas of diabetes, oncology, immunology, neurodegeneration, and pain. During 2020, we also focused on researching and developing potential treatments for COVID-19. In addition to discovering and developing new medicines, we seek to expand the value of existing products through new uses, formulations, and therapeutic approaches that provide additional value to patients.To supplement our internal efforts, we collaborate with others, including academic institutions and research-based pharmaceutical and biotechnology companies. We use the services of physicians, hospitals, medical schools, and other research organizations worldwide to conduct clinical trials to establish the safety and effectiveness of our medicines. We actively invest in external research and technologies that we believe complement and strengthen our own efforts. These investments can take many forms, including, among others, licensing arrangements, co-development agreements, co-promotion arrangements, joint ventures, acquisitions, and equity investments.Pharmaceutical development is time-consuming, expensive, and risky. Very few of the candidates discovered by researchers ultimately become approved medicines. The process from discovery to regulatory approval can take over a decade. Candidates can fail at any stage of the process, and even late-stage candidates sometimes fail to receive regulatory approval or achieve commercial success. The following describes in more detail the research and development process for pharmaceutical products:Phases of New Drug Development•Discovery PhaseIn the discovery phase, scientists identify, design, and synthesize promising candidates by analyzing their effect on biological targets thought to play a role in disease. Targets are often unproven and only candidates that have the desired effect on the target and meet other design criteria move to the next phase of development, which includes the initiation of studies in animals to support regulatory and safety requirements for clinical research in humans. The discovery phase can take years and the probability of any one candidate becoming a medicine is extremely low.16•Early Development PhaseEarly development includes initial testing for safety and efficacy and early analyses of manufacturing requirements. Safety testing is initially performed in laboratory tests and animals, as necessary. In general, the first human tests (often referred to as Phase I) are conducted in small groups of subjects to assess safety and evaluate the potential dosing range. Subsequently, larger populations of patients are studied (Phase II) to identify initial signs of efficacy while continuing to assess safety. In parallel, scientists work to identify safe, effective, and economical manufacturing processes. Long-term animal studies continue to test for potential safety issues. Of the candidates that enter the early development phase, approximately 10 percent move to the late development phase. The early development phase varies but can take several years to complete.•Late Development PhaseLate phase development projects (typically Phase III) have met initial safety requirements and shown initial evidence of efficacy in earlier studies. As a result, these candidates generally have a higher likelihood of success and trials include larger patient populations to demonstrate safety and efficacy in the disease. These studies are designed to demonstrate the benefit and risk of the potential new medicine and may be compared to competitive therapies, placebo, or both. Phase III studies are generally conducted globally and are designed to support regulatory filings for marketing approval. The duration of Phase III testing varies by disease and may take two to four years.•Submission PhaseOnce a potential new medicine is submitted to regulatory agencies, the time to final marketing approval can vary from several months to several years, depending on the disease state, the strength and complexity of available data, the degree of unmet need, and the time required for the regulatory agency(ies) to evaluate the submission, which can depend on prioritization by regulators and other factors. There is no guarantee that a potential medicine will receive marketing approval, or that decisions on marketing approvals or indications will be consistent across geographic areas.We believe our investments in research, both internally and in collaboration with others, have resulted in a robust pipeline of potential new medicines and new treatment indications in all stages of development. We currently have approximately 45 candidates in clinical development or under regulatory review, and a larger number of projects in the discovery phase. See Item 7, “Management's Discussion and Analysis - Results of Operations - Executive Overview - Late-Stage Pipeline,” for more information on certain of our product candidates.Raw Materials and Product SupplyMost of the principal materials we use in our manufacturing operations are available from more than one source. However, we obtain certain raw or intermediate materials primarily from only one source. We generally seek to maintain sufficient inventory to supply the market until an alternative source of supply could be implemented, in the event one of these suppliers was unable to provide the materials or product. However, in the event of an extended failure of a supplier or significant unanticipated increases in demand on a supplier, it is possible that we could experience an interruption in supply until we established new sources or, in some cases, implemented alternative processes.The majority of our revenue comes from products produced in our own facilities. Our principal active ingredient manufacturing occurs at sites we own in the U.S., including Puerto Rico, and Ireland. Finishing operations, including formulation, filling, assembling, delivery device manufacturing, and packaging, take place at a number of sites throughout the world. We utilize third parties for certain active ingredient manufacturing and finishing operations.17We manage our supply chain (including our own facilities, contracted arrangements, and inventory) in a way that is intended to allow us to meet all expected product demand while maintaining flexibility to reallocate manufacturing capacity to improve efficiency and respond to changes in supply and demand. To maintain a stable supply of our products, we use a variety of techniques including comprehensive quality systems, inventory management, and back-up sites.However, pharmaceutical production processes are complex, highly regulated, and vary widely from product to product. Shifting or adding manufacturing capacity can be a very lengthy process requiring significant capital expenditures, process modifications, and regulatory approvals. Accordingly, if we were to experience unplanned plant shutdowns at one of our own facilities, significant failure of a contract supplier, or significant unanticipated increases in demand, we could experience an interruption in supply of certain products or product shortages until production could be resumed or expanded.In addition, COVID-19 could also have an adverse impact on our manufacturing operations, global supply chain, and distribution systems, which could impact our ability to produce and distribute our products and affect the ability of third parties on which we rely to fulfill their obligations to us, and could increase our expenses. For more information, see Item 1A, "Risk Factors - Risks Related to Our Business - The COVID-19 pandemic and efforts to reduce its spread have impacted, and may in future periods negatively impact, our business and operations.” and Item 7, “Management's Discussion and Analysis - Results of Operations - Executive Overview - COVID-19 Pandemic.”Quality AssuranceOur success depends in great measure on customer confidence in the quality of our products and in the integrity of the data that support their safety and effectiveness. Product quality arises from a total commitment to quality in all parts of our operations, including research and development, purchasing, facilities planning, manufacturing, distribution, and dissemination of information about our medicines. Quality of production processes involves strict control of ingredients, equipment, facilities, manufacturing methods, packaging materials, and labeling. We perform tests at various stages of production processes and on the final product in an effort to ensure that the product meets all applicable regulatory requirements and our internal standards. These tests may involve chemical and physical chemical analyses, microbiological testing, testing in animals, or a combination thereof. Additional assurance of quality is provided by quality assurance groups that audit and monitor all aspects of quality related to pharmaceutical manufacturing procedures and systems in company operations and at third-party suppliers.18Executive Officers of the CompanyThe following table sets forth certain information regarding our current executive officers.The term of office for each executive officer expires on the date of the annual meeting of the board of directors, to be held on May 3, 2021 in connection with the company's annual meeting of shareholders, or on the date his or her successor is chosen and qualified. No director or executive officer has a “family relationship” with any other director or executive officer of the company, as that term is defined for purposes of this disclosure requirement. There is no understanding between any executive officer or director and any other person pursuant to which the executive officer was selected.NameAgeTitles and Business ExperienceDavid A. Ricks53Chairman, President, and Chief Executive Officer (CEO) (since 2017). Previously, Mr. Ricks held various leadership roles with Lilly, including senior vice president and president, Lilly Bio-Medicines. Mr. Ricks has 24 years of service with Lilly.Anat Ashkenazi 48Senior Vice President and Chief Financial Officer (since 2021). Previously, Ms. Ashkenazi held various leadership roles with Lilly, including senior vice president, controller and chief financial officer, Lilly Research Laboratories, and vice president, finance and chief financial officer, Lilly Diabetes and Lilly global manufacturing and quality. Ms. Ashkenazi has 19 years of service with Lilly. Melissa S. Barnes52Senior Vice President, Enterprise Risk Management, and Chief Ethics and Compliance Officer (since 2013). Previously, Ms. Barnes held various leadership roles with Lilly, including vice president, deputy general counsel. Ms. Barnes has 26 years of service with Lilly.Stephen F. Fry55Senior Vice President, Human Resources and Diversity (since 2011). Previously, Mr. Fry held various leadership roles with Lilly, including vice president, human resources. Mr. Fry has 33 years of service with Lilly.Anat Hakim51Senior Vice President, General Counsel and Secretary (since 2020). Prior to joining Lilly, Ms. Hakim was senior vice president, general counsel and secretary of WellCare Health Plans, Inc. (WellCare) from 2016 to 2018, and executive vice president, general counsel and secretary of WellCare from 2018 to 2020. Prior to joining WellCare, she served as divisional vice president and associate general counsel of intellectual property litigation at Abbott Laboratories from 2010 to 2013 and divisional vice president and associate general counsel of litigation from 2013 to 2016. Ms. Hakim has one year of service with Lilly.Patrik Jonsson54Senior Vice President, President, Lilly USA, and Chief Customer Officer (since 2020). Previously, Mr. Jonsson held various leadership roles with Lilly, including senior vice president and president, Lilly Bio-Medicines and president and general manager, Lilly Japan. Mr. Jonsson has 30 years of service with Lilly.Michael B. Mason 54Senior Vice President and President, Lilly Diabetes (since 2020). Previously, Mr. Mason held various leadership roles with Lilly, including senior vice president, connected care and insulins and vice president of U.S. Diabetes. Mr. Mason has 31 years of service with Lilly.Johna L. Norton54Senior Vice President, Global Quality (since 2017). Previously, Ms. Norton held various leadership roles with Lilly, including vice president, global quality assurance API manufacturing and product research and development. Ms. Norton has 30 years of service with Lilly.Myles O'Neill62Senior Vice President and President, Manufacturing Operations (since 2018). Previously, Mr. O’Neill held various leadership roles with Lilly, including senior vice president of global parenteral drug product, delivery devices, and regional manufacturing. Mr. O’Neill has 18 years of service with Lilly.Leigh Ann Pusey58Senior Vice President, Corporate Affairs and Communications (since 2017). Prior to joining Lilly, Ms. Pusey was president and chief executive officer of the American Insurance Association from 2009 to 2017. Ms. Pusey has three years of service with Lilly.Aarti Shah, Ph.D.56Senior Vice President and Chief Information and Digital Officer (since 2018). Previously, Dr. Shah held various leadership roles with Lilly, including senior vice president information technology and chief information officer and global brand development leader. Dr. Shah has 27 years of service with Lilly.Daniel M. Skovronsky, M.D., Ph.D.47Senior Vice President, Chief Scientific Officer, and President, Lilly Research Laboratories (since 2018). Previously, Dr. Skovronsky held various leadership roles with Lilly, including senior vice president, clinical and product development. Dr. Skovronsky has 10 years of service with Lilly.Anne E. White52Senior Vice President and President, Lilly Oncology (since 2018). Previously, Ms. White held various leadership roles with Lilly, including vice president of Portfolio Management, Chorus and Next Generation Research and Development. Ms. White has 25 years of service with Lilly.Ilya Yuffa46Senior Vice President and President, Lilly Bio-Medicines (since 2020). Previously, Mr. Yuffa held various leadership roles with Lilly, including vice president of U.S. Diabetes general manager of Italy Hub, and vice president, global ethics and compliance officer since 2014. Mr. Yuffa has 24 years of service with Lilly.Alfonso Zulueta58Senior Vice President and President, Lilly International (since 2014). Previously, Mr. Zulueta held various leadership roles with Lilly, including president of emerging markets and of Lilly Japan. Mr. Zulueta has 32 years of service with Lilly.19Human Capital ManagementOur core values—integrity, excellence, and respect for people—shape our approach to attracting, retaining, engaging, and developing a highly skilled and ethical workforce, which is critical to executing our strategy. We believe the strength of our workforce significantly contributes to our financial performance and enables us to make life better for people around the world. For instance, most of the products we sell today were discovered or developed by our own scientists, and our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines. We believe that fostering a positive culture that values the contributions of our talented colleagues helps drive our success.We are committed to creating a safe, supportive, ethical, and rewarding work environment through strategic focus on our human capital management process, fairness and nondiscrimination in our employment practices, robust training and development opportunities, and competitive pay and benefits. We believe our dedication to promoting diversity and inclusion (D&I) within our company reflects our values and is a key driver of business success and growth. We regularly conduct anonymous employee surveys to seek feedback from our workforce on a variety of topics. These results are reviewed and analyzed by our leaders in order to implement changes to our policies and benefits designed to improve our employees' well-being. As a result of our efforts, we believe that we have a highly performing, cohesive workforce and that our employee relations are good.At the end of 2020, we employed approximately 35,000 people, including approximately 19,500 employees outside the U.S. Our employees include approximately 7,600 people engaged in research and development activities.Strategy and OversightIn order to build diverse and inclusive teams, our CEO and executive committee set expectations for inclusive leadership and hold leaders accountable for achieving results. Because dedication to human capital management is also a core component of our corporate governance, our board of directors regularly engages with management and facilitates a system of reporting designed to monitor human capital management initiatives and progress as part of the overarching framework that guides how we attract, retain, engage, and develop a workforce that aligns with our values and mission. Diversity and InclusionWe are committed to fairness and nondiscrimination in our employment practices, and we deeply value diverse backgrounds, skills, and global perspectives. To fulfill our purpose, we believe we must look at challenges from multiple viewpoints and understand the diverse experiences of the patients who depend on us. We believe that fostering D&I begins with understanding. For example, our Employee Journeys research has yielded important insights about the experiences of women, Black/African American, Latinx, Asian, and lesbian, gay, bisexual, transgender, or queer (LGBTQ) employees at Lilly. The results of this research are reviewed by our senior leadership, and we deploy actions and activities in response to these insights to improve our workplace and corporate culture.Since 2017, we have committed to increasing the number of women, Black/African American, Latinx, and Asian populations in leadership roles, and we actively monitor our progress. From the end of 2017 through the end of 2020, we increased the number of women in management globally from 41 percent to 46 percent. For minority group members (MGM) in the U.S. over the same period, we increased management representation from 16 percent to 22 percent. Across all levels of our workforce, from the end of 2017 through the end of 2020, we have seen increased representation for MGMs in the U.S. and women globally. Our focus on D&I is also evident at our executive committee and board of directors. Seven of 15 members (approximately 47 percent) of our executive committee (which includes our CEO) are women and two are MGM, including one MGM woman. In addition, the company’s 15-member board of directors includes six women and seven members of underrepresented groups (including MGM as well as LGBTQ individuals).20Our efforts in D&I and workplace benefits have garnered numerous recognitions, including, in 2020 and early 2021, Top 50 Companies for Diversity by DiversityInc., America’s Best Employers for Diversity by Forbes, America’s Most JUST Companies and Forbes JUST 100 by Forbes and JUST Capital, Perfect Score on the Human Rights Campaign Foundation Corporate Equality Index (2020 and 2021), World’s Most Ethical Companies by Ethisphere, Leading Disability Employer by the National Organization on Disability, Top Employers by Science Magazine, America’s Most Responsible Companies by Newsweek, and 100 Best Companies, Top 75 Companies for Executive Women, Best Companies for Dads, and Best Companies for Multicultural Women by Working Mother Magazine.Employee DevelopmentWe believe talent begins with the hiring process. We therefore require hiring managers to consider a diverse pool of candidates and we strive to provide a diverse panel of interviewers for open positions. We believe that hiring in this way helps ensure that people from all backgrounds have equal opportunity to advance their careers.We offer training to enable our employees to perform their duties in our highly regulated industry. We also strive to cultivate a culture that promotes ongoing learning by encouraging employees to seek further education and growth experiences, helping them build rewarding careers. We have introduced online programming to facilitate access to our learning and development offerings. Many training courses are designed to improve accessibility for people with disabilities and other unique needs. Across Lilly, we are working to design learning experiences to be more inclusive and effective.To further improve our talent programs and processes, in 2019, we introduced Explore Your Career, a global framework of tools and resources for our employees. We believe Explore Your Career provides broader access and transparency about career development and advancement at Lilly. In 2018, we introduced Emerge, a three-day program led by our CEO that is designed to develop MGM talent at Lilly, and three cohorts comprising Black/African American women, Latinx and Asian women, and MGM men have participated in this enterprise-level program since its inception. Lilly also offers established leadership development programs for women and earlier career multi-cultural talent, as well as leaders at all levels.Employee resource groups (ERGs) are another important component of developing talent at Lilly. We currently have 10 ERGs representing groups including women, MGMs, LGBTQ individuals, and people with disabilities. ERGs offer our diverse workforce opportunities to build relationships, engage with senior leaders, advance our caring community, and offer unique insights and perspectives to improve our business. Membership in our ERGs continues to grow, with an estimated 11,430 people participating worldwide at the end of 2020. In furtherance of our efforts to create an inclusive workplace, in 2020 we expanded Make it Safe to Thrive, an education and awareness program to help employees and leaders understand how individual psychological safety can be created and enhanced, with the goal of ensuring that all employees feel safe to speak up and to share their ideas at work. The program includes live and online training and a monthly video series.Employee Health and SafetyWhile we have consistently focused on protecting the health and safety of our employees, the COVID-19 pandemic has emphasized the importance of this critical priority. In response to the pandemic, we have taken measures to protect our workforce, maximize social distancing, and inform employees about our policies. For example, we instituted travel restrictions and remote working arrangements for employees whose roles do not require on-site presence. To support employee well-being in the U.S., we enhanced local benefits related to health care, childcare, and time off, and expanded reimbursement for home office ergonomic support expenditures. In the U.S., we provide full coverage for COVID-19 diagnostic testing and treatment, and at our corporate headquarters in Indianapolis, we provide free on-site testing for employees and members of their household. In addition, as part of our Make it Safe to Thrive program, we partnered with our ERGs to offer a series of programs highlighting and addressing challenges faced by ERG members during the COVID-19 pandemic, aiming to build understanding of different experiences and to offer ways to be inclusive.21Information Available on Our WebsiteOur company website is www.lilly.com. None of the information accessible on or through our website is incorporated into this Annual Report on Form 10-K. We make available through the website, free of charge, our company filings with the SEC as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. These include our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, registration statements, and any amendments to those documents. The link to our SEC filings is investor.lilly.com/financial-information/sec-filings.In addition, the Governance portion of our website includes our corporate governance guidelines, board of directors and committee information (including committee charters), and our articles of incorporation and bylaws. The link to our corporate governance information is lilly.com/leadership/governance.22Item 1A.Risk FactorsIn addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating our company. It is possible that our business, financial condition, liquidity, cash flows, or results of operations could be materially adversely affected by any of these risks. Certain of these risks could also adversely affect the company's reputation. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could also adversely affect our business and reputation.Risks Related to Our Business•The COVID-19 pandemic and efforts to reduce its spread have impacted, and may in future periods negatively impact, our business and operations.The COVID-19 pandemic has substantially burdened healthcare systems worldwide. The focus of resources on COVID-19 and widespread protective measures implemented to control the spread of the pandemic have impacted discovery, research, development, manufacturing, and sales of our medicines as well as those of the broader pharmaceutical industry. Significant delays or unexpected issues, such as higher discontinuation rates or delays accumulating data, affecting the timing, conduct, or regulatory review of our clinical trials, could adversely affect our ability to commercialize some assets in our product pipeline. Lack of normal access and fewer in-person interactions by patients and our employees with the healthcare system, along with concern about the continued supply of medications, has resulted, and may continue to result, in changes in buying patterns throughout the supply chain, impacting demand for our products and negatively impacting the consolidated operating results of our underlying business. In certain locations in the U.S and around the world with COVID-19 outbreaks, we temporarily halted in-person interactions by our employees with healthcare providers and increased virtual interactions. While in-person interactions have resumed in many locations, we may decide to halt such activity in the future and, in those cases, expect to resume such interactions as it is safe to do so and in compliance with applicable guidance and requirements. The COVID-19 pandemic could also have an adverse impact on our manufacturing operations, global supply chain, and distribution systems, which could impact our ability to produce and distribute our products and affect the ability of third parties on which we rely to fulfill their obligations to us, and could increase our expenses. We also face unique risks and uncertainties related to our development, manufacture, and uptake of potential treatments for COVID-19, including vulnerability to supply chain disruptions, higher manufacturing costs, difficulties in manufacturing sufficient quantities of our therapies, restrictions on administration that limit widespread and timely access to our therapies, and risks related to handling, return, and/or refund of product after delivery by us. Expedited authorization processes, including our EUAs for bamlanivimab and bamlanivimab and etesevimab administered together, have allowed restricted distribution of products with less than typical safety and efficacy data, and additional data that become available may call into question the safety or effectiveness of our COVID-19 therapies. Additionally, the availability of superior or competitive therapies, or preventative measures such as vaccines, coupled with the transient nature of pandemics, could negatively impact or eliminate demand for our COVID-19 therapies. In addition, we may be required to accept returns of certain product previously shipped pursuant to EUAs if the relevant EUA is revoked or terminated. Mutations or the spread of other variants of the coronavirus could also render our therapies ineffective. Any of these risks could prevent us from recouping our substantial investments in the research, development, and manufacture of our COVID-19 therapies. In addition, the conditions created by the COVID-19 pandemic intensify other risks inherent in our business, including, among other things, risks related to drug pricing and access, the conduct of clinical trials, workplace safety and productivity, intellectual property protection, product liability and other litigation, and the impact of adverse global and local economic conditions.23We have experienced negative impacts to our underlying business, including demand for our products, due to the COVID-19 pandemic but the pandemic has not negatively impacted our liquidity position. Given the evolving nature of the virus, the financial impact of the COVID-19 pandemic on our results of operations, financial condition, liquidity, and cash flows in future periods could change, perhaps materially. The degree to which the COVID-19 pandemic affects us will depend on developments that are highly uncertain and beyond our knowledge or control, including, but not limited to, the duration and severity of the pandemic, the actions taken to reduce its transmission, including widespread availability of vaccines, and the speed with which, and extent to which, more stable economic and operating conditions resume. Should the COVID-19 pandemic and any associated recession or depression continue for a prolonged period, our results of operations, financial condition, liquidity, and cash flows could be materially impacted by lower revenues and profitability and a lower likelihood of effectively and efficiently developing and launching new medicines.•Pharmaceutical research and development is very costly and highly uncertain; we may not succeed in developing, licensing, or acquiring commercially successful products sufficient in number or value to replace revenues of products that have lost or will soon lose intellectual property protection or are displaced by competing products or therapies. There are many difficulties and uncertainties inherent in pharmaceutical research and development, the introduction of new products, and business development activities to expand our product pipeline. There is a high rate of failure inherent in new drug discovery and development. To bring a drug from the discovery phase to market can take over a decade and often costs in excess of $2 billion. Failure can occur at any point in the process, including in later stages after substantial investment. As a result, most funds invested in research programs will not generate financial returns. New product candidates that appear promising in development may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns, inability to obtain or maintain necessary regulatory approvals or payer reimbursement or coverage, limited scope of approved uses, changes in the relevant treatment standards or the availability of new or better competitive products, difficulty or excessive costs to manufacture, or infringement of the patents or intellectual property rights of others. Regulatory agencies continue to establish high hurdles for the efficacy and safety of new products. Delays and uncertainties in drug approval processes can result in delays in product launches and lost market opportunity. In addition, it can be very difficult to predict revenue growth rates of new products.We cannot state with certainty when or whether our products now under development will be approved or launched; whether, if initially granted, such approval will be maintained; whether we will be able to develop, license, or otherwise acquire additional product candidates or products; or whether our products, once launched, will be commercially successful. We must maintain a continuous flow of successful new products and successful new indications or brand extensions for existing products, both through our internal efforts and our business development activities, sufficient both to cover our substantial research and development costs and to replace revenues that are lost as profitable products lose intellectual property exclusivity or are displaced by competing products or therapies. Failure to do so in the short-term or long-term would have a material adverse effect on our business, results of operations, cash flows, and financial position. Our business development activities to enhance our product pipeline may include acquisitions, strategic alliances, collaborations, investments, and licensing arrangements. There are substantial risks associated with identifying business development targets and consummating related transactions, which may not be completed in a timely manner, if at all, may not result in successful commercialization of any product, and may give rise to legal proceedings or regulatory scrutiny.See Item 7, “Management’s Discussion and Analysis - Results of Operations - Executive Overview - Late-Stage Pipeline,” for more details about our current product pipeline. 24•We depend on products with intellectual property protection for most of our revenues, cash flows, and earnings; we have lost or will lose effective intellectual property protection for many of those products in the next few years, which has resulted and is likely to continue to result in rapid and severe declines in revenues.A number of our top-selling products, including Alimta and Forteo, have recently lost, or will lose in the next few years, significant patent protection and/or data protection in the U.S. as well as key countries outside the U.S. We have faced and remain exposed to generic competition following the loss of such intellectual property protection. In particular, we expect that the entry of generic competition for Alimta in the U.S. following the loss of patent exclusivity will cause a rapid and severe decline in revenue for the product and have a material adverse effect on our consolidated results of operations and cash flows.Certain other significant products no longer have effective exclusivity through patent protection or data protection. For non-biologic products, loss of exclusivity (whether by expiration of legal rights or by termination thereof as a consequence of litigation) typically results in the entry of one or more generic competitors, leading to a rapid and severe decline in revenues, especially in the U.S. Historically, outside the U.S., the market penetration of generics following loss of exclusivity has not been as rapid or pervasive as in the U.S.; however, generic market penetration is increasing in many markets outside the U.S., including Japan, Europe, and many countries in emerging markets. For biologics (such as Humalog, Humulin, Erbitux, Cyramza, Trulicity, Taltz, and Emgality), loss of exclusivity may or may not result in the near-term entry of competitor versions (i.e., biosimilars) due to many factors, including development timelines, manufacturing challenges, and/or uncertainties regarding the regulatory pathways for approval of the competitor versions. Generic pharmaceutical companies could also introduce a generic product before resolution of any related patent litigation.There is no assurance that the patents we are seeking will be granted or that the patents we hold will be found valid and enforceable if challenged. Moreover, patents relating to particular products, uses, formulations, or processes do not preclude other manufacturers from employing alternative processes or marketing alternative products or formulations that compete with our patented products. In addition, competitors or other third parties may assert claims that our activities infringe patents or other intellectual property rights held by them, or allege a third-party right of ownership in our existing intellectual property. See Item 7, “Management’s Discussion and Analysis - Results of Operations - Executive Overview - Other Matters - Patent Matters,” and Item 1, "Business - Patents, Trademarks, and Other Intellectual Property Rights," for more details. •Our long-term success depends on intellectual property protection; if our intellectual property rights are invalidated, circumvented, or weakened, our business will be adversely affected. Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines. Without strong intellectual property protection, we would be unable to generate the returns necessary to support our significant investments in research and development, as well as the other expenditures required to bring new drugs to the market.Intellectual property protection varies throughout the world and is subject to change over time, depending on local laws and regulations. Changes to such laws and regulations could reduce protections for our innovative products. In the U.S., in addition to the process for challenging patents set forth in the BPCIA, which applies to biologic products, the Hatch-Waxman Act provides generic companies powerful incentives to seek to invalidate our other pharmaceutical patents. As a result, we expect that our U.S. patents on major pharmaceutical products will continue to be routinely challenged in litigation and may not be upheld. In addition, a separate IPR process allows competitors to request review of issued patents by the USPTO without the protections of the Hatch-Waxman Act. Our patents may be invalidated through this expedited review process. Although such a decision can be appealed to the courts, in certain circumstances a loss in such a proceeding could result in a competitor entering the market, while a win provides no precedential value, meaning the same patent can be challenged by other competitors. We face many generic manufacturer challenges to our patents outside the U.S. as well. The entry of generic competitors typically results in rapid and severe declines in revenues. In addition, competitors or other third parties may claim that our activities infringe patents or other intellectual property rights held by them. If successful, such claims could result in our being unable to market a product in a particular territory or being required to pay significant damages for past infringement or royalties on future sales. See Item 1, “Business - Patents, Trademarks, and Other Intellectual Property Rights,” and Item 8, "Financial Statements and Supplementary Data - Note 16, Contingencies," for more details.25•We and our products face intense competition from multinational pharmaceutical companies, biotechnology companies, and lower-cost generic and biosimilar manufacturers, and such competition could have a material adverse effect on our business.We compete with a large number of multinational pharmaceutical companies, biotechnology companies, and generic pharmaceutical companies. To compete successfully, we must continue to deliver to the market innovative, cost-effective products that meet important medical needs. Our product revenues can be adversely affected by the introduction by competitors of branded products that are perceived as superior by the marketplace, by generic or biosimilar versions of our branded products, and by generic or biosimilar versions of other products in the same therapeutic class as our branded products. Our revenues can also be adversely affected by treatment innovations that eliminate or minimize the need for treatment with our drugs.Regulation of generic and biosimilar products varies around the world and such regulation is complex and subject to ongoing interpretation and implementation by regulatory agencies and courts. Particularly for biosimilars, recent government proposals could make it easier, less expensive, and less time consuming for competitor products to enter the market, some of which could be substituted for our products by pharmacies. Given the importance of biologic products to our clinical-stage pipeline, such regulation could have a material adverse effect on our business. See Item 1, “Business - Competition” and "Business - Research and Development," for more details.•Failure, inadequacy, or breach of our IT systems or our business processes regarding confidential information and other data, unauthorized access to our confidential information or violations of data protection laws could result in material harm to our business and reputation.A great deal of confidential information owned by us or our business partners or other third parties is stored in our information systems, networks, and facilities or those of third parties. This includes valuable trade secrets and intellectual property, clinical trial information, corporate strategic plans, marketing plans, customer information, and personally identifiable information, such as employee and patient information (collectively, confidential information). We also rely, to a large extent, on the efficient and uninterrupted operation of complex information technology systems, infrastructure, and hardware (together, IT systems), some of which are within our control and some of which are within the control of third parties, to accumulate, process, store, and transmit large amounts of confidential information and other data. We are subject to a variety of continuously evolving and developing laws and regulations around the world related to privacy, data protection, and data security. Maintaining the confidentiality, integrity and availability of our IT systems and confidential information is vital to our business.IT systems are vulnerable to system inadequacies, operating failures, service interruptions or failures, security breaches, malicious intrusions, or cyber-attacks from a variety of sources. Cyber-attacks are growing in their frequency, sophistication, and intensity, and are becoming increasingly difficult to detect, mitigate, or prevent. Cyber-attacks come in many forms, including the deployment of harmful malware, exploitation of vulnerabilities (including those third-party software or systems), denial-of-service attacks, the use of social engineering, and other means to compromise the confidentiality, integrity and availability of our IT systems, confidential information, and other data. Breaches resulting in the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure or use of confidential information, or the unauthorized access to, disruption of, or interference with our products and services, can occur in a variety of ways, including but not limited to, negligent or wrongful conduct by employees or others with permitted access to our systems and information, or wrongful conduct by hackers, competitors, certain governments or nation-states, or other current or former company personnel. Our third-party partners, including third-party providers of data hosting or cloud services, as well as suppliers, distributors, alliances, and other third-party service providers, face similar risks, which could affect us directly or indirectly. The healthcare industry has been and continues to be a target for cyber-attacks, and the number of threats has only increased during the COVID-19 pandemic. Numerous federal agencies that monitor and regulate internet and cyber-crime have issued guidance, alerts and directives warning of software vulnerabilities that require immediate patching, malicious actors targeting healthcare related systems and nation-state sponsored hacking designed to steal valuable information, including related to potential COVID-19 treatments.26The failure or inadequacy of our IT systems or business processes, the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized access to disclosure or use of confidential information, or the unauthorized access to, disruption of, or interference with our products and services that rely on IT systems or business processes, could impair our ability to secure and maintain intellectual property rights; result in a product manufacturing interruption or failure, or in the interruption or failure of products or services that rely on IT systems or business processes; damage our operations, customer relationships, or reputation; and cause us to lose trade secrets or other competitive advantages. Unauthorized disclosure of personally identifiable information could expose us to significant sanctions for violations of data privacy laws and regulations around the world and could damage public trust in our company. To date, system inadequacies, operating failures, unauthorized access, service interruptions or failures, security breaches, malicious intrusions, cyber-attacks, and the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure or use of confidential information have not had a material impact on our consolidated results of operations. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business, or reputational losses that may result from an interruption or breach of our IT systems. We continue to implement measures in an effort to protect, detect, respond to, and minimize or prevent these risks and to enhance the resiliency of our IT systems; however, these measures may not be successful and we may fail to detect or remediate security breaches, malicious intrusions, cyber-attacks, or other compromises of our systems. Any of these events could result in material financial, legal, commercial, or reputational harm to our business.•Significant economic downturns or international trade disruptions or disputes could adversely affect our business and operating results. While pharmaceuticals have not generally been sensitive to overall economic cycles, prolonged economic slowdowns, including as a result of COVID-19, could lead to decreased utilization of our products, affecting our sales volume. Declining tax revenues attributable to economic downturns increase the pressure on governments to reduce health care spending, leading to increasing government efforts to control drug prices and utilization. Additionally, some customers, including governments or other entities reliant upon government funding, may be unable to pay for our products in a timely manner. Also, if our customers, suppliers, or collaboration partners experience financial difficulties, we could experience slower customer collections, greater bad debt expense, and performance defaults by suppliers or collaboration partners. Similarly, in the event of a significant economic downturn, we could have difficulty accessing credit markets. Significant portions of our business are conducted in Europe, including the United Kingdom, Asia, and other international geographies. Trade disputes and interruptions in international relationships, including pandemic diseases, such as COVID-19, could result in changes to regulations governing our products and our intellectual property, or otherwise affect our ability to do business. While we do not expect either circumstance to materially affect our business in a direct manner, these and similar events could adversely affect us, or our business partners or customers. •Pharmaceutical products can develop unexpected safety or efficacy concerns, which could have a material adverse effect on our revenues, income, and reputation. Pharmaceutical products receive regulatory approval based on data obtained in controlled clinical trials of limited duration. After approval, the products are used for longer periods of time by much larger numbers of patients. Accordingly, we and others (including regulatory agencies and private payers) collect extensive information on the efficacy and safety of our marketed products by continuously monitoring the use of our products in the marketplace. In addition, we or others may conduct post-marketing clinical studies on efficacy and safety of our marketed products. New safety or efficacy data from both market surveillance and post-marketing clinical studies may result in product label changes or other measures that could reduce the product's market acceptance and result in declining sales. Serious safety or efficacy issues that arise after product approval could result in voluntary or mandatory product recalls or withdrawals from the market. Safety issues could also result in costly product liability claims. See also “ - The COVID-19 pandemic and efforts to reduce its spread have impacted, and may in future periods negatively impact, our business and operations.”27•We face litigation and investigations related to our products and our pricing practices and are self-insured; we could face large numbers of claims in the future, which could adversely affect our business. We are subject to a substantial number of product liability claims involving various products, as well as litigation and investigations related to the pricing of our products. See Item 8, “Financial Statements and Supplementary Data - Note 16, Contingencies” for more information on our current product liability litigation, as well as pricing litigation, investigations, and inquiries. Because of the nature of pharmaceutical products, we are and could in the future become subject to large numbers of product liability claims for these or other products, or to further litigation or investigations, including related to pricing or other commercial practices. Such matters could affect our results of operations or require us to recognize substantial charges to resolve and, if involving marketed products, could adversely affect sales of the product. Due to a very restrictive market for liability insurance, we are self-insured for product liability losses for all our currently marketed products, as well as for litigation or investigations related to our pricing practices or other similar matters. •Manufacturing difficulties or disruptions could lead to product supply problems. Pharmaceutical manufacturing is complex and highly regulated. Manufacturing or quality assurance difficulties at our facilities or contracted facilities, or the failure or refusal of a supplier or contract manufacturer to supply contracted quantities, could result in product shortages, leading to lost revenue. Such difficulties or disruptions could result from quality, oversight, or regulatory compliance problems; natural disasters or pandemic disease; equipment, mechanical, data, or information technology system vulnerabilities, such as system inadequacies, inadequate controls or procedures, operating failures, service interruptions or failures, security breaches, malicious intrusions, or cyber-attacks from a variety of sources; or inability to obtain single-source raw or intermediate materials. In addition, given the difficulties in predicting sales of new products and the very long lead times necessary for the expansion and regulatory qualification of pharmaceutical manufacturing capacity, it is possible that we could have difficulty meeting unanticipated demand for new products. See Item 1, “Business - Raw Materials and Product Supply,” for more details.•Reliance on third-party relationships and outsourcing arrangements could adversely affect our business. We rely on third parties, including suppliers, distributors, alliances, and collaborations with other pharmaceutical and biotechnology companies, and third-party service providers, for selected aspects of product development, manufacturing, commercialization, support for information technology systems, product distribution, and certain financial transactional processes. For example, we outsource the day-to-day management and oversight of our clinical trials to contract research organizations. Outsourcing these functions involves the risk that the third parties may not perform to our standards or legal requirements; may not produce reliable results; may not perform in a timely manner; may not maintain the confidentiality, integrity, and availability of confidential and proprietary information relating to us, our clinical trial subjects, or patients; may experience disruption or fail to perform due to information technology system vulnerabilities, breaches, cyber-attacks, or inadequate controls or procedures; or may fail to perform at all. Failure of these third parties to meet their contractual, regulatory, confidentiality, privacy, security, or other obligations to us, our clinical trial subjects, and our patients could have a material adverse effect on our business. Risks Related to Government Regulation•Our business is subject to increasing government price controls and other public and private restrictions on pricing, reimbursement, and access for our drugs, which could have a material adverse effect on our reputation or business. Public and private payers continue to take aggressive steps to control their expenditures for pharmaceuticals by placing restrictions on pricing and reimbursement for, and patient access to, our medications. These pressures could continue to negatively affect our future revenues and net income.28We expect governments and private payers worldwide to intensify their scrutiny of, and actions intended to address, pricing, reimbursement, and access to pharmaceutical products. Additional regulations, legislation, or enforcement, including as a result of the current U.S. presidential administration, could adversely impact our revenue. However, we cannot predict the likelihood, nature, or extent of current and future health care reform efforts. We also may experience potential additional pricing pressures resulting from the financial strain of the COVID-19 pandemic on government-funded healthcare systems around the world.For more details, see Item 1, “Business - Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access,” and Item 7, “Management’s Discussion and Analysis - Results of Operations - Executive Overview - Other Matters - Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access.”•Changes in foreign currency rates or interest rate risks could materially affect our revenue, cost of sales, and operating expenses.As a global company with substantial operations outside the U.S., we face foreign currency risk exposure from fluctuating currency exchange rates. While we seek to manage a portion of these exposures through hedging and other risk management techniques, significant fluctuations in currency rates can have a material impact, either positive or negative, on our revenue, cost of sales, and operating expenses. In the event of an extreme devaluation of local currency, the price of our products could become unsustainable in the relevant market. See Item 7, “Management’s Discussion and Analysis - Financial Condition and Liquidity” for more details.•Unanticipated changes in our tax rates or exposure to additional tax liabilities could increase our income taxes and decrease our net income. We are subject to income taxes in the U.S. and numerous foreign jurisdictions, and in the course of our business, we make judgments about the expected tax treatment of various transactions and events. Changes in relevant tax laws, regulations, administrative practices, principles, and interpretations, as well as events that differ from our expectations, could adversely affect our future effective tax rates. In addition, global tax authorities routinely examine our tax returns and are expected to become more aggressive in their examinations of profit allocations among jurisdictions which could affect our anticipated tax liabilities. In December 2017, the U.S. enacted tax reform legislation significantly revising U.S. tax laws, and a number of other countries are also actively considering or enacting tax changes. Significant uncertainty currently exists regarding proposed tax policies of the current U.S. presidential administration including repeal of certain aspects of the 2017 tax law. Modifications to key elements of the U.S. or international tax framework could have a material adverse effect on our consolidated operating results and cash flows. See Item 7, “Management’s Discussion and Analysis - Results of Operations - Executive Overview - Other Matters - Tax Matters” and Item 8, "Financial Statements and Supplementary Data - Note 14, Income Taxes," for more details.We have taken the position, based on an opinion of tax counsel, that our divestiture of Elanco common stock in connection with the 2019 separation of Elanco qualifies as a transaction that is tax-free for U.S. federal income tax purposes. If any facts, assumptions, representations, and undertakings from Lilly and Elanco regarding the past and future conduct of their respective businesses and other matters are incorrect or not otherwise satisfied, the divestiture may not qualify for tax-free treatment, which could result in significant U.S. federal income tax liabilities for us and our shareholders who exchanged their stock for Elanco stock.29•Regulatory compliance problems could be damaging to the company. The marketing, promotional, and pricing practices of pharmaceutical manufacturers, as well as the manner in which manufacturers interact with purchasers, prescribers, and patients, are subject to extensive regulation. Many companies, including us, have been subject to claims related to these practices asserted by federal, state, and foreign governmental authorities, private payers, and consumers. These claims have resulted in substantial expense and other significant consequences to us. We are and could in the future become subject to such investigations, the outcomes of which could include criminal charges and fines, penalties, or other monetary or non-monetary remedies, including exclusion from U.S. federal and other health care programs. Such investigations may intensify as a result of the regulatory priorities of the current U.S. presidential administration. In addition, regulatory issues concerning compliance with cGMP, quality assurance, and similar regulations (and comparable foreign regulations) for our products can lead to regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in the approvals of new products pending resolution of the issues, and reputational harm, any of which would adversely affect our business. See Item 1, “Business - Government Regulation of Our Operations,” for more details. 30Item 1B.Unresolved Staff CommentsNone.Item 2.PropertiesOur principal domestic and international executive offices are located in Indianapolis. At December 31, 2020, we owned 9 production and distribution sites in the U.S., including Puerto Rico. Together with the corporate administrative offices, these facilities contain an aggregate of approximately 8.2 million square feet of floor area dedicated to production, distribution, and administration. Major production sites include Indianapolis, Indiana; Carolina, Puerto Rico; and Branchburg, New Jersey.We own production and distribution sites in 8 countries outside the U.S., containing an aggregate of approximately 4.4 million square feet of floor area. Major production sites include facilities in Ireland, France, Spain, Italy, and China.In the U.S., our research and development facilities contain an aggregate of approximately 4.2 million square feet of floor area, primarily consisting of owned facilities located in Indianapolis. We also lease smaller sites in San Diego, California; San Francisco, California; and New York, New York. Outside the U.S., we own a small research and development facility in Spain and lease a small site in Singapore.We believe that none of our properties is subject to any encumbrance, easement, or other restriction that would detract materially from its value or impair its use in the operation of the business. The buildings we own are of varying ages and in good condition.Item 3.Legal ProceedingsWe are a party to various currently pending legal actions, government investigations, and environmental proceedings. Information pertaining to legal proceedings is described in Item 8, "Financial Statements and Supplementary Data - Note 16, Contingencies," and incorporated by reference herein. Item 4.Mine Safety DisclosuresNot applicable.31Part IIItem 5.Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity SecuritiesInformation relating to the principal market for our common stock and related stockholder matters is described in Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition" and Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." This information is incorporated herein by reference.As of February 12, 2021, there were approximately 21,650 holders of record of our common stock based on information provided by our transfer agent. Our common stock is listed under the ticker symbol LLY on the New York Stock Exchange (NYSE). The following table summarizes the activity related to repurchases of our equity securities during the fourth quarter ended December 31, 2020:PeriodTotal Number ofShares Purchased(in thousands)Average Price Paidper ShareTotal Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs(in thousands)Approximate Dollar Valueof Shares that May Yet BePurchased Under thePlans or Programs(dollars in millions)October 2020— $—— $1,000.0November 2020— —— 1,000.0December 2020— —— 1,000.0Total— —— During the three months ended December 31, 2020, we did not repurchase any shares under the $8.00 billion share repurchase program authorized in June 2018. 32PERFORMANCE GRAPHThe following graph compares the return on Lilly stock with that of the Standard & Poor’s (S&P) 500 Stock Index and our peer group for the years 2016 through 2020. The graph assumes that, on December 31, 2015, a person invested $100 each in Lilly stock, the S&P 500 Stock Index, and the peer group's collective common stock. The graph measures total shareholder return, which takes into account both stock price and dividends. It assumes that dividends paid by a company are immediately reinvested in that company’s stock. Value of $100 Invested on Last Business Day of 2015 Comparison of Five-Year Cumulative Total Shareholder Return Among Lilly, S&P 500 Stock Index, and Peer Group(1)LillyPeer GroupS&P 500Dec-15$100.00 $100.00 $100.00 Dec-16$89.63 $94.96 $111.96 Dec-17$105.61 $111.86 $136.40 Dec-18$148.33 $117.57 $130.42 Dec-19$172.29 $138.80 $171.49 Dec-20$225.80 $141.88 $203.04 (1)    We constructed the peer group as the industry index for this graph. It is comprised of the following companies in the pharmaceutical and biotechnology industries: AbbVie Inc.; Allergan plc; Amgen Inc.; AstraZeneca PLC; Biogen Inc.; Bristol-Myers Squibb Company; Gilead Sciences Inc.; GlaxoSmithKline plc; Johnson & Johnson; Merck & Co., Inc.; Novartis AG.; Novo Nordisk A/S; Pfizer Inc.; Roche Holding AG; Sanofi S.A.; and Takeda Pharmaceutical Company Limited. The peer group used for performance benchmarking aligns with the peer group used for executive compensation purposes for 2020 other than our peer group for performance benchmarking excludes Celgene Corporation and Shire plc as they were acquired in 2019.33Item 6. [Reserved]Item 7.Management’s Discussion and Analysis of Results of Operations and Financial ConditionRESULTS OF OPERATIONS(Tables present dollars in millions, except per-share data)GeneralManagement’s discussion and analysis of results of operations and financial condition is intended to assist the reader in understanding and assessing significant changes and trends related to the results of operations and financial position of our consolidated company. This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying footnotes in Item 8 of Part II of this Annual Report on Form 10-K. Certain statements in this Item 7 of Part II of this Annual Report on Form 10-K constitute forward-looking statements. Various risks and uncertainties, including those discussed in "Forward-Looking Statements" and Item 1A, “Risk Factors,” may cause our actual results, financial position, and cash generated from operations to differ materially from these forward-looking statements.Executive OverviewThis section provides an overview of our financial results, recent product and late-stage pipeline developments, and other matters affecting our company and the pharmaceutical industry. Earnings per share (EPS) data are presented on a diluted basis.COVID-19 PandemicIn response to the COVID-19 pandemic, we have been focused on maintaining a reliable supply of our medicines; reducing the strain on the medical system; developing treatments for COVID-19; protecting the health, safety, and well-being of our employees; supporting our communities; and ensuring affordability of and access to our medicines, particularly insulin.We have experienced negative impacts to our underlying business due to the COVID-19 pandemic, including decreases in new prescriptions as a result of fewer patient visits to physician’s offices to begin or change treatment, changes in payer segment mix, and the use of patient affordability programs in the United States (U.S.) due to rising unemployment. Additionally, we have experienced, and may continue to experience, decreased demand as a result of lack of normal access and fewer in-person interactions by patients and our employees with the healthcare system. In certain locations in the U.S. and around the world with COVID-19 outbreaks, we temporarily halted in-person interactions by our employees with healthcare providers and increased virtual interactions. While in-person interactions have resumed in many locations, we may decide to halt such activity in the future and, in those cases, expect to resume such interactions as it is safe to do so and in compliance with applicable guidance and requirements. We may experience additional pricing pressures resulting from the financial strain of the COVID-19 pandemic on government-funded healthcare systems around the world. We remain committed to discovering and developing new treatments for the patients we serve. At the beginning of the COVID-19 pandemic, we paused new clinical trial starts and enrollment in new trials in order to reduce the strain on the medical system, and we have resumed this activity in our clinical trials. However, significant delays or unexpected issues, such as higher discontinuation rates or delays accumulating data, affecting the timing, conduct, or regulatory review of our clinical trials, could adversely affect our ability to commercialize some assets in our product pipeline if the COVID-19 pandemic continues for a protracted period. 34In regards to COVID-19 therapies, the U.S. Food and Drug Administration (FDA) granted Emergency Use Authorizations (EUA) for bamlanivimab and bamlanivimab and etesevimab administered together for higher-risk patients who have been recently diagnosed with mild-to-moderate COVID-19 and for baricitinib in combination with remdesivir in hospitalized COVID-19 patients. We are actively working with a variety of organizations, including governmental agencies, to facilitate access to our COVID-19 treatments in various countries. However, we face unique risks and uncertainties in our development, manufacture, and uptake of potential treatments for COVID-19, including vulnerability to supply chain disruptions, higher manufacturing costs, difficulties in manufacturing sufficient quantities of our therapies, restrictions on administration that limit widespread and timely access to our therapies, and risks related to handling, return, and/or refund of product after delivery by us. Expedited authorization processes, including our EUAs for bamlanivimab and bamlanivimab and etesevimab administered together, have allowed restricted distribution of products with less than typical safety and efficacy data, and additional data that become available may call into question the safety or effectiveness of our COVID-19 therapies. Additionally, the availability of superior or competitive therapies, or preventative measures, such as vaccines, coupled with the transient nature of pandemics, could negatively impact or eliminate demand for our COVID-19 therapies. In addition, we may be required to accept returns of certain product previously shipped pursuant to EUAs if the relevant EUA is revoked or terminated. Mutations or the spread of other variants of the coronavirus could also render our therapies ineffective. Any of these risks could prevent us from recouping our substantial investments in the research, development, and manufacture of our COVID-19 therapies. Our ability to continue to operate without significant negative impacts will in part depend on our ability to protect our employees and our supply chain. We have taken steps to protect our employees worldwide, with particular measures in place for those working in our manufacturing sites and distribution facilities. For 2020, we were able to largely maintain our normal operations. However, uncertainty resulting from the COVID-19 pandemic could have an adverse impact on our manufacturing operations, global supply chain, and distribution systems, which could impact our ability to produce and distribute our products and the ability of third parties on which we rely to fulfill their obligations to us, and could increase our expenses.Although the COVID-19 pandemic has affected our operations and demand for our products, it has not negatively impacted our liquidity position. We expect to continue to generate cash flows to meet our short-term liquidity needs and to have access to liquidity via the short-term and long-term debt markets. We also have not observed any material impairments of our assets or significant changes in the fair value of assets due to the COVID-19 pandemic.The degree to which the COVID-19 pandemic will continue to impact our business operations, financial results, and liquidity will depend on future developments, is highly uncertain, and cannot be predicted due to, among other things, the duration and severity of the pandemic, the actions taken to reduce its transmission, including widespread availability of vaccines, and the speed with which, and extent to which, more stable economic and operating conditions resume. Should the COVID-19 pandemic and any associated recession or depression continue for a prolonged period, our results of operations, financial condition, liquidity, and cash flows could be materially impacted by lower revenues and profitability and a lower likelihood of effectively and efficiently developing and launching new medicines. See “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for additional information on risk factors that could impact our results.Elanco Animal Health (Elanco) DispositionOn March 11, 2019, we completed the disposition of our remaining 80.2 percent ownership of Elanco common stock through a tax-free exchange offer. As a result, we recognized a gain on the disposition of approximately $3.7 billion in the first quarter of 2019 and now operate as a single segment. See Note 19 to the consolidated financial statements for further discussion. 35Financial ResultsThe following table summarizes our key operating results:Year Ended December 31Percent Change20202019Revenue$24,539.8 $22,319.5 10Gross margin19,056.5 17,598.3 8Gross margin as a percent of revenue77.7 %78.8 %Operating expense$12,206.9 $11,808.8 3Acquired in-process research and development 660.4 239.6 NMAsset impairment, restructuring, and other special charges131.2 575.6 (77)Income before income taxes7,229.9 5,265.9 37Income taxes1,036.2 628.0 65Net income from continuing operations6,193.7 4,637.9 34Net income6,193.7 8,318.4 (26)EPS from continuing operations6.79 4.96 37EPS6.79 8.89 (24)NM - not meaningfulRevenue increased in 2020 driven by increased volume, partially offset by lower realized prices. Operating expenses, defined as the sum of research and development and marketing, selling, and administrative expenses, increased in 2020, driven primarily by approximately $450 million of development expenses for COVID-19 therapies. The decreases in net income and EPS in 2020 were driven primarily by the approximately $3.7 billion gain recognized on the disposition of Elanco in 2019, partially offset by higher gross margin and higher other income in 2020. The following highlighted items affect comparisons of our 2020 and 2019 financial results:2020Acquired in-process research and development (IPR&D) (Note 3 to the consolidated financial statements)•We recognized acquired IPR&D charges of $660.4 million resulting from the acquisitions of Disarm Therapeutics, Inc. (Disarm) and a pre-clinical stage company as well as collaborations with Innovent Biologics, Inc. (Innovent), Sitryx Therapeutics Limited (Sitryx), Fochon Pharmaceuticals, Ltd. (Fochon), AbCellera Biologics Inc. (AbCellera), Evox Therapeutics Ltd (Evox), and Shanghai Junshi Biosciences Co., Ltd. (Junshi Biosciences). Asset Impairment, Restructuring, and Other Special Charges (Note 5 to the consolidated financial statements)•We recognized charges of $131.2 million primarily related to severance costs incurred as a result of actions taken worldwide to reduce our cost structure, as well as acquisition and integration costs incurred as part of the acquisition of Dermira, Inc. (Dermira).Other-Net, (Income) Expense (Note 18 to the consolidated financial statements)•We recognized $1.44 billion of net investment gains on equity securities. 2019 Acquired IPR&D (Note 3 to the consolidated financial statements)•We recognized acquired IPR&D charges of $239.6 million resulting from collaborations with AC Immune SA (AC Immune), Centrexion Therapeutics Corporation (Centrexion), ImmuNext, Inc. (ImmuNext), and Avidity Biosciences, Inc. (Avidity). Asset Impairment, Restructuring, and Other Special Charges (Note 5 to the consolidated financial statements)•We recognized charges of $575.6 million primarily associated with the accelerated vesting of Loxo Oncology, Inc. (Loxo) employee equity awards as part of the acquisition of Loxo.36Other-Net, (Income) Expense (Note 18 to the consolidated financial statements)•We recognized $401.2 million of net investment gains on equity securities. •We recognized a gain of $309.8 million on the sale of our antibiotics business in China. •We recognized a debt extinguishment loss of $252.5 million related to the repurchase of debt. Net Income from Discontinued Operations (Note 19 to the consolidated financial statements)•We recognized a gain related to the disposition of Elanco of approximately $3.7 billion.Late-Stage PipelineOur long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines. We currently have approximately 45 candidates in clinical development or under regulatory review, and a larger number of projects in the discovery phase.The following new molecular entities (NMEs) and diagnostic agent are currently in Phase III clinical trials or have been submitted for regulatory review or have received first regulatory approval in the U.S., Europe, or Japan in 2020. In addition, the following table includes certain NMEs currently in Phase II clinical trials. The following table reflects the status of these NMEs and diagnostic agent, including certain other developments since January 1, 2020.CompoundIndicationStatus DevelopmentsCOVID-19 Therapies BamlanivimabCOVID-19Emergency Use AuthorizationThe FDA granted EUA for higher-risk patients recently diagnosed with mild-to-moderate COVID-19 in the fourth quarter of 2020. Announced in January 2021 that a Phase III trial met the primary and all key secondary endpoints. Additional Phase III trials are ongoing. Bamlanivimab and etesevimab administered togetherCOVID-19Emergency Use AuthorizationAnnounced in January 2021 that a Phase III trial met the primary and all key secondary endpoints. The FDA granted EUA for higher-risk patients recently diagnosed with mild-to-moderate COVID-19 in January 2021. Additional Phase III trials are ongoing. We intend to submit to the FDA for approval in the second half of 2021. EndocrinologyUltra-rapid Lispro (Lyumjev®)Type 1 and 2 diabetesLaunchedLaunched in Japan in the second quarter of 2020 and in the U.S. and Europe in the third quarter of 2020. Tirzepatide Type 2 diabetesPhase IIIAnnounced in the fourth quarter of 2020 and in February 2021 that Phase III trials met the primary and all key secondary endpoints. Additional Phase III trials are ongoing.ObesityPhase III trials are ongoing.Nonalcoholic steatohepatitis Phase IIPhase II trial is ongoing. Basal Insulin-FcType 1 and 2 diabetesPhase IIPhase II trials are ongoing.37CompoundIndicationStatus DevelopmentsImmunologyLebrikizumab(1)Atopic dermatitisPhase IIIAcquired in Dermira acquisition in February 2020. The FDA granted Fast Track designation(2). Phase III trials are ongoing.MirikizumabCrohn's DiseasePhase IIIPhase III trials are ongoing. PsoriasisAnnounced in the third quarter of 2020 that Phase III trials met the primary and all key secondary endpoints. Additional Phase III trials are ongoing. Ulcerative colitisPhase III trials are ongoing.CXCR1/2 Ligands Monoclonal AntibodyHidradenitis SuppurativaPhase IIPhase II trial initiated in the third quarter of 2020. IL-2 ConjugateSystemic Lupus ErythematosusPhase IIPhase II trial is ongoing.NeuroscienceLasmiditan (Reyvow®)Acute treatment of migraineLaunchedReceived Schedule V classification from the Drug Enforcement Agency and launched in the U.S. in the first quarter of 2020. Submitted in Europe and Japan in the fourth quarter of 2020.Flortaucipir (TauvidTM)Alzheimer's disease diagnosticLaunchedLaunched in the U.S. in the fourth quarter of 2020. Tanezumab(3)Osteoarthritis painSubmittedSubmitted to the FDA in 2019. The FDA intends to hold an Advisory Committee meeting, expected to occur in March 2021, to discuss the submission. Cancer painPhase IIIPhase III trial is ongoing.SolanezumabPreclinical Alzheimer's diseasePhase IIIAnnounced in the first quarter of 2020 that a Phase III trial for people with dominantly inherited Alzheimer's disease (DIAD) did not meet the primary endpoint. We do not plan to pursue submission for DIAD. Phase III trial is ongoing for Anti-Amyloid Treatment in Asymptomatic Alzheimer's.DonanemabAlzheimer’s diseasePhase IIAnnounced in January 2021 that a Phase II trial met the primary endpoint. Additional Phase II trials are ongoing. Epiregulin/TGFa mAbChronic painPhase IIPhase II trials initiated in the third quarter of 2020. PACAP38 AntibodyChronic painPhase IIPhase II trial initiated in the fourth quarter of 2020. SSTR4 Agonist Chronic pain Phase IIPhase II trials initiated in the fourth quarter of 2020. ZagotenemabAlzheimer’s diseasePhase IIPhase II trial is ongoing. OncologySelpercatinib (Retevmo®)Thyroid cancerLaunchedGranted accelerated approval(4) by the FDA based on Phase II data and launched in the U.S. in the second quarter of 2020. Submitted in Japan in the fourth quarter of 2020. Granted conditional marketing authorisation(4) in Europe in February 2021. Phase III trials are ongoing. Lung cancerLOXO-305Hematological cancersPhase IIPhase II trial initiated in the second quarter of 2020. Presented positive data at the American Society of Hematology Annual Meeting in the fourth quarter of 2020. (1) In collaboration with Almirall, S.A. (Almirall) in Europe.(2) Fast Track designation is designated to expedite the development and review of new therapies to treat serious conditions and address unmet medical needs.(3) In collaboration with Pfizer, Inc. (4) Continued approval may be contingent on verification and description of clinical benefit in confirmatory Phase III trials.38As part of our collaboration with Innovent, we plan to pursue registration of sintilimab injection (Tyvyt®) in the U.S. and other markets. Our pipeline also contains several new indication line extension (NILEX) products. The following certain NILEX products are currently in Phase II or Phase III clinical testing, have been submitted for regulatory review, or have received first regulatory approval in the U.S., Europe, or Japan for use in the indication described in 2020. The following table reflects the status of certain NILEX products, including certain other developments since January 1, 2020:CompoundIndicationStatusDevelopmentsEndocrinologyEmpagliflozin (Jardiance®)(1)Heart failure with reduced ejection fractionSubmittedSubmitted in the U.S., Europe and Japan in the fourth quarter of 2020.Chronic kidney diseasePhase IIIGranted FDA Fast Track designation(2). Phase III trials are ongoing.Heart failure with preserved ejection fractionImmunologyBaricitinib (Olumiant®)Atopic dermatitisApprovedAnnounced in the first quarter of 2020 that a Phase III trial met the primary and all key secondary endpoints. Submitted in the U.S. in the second quarter of 2020. Approved in Europe in the third quarter of 2020 and in Japan in the fourth quarter of 2020.COVID-19Emergency Use AuthorizationThe FDA granted EUA in combination with remdesivir in hospitalized COVID-19 patients in the fourth quarter of 2020.Alopecia areataPhase IIIThe FDA granted Breakthrough Therapy designation(3). Phase III trials are ongoing.Systemic lupus erythematosusPhase III trials are ongoing. OncologyAbemaciclib (Verzenio®)Adjuvant breast cancerSubmittedAnnounced in the second quarter of 2020 that a Phase III trial met the primary endpoint. Submitted in the U.S. and Europe in the fourth quarter of 2020. Prostate cancerPhase IIPhase II trials are ongoing. (1) In collaboration with Boehringer Ingelheim. (2) Fast Track designation is designated to expedite the development and review of new therapies to treat serious conditions and address unmet medical needs.(3) Breakthrough Therapy designation is designed to expedite the development and review of potential medicines that are intended to treat a serious condition where preliminary clinical evidence indicates that the treatment may demonstrate substantial improvement over available therapy on a clinically significant endpoint.39There are many difficulties and uncertainties inherent in pharmaceutical research and development and the introduction of new products, as well as a high rate of failure inherent in new drug discovery and development. To bring a drug from the discovery phase to market can take over a decade and often costs in excess of $2 billion. Failure can occur at any point in the process, including in later stages after substantial investment. As a result, most funds invested in research programs will not generate financial returns. New product candidates that appear promising in development may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns, inability to obtain or maintain necessary regulatory approvals or payer reimbursement or coverage, limited scope of approved uses, changes in the relevant treatment standards or the availability of new or better competitive products, difficulty or excessive costs to manufacture, or infringement of the patents or intellectual property rights of others. Regulatory agencies continue to establish high hurdles for the efficacy and safety of new products. Delays and uncertainties in drug approval processes can result in delays in product launches and lost market opportunity. In addition, it can be very difficult to predict revenue growth rates of new products. We manage research and development spending across our portfolio of potential new medicines. A delay in, or termination of, any one project will not necessarily cause a significant change in our total research and development spending. Due to the risks and uncertainties involved in the research and development process, we cannot reliably estimate the nature, timing, and costs of the efforts necessary to complete the development of our research and development projects, nor can we reliably estimate the future potential revenue that will be generated from any successful research and development project. Each project represents only a portion of the overall pipeline, and none is individually material to our consolidated research and development expense. While we do accumulate certain research and development costs on a project level for internal reporting purposes, we must make significant cost estimations and allocations, some of which rely on data that are neither reproducible nor validated through accepted control mechanisms. Therefore, we do not have sufficiently reliable data to report on total research and development costs by project, by preclinical versus clinical spend, or by therapeutic category.Other MattersPatent MattersWe depend on patents or other forms of intellectual property protection for most of our revenue, cash flows, and earnings. Our formulation patents for Forteo® expired in December 2018, and our use patents expired in August 2019 in major European markets and the U.S. Both the formulation patent and the use patent expired in August 2019 in Japan. We expect further volume decline as a result of the anticipated entry of generic and biosimilar competition following the loss of patent exclusivity in these markets. In the aggregate, we expect that the decline in revenue will have a material adverse effect on our consolidated results of operations and cash flows.The Alimta® vitamin regimen patents, which we expect to provide us with patent protection for Alimta through June 2021 in Japan and major European countries, and through May 2022 in the U.S., have been challenged in each of these jurisdictions. In the U.S., most challenges have been finally resolved in our favor, and one remains in active litigation. We and Eagle Pharmaceuticals, Inc. (Eagle) reached an agreement in December 2019 to settle all pending litigation, allowing Eagle a limited initial entry into the market with its product starting February 2022 (up to an approximate three-week supply) and subsequent unlimited entry starting April 2022. We expect that the entry of generic competition in the U.S. either from an unfavorable outcome to the patent challenge or following the loss of patent exclusivity, will cause a rapid and severe decline in revenue and have a material adverse effect on our consolidated results of operations and cash flows.40We are aware that several companies have received approval to market generic versions of pemetrexed in major European markets and that generic competitors may choose to attempt a launch at risk. Following a final decision in the Supreme Court of Germany in July 2020 overturning the lower court and upholding the validity of our Alimta patent, several generics that were on the market at risk in Germany left. We have removed the remaining generics from the market in Germany by obtaining preliminary injunctions in our favor. In September 2020, the Paris Court of First Instance in France issued a final decision upholding the validity of our Alimta patent and found infringement by Fresenius Kabi France and Fresenius Kabi Groupe France’s (collectively, Kabi) pemetrexed product. The court issued an injunction against Kabi and provisionally awarded us damages. In January 2021, that same court issued a preliminary injunction against Zentiva France S.A.S. (Zentiva), the last remaining company with a generic pemetrexed product on the French market, and provisionally awarded us damages. In October 2020, the Court of Appeal of the Netherlands overturned a lower court decision and ruled that our Alimta patent is valid and infringed and reinstated an injunction against Kabi, thereby removing Kabi's pemetrexed product from the Netherlands market. Kabi has appealed this decision to the Netherlands Supreme Court. Kabi's generic pemetrexed product was the only at risk generic on the market in the Netherlands. Our vitamin regimen patents have also been challenged in other smaller European jurisdictions. We expect that further entry of generic competition for Alimta in major European markets following either the loss of effective patent protection or of patent exclusivity will cause a rapid and severe decline in revenue. See Note 16 to the consolidated financial statements for a more detailed account of the legal proceedings currently pending in the U.S., Europe, and Japan regarding, among others, our Alimta patents.The compound patent for Humalog® (insulin lispro) has expired in major markets. Global regulators have different legal pathways to approve similar versions of insulin lispro. A competitor launched a similar version of insulin lispro in certain European markets in 2017 and in the U.S. in the second quarter of 2018. While it is difficult to estimate the severity of the impact of insulin lispro products entering the market, we do not expect and have not experienced a rapid and severe decline in revenue; however, we expect additional pricing pressure and some loss of market share that would continue over time.Our compound patent protection for Cymbalta® expired in Japan in January 2020. We expect generics to enter the market in mid-2021. We expect that the entry of generic competition will cause a rapid and severe decline in revenue and will have a material adverse effect on our consolidated results of operations and cash flows.Foreign Currency Exchange RatesAs a global company with substantial operations outside the U.S., we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S. dollar against the euro and Japanese yen. While we seek to manage a portion of these exposures through hedging and other risk management techniques, significant fluctuations in currency rates can have a material impact, either positive or negative, on our revenue, cost of sales, and operating expenses. While there is uncertainty in the future movements in foreign exchange rates, fluctuations in these rates could negatively impact our future consolidated results of operations and cash flows. Trends Affecting Pharmaceutical Pricing, Reimbursement, and AccessU.S.In the U.S., public concern over access to and affordability of pharmaceuticals continues to drive the regulatory and legislative debate. These policy and political issues increase the risk that taxes, fees, rebates, or other cost control measures may be enacted to manage federal and state budgets. Key health policy initiatives affecting biopharmaceuticals include:•the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent stimulus bills that focus on ensuring availability and access to lifesaving drugs during a public health crisis, •foreign reference pricing in Medicare and private insurance,•modifications to Medicare Parts B and D,•provisions that would allow the Department of Health and Human Services (HHS) to negotiate prices for biologics and drugs in Medicare,•a reduction in biologic data exclusivity,41•proposals related to Medicaid prescription drug coverage and manufacturer drug rebates,•proposals that would require biopharmaceutical manufacturers to disclose proprietary drug pricing information, and•state-level proposals related to prescription drug prices and reducing the cost of pharmaceuticals purchased by government health care programs.On July 24, 2020 and September 13, 2020, former U.S. President Donald Trump signed Executive Orders related to the 340B Prescription Drug Program, rebate reform in Medicare Part D, drug importation including insulin, and foreign reference pricing in Medicare Part B and Part D. Although their current status is unclear given the change in presidential administration, these Executive Orders, if implemented, could have a material adverse impact on our future consolidated results of operations, liquidity, and financial position. On September 1, 2020, Lilly announced it would distribute all 340B ceiling priced products directly to covered entities and their child sites only. Lilly provides 340B discounts to a contract pharmacy only if it is a wholly owned subsidiary of a covered entity, if a covered entity does not have an in-house pharmacy or, in the case of insulin, if the subject covered entity and its contract pharmacies agree to pass along the discount to patients without any markup for dispensing fees and without billing insurance or collecting duplicate discounts. Lilly has been transparent with regulators on its distribution activity and continues to comply with all 340B program requirements. Certain covered entities and their trade associations have threatened litigation, questioning whether Lilly’s program, and similar actions by other manufacturers, violate 340B program requirements. On October 9, 2020, three covered entities sued HHS and the Health Resources and Services Administration (HRSA) in the U.S. District Court for the District of Columbia seeking to compel the agencies to take enforcement action against Lilly and three other companies, among other requested relief. On October 21, 2020, a trade association representing certain covered entities sued HHS in the same court seeking to compel the agency to promulgate administrative dispute resolution regulations. On December 11, 2020, a number of associations and entities filed suit against HHS in the U.S. District Court for the Northern District of California requesting immediate enforcement of the contract pharmacy guidance. On December 31, 2020, the General Counsel of HHS issued an advisory opinion alleging that honoring contract pharmacy agreements is mandatory. In January 2021, Lilly filed suit against HHS, the Secretary of HHS, the HRSA, and the Administrator of the HRSA in the U.S. District Court for the Southern District of Indiana seeking a declaratory judgment that HHS's attempt to require manufacturers to permit contract pharmacy distribution is unlawful and a preliminary injunction enjoining implementation of the alternative dispute resolution process created by defendants and, with it, their application of the advisory opinion, and other related relief. The cases are pending and the impact of these cases and any subsequent litigation is uncertain. See Note 16 to the consolidated financial statements for additional information. California and several other states have enacted legislation related to prescription drug pricing transparency and it is unclear the effect this legislation will have on our business. Several states have also passed importation legislation, including Colorado, Florida, Maine, New Hampshire, New Mexico, and Vermont. As of late 2020 several of these states were actively working with the former presidential administration to implement an importation program from Canada. On November 22, 2020, Florida announced it submitted a proposed importation plan to the U.S. In 2020, HHS and the FDA also took several actions to advance state importation initiatives, including issuing requests for proposals for personal importation and reimportation of insulin and a final rule on the Importation of Prescription Drugs. Additionally, on November 27, 2020, the Canadian Minister of Health issued an interim order to ensure that participation in bulk importation frameworks, such as the one recently established by the U.S., does not cause or exacerbate a drug shortage in Canada. We continue to review these state proposals and legislation, as well as federal rules and guidance published by HHS and the FDA, the impact of which is uncertain at this time. Currently, it is unclear if the current presidential administration will adopt any of the importation initiatives put forth by the former presidential administration. We will continue to monitor and assess these developments.42In the private sector, consolidation and integration among healthcare providers significantly affects the competitive marketplace for pharmaceuticals. Health plans, pharmacy benefit managers, wholesalers, and other supply chain stakeholders have been consolidating into fewer, larger entities, thus enhancing their purchasing strength and importance. Private third-party insurers, as well as governments, typically maintain formularies that specify coverage (the conditions under which drugs are included on a plan's formulary) and reimbursement (the associated out-of-pocket cost to the consumer) to control costs by negotiating discounted prices in exchange for formulary inclusion. Formulary placement can lead to reduced usage of a drug for the relevant patient population due to coverage restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations that result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and higher deductibles. Consequently, pharmaceutical companies compete for formulary placement not only on the basis of product attributes such as efficacy, safety profile, or patient ease of use, but also by providing rebates. Value-based agreements, where pricing is based on achievement (or not) of specified outcomes, are another tool that may be utilized between payers and pharmaceutical companies as formulary placement and pricing are negotiated. Price is an increasingly important factor in formulary decisions, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable. We expect these downward pricing pressures will continue to negatively affect our consolidated results of operations. In addition to formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing through high deductible plans and higher co-insurance or co-pays. We continue to invest in patient affordability solutions (resulting in lower revenue) in an effort to assist patients in affording their medicines.The main coverage expansion provisions of the Affordable Care Act (ACA) are currently in effect through both state-based exchanges and the expansion of Medicaid. A trend has been the prevalence of benefit designs containing high out-of-pocket costs for patients, particularly for pharmaceuticals. In addition to the coverage expansions, many employers in the commercial market continue to evaluate strategies such as private exchanges and wider use of consumer-driven health plans to reduce their healthcare liabilities over time. Federal legislation, litigation, or administrative actions to repeal or modify some or all of the provisions of the ACA could have a material adverse effect on our consolidated results of operations and cash flows. At the same time, the broader paradigm shift towards performance-based reimbursement and the launch of several value-based purchasing initiatives have placed demands on the pharmaceutical industry to offer products with proven real-world outcomes data and a favorable economic profile.InternationalInternational operations also are generally subject to extensive price and market regulations. Cost-containment measures exist in a number of countries, including additional price controls and mechanisms to limit reimbursement for our products. Such policies are expected to increase in impact and reach, given the pressures on national and regional health care budgets that come from a growing, aging population and ongoing economic challenges. As additional reforms are finalized, we will assess their impact on future revenues. In addition, governments in many emerging markets are becoming increasingly active in expanding health care system offerings. Given the budget challenges of increasing health care coverage for citizens, policies may be proposed that promote generics and biosimilars only and reduce current and future access to branded pharmaceutical products. The COVID-19 pandemic is also creating additional pressure on health systems worldwide. As a result, cost containment and other measures may intensify as governments manage and emerge from the pandemic. Tax MattersWe are subject to income taxes and various other taxes in the U.S. and in many foreign jurisdictions; therefore, changes in both domestic and international tax laws or regulations could affect our effective tax rate, results of operations, and cash flows. Countries around the world, including the U.S., are actively considering and enacting tax law changes. The current presidential administration's tax proposal contains significant changes, including the rate at which income of U.S. companies would be taxed. Further, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development and the European Commission could influence tax policy in countries in which we operate. In addition, global tax authorities routinely examine our tax returns and are expected to become more aggressive in their examinations of profit allocations among jurisdictions, which could affect our anticipated tax liabilities. 43AcquisitionsWe strategically invest in external research and technologies that we believe complement and strengthen our own efforts. These investments can take many forms, including acquisitions, strategic alliances, collaborations, investments, and licensing arrangements. We view our business development activity as an important way to achieve our strategies, as we seek to bolster our pipeline and enhance shareholder value. We continuously evaluate business development transactions that have the potential to strengthen our business.In 2019, we acquired all shares of Loxo for a purchase price of $6.92 billion, net of cash acquired. Under the terms of the agreement, we acquired a pipeline of investigational medicines, including selpercatinib, an oral RET inhibitor, and LOXO-305, an oral BTK inhibitor. In the second quarter of 2020, the FDA approved selpercatinib (Retevmo) under its Accelerated Approval regulations and continued approval may be contingent upon verification and description of clinical benefit in confirmatory trials. In 2020, we acquired all shares of Dermira for a purchase price of $849.3 million, net of cash acquired. Under terms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. Lebrikizumab was granted Fast Track designation from the FDA. We also acquired Qbrexza® cloth, a medicated cloth for the topical treatment of primary axillary hyperhidrosis (uncontrolled excessive underarm sweating).In January 2021, we acquired all shares of Prevail Therapeutics Inc. (Prevail) for a purchase price of approximately $880 million in cash plus one non-tradable contingent value right (CVR). The CVR entitles Prevail stockholders to up to an additional approximately $160 million payable, subject to certain terms and conditions, upon the first regulatory approval of a Prevail product in one of the following countries: U.S., Japan, United Kingdom, Germany, France, Italy, or Spain. Under the terms of the agreement, we acquired a biotechnology company developing potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases. See Note 3 to the consolidated financial statements for further discussion regarding our recent acquisitions.44Operating Results—2020 RevenueThe following table summarizes our revenue activity by region:Year EndedDecember 31,20202019Percent ChangeU.S.$14,229.3 $12,722.6 12Outside U.S.10,310.5 9,596.8 7Revenue$24,539.8 $22,319.5 10Numbers may not add due to rounding.The following are components of the change in revenue compared with the prior year:2020 vs. 2019U.S.Outside U.S.ConsolidatedVolume17 %13 %15 %Price(5)%(6)%(5)%Foreign exchange rates— %— %— %Percent change12 %7 %10 %Numbers may not add due to rounding.In the U.S., the revenue increase in 2020 was driven by increased volume primarily for Trulicity®, bamlanivimab, and Taltz®. Excluding bamlanivimab revenue, U.S. revenue grew 5 percent. The increase in revenue due to volume was partially offset by a decrease in realized prices. The decrease in realized prices in the U.S. was primarily driven by increased rebates to gain and maintain broad commercial access across the portfolio and, to a lesser extent, unfavorable segment mix and changes to estimates for rebates and discounts, most notably impacting Humalog. The decrease in realized prices in the U.S. was partially offset by modest list price increases and lower utilization in the 340B segment. Outside the U.S., the revenue increase in 2020 was driven by increased volume primarily for Tyvyt, Trulicity, Alimta, and Olumiant. The increase in revenue due to volume was partially offset by lower realized prices primarily for Tyvyt and Alimta. The increase in volume and decrease in realized prices for Tyvyt and Alimta was driven primarily by their inclusion in government reimbursement programs in China. 45The following table summarizes our revenue activity in 2020 compared with 2019:Year EndedDecember 31, 20202019ProductU.S.Outside U.S.TotalTotalPercent ChangeTrulicity$3,835.9 $1,232.2 $5,068.1 $4,127.8 23Humalog(1)1,485.6 1,140.3 2,625.9 2,820.7 (7)Alimta1,265.3 1,064.7 2,329.9 2,115.8 10Taltz1,288.5 500.0 1,788.5 1,366.4 31Humulin®866.4 393.2 1,259.6 1,290.1 (2)Jardiance(2)620.8 533.0 1,153.8 944.2 22Basaglar®842.3 282.1 1,124.4 1,112.6 1Forteo510.3 536.0 1,046.3 1,404.7 (26)Cyramza®381.9 650.8 1,032.6 925.1 12Verzenio618.2 294.4 912.7 579.7 57Bamlanivimab(3)850.0 21.2 871.2 — NMCymbalta42.1 725.6 767.7 725.4 6Olumiant63.8 575.0 638.9 426.9 50Cialis®61.8 545.4 607.1 890.5 (32)Erbitux®480.1 56.3 536.4 543.4 (1)Zyprexa®46.1 360.5 406.5 418.7 (3)Emgality®325.9 37.0 362.9 162.5 NMTrajenta®(4)95.6 263.0 358.5 590.6 (39)Other products548.7 1,099.8 1,648.8 1,874.4 (12)Revenue$14,229.3 $10,310.5 $24,539.8 $22,319.5 10Numbers may not add due to rounding.NM - Not meaningful(1)    Humalog revenue includes insulin lispro.(2) Jardiance revenue includes Glyxambi®, Synjardy®, and Trijardy® XR.(3)    Bamlanivimab sales are pursuant to EUA. (4)    Trajenta revenue includes Jentadueto®.Revenue of Trulicity, a treatment for type 2 diabetes and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors, increased 22 percent in the U.S., driven by increased volume, partially offset by lower realized prices primarily due to higher contracted rebates. Revenue outside the U.S. increased 27 percent, primarily driven by increased volume.Revenue of Humalog, an injectable human insulin analog for the treatment of diabetes, decreased 11 percent in the U.S., driven by lower realized prices, partially offset by higher demand. Revenue outside the U.S. decreased 1 percent, primarily driven by the unfavorable impact of foreign exchange rates. Included in the revenue of Humalog in the U.S. are our own insulin lispro authorized generics, which began launching in the second quarter of 2019 in order to lower out-of-pocket costs for patients. While it is difficult to estimate the severity of the impact of similar insulin lispro products entering the market, we do not expect and have not experienced a rapid severe decline in revenue. However, due to the impact of competition and due to pricing pressure in the U.S. and some international markets, we expect some price decline and loss of market share to continue over time.Revenue of Alimta, a treatment for various cancers, increased 4 percent in the U.S., primarily driven by higher realized prices. Revenue outside the U.S. increased 19 percent, primarily driven by increased volume in China and Germany, partially offset by lower realized prices. We will lose our patent protection for Alimta in Japan and major European countries in June 2021. We expect the limited entry of generic competition in the U.S. starting February 2022 and subsequent unlimited entry starting April 2022. We expect that the entry of generic competition following the loss of exclusivity will cause a rapid and severe decline in revenue. See "Results of Operations - Executive Overview - Other Matters" for more information.46Revenue of Taltz, a treatment for moderate-to-severe plaque psoriasis, active psoriatic arthritis, ankylosing spondylitis, and active non-radiographic axial spondyloarthritis, increased 27 percent in the U.S., primarily driven by increased demand. Revenue outside the U.S. increased 43 percent, primarily driven by increased volume. Revenue of Humulin, an injectable human insulin for the treatment of diabetes, decreased 2 percent in the U.S., driven by lower realized prices, partially offset by higher volume. Revenue outside the U.S. decreased 4 percent, driven by decreased volume and the unfavorable impact of foreign exchange rates, partially offset by higher realized prices.Revenue of Jardiance, a treatment for type 2 diabetes and to reduce the risk of cardiovascular death in adult patients with type 2 diabetes and established cardiovascular disease, increased 10 percent in the U.S., driven by increased volume. Revenue outside the U.S. increased 41 percent, driven primarily by increased volume. See Note 4 to the consolidated financial statements for information regarding our collaboration with Boehringer Ingelheim involving Jardiance.Revenue of Basaglar, a long-acting human insulin analog for the treatment of diabetes, decreased 4 percent in the U.S., driven by lower realized prices. Revenue outside the U.S. increased 19 percent, driven primarily by increased volume. See Note 4 to the consolidated financial statements for information regarding our collaboration with Boehringer Ingelheim involving Basaglar. A competitor launched a similar version of glargine in the U.S. in 2020. Due to the impact of competitive pressures, we expect some price decline and loss of market share over time. Revenue of Forteo, an injectable treatment for osteoporosis in postmenopausal women and men at high risk for fracture and for glucocorticoid-induced osteoporosis in men and postmenopausal women, decreased 21 percent in the U.S., primarily driven by decreased demand. Revenue outside the U.S. decreased 29 percent, driven by decreased volume and, to a lesser extent, lower realized prices. We expect further volume declines as a result of the anticipated entry of generic and biosimilar competition due to the loss of patent exclusivity in the U.S., Japan, and major European markets. See "Executive Overview - Other Matters - Patent Matters" for more information. Revenue of Cyramza, a treatment for various cancers, increased 14 percent in the U.S., driven primarily by increased demand and, to a lesser extent, higher realized prices. Revenue outside the U.S. increased 10 percent, driven primarily by increased volume. Revenue of Verzenio, a treatment for HR+, HER2- metastatic breast cancer, increased 36 percent in the U.S., driven by increased demand and, to a lesser extent, higher realized prices. Revenue outside the U.S. increased $169.5 million driven by higher volume.Gross Margin, Costs, and ExpensesGross margin as a percent of revenue was 77.7 percent in 2020, a decrease of 1.1 percentage points compared with 2019, primarily due to the impact of lower realized prices on revenue, the unfavorable effect of foreign exchange rates on international inventories sold, and higher intangibles amortization expense related to Retevmo, partially offset by charges in 2019 resulting from the withdrawal of Lartruvo® and greater manufacturing efficiencies. Gross margin percent for 2020 was also negatively impacted as a result of bamlanivimab sales in the fourth quarter of 2020. Research and development expenses increased 9 percent to $6.09 billion in 2020, driven primarily by approximately $450 million of development expenses for COVID-19 therapies. Excluding these expenses related to COVID-19 therapies, research and development expenses were relatively flat. Marketing, selling, and administrative expenses decreased 1 percent to $6.12 billion in 2020 primarily due to lower marketing activity.We recognized acquired IPR&D charges of $660.4 million in 2020 resulting from the acquisitions of Disarm and a pre-clinical stage company as well as collaborations with Innovent, Sitryx, Fochon, AbCellera, Evox, and Junshi Biosciences. In 2019, we recognized acquired IPR&D charges of $239.6 million resulting from collaborations with AC Immune, Centrexion, ImmuNext, and Avidity.47We recognized asset impairment, restructuring, and other special charges of $131.2 million in 2020. The charges were primarily related to severance costs incurred as a result of actions taken worldwide to reduce our cost structure, as well as acquisition and integration costs incurred as part of the acquisition of Dermira. In 2019, we recognized $575.6 million of asset impairment, restructuring, and other special charges primarily associated with the accelerated vesting of Loxo employee equity awards as part of the acquisition of Loxo.Other—net, (income) expense was income of $1.17 billion in 2020 compared to income of $291.6 million in 2019 primarily driven by higher net gains on investment securities.Our effective tax rate was 14.3 percent in 2020, compared with an effective tax rate of 11.9 percent in 2019 driven by net discrete tax benefits in 2019. Operating Results—2019 For a discussion of our results of operations pertaining to 2019 and 2018 see Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition" in our Annual Report on Form 10-K for the year ended December 31, 2019.48FINANCIAL CONDITION AND LIQUIDITYWe believe our available cash and cash equivalents, together with our ability to generate operating cash flow and our access to short-term and long-term borrowings, are sufficient to fund our existing and planned capital requirements, which include: •working capital requirements, including related to employee payroll, clinical trials, manufacturing materials, and taxes;•capital expenditures;•share repurchases and dividends;•repayment of outstanding short-term and long-term borrowings; •contributions to our defined benefit pension and retiree health benefit plans;•milestone and royalty payments; and•potential business development activities, including acquisitions, strategic alliances, collaborations, investments, and licensing arrangements.Our management continuously evaluates our liquidity and capital resources, including our access to external capital, to ensure we can adequately and efficiently finance our capital requirements. As of December 31, 2020, our material cash requirements primarily related to purchases of goods and services to produce our products and conduct our operations, capital equipment expenditures, dividends, repayment of outstanding borrowings, the remaining obligations for the one-time repatriation transition tax (also known as the 'Toll Tax') from the Tax Cuts and Jobs Act (2017 Tax Act), leases, unfunded commitments to invest in venture capital funds, and retirement benefits (see Notes 11, 14, 10, 7, and 15 to the consolidated financial statements). We anticipate our cash requirements related to ordinary course purchases of goods and services and capital equipment expenditures will be consistent with our past levels relative to revenues. Cash and cash equivalents increased to $3.66 billion as of December 31, 2020, compared with $2.34 billion at December 31, 2019. Net cash provided by operating activities was $6.50 billion in 2020, compared with $4.84 billion in 2019. Net cash provided by operating activities in 2019 included approximately $360 million of cash paid to settle the accelerated vesting of Loxo employee equity awards (see Note 5 to the consolidated financial statements). Refer to the consolidated statements of cash flows for additional details on the significant sources and uses of cash for the years ended December 31, 2020 and 2019. In addition to our cash and cash equivalents, we held total investments of $2.99 billion and $2.06 billion as of December 31, 2020 and 2019, respectively. See Note 7 to the consolidated financial statements for additional details.In February 2020, we completed our acquisition of Dermira for $18.75 per share, or approximately $1.1 billion, which was funded through cash on hand and the issuance of commercial paper. In February 2019, we completed our acquisition of Loxo for $235 per share or approximately $6.9 billion, which was funded through a mixture of cash and debt. See Note 3 to the consolidated financial statements for additional information.As of December 31, 2020, total debt was $16.60 billion, an increase of $1.28 billion compared with $15.32 billion at December 31, 2019. The increase primarily related to the net proceeds from the issuance of $1.00 billion of 2.25 percent fixed-rate notes in May 2020, as well as the net proceeds from the issuance of an additional $250.0 million of 2.25 percent fixed-rate notes and the issuance of $850.0 million of 2.50 percent fixed-rate notes in August 2020. We used the net proceeds from the sale of these notes for general corporate purposes, which included the repayment of outstanding commercial paper used to fund a portion of the purchase price for our acquisition of Dermira. See Note 11 to the consolidated financial statements for additional information. As of December 31, 2020, we had a total of $5.24 billion of unused committed bank credit facilities, $5.00 billion of which is available to support our commercial paper program. See Note 11 to the consolidated financial statements for additional details. We believe that amounts accessible through existing commercial paper markets should be adequate to fund any short-term borrowing needs.For the 135th consecutive year, we distributed dividends to our shareholders. Dividends of $2.96 per share and $2.58 per share were paid in 2020 and 2019, respectively. In the fourth quarter of 2020, effective for the dividend to be paid in the first quarter of 2021, the quarterly dividend was increased to $0.85 per share, resulting in an indicated annual rate for 2021 of $3.40 per share.Capital expenditures of $1.39 billion during 2020, compared to $1.03 billion in 2019.49In 2020, we repurchased $500.0 million of shares under our $8.00 billion share repurchase program authorized in June 2018. As of December 31, 2020, we had $1.00 billion remaining under this program. See Note 13 to the consolidated financial statements for additional details.On March 11, 2019, we completed the disposition of our remaining 80.2 percent ownership of Elanco common stock through a tax-free exchange offer, which resulted in a reduction in shares of our common stock outstanding by approximately 65 million as of that date.In January 2021, we completed our acquisition of Prevail for $22.50 per share, or approximately $880 million in cash, plus one non-tradable CVR that entitles Prevail stockholders to up to an additional $4.00 per share in cash (or an aggregate of approximately $160 million) payable, subject to certain terms and conditions. This acquisition was funded primarily through cash on hand and the issuance of commercial paper. See Note 3 to the consolidated financial statements for additional information. See "Results of Operations - Executive Overview - Other Matters - Patent Matters" for information regarding recent and upcoming losses of patent protection.Both domestically and abroad, we continue to monitor the potential impacts of the economic environment; the creditworthiness of our wholesalers and other customers, including foreign government-backed agencies and suppliers; the uncertain impact of health care legislation; and various international government funding levels. In the normal course of business, our operations are exposed to fluctuations in interest rates, currency values, and fair values of equity securities. These fluctuations can vary the costs of financing, investing, and operating. We seek to address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments. The objective of this risk management program is to limit the impact on earnings of fluctuations in interest and currency exchange rates. All derivative activities are for purposes other than trading.Our primary interest rate risk exposure results from changes in short-term U.S. dollar interest rates. In an effort to manage interest rate exposures, we strive to achieve an acceptable balance between fixed and floating rate debt positions and may enter into interest rate derivatives to help maintain that balance. Based on our overall interest rate exposure at December 31, 2020 and 2019, including derivatives and other interest rate risk-sensitive instruments, a hypothetical 10 percent change in interest rates applied to the fair value of the instruments as of December 31, 2020 and 2019, respectively, would not have a material impact on earnings, cash flows, or fair values of interest rate risk-sensitive instruments over a one-year period.Our foreign currency risk exposure results from fluctuating currency exchange rates, primarily the U.S. dollar against the euro and Japanese yen. We face foreign currency exchange exposures when we enter into transactions arising from subsidiary trade and loan payables and receivables denominated in foreign currencies. We also face currency exposure that arises from translating the results of our global operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. We may enter into foreign currency forward or option derivative contracts to reduce the effect of fluctuating currency exchange rates (principally the euro and the Japanese yen). Our corporate risk-management policy outlines the minimum and maximum hedge coverage of such exposures. Gains and losses on these derivative contracts offset, in part, the impact of currency fluctuations on the existing assets and liabilities. We periodically analyze the fair values of the outstanding foreign currency derivative contracts to determine their sensitivity to changes in foreign exchange rates. A hypothetical 10 percent change in exchange rates (primarily against the U.S. dollar) applied to the fair values of our outstanding foreign currency derivative contracts as of December 31, 2020 and 2019, would not have a material impact on earnings, cash flows, or financial position over a one-year period. This sensitivity analysis does not consider the impact that hypothetical changes in exchange rates would have on the underlying foreign currency denominated transactions.Our fair value risk exposure relates primarily to our public equity investments and to equity investments that do not have readily determinable fair values. As of December 31, 2020 and 2019, our carrying values of these investments were $2.04 billion and $1.12 billion, respectively. A hypothetical 20 percent change in fair value of the equity instruments would have impacted other-net, (income) expense by $407.6 million and $224.7 million as of December 31, 2020 and 2019, respectively. 50We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. We acquire and collaborate on potential products still in development and enter into research and development arrangements with third parties that often require milestone and royalty payments to the third party contingent upon the occurrence of certain future events linked to the success of the asset in development. Milestone payments may be required contingent upon the successful achievement of an important point in the development life cycle of the pharmaceutical product (e.g., approval for marketing by the appropriate regulatory agency or upon the achievement of certain sales levels). If required by the arrangement, we may make royalty payments based upon a percentage of the sales of the product in the event that regulatory approval for marketing is obtained. Individually, these arrangements are generally not material in any one annual reporting period. However, if milestones for multiple products covered by these arrangements were reached in the same reporting period, the aggregate expense or aggregate milestone payments made could be material to our results of operations or cash flows, respectively, in that period. See Note 4 to the consolidated financial statements for additional details. These arrangements often give us the discretion to unilaterally terminate development of the product, which would allow us to avoid making the contingent payments; however, we are unlikely to cease development if the compound successfully achieves milestone objectives. We also note that, from a business perspective, we view these payments as positive because they signify that the product is successfully moving through development and is now generating or is more likely to generate cash flows from sales of products.51APPLICATION OF CRITICAL ACCOUNTING ESTIMATESIn preparing our financial statements in accordance with accounting principles generally accepted in the U.S. (GAAP), we must often make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Some of those judgments can be subjective and complex, and consequently actual results could differ from those estimates. For any given individual estimate or assumption we make, it is possible that other people applying reasonable judgment to the same facts and circumstances could develop different estimates. We believe that, given current facts and circumstances, it is unlikely that applying any such other reasonable judgment would cause a material adverse effect on our consolidated results of operations, financial position, or liquidity for the periods presented in this report. Our most critical accounting estimates have been discussed with our audit committee and are described below.Revenue Recognition and Sales Return, Rebate, and Discount AccrualsWe recognize revenue primarily from two different types of contracts, product sales to customers (net product revenue) and collaborations and other arrangements. For product sales to customers, provisions for returns, rebates and discounts are established in the same period the related product sales are recognized. To determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Significant judgments are required in making these estimates. The largest of our sales rebate and discount amounts are rebates associated with sales covered by managed care, Medicare, Medicaid, and chargeback contracts in the U.S. In determining the appropriate accrual amount, we consider our historical rebate payments for these programs by product as a percentage of our historical sales as well as any significant changes in sales trends (e.g., patent expiries and product launches), an evaluation of the current contracts for these programs, the percentage of our products that are sold via these programs, and our product pricing.Refer to Note 2 to the consolidated financial statements for further information on revenue recognition and sales return, rebate, and discount accruals.Revenue recognized from collaborations and other arrangements will include our share of profits from the collaboration, as well as royalties, upfront and milestone payments we receive under these types of contracts.Financial Statement ImpactWe believe that our accruals for sales returns, rebates, and discounts are reasonable and appropriate based on current facts and circumstances. Our global rebate and discount liabilities are included in sales rebates and discounts on our consolidated balance sheet. Our global sales return liability is included in other current liabilities and other noncurrent liabilities on our consolidated balance sheet. As of December 31, 2020, a 5 percent change in our global sales return, rebate, and discount liability would have led to an approximate $313 million effect on our income before income taxes. The portion of our global sales return, rebate, and discount liability resulting from sales of our products in the U.S. was approximately 90 percent as of December 31, 2020 and 2019.The following represents a roll-forward of our most significant U.S. sales return, rebate, and discount liability balances, including managed care, Medicare, Medicaid, chargebacks, and patient assistance programs:(Dollars in millions)20202019Sales return, rebate, and discount liabilities, beginning of year$4,635.5 $4,670.9 Reduction of net sales(1) 18,668.4 15,490.2 Cash payments(17,903.9)(15,525.6)Sales return, rebate, and discount liabilities, end of year$5,400.0 $4,635.5 (1) Adjustments of the estimates for these returns, rebates, and discounts to actual results were less than 2 percent of consolidated net sales for each of the years presented.52Product Litigation Liabilities and Other ContingenciesBackground and UncertaintiesProduct litigation liabilities and other contingencies are, by their nature, uncertain and based upon complex judgments and probabilities. The factors we consider in developing our product litigation liability reserves and other contingent liability amounts include the merits and jurisdiction of the litigation, the nature and the number of other similar current and past matters, the nature of the product and the current assessment of the science subject to the litigation, and the likelihood of settlement and current state of settlement discussions, if any. In addition, we accrue for certain product liability claims incurred, but not filed, to the extent we can formulate a reasonable estimate of their costs based primarily on historical claims experience and data regarding product usage. We accrue legal defense costs expected to be incurred in connection with significant product liability contingencies when both probable and reasonably estimable.We also consider the insurance coverage we have to diminish the exposure for periods covered by insurance. In assessing our insurance coverage, we consider the policy coverage limits and exclusions, the potential for denial of coverage by the insurance company, the financial condition of the insurers, and the possibility of and length of time for collection. Due to a very restrictive market for product liability insurance, we are self-insured for product liability losses for all our currently marketed products. In addition to insurance coverage, we consider any third-party indemnification to which we are entitled or under which we are obligated. With respect to our third-party indemnification rights, these considerations include the nature of the indemnification, the financial condition of the indemnifying party, and the possibility of and length of time for collection.The litigation accruals and environmental liabilities and the related estimated insurance recoverables have been reflected on a gross basis as liabilities and assets, respectively, on our consolidated balance sheets.AcquisitionsBackground and UncertaintiesTo determine whether acquisitions or licensing transactions should be accounted for as a business combination or as an asset acquisition, we make certain judgments, which include assessing whether the acquired set of activities and assets would meet the definition of a business under the relevant accounting rules. If the acquired set of activities and assets meets the definition of a business, assets acquired and liabilities assumed are required to be recorded at their respective fair values as of the acquisition date. The excess of the purchase price over the fair value of the acquired net assets, where applicable, is recorded as goodwill. If the acquired set of activities and assets does not meet the definition of a business, the transaction is recorded as an acquisition of assets and, therefore, any acquired IPR&D that does not have an alternative future use is charged to expense at the acquisition date, and goodwill is not recorded. Refer to Note 3 to the consolidated financial statements for additional information. The judgments made in determining estimated fair values assigned to assets acquired and liabilities assumed in a business combination, as well as estimated asset lives, can materially affect our consolidated results of operations. The fair values of intangible assets, including acquired IPR&D, are determined using information available near the acquisition date based on estimates and assumptions that are deemed reasonable by management. Significant estimates and assumptions include, but are not limited to, probability of technical success, revenue growth and discount rate. Depending on the facts and circumstances, we may deem it necessary to engage an independent valuation expert to assist in valuing significant assets and liabilities. The fair values of identifiable intangible assets are primarily determined using an "income method," as described in Note 8 to the consolidated financial statements.53Impairment of Indefinite-Lived and Long-Lived AssetsBackground and UncertaintiesWe review the carrying value of long-lived assets (both intangible and tangible) for potential impairment on a periodic basis and whenever events or changes in circumstances indicate the carrying value of an asset (or asset group) may not be recoverable. We identify impairment by comparing the projected undiscounted cash flows to be generated by the asset (or asset group) to its carrying value. If an impairment is identified, a loss is recorded equal to the excess of the asset’s net book value over its fair value, and the cost basis is adjusted.Goodwill and indefinite-lived intangible assets are reviewed for impairment at least annually, or more frequently if impairment indicators are present, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the intangible asset to its carrying value is performed to determine the amount of any impairment.Several methods may be used to determine the estimated fair value of acquired IPR&D, all of which require multiple assumptions. We utilize the “income method,” as described in Note 8 to the consolidated financial statements.For acquired IPR&D assets, the risk of failure has been factored into the fair value measure and there can be no certainty that these assets ultimately will yield a successful product, as discussed previously in “Results of Operations - Executive Overview - Late-Stage Pipeline." The nature of the pharmaceutical business is high-risk and requires that we invest in a large number of projects to maintain a successful portfolio of approved products. As such, it is likely that some acquired IPR&D assets will become impaired in the future.Estimates of future cash flows, based on what we believe to be reasonable and supportable assumptions and projections, require management’s judgment. Actual results could vary materially from these estimates.Retirement Benefits AssumptionsBackground and UncertaintiesDefined benefit pension plan and retiree health benefit plan costs include assumptions for the discount rate, expected return on plan assets, and retirement age. These assumptions have a significant effect on the amounts reported. In addition to the analysis below, see Note 15 to the consolidated financial statements for additional information regarding our retirement benefits.Annually, we evaluate the discount rate and the expected return on plan assets in our defined benefit pension and retiree health benefit plans. We use an actuarially determined, plan-specific yield curve of high quality, fixed income debt instruments to determine the discount rates. In evaluating the expected return on plan assets, we consider many factors, with a primary analysis of current and projected market conditions, asset returns and asset allocations (approximately 65 percent of which are growth investments); and the views of leading financial advisers and economists. We may also review our historical assumptions compared with actual results, as well as the discount rates and expected return on plan assets of other companies, where applicable. In evaluating our expected retirement age assumption, we consider the retirement ages of our past employees eligible for pension and medical benefits together with our expectations of future retirement ages.Annually, we determine the fair value of the plan assets in our defined benefit pension and retiree health benefit plans. Approximately 35 percent of our plan assets are in hedge funds and private equity-like investment funds (collectively, alternative assets). We value these alternative investments using significant unobservable inputs or using the net asset value reported by the counterparty, adjusted as necessary. Inputs include underlying net asset values, discounted cash flows valuations, comparable market valuations, and adjustments for currency, credit, liquidity and other risks.54Financial Statement ImpactIf the 2020 discount rate for the U.S. defined benefit pension and retiree health benefit plans (U.S. plans) were to change by a quarter percentage point, income before income taxes would change by $21.6 million. If the 2020 expected return on plan assets for U.S. plans were to change by a quarter percentage point, income before income taxes would change by $28.8 million. If our assumption regarding the 2020 expected age of future retirees for U.S. plans were adjusted by one year, our income before income taxes would be affected by $52.0 million. The U.S. plans, including Puerto Rico, represent approximately 75 percent and 80 percent of the total projected benefit obligation and total plan assets, respectively, at December 31, 2020.Adjustments to the fair value of plan assets are not recognized in pension and retiree health benefit expense in the year that the adjustments occur. Such changes are deferred, along with other actuarial gains and losses, and are amortized into expense over the expected remaining service life of employees.Income TaxesBackground and UncertaintiesWe prepare and file tax returns based upon our interpretation of tax laws and regulations, and we record estimates based upon these interpretations. Our tax returns are routinely subject to examination by various taxing authorities, which could result in future tax, interest, and penalty assessments. Inherent uncertainties exist in estimates of many tax positions due to changes in tax law resulting from legislation and regulation as concluded through the various jurisdictions’ tax court systems. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. The amount of unrecognized tax benefits is adjusted for changes in facts and circumstances. For example, adjustments could result from changes to existing tax law, the issuance of regulations by the taxing authorities, new information obtained during a tax examination, or resolution of a tax examination. We believe our estimates for uncertain tax positions are appropriate and sufficient to pay assessments that may result from examinations of our tax returns. We recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense.We have recorded valuation allowances against certain of our deferred tax assets, primarily those that have been generated from net operating losses and tax credit carryforwards in certain taxing jurisdictions. In evaluating whether we would more likely than not recover these deferred tax assets, we have not assumed future taxable income in the jurisdictions associated with these carryforwards where history does not support such an assumption. Implementation of tax planning strategies to recover these deferred tax assets or to generate future taxable income in these jurisdictions could lead to the reversal of all or a portion of these valuation allowances and a reduction of income tax expense.Financial Statement ImpactAs of December 31, 2020, a 5 percent change in the amount of uncertain tax positions and the valuation allowance would result in a change in net income of $83.4 million and $40.8 million, respectively.LEGAL AND REGULATORY MATTERS Information relating to certain legal proceedings can be found in Note 16 to the consolidated financial statements and is incorporated here by reference.FINANCIAL EXPECTATIONS FOR 2021 For the full year of 2021, we expect EPS to be in the range of $7.10 to $7.75, which excludes estimated acquisition and integration costs related to the acquisition of Prevail. We anticipate total revenue between $26.5 billion and $28.0 billion, including an estimated $1 billion to $2 billion of revenue from COVID-19 therapies. Revenue growth is expected to be driven by volume from Trulicity, Taltz, Verzenio, Jardiance, Olumiant, Cyramza, Emgality, Tyvyt, and Retevmo, as well as by COVID-19 therapies. Revenue growth is expected to be partially offset by lower revenue for products that have lost patent exclusivity. We expect mid-single digit net price declines globally in 2021. In the U.S., we expect low-to-mid-single digit net price declines, driven primarily by increased rebates to maintain broad commercial access and segment mix, partially offset by lower utilization in the 340B segment. Outside the U.S., we expect net price declines in China, Japan, and Europe. 55We anticipate that gross margin as a percent of revenue will be approximately 77 percent in 2021. Research and development expenses are expected to be in the range of $6.5 billion to $6.7 billion, including approximately $300 million to $400 million of continued investment in COVID-19 therapies. Marketing, selling, and administrative expenses are expected to be in the range of $6.2 billion to $6.4 billion. Other—net, (income) expense is expected to be expense in the range of $200 million to $300 million. The 2021 effective tax rate is expected to be approximately 15 percent.Item 7A.Quantitative and Qualitative Disclosures About Market RiskYou can find quantitative and qualitative disclosures about market risk (e.g., interest rate risk) at Item 7, “Management’s Discussion and Analysis - Financial Condition and Liquidity.” That information is incorporated by reference herein.56Item 8.Financial Statements and Supplementary DataConsolidated Statements of OperationsELI LILLY AND COMPANY AND SUBSIDIARIES(Dollars in millions and shares in thousands, except per-share data)Year Ended December 31202020192018Revenue$24,539.8 $22,319.5 $21,493.3 Costs, expenses, and other:Cost of sales5,483.3 4,721.2 4,681.7 Research and development6,085.7 5,595.0 5,051.2 Marketing, selling, and administrative6,121.2 6,213.8 5,975.1 Acquired in-process research and development (Note 3)660.4 239.6 1,983.9 Asset impairment, restructuring, and other special charges (Note 5)131.2 575.6 266.9 Other—net, (income) expense (Note 18)(1,171.9)(291.6)(145.6)17,309.9 17,053.6 17,813.2 Income before income taxes7,229.9 5,265.9 3,680.1 Income taxes (Note 14)1,036.2 628.0 529.5 Net income from continuing operations6,193.7 4,637.9 3,150.6 Net income from discontinued operations (Note 19)— 3,680.5 81.4 Net income$6,193.7 $8,318.4 $3,232.0 Earnings per share:Earnings from continuing operations - basic$6.82 $4.98 $3.07 Earnings from discontinued operations - basic— 3.95 0.07 Earnings per share - basic$6.82 $8.93 $3.14 Earnings from continuing operations - diluted$6.79 $4.96 $3.05 Earnings from discontinued operations - diluted— 3.93 0.08 Earnings per share - diluted$6.79 $8.89 $3.13 Shares used in calculation of earnings per share:Basic907,634 931,059 1,027,721 Diluted912,505 935,684 1,033,667 See notes to consolidated financial statements.57Consolidated Statements of Comprehensive Income (Loss)ELI LILLY AND COMPANY AND SUBSIDIARIES(Dollars in millions)Year Ended December 31202020192018Net income$6,193.7 $8,318.4 $3,232.0 Other comprehensive income (loss) from continuing operations:Change in foreign currency translation gains (losses)122.1 (89.9)(429.6)Change in net unrealized gains (losses) on securities14.2 34.4 (8.8)Change in defined benefit pension and retiree health benefit plans (Note 15)(157.1)(970.0)544.0 Change in effective portion of cash flow hedges(152.9)34.3 (6.0)Other comprehensive income (loss) from continuing operations before income taxes(173.7)(991.2)99.6 Benefit (provision) for income taxes related to other comprehensive income (loss) from continuing operations200.9 151.0 (30.3)Other comprehensive income (loss) from continuing operations, net of tax (Note 17)27.2 (840.2)69.3 Other comprehensive income from discontinued operations, net of tax (Note 17)— 56.8 14.3 Other comprehensive income (loss), net of tax (Note 17)27.2 (783.4)83.6 Comprehensive income$6,220.9 $7,535.0 $3,315.6 See notes to consolidated financial statements.58Consolidated Balance SheetsELI LILLY AND COMPANY AND SUBSIDIARIES(Dollars in millions, shares in thousands)December 3120202019AssetsCurrent AssetsCash and cash equivalents (Note 7)$3,657.1 $2,337.5 Short-term investments (Note 7)24.2 101.0 Accounts receivable, net of allowances of $25.9 (2020) and $22.4 (2019)5,875.3 4,547.3 Other receivables1,053.7 994.2 Inventories (Note 6)3,980.3 3,190.7 Prepaid expenses and other2,871.5 2,538.9 Total current assets17,462.1 13,709.6 Investments (Note 7)2,966.8 1,962.4 Goodwill (Note 8)3,766.5 3,679.4 Other intangibles, net (Note 8)7,450.0 6,618.0 Deferred tax assets (Note 14)2,830.4 2,572.6 Property and equipment, net (Note 9)8,681.9 7,872.9 Other noncurrent assets3,475.4 2,871.2 Total assets$46,633.1 $39,286.1 Liabilities and EquityCurrent LiabilitiesShort-term borrowings and current maturities of long-term debt (Note 11)$8.7 $1,499.3 Accounts payable1,606.7 1,405.3 Employee compensation997.2 915.5 Sales rebates and discounts5,853.0 4,933.6 Dividends payable770.6 671.5 Income taxes payable (Note 14)495.1 160.6 Other current liabilities2,750.3 2,189.4 Total current liabilities12,481.6 11,775.2 Other LiabilitiesLong-term debt (Note 11)16,586.6 13,817.9 Accrued retirement benefits (Note 15)4,094.5 3,698.2 Long-term income taxes payable (Note 14)3,837.8 3,607.2 Other noncurrent liabilities1,707.5 1,501.0 Deferred tax liabilities (Note 14)2,099.9 2,187.5 Total other liabilities28,326.3 24,811.8 Commitments and Contingencies (Note 16)Eli Lilly and Company Shareholders' Equity (Notes 12 and 13)Common stock—no par value Authorized shares: 3,200,000 Issued shares: 957,077 (2020) and 958,056 (2019)598.2 598.8 Additional paid-in capital6,778.5 6,685.3 Retained earnings7,830.2 4,920.4 Employee benefit trust(3,013.2)(3,013.2)Accumulated other comprehensive loss (Note 17)(6,496.4)(6,523.6)Cost of common stock in treasury(55.7)(60.8)Total Eli Lilly and Company shareholders' equity5,641.6 2,606.9 Noncontrolling interests183.6 92.2 Total equity5,825.2 2,699.1 Total liabilities and equity$46,633.1 $39,286.1 See notes to consolidated financial statements.59Consolidated Statements of Shareholders' Equity Equity of Eli Lilly and Company ShareholdersELI LILLY AND COMPANY AND SUBSIDIARIES(Dollars in millions, shares in thousands)Common StockAdditionalPaid-inCapitalRetainedEarningsEmployee Benefit TrustAccumulated Other Comprehensive LossCommon Stock in TreasuryNoncontrolling InterestSharesAmountSharesAmountBalance at January 1, 20181,100,672 $687.9 $5,817.8 $13,894.1 $(3,013.2)$(5,718.6)664 $(75.8)$75.7 Net income3,232.0 3.7 Other comprehensive income (loss), net of tax85.6 (2.0)Cash dividends declared per share: $2.33(2,372.0)Retirement of treasury shares(45,882)(28.7)(4,122.0)(45,882)4,150.7 Purchase of treasury shares45,882 (4,150.7)Issuance of stock under employee stock plans, net2,849 1.8 (139.0)(60)6.4 Stock-based compensation279.5 Adoption of new accounting standards (Note 1)763.8 (105.2)Sale of Elanco Stock (Note 19)629.2 9.0 1,017.2 Other(3.9)(14.2)Balance at December 31, 20181,057,639 661.0 6,583.6 11,395.9 (3,013.2)(5,729.2)604 (69.4)1,080.4 Net income 8,318.4 37.7 Other comprehensive income (loss), net of tax(794.4)11.0 Cash dividends declared per share: $2.68(2,430.5)Retirement of treasury shares(102,640)(64.1)(12,363.4)(102,640)12,427.5 Purchase of treasury shares37,639 (4,400.0)Issuance of stock under employee stock plans, net3,057 1.9 (210.7)(74)8.6 Stock-based compensation312.4 Acquisition of common stock in exchange offer65,001(8,027.5)Deconsolidation of Elanco(1,028.9)Other(8.0)Balance at December 31, 2019958,056 598.8 6,685.3 4,920.4 (3,013.2)(6,523.6)530 (60.8)92.2 Net income6,193.7 126.6 Other comprehensive income, net of tax27.2 Cash dividends declared per share: $3.07(2,786.2)Retirement of treasury shares(3,627)(2.3)(497.7)(3,627)500.0 Purchase of treasury shares3,627 (500.0)Issuance of stock under employee stock plans, net2,648 1.7 (212.7)(43)5.1 Stock-based compensation308.1 Other(2.2)(35.2)Balance at December 31, 2020957,077 $598.2 $6,778.5 $7,830.2 $(3,013.2)$(6,496.4)487 $(55.7)$183.6 See notes to consolidated financial statements.60Consolidated Statements of Cash FlowsELI LILLY AND COMPANY AND SUBSIDIARIES(Dollars in millions)Year Ended December 31202020192018Cash Flows from Operating ActivitiesNet income$6,193.7 $8,318.4 $3,232.0 Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:Gain related to disposition of Elanco (Note 19)— (3,680.5)— Gain on sale of antibiotic business in China (Note 3)— (309.8)— Depreciation and amortization1,323.9 1,232.6 1,609.0 Change in deferred income taxes(134.5)62.4 326.8 Stock-based compensation expense308.1 312.4 279.5 Net investment gains(1,438.5)(403.1)(27.0)Acquired in-process research and development (Note 3)660.4 239.6 1,983.9 Other non-cash operating activities, net333.9 751.8 499.0 Other changes in operating assets and liabilities, net of acquisitions and divestitures:Receivables—(increase) decrease(1,350.2)(127.2)(996.7)Inventories—(increase) decrease(533.4)(258.7)7.8 Other assets—(increase) decrease(457.1)(602.3)(980.0)Income taxes payable—increase (decrease)322.0 (221.3)(125.3)Accounts payable and other liabilities—increase (decrease)1,271.3 (477.7)(284.5)Net Cash Provided by Operating Activities6,499.6 4,836.6 5,524.5 Cash Flows from Investing ActivitiesPurchases of property and equipment(1,387.9)(1,033.9)(1,210.6)Proceeds from sales and maturities of short-term investments129.7 136.6 2,552.5 Purchases of short-term investments(11.4)(42.7)(112.2)Proceeds from sales of noncurrent investments757.1 609.8 3,509.5 Purchases of noncurrent investments(358.7)(247.5)(837.9)Purchases of in-process research and development(641.2)(319.6)(1,807.6)Cash paid for acquisitions, net of cash acquired (Note 3)(849.3)(6,917.7)— Cash distributed to Elanco upon disposition— (374.0)— Cash received for sale of antibiotic business in China— 354.8 — Other investing activities, net102.8 (248.7)(187.7)Net Cash Provided by (Used for) Investing Activities(2,258.9)(8,082.9)1,906.0 Cash Flows from Financing ActivitiesDividends paid(2,687.1)(2,409.8)(2,311.8)Net change in short-term borrowings(1,494.2)995.4 (2,197.9)Proceeds from issuance of long-term debt2,062.3 6,556.4 2,477.7 Repayments of long-term debt(276.5)(2,866.4)(1,009.1)Purchases of common stock(500.0)(4,400.0)(4,150.7)Net proceeds from Elanco initial public offering (Note 19)— — 1,659.7 Other financing activities, net(241.6)(200.1)(372.8)Net Cash Used for Financing Activities(3,137.1)(2,324.5)(5,904.9)Effect of exchange rate changes on cash and cash equivalents216.0 (89.9)(63.6)Net increase (decrease) in cash and cash equivalents1,319.6 (5,660.7)1,462.0 Cash and cash equivalents at beginning of year (includes $677.5 (2019) and $324.4 (2018) of discontinued operations)2,337.5 7,998.2 6,536.2 Cash and Cash Equivalents at End of Year (includes $677.5 (2018) of discontinued operations)$3,657.1 $2,337.5 $7,998.2 See notes to consolidated financial statements.61Notes to Consolidated Financial StatementsELI LILLY AND COMPANY AND SUBSIDIARIES(Tables present dollars in millions, except per-share data)Note 1: Summary of Significant Accounting Policies and Implementation of New Financial Accounting StandardsBasis of PresentationThe accompanying consolidated financial statements include Eli Lilly and Company and all subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). We consider majority voting interests, as well as effective economic or other control over an entity when deciding whether or not to consolidate an entity. We generally do not have control by means other than voting interests. Where our ownership of consolidated subsidiaries is less than 100 percent, the noncontrolling shareholders’ interests are reflected as a separate component of equity. All intercompany balances and transactions have been eliminated.The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. We issued our financial statements by filing with the Securities and Exchange Commission (SEC) and have evaluated subsequent events up to the time of the filing of this Annual Report on Form 10-K.Certain reclassifications have been made to prior periods in the consolidated financial statements and accompanying notes to conform with the current presentation.All per-share amounts, unless otherwise noted in the footnotes, are presented on a diluted basis.On March 11, 2019, we completed the disposition of our remaining 80.2 percent ownership of Elanco Animal Health Incorporated (Elanco) common stock through a tax-free exchange offer. As a result, Elanco has been presented as discontinued operations in our consolidated financial statements for all periods presented.Following the completion of the disposition of Elanco, we now operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, and sales of pharmaceutical products worldwide. A global research and development organization and a supply chain organization are responsible for the discovery, development, manufacturing, and supply of our products. Regional commercial organizations market, distribute, and sell the products. The business is also supported by global corporate staff functions. Our determination that we operate as a single segment is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods.Research and Development Expenses and Acquired In-Process Research and Development (IPR&D)Research and development expenses include the following:•Research and development costs, which are expensed as incurred.•Milestone payment obligations incurred prior to regulatory approval of the product, which are accrued when the event requiring payment of the milestone occurs.Acquired IPR&D expense includes the initial costs of externally developed IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use.Earnings Per Share (EPS)We calculate basic EPS based on the weighted-average number of common shares outstanding and incremental shares from potential participating securities. We calculate diluted EPS based on the weighted-average number of common shares outstanding, including incremental shares from our stock-based compensation programs. 62Foreign Currency TranslationOperations in our subsidiaries outside the United States (U.S.) are recorded in the functional currency of each subsidiary which is determined by a review of the environment where each subsidiary primarily generates and expends cash. The results of operations for our subsidiaries outside the U.S. are translated from functional currencies into U.S. dollars using the weighted average currency rate for the period. Assets and liabilities are translated using the period end exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries are recorded in other comprehensive income (loss).Advertising ExpensesCosts associated with advertising are expensed as incurred and are included in marketing, selling, and administrative expenses. Advertising expenses, comprised primarily of television, radio, print media, and Internet advertising, totaled approximately $1.1 billion, $1.1 billion, and $900 million in 2020, 2019, and 2018, respectively, which was less than 5 percent of revenue each year.Other Significant Accounting PoliciesOur other significant accounting policies are described in the remaining appropriate notes to the consolidated financial statements.Implementation of New Financial Accounting StandardsEffective January 1, 2019, we adopted Accounting Standards Update 2016-02, Leases, using the modified retrospective approach, applied at the beginning of the period of adoption, and we elected the package of transitional practical expedients. The adoption of this standard resulted in recording of operating lease assets of approximately $530 million, which included reclassifying approximately $65 million of deferred rent and lease incentives, net of prepaid rent, as a component of the operating lease assets as of January 1, 2019. The adoption also resulted in recording operating lease liabilities of approximately $595 million as of January 1, 2019. Our accounting for finance leases remained substantially unchanged. Adoption of this standard did not result in a material change in net income in the year of adoption. Effective January 1, 2018, we adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers, and other related updates. This standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We applied this standard to contracts for which performance was not substantially complete as of the date of adoption. For those contracts that were modified prior to the date of adoption, we reflected the aggregate effect of those modifications when determining the appropriate accounting under the new standard. We don’t believe the effect of applying this practical expedient resulted in material differences. We applied this standard through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. Upon adoption, the cumulative effect of applying this standard resulted in an increase of approximately $5 million to retained earnings as of January 1, 2018. Adoption of this standard did not result in a material change in revenue or net income in the year of adoption.Effective January 1, 2018, we adopted Accounting Standards Update 2016-01 (ASU 2016-01), Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This standard requires entities to recognize changes in the fair value of equity investments with readily determinable fair values in net income (except for investments accounted for under the equity method of accounting or those that result in consolidation of the investee). We applied the new standard through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. Upon adoption, we reclassified from accumulated other comprehensive loss the after-tax amount of net unrealized gains resulting in an increase to retained earnings of approximately $105 million as of January 1, 2018. Adoption of this standard did not result in a material change in net income in the year of adoption.Effective January 1, 2018, we adopted Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. This standard requires entities to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of transfer. We adopted this standard using a modified retrospective approach. Upon adoption, the cumulative effect of applying this standard resulted in an increase of approximately $700 million to retained earnings, $2.5 billion to deferred tax assets, and $1.8 billion to deferred tax liabilities as of January 1, 2018. Adoption of this standard did not result in a material change in net income in the year of adoption.63Change in Accounting Principle for Retirement Benefit Plan AssetsEffective during the third quarter of 2020, we adopted a voluntary change in our method of applying an accounting principle for certain of our retirement benefit plans. Refer to Note 15 for additional information.Note 2: RevenueThe following table summarizes our revenue recognized in our consolidated statements of operations:202020192018Net product revenue$22,694.8 $20,377.3 $19,866.4 Collaboration and other revenue(1)1,845.0 1,942.2 1,626.9 Revenue$24,539.8 $22,319.5 $21,493.3 (1) Collaboration and other revenue associated with prior period transfers of intellectual property was $135.6 million, $301.5 million, and $303.2 million during the years ended December 31, 2020, 2019, and 2018, respectively.We recognize revenue primarily from two different types of contracts, product sales to customers (net product revenue) and collaborations and other arrangements. Revenue recognized from collaborations and other arrangements will include our share of profits from the collaboration, as well as royalties, upfront and milestone payments we receive under these types of contracts. See Note 4 for additional information related to our collaborations and other arrangements. Collaboration and other revenue disclosed above includes the revenue from the Trajenta® and Jardiance® families of products resulting from our collaboration with Boehringer Ingelheim discussed in Note 4. Substantially all of the remainder of collaboration and other revenue is related to contracts accounted for as contracts with customers.Net Product RevenueRevenue from sales of products is recognized at the point where the customer obtains control of the goods and we satisfy our performance obligation, which generally is at the time we ship the product to the customer. Payment terms differ by jurisdiction and customer, but payment terms in most of our major jurisdictions typically range from 30 to 70 days from date of shipment. Revenue for our product sales has not been adjusted for the effects of a financing component as we expect, at contract inception, that the period between when we transfer control of the product and when we receive payment will be one year or less. Any exceptions are either not material or we collect interest for payments made after the due date. Provisions for rebates, discounts, and returns are established in the same period the related sales are recognized. We generally ship product shortly after orders are received; therefore, we generally only have a few days of orders received but not yet shipped at the end of any reporting period. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are imposed on our sales of product and collected from a customer.Most of our products are sold to wholesalers that serve pharmacies, physicians and other health care professionals, and hospitals. For the years ended December 31, 2020, 2019, and 2018, our three largest wholesalers each accounted for between 15 percent and 20 percent of consolidated revenue. Further, they each accounted for between 19 percent and 27 percent of accounts receivable as of December 31, 2020 and 2019. Significant judgments must be made in determining the transaction price for our sales of products related to anticipated rebates, discounts and returns. The following describe the most significant of these judgments:Sales Rebates and Discounts - Background and Uncertainties•We initially invoice our customers at contractual list prices. Contracts with direct and indirect customers may provide for various rebates and discounts that may differ in each contract. As a consequence, to determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we must estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Significant judgments are required in making these estimates.64•The rebate and discount amounts are recorded as a deduction to arrive at our net product revenue. Sales rebates and discounts that require the use of judgment in the establishment of the accrual include managed care, Medicare, Medicaid, chargebacks, long-term care, hospital, patient assistance programs, and various other programs. We estimate these accruals using an expected value approach.•The largest of our sales rebate and discount amounts are rebates associated with sales covered by managed care, Medicare, Medicaid, chargeback, and patient assistance programs in the U.S. In determining the appropriate accrual amount, we consider our historical rebate payments for these programs by product as a percentage of our historical sales as well as any significant changes in sales trends (e.g., patent expiries and product launches), an evaluation of the current contracts for these programs, the percentage of our products that are sold via these programs, and our product pricing. Although we accrue a liability for rebates related to these programs at the time we record the sale, the rebate related to that sale is typically paid up to six months later. Because of this time lag, in any particular period our rebate adjustments may incorporate revisions of accruals for several periods.•Most of our rebates outside the U.S. are contractual or legislatively mandated and are estimated and recognized in the same period as the related sales. In some large European countries, government rebates are based on the anticipated budget for pharmaceutical payments in the country. An estimate of these rebates, updated as governmental authorities revise budgeted deficits, is recognized in the same period as the related sale.Sales Returns - Background and Uncertainties•When product sales occur, to determine the appropriate transaction price for our sales, we estimate a reserve for future product returns related to those sales using an expected value approach. This estimate is based on several factors, including: historical return rates, expiration date by product (on average, approximately 24 months after the initial sale of a product to our customer), and estimated levels of inventory in the wholesale and retail channels, as well as any other specifically-identified anticipated returns due to known factors such as the loss of patent exclusivity, product recalls and discontinuances, or a changing competitive environment. We maintain a returns policy that allows most U.S. customers to return product for dating issues within a specified period prior to and subsequent to the product's expiration date. Following the loss of exclusivity for a patent-dependent product, we expect to experience an elevated level of product returns as product inventory remaining in the wholesale and retail channels expires. In the U.S. we allow bamlanivimab to be returned if the Emergency Use Authorization (EUA) is revoked. If the EUA were to be revoked, we could experience an elevated level of product returns of bamlanivimab, dependent on the amount of product remaining in the distribution channel. Adjustments to the returns reserve have been and may in the future be required based on revised estimates to our assumptions. We record the return amounts as a deduction to arrive at our net product revenue. Once the product is returned, it is destroyed; we do not record a right of return asset. Our returns policies outside the U.S. are generally more restrictive than in the U.S. as returns are not allowed for reasons other than failure to meet product specifications in many countries. Our reserve for future product returns for product sales outside the U.S. is not material.•As a part of our process to estimate a reserve for product returns, we regularly review the supply levels of our significant products at the major wholesalers in the U.S. and in major markets outside the U.S., primarily by reviewing periodic inventory reports supplied by our major wholesalers and available prescription volume information for our products, or alternative approaches. We attempt to maintain U.S. wholesaler inventory levels at an average of approximately one month or less on a consistent basis across our product portfolio. Causes of unusual wholesaler buying patterns include actual or anticipated product-supply issues, weather patterns, anticipated changes in the transportation network, redundant holiday stocking, and changes in wholesaler business operations. In the U.S., the current structure of our arrangements provides us with data on inventory levels at our wholesalers; however, our data on inventory levels in the retail channel is more limited. Wholesaler stocking and destocking activity historically has not caused any material changes in the rate of actual product returns.65•Actual U.S. product returns have been less than 2 percent of our U.S. revenue over each of the past three years and have not fluctuated significantly as a percentage of revenue, although fluctuations are more likely in periods following loss of patent exclusivity for major products in the U.S. market. Adjustments to RevenueAdjustments to increase revenue recognized as a result of changes in estimates for the judgments described above for our most significant U.S. sales returns, rebates, and discounts liability balances for products shipped in previous periods were approximately 1 percent, 2 percent and 1 percent of U.S revenue during 2020, 2019, and 2018, respectively.Collaboration and Other ArrangementsWe recognize several types of revenue from our collaborations and other arrangements, which we discuss in general terms immediately below and more specifically in Note 4 for each of our material collaborations and other arrangements. Our collaborations and other arrangements are not contracts with customers but are evaluated to determine whether any aspects of the arrangements are contracts with customers. •Revenue related to products we sell pursuant to these arrangements is included in net product revenue, while other sources of revenue (e.g., royalties and profit sharing from our partner) are included in collaboration and other revenue.•Initial fees and developmental milestones we receive in collaborative and other similar arrangements from the partnering of our compounds under development are generally deferred and amortized into income through the expected product approval date. •Profit-sharing due from our collaboration partners, which is based upon gross margins reported to us by our partners, is recognized as collaboration and other revenue as earned.•Royalty revenue from licensees and certain of our collaboration partners, which is based on sales to third-parties of licensed products and technology, is recorded when the third-party sale occurs and the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). This royalty revenue is included in collaboration and other revenue.•For arrangements involving multiple goods or services (e.g., research and development, marketing and selling, manufacturing, and distribution), each required good or service is evaluated to determine whether it is distinct. If a good or service does not qualify as distinct, it is combined with the other non-distinct goods or services within the arrangement and these combined goods or services are treated as a single performance obligation for accounting purposes. The arrangement's transaction price is then allocated to each performance obligation based on the relative standalone selling price of each performance obligation. For arrangements that involve variable consideration where we have sold intellectual property, we recognize revenue based on estimates of the amount of consideration we believe we will be entitled to receive from the other party, subject to a constraint. These estimates are adjusted to reflect the actual amounts to be collected when those facts and circumstances become known.•Significant judgments must be made in determining the transaction price for our sales of intellectual property. Because of the risk that products in development will not receive regulatory approval, we generally do not recognize any contingent payments that would be due to us upon or after regulatory approval. •We have entered into arrangements whereby we transferred rights to products and committed to supply for a period of time. For those arrangements for which we concluded that the obligations were not distinct, any amounts received upfront are being amortized to revenue as net product revenue over the period of the supply arrangement as the performance obligation is satisfied.66Contract LiabilitiesOur contract liabilities result from arrangements where we have received payment in advance of performance under the contract and do not include sales returns, rebates, and discounts. Changes in contract liabilities are generally due to either receipt of additional advance payments or our performance under the contract. The following table summarizes contract liability balances: 20202019Contract liabilities$276.8 $264.6 The contract liabilities balances disclosed above as of December 31, 2020 and 2019 were primarily related to the remaining license period of symbolic intellectual property and obligations to perform research and development activities or supply product for a defined period of time.During the years ended December 31, 2020, 2019, and 2018, revenue recognized from contract liabilities as of the beginning of the respective year was not material. Revenue expected to be recognized in the future from contract liabilities as the related performance obligations are satisfied is not expected to be material in any one year.67Disaggregation of Revenue The following table summarizes revenue by product:U.S.Outside U.S.202020192018202020192018Revenue—to unaffiliated customers:Diabetes:Trulicity®$3,835.9 $3,155.2 $2,515.8 $1,232.2 $972.7 $683.3 Humalog® (1)1,485.6 1,669.7 1,787.8 1,140.3 1,151.0 1,208.7 Humulin®866.4 879.7 910.2 393.2 410.4 421.2 Jardiance (2)620.8 565.9 400.2 533.0 378.3 258.1 Basaglar®842.3 876.2 622.8 282.1 236.3 178.5 Trajenta (3)95.6 224.8 224.2 263.0 365.8 350.5 Other Diabetes162.5 158.0 146.0 81.5 88.1 112.2 Total Diabetes7,909.1 7,529.5 6,607.0 3,925.3 3,602.6 3,212.5 Oncology:Alimta®1,265.3 1,219.5 1,131.0 1,064.7 896.4 1,001.9 Cyramza®381.9 335.3 291.5 650.8 589.9 529.9 Verzenio®618.2 454.8 248.5 294.4 124.9 6.6 Erbitux®480.1 487.9 531.6 56.3 55.4 103.8 Other Oncology46.6 111.0 200.6 461.0 339.3 215.1 Total Oncology2,792.1 2,608.5 2,403.2 2,527.2 2,005.9 1,857.3 Immunology:Taltz®1,288.5 1,016.8 738.7 500.0 349.6 198.7 Olumiant®63.8 42.2 6.7 575.0 384.7 195.9 Other Immunology20.0 — — 14.6 — — Total Immunology1,372.3 1,059.0 745.4 1,089.6 734.3 394.6 Neuroscience:Cymbalta®42.1 49.6 54.3 725.6 675.8 653.7 Zyprexa®46.1 41.0 36.2 360.5 377.6 435.1 Emgality®325.9 154.9 4.9 37.0 7.7 — Other Neuroscience73.2 111.0 182.0 220.9 305.3 454.5 Total Neuroscience487.3 356.5 277.4 1,344.0 1,366.4 1,543.3 Other:Forteo®510.3 645.5 757.9 536.0 759.1 817.7 Bamlanivimab (4)850.0 — — 21.2 — — Cialis®61.8 231.7 1,129.2 545.4 658.8 722.7 Other246.4 291.9 471.8 321.8 469.7 553.3 Total Other1,668.4 1,169.1 2,358.8 1,424.4 1,887.7 2,093.7 Revenue$14,229.3 $12,722.6 $12,391.9 $10,310.5 $9,596.8 $9,101.4 Numbers may not add due to rounding.(1) Humalog revenue includes insulin lispro.(2) Jardiance revenue includes Glyxambi® and Synjardy®, and Trijardy® XR.(3) Trajenta revenue includes Jentadueto®.(4) Bamlanivimab sales are pursuant to EUA. 68The following table summarizes revenue by geographical area:202020192018Revenue—to unaffiliated customers(1):U.S.$14,229.3 $12,722.6 $12,391.9 Europe4,187.7 3,765.0 3,663.1 Japan2,583.1 2,547.6 2,407.4 China1,116.9 939.4 750.8 Other foreign countries2,422.7 2,344.9 2,280.1 Revenue$24,539.8 $22,319.5 $21,493.3 Numbers may not add due to rounding.(1) Revenue is attributed to the countries based on the location of the customer.Note 3: Acquisitions and DivestitureIn February 2020 and 2019, we completed the acquisitions of Dermira, Inc. (Dermira) and Loxo Oncology, Inc. (Loxo), respectively. These transactions, as further discussed in this note below in Acquisitions of Businesses, were accounted for as business combinations under the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated financial statements. The determination of estimated fair value required management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of these acquisitions have been included in our consolidated financial statements from the date of acquisition.We also acquired assets in development in 2020, 2019, and 2018, which are further discussed in this note below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D was immediately expensed because the compound acquired had no alternative future use. For the years ended December 31, 2020, 2019, and 2018, we recorded acquired IPR&D charges of $660.4 million, $239.6 million, and $1.98 billion, respectively.Acquisitions of BusinessesDermira AcquisitionOverview of TransactionIn February 2020, we acquired all shares of Dermira for a purchase price of approximately $849.3 million, net of cash acquired. Under terms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. Lebrikizumab was granted Fast Track designation from the U.S. Food and Drug Administration (FDA). We also acquired Qbrexza® (glycopyrronium) cloth, a medicated cloth approved by the FDA for the topical treatment of primary axillary hyperhidrosis (uncontrolled excessive underarm sweating).Assets Acquired and Liabilities AssumedThe fair values recognized related to the assets acquired and liabilities assumed in this acquisition included goodwill of $86.8 million, other intangibles of $1.20 billion primarily related to lebrikizumab, deferred income tax liabilities of $49.5 million, and long-term debt of $375.5 million. After the acquisition, we repaid $276.2 million of long-term debt assumed as part of our acquisition of Dermira.Revenue attributable to assets acquired in the Dermira acquisition did not have a material impact on our consolidated statement of operations for the year ended December 31, 2020. We are unable to provide the results of operations for the year ended December 31, 2020 attributable to Dermira as those operations were substantially integrated into our legacy business. Pro forma information has not been included because this acquisition did not have a material impact on our results of operations for the years ended December 31, 2020 and 2019.69Loxo AcquisitionOverview of TransactionIn February 2019, we acquired all shares of Loxo for a purchase price of $6.92 billion, net of cash acquired. The accelerated vesting of Loxo employee equity awards was recognized as transaction expense included in asset impairment, restructuring, and other special charges during the year ended December 31, 2019 (see Note 5).Under the terms of the agreement, we acquired a pipeline of investigational medicines, including selpercatinib (LOXO-292), an oral RET inhibitor, and LOXO-305, an oral BTK inhibitor. In the second quarter of 2020, the FDA approved selpercatinib (Retevmo®) under its Accelerated Approval regulations and continued approval may be contingent upon verification and description of clinical benefit in confirmatory trials. At the time of approval, we reclassified our $4.60 billion intangible asset for selpercatinib (Retevmo) from indefinite-lived intangible assets to finite-lived intangible assets and began amortizing straight line over its estimated useful life.Assets Acquired and Liabilities AssumedThe following table summarizes the amounts recognized for assets acquired and liabilities assumed in the acquisition of Loxo as of the acquisition date:Estimated Fair Value at February 15, 2019Acquired IPR&D(1)$4,670.0 Finite-lived intangibles(2)980.0 Deferred income taxes(1,032.8)Other assets and liabilities - net(26.4)Total identifiable net assets4,590.8 Goodwill(3)2,326.9 Total consideration transferred - net of cash acquired$6,917.7 (1) $4.60 billion of the acquired IPR&D relates to selpercatinib (LOXO-292).(2) Contract-based intangibles (primarily related to Vitrakvi) which are being amortized to cost of sales on a straight-line basis over their estimated useful lives, were expected to have a weighted average useful life of approximately 12 years from the acquisition date. (3) The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled workforce for Loxo and is not deductible for tax purposes.Our consolidated statement of operations for the year ended December 31, 2019 includes revenue attributable to assets acquired in the Loxo acquisition of $136.7 million, primarily due to regulatory approval and sales milestones received. We are unable to provide the results of operations for the year ended December 31, 2019 attributable to Loxo as those operations were substantially integrated into our legacy business. Pro forma information has not been included because this acquisition did not have a material impact on our results of operations for the years ended December 31, 2019 and 2018.Asset AcquisitionsThe following table and narrative summarize our asset acquisitions during 2020, 2019, and 2018.CounterpartyCompound(s),Therapy, or AssetAcquisition MonthPhase of Development(1)Acquired IPR&D ExpenseSitryx Therapeutics Limited Pre-clinical targets that could lead to potential new medicines for autoimmune diseasesMarch 2020Pre-clinical$52.3 AbCellera Biologics Inc. (AbCellera)(2)Neutralizing antibodies for the treatement and prevention of COVID-19March 2020Pre-clinical25.0 Shanghai Junshi Biosciences Co., Ltd. (Junshi Biosciences)Neutralizing antibodies for the treatment and prevention of COVID-19May 2020Pre-clinical20.0 70UndisclosedPre-clinical target that could lead to potential new medicineMay 2020Pre-clinical174.8 Evox Therapeutics LtdPre-clinical research collaboration for the potential treatment of neurological disordersJune 2020Pre-clinical22.0 Innovent Biologics, Inc. (Innovent) Sintilimab injection, an anti-PD-1 monoclonal antibody immuno-oncology medicine, for geographies outside of ChinaOctober 2020Phase III200.0 Disarm Therapeutics, Inc. (Disarm)Disease-modifying therapeutics program for patients with axonal degenerationOctober 2020Pre-clinical126.3 Fochon Pharmaceuticals, Ltd. Pre-clinical molecule targeting hematological malignanciesNovember 2020Pre-clinical40.0 AC Immune SATau aggregation inhibitor small molecules for the potential treatment of Alzheimer's disease and other neurodegenerative diseasesJanuary 2019 & September 2019(3)Pre-clinical127.1 ImmuNext, Inc.Novel immunometabolism targetMarch 2019Pre-clinical40.0 Avidity Biosciences, Inc.Potential new medicines in immunology and other select indicationsApril 2019Pre-clinical25.0 Centrexion Therapeutics CorporationCNTX-0290, a novel, small molecule somatostatin receptor type 4 agonistJuly 2019Phase I47.5 Sigilon Therapeutics, Inc.Encapsulated cell therapies for the potential treatment of type 1 diabetesApril 2018Pre-clinical66.9 AurKa Pharma Inc.AK-01, an Aurora kinase A inhibitorJune 2018Phase I81.8 ARMO BioSciences, Inc. (ARMO) Cancer therapy - pegilodecakinJune 2018Phase III1,475.8 Anima Biotech Inc.Translation inhibitors for selected neuroscience targetsJuly 2018Pre-clinical30.0 SIGA Technologies, Inc.Priority Review VoucherOctober 2018Not applicable80.0 Chugai Pharmaceutical Co., Ltd.OWL833, an oral non-peptidic GLP-1 receptor agonistOctober 2018Pre-clinical50.0 NextCure, Inc.Immuno-oncology cancer therapiesNovember 2018Pre-clinical(4)28.1 Dicerna Pharmaceuticals Inc.Cardio-metabolic disease, neurodegeneration, and painDecember 2018Pre-clinical148.7 Hydra BiosciencesTRPA1 antagonists program for the potential treatment of chronic pain syndromesDecember 2018Pre-clinical22.6 (1) The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired, where applicable.(2) We recognized the acquired IPR&D expense of $25.0 million in May 2020 upon closing of the transaction. (3) We recognized acquired IPR&D expenses of $96.9 million in January 2019 upon entering into a license agreement and $30.2 million in September 2019 upon entering into an amendment to the license agreement.(4) This research and development collaboration agreement terminated effective March 2020.71In connection with these arrangements, our partners may be entitled to future royalties and/or commercial milestones based on sales should products be approved for commercialization and/or milestones based on the successful progress of compounds through the development process.DivestitureIn October 2019, we completed a transaction in which we sold the rights in China for two legacy antibiotic medicines, as well as a manufacturing facility in Suzhou, China to Eddingpharm, a China-based specialty pharmaceutical company. In connection with the sale, we received net cash proceeds of $354.8 million and $40.3 million from Eddingpharm in 2019 and 2020, respectively. We accounted for the transaction as the sale of a business. We recorded a gain of $309.8 million in Other—net, (income) expense upon closing the transaction in 2019.Subsequent Events Precision BioSciences, Inc. (Precision)In January 2021, we entered into a research collaboration and exclusive license agreement with Precision to utilize Precision's proprietary ARCUS genome editing platform for the research and development of potential in vivo therapies for genetic disorders. Under terms of the agreement, we paid an upfront cash payment of $100.0 million and invested $35.0 million in Precision's common stock at a premium. As a result of the transaction, we will record an acquired IPR&D charge of $107.8 million in the first quarter of 2021. Merus N.V. (Merus) In January 2021, we entered into a research collaboration and exclusive license agreement with Merus to research and develop up to three CD3-engaging T-cell re-directing bispecific antibody therapies. Under the terms of the agreement, we paid Merus an upfront cash payment of $40.0 million and invested $20.0 million in Merus common shares at a premium. As a result of the transaction, we will record an acquired IPR&D charge of $46.5 million in the first quarter of 2021.Prevail Therapeutics Inc. (Prevail) In January 2021, we completed our acquisition of Prevail. Prevail is a biotechnology company developing potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases. The acquisition establishes a new modality for drug discovery and development, extending our research efforts through the creation of a gene therapy program that will be anchored by Prevail’s portfolio of clinical-stage and preclinical neuroscience assets. We acquired all shares of Prevail for $22.50 per share (approximately $880 million) in cash plus one non-tradable contingent value right (CVR). The CVR entitles Prevail stockholders to up to an additional $4.00 per share in cash (or an aggregate of approximately $160 million) payable, subject to terms and conditions, upon the first regulatory approval of a Prevail product in one of the following countries: U.S., Japan, United Kingdom (U.K.), Germany, France, Italy or Spain. To achieve the full value of the CVR, such regulatory approval must occur by December 31, 2024. If such regulatory approval occurs after December 31, 2024, the value of the CVR will be reduced by approximately 8.3 cents per month until December 1, 2028, at which point the CVR will expire.The accounting impact of this acquisition and the results of the operations for Prevail will be included in our consolidated financial statements beginning in the first quarter of 2021.The initial accounting for this acquisition is incomplete. Significant, relevant information needed to complete the initial accounting is not available because the valuation of assets acquired and liabilities assumed is not complete. As a result, determining these values is not practicable, and we are unable to disclose these values or provide other related disclosures at this time.Asahi Kasei Pharma Corporation (Asahi)In January 2021, we entered into a license agreement with Asahi to acquire the exclusive rights for AK1780, an orally bioavailable P2X7 receptor antagonist that recently completed Phase 1 single and multiple ascending dose and clinical pharmacology studies for the potential treatment of chronic pain conditions. As a result of the transaction, we will pay Asahi an upfront cash payment and record an acquired IPR&D charge of $20.0 million in the first quarter of 2021.72Note 4: Collaborations and Other ArrangementsWe often enter into collaborative and other similar arrangements to develop and commercialize drug candidates. Collaborative activities may include research and development, marketing and selling (including promotional activities and physician detailing), manufacturing, and distribution. These arrangements often require milestone as well as royalty or profit-share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements from or payments to the collaboration partner. See Note 2 for amounts of collaboration and other revenue recognized from these types of arrangements.Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay. Each collaboration is unique in nature, and our more significant arrangements are discussed below.Boehringer Ingelheim Diabetes CollaborationWe and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of diabetes compounds. Currently included in the collaboration are Boehringer Ingelheim’s oral diabetes products: Trajenta, Jentadueto, Jardiance, Glyxambi, Synjardy, and Trijardy XR as well as our basal insulin, Basaglar. Jentadueto is included in the Trajenta product family. Glyxambi, Synjardy, and Trijardy XR are included in the Jardiance product family. The table below summarizes significant milestones (deferred) capitalized for the compounds included in this collaboration: Product FamilyMilestones (Deferred) Capitalized(1)Trajenta(2)$446.4 Jardiance(3)289.0 Basaglar(250.0)(1) In connection with the regulatory approvals of Basaglar in the U.S., Europe, and Japan, milestone payments received were recorded as contract liabilities and are being amortized through the term of the collaboration (2029) to collaboration and other revenue. In connection with the regulatory approvals of Trajenta and Jardiance, milestone payments made were capitalized as intangible assets and are being amortized to cost of sales through the term of the collaboration. This represents the cumulative amounts that have been (deferred) or capitalized from the start of this collaboration through the end of the reporting period.(2) The collaboration agreement with Boehringer Ingelheim for Trajenta ends upon expiration of the compound patent and any supplementary protection certificates or extensions thereto.(3) The collaboration agreement with Boehringer Ingelheim for Jardiance ends upon expiration of the compound patent and any supplementary protection certificates or extensions thereto.Through December 31, 2019, in the most significant markets, we and Boehringer Ingelheim shared equally the ongoing development costs, commercialization costs, and agreed upon gross margin for any product resulting from the collaboration. We recorded our portion of the gross margin associated with Boehringer Ingelheim's products as collaboration and other revenue. We recorded our sales of Basaglar to third parties as net product revenue with the payments made to Boehringer Ingelheim for their portion of the gross margin recorded as cost of sales. For all compounds under this collaboration, we recorded our portion of the development and commercialization costs as research and development expense and marketing, selling, and administrative expense, respectively. Each company was entitled to potential performance payments depending on the sales of the molecules it contributes to the collaboration. These performance payments may have resulted in the owner of the molecule retaining a greater share of the agreed upon gross margin of that product. Subject to achieving these thresholds, in a given period, our reported revenue for Trajenta and Jardiance may have been reduced by any performance payments we made related to these products. Similarly, performance payments we may have received related to Basaglar effectively reduced Boehringer Ingelheim's share of the gross margin, which reduced our cost of sales.73Effective January 1, 2020, we and Boehringer Ingelheim modernized the alliance. In the most significant markets, we and Boehringer Ingelheim share equally the ongoing development costs and commercialization costs for the Jardiance product family. We receive a royalty on net sales of Boehringer Ingelheim's products in the most significant markets and recognize the royalty as collaboration and other revenue. We pay to Boehringer Ingelheim a royalty on net sales for Basaglar in the U.S. We record our sales of Basaglar to third parties as net product revenue with the royalty payments made to Boehringer Ingelheim recorded as cost of sales. For the Jardiance product family, we record our portion of the development and commercialization costs as research and development expense and marketing, selling, and administrative expense, respectively. Boehringer Ingelheim is entitled to potential performance payments depending on the net sales of the Jardiance product family; therefore, our reported revenue for Jardiance may be reduced by any potential performance payments we make related to this product. Beginning January 1, 2021, the royalty received by us related to the Jardiance product family may also be increased or decreased depending on whether net sales for this product family exceed or fall below certain thresholds.The following table summarizes our net product revenue recognized with respect to Basaglar and collaboration and other revenue recognized with respect to the Jardiance and Trajenta families of products:202020192018Basaglar$1,124.4 $1,112.6 $801.2 Jardiance1,153.8 944.2 658.3 Trajenta358.5 590.6 574.7 OlumiantWe have a worldwide license and collaboration agreement with Incyte Corporation (Incyte), which provides us the development and commercialization rights to its Janus tyrosine kinase (JAK) inhibitor compound, now known as Olumiant (baricitinib), and certain follow-on compounds, for the treatment of inflammatory and autoimmune diseases. Incyte has the right to receive tiered, double digit royalty payments on global net sales with rates ranging up to 20 percent. The agreement calls for payments by us to Incyte associated with certain development, success-based regulatory, and sales-based milestones. In the first half of 2020, the agreement was amended to include the treatment of COVID-19, with Incyte obtaining the right to receive an additional royalty ranging up to the low teens on global net sales for the treatment of COVID-19 that exceed a specified aggregate global net sales threshold. In connection with the regulatory approvals of Olumiant in the U.S., Europe, and Japan, milestone payments of $210.0 million and $180.0 million were capitalized as intangible assets as of December 31, 2020 and 2019, respectively, and are being amortized to cost of sales through the term of the collaboration. This represents the cumulative amounts that have been capitalized from the start of this collaboration through the end of each reporting period.As of December 31, 2020, Incyte is eligible to receive up to $100.0 million of additional payments from us contingent upon certain success-based regulatory milestones. Incyte is also eligible to receive up to $150.0 million of potential sales-based milestones.We record our sales of Olumiant to third parties as net product revenue with the royalty payments made to Incyte recorded as cost of sales. The following table summarizes our net product revenue recognized with respect to Olumiant:202020192018Olumiant$638.9 $426.9 $202.5 74COVID-19 antibody therapiesIn 2020, we entered into a worldwide license and collaboration agreement with AbCellera to co-develop therapeutic antibodies for the potential prevention and treatment of COVID-19, including bamlanivimab, for which we hold development and commercialization rights. In connection with this transaction, we recognized an acquired IPR&D expense of $25.0 million in 2020. AbCellera has the right to receive tiered royalty payments on global net sales of bamlanivimab with percentages ranging in the mid-teens to mid-twenties. Royalty payments made to AbCellera are recorded as cost of sales. Pursuant to an EUA, we recognized $871.2 million of net product revenue associated with our sales of bamlanivimab to third parties during the year ended December 31, 2020. In 2020, we entered into a license and collaboration agreement with Junshi Biosciences to co-develop therapeutic antibodies for the potential prevention and treatment of COVID-19, including etesevimab, for which we hold development and commercialization rights outside of Greater China (which includes mainland China, Hong Kong and Macau Special Administrative Regions and Taiwan) and Junshi Biosciences maintains all rights in Greater China. In connection with this transaction, we recognized an acquired IPR&D expense of $20.0 million in 2020. Junshi Biosciences has the right to receive royalty payments in the mid-teens on our future net sales of etesevimab. Junshi Biosciences also has the right to receive certain development, success-based regulatory and sales-based milestones. As of December 31, 2020, Junshi Biosciences is eligible to receive up to $75.0 million of additional payments contingent upon certain success-based regulatory milestones and up to $120.0 million of potential sales-based milestones, contingent upon the commercial success of etesevimab. During the year ended December 31, 2020, we recognized $50.0 million of research and development expenses related to development milestones.Tyvyt®We have a collaboration agreement with Innovent to jointly develop and commercialize Tyvyt (sintilimab injection) in China. In 2019, we and Innovent began co-commercializing Tyvyt in China. We record our sales of Tyvyt to third parties as revenue, with payments made to Innovent for its portion of the gross margin reported as cost of sales. We also report as revenue our portion of the gross margin for Tyvyt sales made by Innovent to third parties. Our Tyvyt revenue in China, which is primarily recorded as net product revenue, was $308.7 million and $134.0 million in 2020 and 2019, respectively.In October 2020, we obtained an exclusive license for Tyvyt from Innovent for geographies outside of China and plan to pursue registration of Tyvyt in the U.S. and other markets. We recorded an acquired IPR&D charge of $200.0 million in 2020 associated with the upfront payment to Innovent. As of December 31, 2020, Innovent is eligible to receive up to $825.0 million for geographies outside of China and up to $75.0 million in China in success-based regulatory and sales-based milestones. Innovent is also eligible to receive tiered double digit royalties on net sales for geographies outside of China. TanezumabWe have a collaboration agreement with Pfizer Inc. (Pfizer) to jointly develop and globally commercialize tanezumab for the treatment of osteoarthritis pain and cancer pain. The companies equally share the ongoing development costs and, if successful, in the U.S. will co-commercialize and equally share in gross margin and certain commercialization expenses. As a result of an amendment to the agreement in the third quarter of 2020, Pfizer will be responsible for commercialization activities and costs outside the U.S., and we have the right to receive tiered royalties in percentages from the high teens to mid-twenties for net sales in Japan as well as low double digit royalties on annual net sales greater than $150.0 million in all other territories outside of the U.S. and Japan. As of December 31, 2020, Pfizer is eligible to receive up to $147.5 million in success-based regulatory milestones based on current development plans and up to $1.23 billion in a series of sales-based milestones, contingent upon the commercial success of tanezumab.LebrikizumabAs a result of our acquisition of Dermira, we have a worldwide licensing agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc. (collectively Roche), which provides us the global development and commercialization rights to lebrikizumab. Roche has the right to receive tiered royalty payments on future global net sales ranging in percentages from high single digits to high teens if the product is successfully commercialized. As of December 31, 2020, Roche is eligible to receive up to $180.0 million of payments from us contingent upon the achievement of success-based regulatory milestones, and up to $1.03 billion in a series of sales-based milestones, contingent upon the commercial success of lebrikizumab.75As a result of our acquisition of Dermira, we have a license agreement with Almirall, S.A. (Almirall), under which Almirall licensed the rights to develop and commercialize lebrikizumab for the treatment or prevention of dermatology indications, including, but not limited to, atopic dermatitis in Europe. We have the right to receive tiered royalty payments on future net sales in Europe ranging in percentages from low double digits to low twenties if the product is successfully commercialized. As of December 31, 2020, we are eligible to receive additional payments of $85.0 million from Almirall contingent upon the achievement of success-based regulatory milestones and up to $1.25 billion in a series of sales-based milestones, contingent upon the commercial success of lebrikizumab.As of December 31, 2020, $29.7 million was recorded as a contract liability on the consolidated balance sheet and is expected to be recognized as collaboration and other revenue over the remaining Phase III development period. During the twelve months ended December 31, 2020, milestones received and collaboration and other revenue recognized were not material. Note 5: Asset Impairment, Restructuring, and Other Special ChargesThe components of the charges included in asset impairment, restructuring, and other special charges in our consolidated statements of operations are described below: 202020192018Severance$151.2 $77.8 $127.8 Asset impairment (gain) and other special charges(20.0)497.8 139.1 Total asset impairment, restructuring, and other special charges$131.2 $575.6 $266.9 Severance costs recognized during the years ended December 31, 2020, 2019 and 2018 were incurred as a result of actions taken worldwide to reduce our cost structure. Substantially all of the severance costs incurred during the year ended December 31, 2020 are expected to be paid in the next 12 months.Asset impairment and other special charges recognized during the year ended December 31, 2019 resulted primarily from $400.7 million of other special charges related to the acquisition of Loxo, substantially all of which is associated with the accelerated vesting of Loxo employee equity awards. Asset impairment and other special charges recognized during the year ended December 31, 2018 resulted primarily from asset impairment and other special charges related to the sale of the Posilac® (rbST) brand and the associated Augusta, Georgia manufacturing site.Note 6: InventoriesWe use the last-in, first-out (LIFO) method for the majority of our inventories located in the continental U.S. Other inventories are valued by the first-in, first-out (FIFO) method. FIFO cost approximates current replacement cost. Inventories measured using LIFO must be valued at the lower of cost or market. Inventories measured using FIFO must be valued at the lower of cost or net realizable value. Inventories at December 31 consisted of the following:20202019Finished products$758.9 $647.3 Work in process2,535.4 2,067.6 Raw materials and supplies651.2 424.6 Total (approximates replacement cost)3,945.5 3,139.5 Increase to LIFO cost34.8 51.2 Inventories$3,980.3 $3,190.7 Inventories valued under the LIFO method comprised $1.21 billion and $1.20 billion of total inventories at December 31, 2020 and 2019, respectively.76Note 7: Financial InstrumentsFinancial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments. Wholesale distributors of life-science products account for a substantial portion of our trade receivables; collateral is generally not required. We seek to mitigate the risk associated with this concentration through our ongoing credit-review procedures and insurance. A large portion of our cash is held by a few major financial institutions. We monitor our exposures with these institutions and do not expect any of these institutions to fail to meet their obligations. In accordance with documented corporate risk-management policies, we monitor the amount of credit exposure to any one financial institution or corporate issuer. We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect any counterparties to fail to meet their obligations given their high credit ratings.We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. The cost of these investments approximates fair value.Our equity investments are accounted for using three different methods depending on the type of equity investment:•Investments in companies over which we have significant influence but not a controlling interest are accounted for using the equity method, with our share of earnings or losses reported in other-net, (income) expense. •For equity investments that do not have readily determinable fair values, we measure these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any change in recorded value is recorded in other-net, (income) expense. •Our public equity investments are measured and carried at fair value. Any change in fair value is recognized in other-net, (income) expense. We review equity investments other than public equity investments for indications of impairment and observable price changes on a regular basis.Our derivative activities are initiated within the guidelines of documented corporate risk-management policies and are intended to offset losses and gains on the assets, liabilities, and transactions being hedged. Management reviews the correlation and effectiveness of our derivatives on a quarterly basis.For derivative instruments that are designated and qualify as fair value hedges, the derivative instrument is marked to market with gains and losses recognized currently in income to offset the respective losses and gains recognized on the underlying exposure. For derivative instruments that are designated and qualify as cash flow hedges, gains and losses are reported as a component of accumulated other comprehensive loss and reclassified into earnings in the same period the hedged transaction affects earnings. For derivative and non-derivative instruments that are designated and qualify as net investment hedges, the foreign currency translation gains or losses due to spot rate fluctuations are reported as a component of accumulated other comprehensive loss. Derivative contracts that are not designated as hedging instruments are recorded at fair value with the gain or loss recognized in earnings during the period of change.We may enter into foreign currency forward or option contracts to reduce the effect of fluctuating currency exchange rates (principally the euro, British pound, and the Japanese yen). Foreign currency derivatives used for hedging are put in place using the same or like currencies and duration as the underlying exposures. Forward and option contracts are principally used to manage exposures arising from subsidiary trade and loan payables and receivables denominated in foreign currencies. These contracts are recorded at fair value with the gain or loss recognized in other–net, (income) expense. We may enter into foreign currency forward and option contracts and currency swaps as fair value hedges of firm commitments. Forward contracts generally have maturities not exceeding 12 months. At December 31, 2020, we had outstanding foreign currency forward commitments to purchase 647.9 million U.S. dollars and sell 530.7 million euro; commitments to purchase 2.97 billion euro and sell 3.62 billion U.S. dollars; commitments to purchase 180.7 million U.S. dollars and sell 18.64 billion Japanese yen, and commitments to purchase 272.2 million British pounds and sell 363.9 million U.S. dollars which all settled within 30 days.77Foreign currency exchange risk is also managed through the use of foreign currency debt and cross-currency interest rate swaps. Our foreign currency-denominated notes had carrying amounts of $6.02 billion and $5.49 billion as of December 31, 2020 and 2019, respectively, of which $4.50 billion and $4.10 billion have been designated as, and are effective as, economic hedges of net investments in certain of our euro-denominated foreign operations as of December 31, 2020 and 2019, respectively. At December 31, 2020, we had outstanding cross currency swaps with notional amounts of $3.76 billion swapping U.S. dollars to euro and $1.00 billion swapping swiss francs to U.S. dollars which have settlement dates ranging through 2028. Our cross-currency interest rate swaps, for which a majority convert a portion of our U.S. dollar-denominated fixed rate debt to foreign-denominated fixed rate debt, have also been designated as, and are effective as, economic hedges of net investments.In the normal course of business, our operations are exposed to fluctuations in interest rates which can vary the costs of financing, investing, and operating. We seek to address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments. The objective of controlling these risks is to limit the impact of fluctuations in interest rates on earnings. Our primary interest-rate risk exposure results from changes in short-term U.S. dollar interest rates. In an effort to manage interest-rate exposures, we strive to achieve an acceptable balance between fixed- and floating-rate debt and investment positions and may enter into interest rate swaps or collars to help maintain that balance. Interest rate swaps or collars that convert our fixed-rate debt to a floating rate are designated as fair value hedges of the underlying instruments. Interest rate swaps or collars that convert floating-rate debt to a fixed rate are designated as cash flow hedges. Interest expense on the debt is adjusted to include the payments made or received under the swap agreements. Cash proceeds from or payments to counterparties resulting from the termination of interest rate swaps are classified as operating activities in our consolidated statements of cash flows. At December 31, 2020, substantially all of our total long-term debt is at a fixed rate. We have converted approximately 9 percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps.We also may enter into forward-starting interest rate swaps, which we designate as cash flow hedges, as part of any anticipated future debt issuances in order to reduce the risk of cash flow volatility from future changes in interest rates. The change in fair value of these instruments is recorded as part of other comprehensive income (loss), and upon completion of a debt issuance and termination of the swap, is amortized to interest expense over the life of the underlying debt. As of December 31, 2020, the total notional amounts of forward-starting interest rate contracts in designated cash flow hedging instruments were $1.75 billion, which have settlement dates ranging between 2023 and 2025.The Effect of Risk Management Instruments on the Consolidated Statements of OperationsThe following effects of risk-management instruments were recognized in other–net, (income) expense:202020192018Fair value hedges:Effect from hedged fixed-rate debt$86.9 $112.1 $(40.9)Effect from interest rate contracts(86.9)(112.1)40.9 Cash flow hedges:Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss16.4 15.9 14.8    Cross-currency interest rate swaps(102.4)(17.1)— Net (gains) losses on foreign currency exchange contracts not designated as hedging instruments(123.7)61.9 100.0 Total $(209.7)$60.7 $114.8 During the years ended December 31, 2020, 2019 and 2018, the amortization of losses related to the portion of our risk management hedging instruments, fair value hedges, and cash flow hedges that was excluded from the assessment of effectiveness was not material. 78The Effect of Risk-Management Instruments on Other Comprehensive Income (Loss)The effective portion of risk-management instruments that was recognized in other comprehensive income (loss) is as follows:202020192018Net investment hedges:    Foreign currency-denominated notes$(404.0)$40.1 $110.4     Cross-currency interest rate swaps(207.9)47.4 96.8     Foreign currency exchange contracts— — 5.7 Cash flow hedges:    Forward-starting interest rate swaps(110.9)31.6 —     Cross-currency interest rate swaps(53.7)(8.3)— During the next 12 months, we expect to reclassify $16.8 million of net losses on cash flow hedges from accumulated other comprehensive loss to other–net, (income) expense. During the years ended December 31, 2020, 2019 and 2018, the amounts excluded from the assessment of hedge effectiveness recognized in other comprehensive income (loss) were not material. 79Fair Value of Financial InstrumentsThe following tables summarize certain fair value information at December 31 for assets and liabilities measured at fair value on a recurring basis, as well as the carrying amount and amortized cost of certain other investments:   Fair Value Measurements Using DescriptionCarryingAmountCost (1)Quoted Prices in Active Markets for Identical Assets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)FairValueDecember 31, 2020Cash equivalents$2,097.9 $2,097.9 $2,097.9 $— $— $2,097.9 Short-term investments:U.S. government and agency securities$9.9 $9.9 $9.9 $— $— $9.9 Corporate debt securities2.8 2.8 — 2.8 — 2.8 Asset-backed securities1.2 1.2 — 1.2 — 1.2 Other securities10.3 10.3 — — 10.3 10.3 Short-term investments$24.2 Noncurrent investments:U.S. government and agency securities$78.7 $74.3 $78.7 $— $— $78.7 Corporate debt securities137.0 126.8 — 137.0 — 137.0 Mortgage-backed securities106.4 101.4 — 106.4 — 106.4 Asset-backed securities24.3 23.7 — 24.3 — 24.3 Other securities110.5 31.8 — — 110.5 110.5 Marketable equity securities1,664.2 311.6 1,664.2 — — 1,664.2 Equity investments without readily determinable fair values(2)373.9 Equity method investments(2)471.8 Noncurrent investments$2,966.8 December 31, 2019Cash equivalents$1,025.4 $1,025.4 $1,025.4 $— $— $1,025.4 Short-term investments:U.S. government and agency securities$7.2 $7.2 $7.2 $— $— $7.2 Corporate debt securities81.4 81.1 — 81.4 — 81.4 Asset-backed securities2.6 2.6 — 2.6 — 2.6 Other securities9.8 9.8 — — 9.8 9.8 Short-term investments$101.0 Noncurrent investments:U.S. government and agency securities$77.2 $76.3 $77.2 $— $— $77.2 Corporate debt securities271.1 267.8 — 271.1 — 271.1 Mortgage-backed securities101.1 99.6 — 101.1 — 101.1 Asset-backed securities30.0 29.6 — 30.0 — 30.0 Other securities60.0 27.4 — — 60.0 60.0 Marketable equity securities718.6 254.4 718.6 — — 718.6 Equity investments without readily determinable fair values(2)405.0 Equity method investments(2)299.4 Noncurrent investments$1,962.4 (1) For available-for-sale debt securities, amounts disclosed represent the securities' amortized cost.(2) Fair value disclosures are not applicable for equity method investments and investments accounted for under the measurement alternative for equity investments.80 Fair Value Measurements Using DescriptionCarryingAmountQuoted Prices in Active Markets for Identical Assets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)FairValueShort-term commercial paper borrowingsDecember 31, 2020$— $— $— $— $— December 31, 2019(1,494.2)— (1,491.6)— (1,491.6)Long-term debt, including current portionDecember 31, 2020$(16,595.3)$— $(19,038.9)$— $(19,038.9)December 31, 2019(13,823.0)— (15,150.0)— (15,150.0)81 Fair Value Measurements Using DescriptionCarryingAmountQuoted Prices in Active Markets for Identical Assets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)FairValueDecember 31, 2020Risk-management instrumentsInterest rate contracts designated as fair value hedges:Other noncurrent assets$158.9 $— $158.9 $— $158.9 Interest rate contracts designated as cash flow hedges:Other noncurrent assets38.1 — 38.1 — 38.1 Other noncurrent liabilities(97.8)— (97.8)— (97.8)Cross-currency interest rate contracts designated as net investment hedges:    Other current liabilities(92.6)— (92.6)— (92.6)Other noncurrent liabilities(97.2)— (97.2)— (97.2)Cross-currency interest rate contracts designated as cash flow hedges:Other noncurrent assets34.4 — 34.4 — 34.4 Other noncurrent liabilities(2.9)— (2.9)— (2.9)Foreign exchange contracts not designated as hedging instruments:Other receivables41.1 — 41.1 — 41.1 Other current liabilities(15.2)— (15.2)— (15.2)December 31, 2019Risk-management instrumentsInterest rate contracts designated as fair value hedges:Other noncurrent assets72.0 — 72.0 — 72.0 Interest rate contracts designated as cash flow hedges:Other noncurrent assets43.3 — 43.3 — 43.3 Cross-currency interest rate contracts designated as net investment hedges:Other noncurrent assets45.1 — 45.1 — 45.1     Other current liabilities(21.4)— (21.4)— (21.4)Other noncurrent liabilities(5.7)— (5.7)— (5.7)Cross-currency interest rate contracts designated as cash flow hedges:Other noncurrent assets3.0 — 3.0 — 3.0 Other noncurrent liabilities(20.1)— (20.1)— (20.1)Foreign exchange contracts not designated as hedging instruments:Other receivables18.4 — 18.4 — 18.4 Other current liabilities(11.9)— (11.9)— (11.9)Risk-management instruments above are disclosed on a gross basis. There are various rights of setoff associated with certain of the risk-management instruments above that are subject to enforceable master netting arrangements or similar agreements. Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties to the risk-management instruments above, individually, these financial rights are not material.82We determine our Level 1 and Level 2 fair value measurements based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses. Level 3 fair value measurements for other investment securities are determined using unobservable inputs, including the investments' cost adjusted for impairments and price changes from orderly transactions. The fair values of equity method investments and investments measured under the measurement alternative for equity investments that do not have readily determinable fair values are not readily available. As of December 31, 2020, we had approximately $687 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period ofup to 10 years.The table below summarizes the contractual maturities of our investments in debt securities measured at fair value as of December 31, 2020: Maturities by Period  TotalLess Than1 Year1-5 Years6-10 YearsMore Than 10 YearsFair value of debt securities$360.3 $13.9 $135.6 $82.7 $128.1 The net gains recognized in our consolidated statements of operations for equity securities were $1,442.2 million, $401.2 million and $72.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. The net gains/losses recognized for the years ended December 31, 2020, 2019 and 2018 on equity securities sold during the respective periods were not material.We adjust our equity investments without readily determinable fair values based upon changes in the equity instruments' values resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Downward adjustments resulting from an impairment are recorded based upon impairment considerations, including the financial condition and near term prospects of the issuer, general market conditions, and industry specific factors. Adjustments recorded for the years ended December 31, 2020, 2019 and 2018 were not material.A summary of the fair value of available-for-sale securities in an unrealized gain or loss position and the amount of unrealized gains and losses in accumulated other comprehensive loss follows:20202019Unrealized gross gains$20.9 $10.3 Unrealized gross losses0.5 4.0 Fair value of securities in an unrealized gain position348.9 429.5 Fair value of securities in an unrealized loss position11.4 141.1 We periodically assess our investment in available-for-sale securities for impairment and credit losses. The amount of credit losses are determined by comparing the difference between the present value of future cash flows expected to be collected on these securities and the amortized cost. Factors considered in assessing credit losses include the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration. Impairment and credit losses related to available-for-sale securities were not material for the years ended December 31, 2020, 2019 and 2018.As of December 31, 2020, the available-for-sale securities in an unrealized loss position include primarily fixed-rate debt securities of varying maturities, which are sensitive to changes in the yield curve and other market conditions. Approximately 86 percent of the fixed-rate debt securities in a loss position are investment-grade debt securities. As of December 31, 2020, we do not intend to sell, and it is not more likely than not that we will be required to sell, the securities in a loss position before the market values recover or the underlying cash flows have been received, and there is no indication of default on interest or principal payments for any of our debt securities.83Activity related to our available-for-sale securities was as follows:202020192018Proceeds from sales$264.8 $431.6 $5,529.0 Realized gross gains on sales4.5 4.9 3.6 Realized gross losses on sales8.2 3.0 49.2 Realized gains and losses on sales of available-for-sale investments are computed based upon specific identification of the initial cost adjusted for any other-than-temporary declines in fair value that were recorded in earnings.Accounts Receivable Factoring ArrangementsWe have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable. These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. We derecognized $754.9 million and $678.8 million of accounts receivable as of December 31, 2020 and 2019, respectively, under these factoring arrangements. The costs of factoring such accounts receivable on our consolidated results of operations for the years ended December 31, 2020, 2019, and 2018 were not material.Note 8: Goodwill and Other IntangiblesGoodwillGoodwill results from excess consideration in a business combination over the fair value of identifiable net assets acquired. Goodwill is not amortized but is reviewed for impairment at least annually, or more frequently if impairment indicators are present, by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value to its carrying value is performed to determine the amount of any impairment. The changes in goodwill during 2020 and 2019 were primarily related to our acquisitions of Dermira and Loxo, respectively. See Note 3 for further discussion.No impairments occurred with respect to the carrying value of goodwill for the years ended December 31, 2020, 2019, and 2018.Other IntangiblesThe components of intangible assets other than goodwill at December 31 were as follows: 20202019DescriptionCarryingAmount, GrossAccumulatedAmortizationCarryingAmount, NetCarryingAmount, GrossAccumulatedAmortizationCarryingAmount, NetFinite-lived intangible assets:Marketed products$7,984.0 $(1,659.5)$6,324.5 $3,150.2 $(1,244.6)$1,905.6 Other92.8 (68.3)24.5 94.2 (51.8)42.4 Total finite-lived intangible assets8,076.8 (1,727.8)6,349.0 3,244.4 (1,296.4)1,948.0 Indefinite-lived intangible assets:Acquired IPR&D1,101.0 — 1,101.0 4,670.0 — 4,670.0 Other intangibles$9,177.8 $(1,727.8)$7,450.0 $7,914.4 $(1,296.4)$6,618.0 Marketed products consist of the amortized cost of the rights to assets acquired in business combinations and approved for marketing in a significant global jurisdiction (U.S., Europe, and Japan) and capitalized milestone payments. For transactions other than a business combination, we capitalize milestone payments incurred at or after the product has obtained regulatory approval for marketing.84Other finite-lived intangible assets consist primarily of the amortized cost of licensed platform technologies that have alternative future uses in research and development, manufacturing technologies, and customer relationships from business combinations. Acquired IPR&D consists of the fair values of acquired IPR&D projects acquired in business combination, adjusted for subsequent impairments, if any. The costs of acquired IPR&D projects acquired directly in a transaction other than a business combination are capitalized as other intangible assets if the projects have an alternative future use; otherwise, they are expensed immediately. See Note 3 for acquired IPR&D projects that had no alternative future use. Several methods may be used to determine the estimated fair value of other intangibles acquired in a business combination. We utilize the “income method,” which is a Level 3 fair value measurement and applies a probability weighting that considers the risk of development and commercialization to the estimated future net cash flows that are derived from projected revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products, analyst expectations, and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each asset independently. The acquired IPR&D assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are tested for impairment and amortized over the remaining useful life or written off, as appropriate. The increase in marketed products and the decrease in acquired IPR&D in 2020 primarily relates to the reclassification of our $4.60 billion intangible asset for selpercatinib (Retevmo) from indefinite-lived to finite-lived as it was approved by the FDA in the second quarter of 2020. This decrease in acquired IPR&D in 2020 was partially offset by the addition of acquired IPR&D for lebrikizumab as a result of the Dermira acquisition. The increases in marketed products and acquired IPR&D intangible assets in 2019 were primarily related to our acquisition of Loxo. See Note 3 for further discussion of intangible assets acquired in recent business combinations and Note 4 for additional discussion of recent capitalized milestone payments.Indefinite-lived intangible assets are reviewed for impairment at least annually, or more frequently if impairment indicators are present, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the intangible asset to its carrying value is performed to determine the amount of any impairment. Finite-lived intangible assets are reviewed for impairment when an indicator of impairment is present. When required, a comparison of fair value to the carrying amount of assets is performed to determine the amount of any impairment. When determining the fair value of indefinite-lived acquired IPR&D as well as the fair value of finite-lived intangible assets for impairment testing purposes, we utilize the "income method" discussed above. Intangible assets with finite lives are capitalized and are amortized over their estimated useful lives, ranging from three to 20 years. As of December 31, 2020, the remaining weighted-average amortization period for finite-lived intangible assets was approximately 15 years. Amortization expense related to finite-lived intangible assets was as follows:202020192018Amortization expense$428.2 $225.8 $361.3 The estimated amortization expense for each of the next five years associated with our finite-lived intangible assets as of December 31, 2020 is as follows:20212022202320242025Estimated amortization expense$517.7 $513.0 $501.2 $449.1 $432.5 Amortization expense is included in either cost of sales, marketing, selling, and administrative or research and development depending on the nature of the intangible asset being amortized.85Note 9: Property and EquipmentProperty and equipment is stated on the basis of cost. Provisions for depreciation of buildings and equipment are computed generally by the straight-line method at rates based on their estimated useful lives (12 to 50 years for buildings and three to 25 years for equipment). We review the carrying value of long-lived assets for potential impairment on a periodic basis and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Impairment is determined by comparing projected undiscounted cash flows to be generated by the asset to its carrying value. If an impairment is identified, a loss is recorded equal to the excess of the asset’s net book value over its fair value, and the cost basis is adjusted.At December 31, property and equipment consisted of the following:20202019Land$226.8 $169.5 Buildings7,326.1 7,067.3 Equipment8,560.9 7,913.3 Construction in progress2,138.8 1,884.4 18,252.6 17,034.5 Less accumulated depreciation(9,570.7)(9,161.6)Property and equipment, net$8,681.9 $7,872.9 Depreciation expense related to property and equipment was as follows:202020192018Depreciation expense$765.2 $814.7 $797.1 Capitalized interest costs were not material for the years ended December 31, 2020, 2019, and 2018. The following table summarizes long-lived assets by geographical area:20202019Long-lived assets(1):U.S. and Puerto Rico$6,113.6 $5,595.4 Ireland1,786.9 1,454.8 Other foreign countries1,747.7 1,758.3 Long-lived assets$9,648.2 $8,808.5 (1) Long-lived assets consist of property and equipment, net, operating lease assets, and certain other noncurrent assets.Note 10: LeasesWe determine if an arrangement is a lease at inception. We have leases with terms up to 12 years primarily for corporate offices, research and development facilities, vehicles, and equipment, including some of which have options to extend and/or early-terminate the leases. We determine the lease term by assuming the exercise of any renewal and/or early-termination options that are reasonably assured.Operating lease right-of-use assets are presented as other noncurrent assets in our consolidated balance sheets, and the current and long-term portions of operating lease liabilities are included in other current liabilities and other noncurrent liabilities, respectively, in our consolidated balance sheets. Short-term leases, which are deemed at inception to have a lease term of 12 months or less, are not recorded on the consolidated balance sheets. Operating lease assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. 86Lease expense for operating lease assets, which is recognized on a straight-line basis over the lease term, was $154.6 million and $172.8 million during the years ended December 31, 2020 and 2019, respectively. Variable lease payments, which represent non-lease components such as maintenance, insurance and taxes, and which vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the payment obligation is incurred and were not material during the years ended December 31, 2020 and 2019. Short-term lease expense was not material during the years ended December 31, 2020 and 2019.Supplemental balance sheet information related to operating leases as of December 31, 2020 and 2019 was as follows:20202019Weighted-average remaining lease term7 years8 yearsWeighted-average discount rate3.3 %3.6 %Supplemental cash flow information related to operating leases during the years ended December 31, 2020 and 2019 was as follows:20202019Operating cash flows from operating leases$160.9 $153.6 Right-of-use assets obtained in exchange for new operating lease liabilities136.7 81.2The annual minimum lease payments of our operating lease liabilities as of December 31, 2020 were as follows:Year 1$150.9 Year 2120.7 Year 394.1 Year 473.3 Year 563.4 After Year 5258.7 Total lease payments761.1 Less imputed interest97.4 Total$663.7 Rental expense for all leases, including contingent rentals (not material), was $175.7 million for the year ended December 31, 2018. Finance leases are included in property and equipment, short-term borrowings and current maturities of long-term debt, and long-term debt in our consolidated balance sheets. Finance leases are not material to our consolidated financial statements.87Note 11: BorrowingsDebt at December 31 consisted of the following:20202019Short-term commercial paper borrowings$— $1,494.2 Long-term notes 16,348.7 13,638.5 Other long-term debt14.8 12.9 Unamortized debt issuance costs(89.1)(73.6)Fair value adjustment on hedged long-term notes320.9 245.2 Total debt16,595.3 15,317.2 Less current portion(8.7)(1,499.3)Long-term debt$16,586.6 $13,817.9 The following table summarizes long-term notes at December 31:202020192.35% notes due 2022$750.0 $750.0 3.00% notes due 202299.2 — 1.00% Euro denominated notes due 2022737.9 671.8 0.15% Swiss Franc denominated notes due 2024679.7 618.3 7.125% notes due 2025229.7 229.7 2.75% notes due 2025560.6 560.6 1.625% Euro denominated notes due 2026922.4 839.7 5.5% notes due 2027377.5 377.5 3.1% notes due 2027401.5 401.5 0.45% Swiss Franc denominated notes due 2028453.2 412.2 3.375% notes due 20291,150.0 1,150.0 0.42% Japanese Yen denominated notes due 2029222.4 209.9 2.125% Euro denominated notes due 2030922.4 839.7 0.625% Euro denominated notes due 2031737.9 671.8 0.56% Japanese Yen denominated notes due 203490.0 85.0 6.77% notes due 2036174.4 174.4 5.55% notes due 2037476.2 476.2 5.95% notes due 2037284.1 284.1 3.875% notes due 2039360.7 360.7 4.65% notes due 204443.0 43.0 3.7% notes due 2045412.5 412.5 3.95% notes due 2047436.1 436.1 3.95% notes due 20491,500.0 1,500.0 1.7% Euro denominated notes due 20491,229.9 1,119.6 0.97% Japanese Yen denominated notes due 204974.1 70.0 2.25% notes due 20501,250.0 — 4.15% notes due 20591,000.0 1,000.0 2.5% notes due 2060850.0 — Unamortized note discounts(76.7)(55.8)Total long-term notes$16,348.7 $13,638.5 88The weighted-average effective borrowing rate on outstanding commercial paper at December 31, 2019 was 1.65 percent. The weighted-average effective borrowing rate for each issuance of the long term-notes approximates the stated interest rate. At December 31, 2020, we had a total of $5.24 billion of unused committed bank credit facilities, which consisted primarily of a $3.00 billion credit facility that expires in December 2024 and a $2.00 billion 364-day facility that expires in December 2021, both of which are available to support our commercial paper program. We have not drawn against the $3.00 billion and $2.00 billion facilities as of December 31, 2020. Of the remaining committed bank credit facilities, the outstanding balances as of December 31, 2020 and 2019 were not material. Compensating balances and commitment fees are not material, and there are no conditions that are probable of occurring under which the lines may be withdrawn. In May 2020, we issued $1.00 billion of 2.25 percent fixed-rate notes due in May 2050, with interest to be paid semi-annually. We used the net cash proceeds from the offering of $988.6 million for general corporate purposes, including the repayment of outstanding commercial paper. In August 2020, we issued $850.0 million of 2.50 percent fixed-rate notes due in September 2060 and an additional $250.0 million of our 2.25 percent fixed-rate notes due in May 2050, with interest to be paid semi-annually. We used the net cash proceeds from the offering of $1.07 billion for general corporate purposes, including the repayment of outstanding commercial paper. In February 2019, we issued $1.15 billion of 3.375 percent fixed-rate notes due in March 2029, $850.0 million of 3.875 percent fixed-rate notes due in March 2039, $1.50 billion of 3.95 percent fixed-rate notes due in March 2049, and $1.00 billion of 4.15 percent fixed-rate notes due in March 2059, with interest to be paid semi-annually. We used the net cash proceeds of $4.45 billion from the offering to repay commercial paper that was issued in connection with the acquisition of Loxo and for general corporate purposes. In November 2019, we issued euro-denominated notes consisting of €600.0 million of 0.625 percent fixed-notes due November 2031 and €1.00 billion of 1.70 percent fixed-rate notes due in November 2049 with interest to be paid annually. We paid $2.27 billion, comprised of $1.75 billion of net cash proceeds from the offering and proceeds from commercial paper, to purchase and redeem certain higher interest rate U.S. dollar denominated notes with an aggregate principal amount of $2.00 billion and a net carrying value of $2.01 billion, resulting in a debt extinguishment loss of $252.5 million. This loss was included in other-net, (income) expense in our consolidated statement of operations during the year ended December 31, 2019.In November 2019, we issued Japanese Yen-denominated notes consisting of ¥22.92 billion of 0.42 percent fixed-rate notes due in November 2029, ¥9.28 billion of 0.56 percent fixed-rate notes due in November 2034, and ¥7.64 billion of 0.97 percent fixed-rate notes due in November 2049, with interest to be paid semi-annually. We used the net cash proceeds from the offering of $356.6 million for general corporate purposes, including the repayment of outstanding commercial paper.The aggregate amounts of maturities on long-term debt for the next five years are as follows:20212022202320242025Maturities on long-term debt$6.0 $1,590.2 $2.3 $681.1 $790.3 We have converted approximately 9 percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps. The weighted-average effective borrowing rates based on long-term debt obligations and interest rates at December 31, 2020 and 2019, including the effects of interest rate swaps for hedged debt obligations, were 2.61 percent and 2.88 percent, respectively.The aggregate amount of cash payments for interest on borrowings, net of capitalized interest, are as follows:202020192018Cash payments for interest on borrowings$345.8 $305.5 $223.8 In accordance with the requirements of derivatives and hedging guidance, the portion of our fixed-rate debt obligations that is hedged as a fair value hedge is reflected in the consolidated balance sheets as an amount equal to the sum of the debt’s carrying value plus the fair value adjustment representing changes in fair value of the hedged debt attributable to movements in market interest rates subsequent to the inception of the hedge.89Note 12: Stock-Based CompensationOur stock-based compensation expense consists of performance awards (PAs), shareholder value awards (SVAs), relative value awards (RVAs), and restricted stock units (RSUs). We recognize the fair value of stock-based compensation as expense over the requisite service period of the individual grantees, which generally equals the vesting period. We provide newly issued shares of our common stock and treasury stock to satisfy the issuance of PA, SVA, RVA, and RSU shares.Stock-based compensation expense and the related tax benefits were as follows:202020192018Stock-based compensation expense$308.1 $306.8 $253.5 Tax benefit64.7 64.4 53.2 At December 31, 2020, stock-based compensation awards may be granted under the 2002 Lilly Stock Plan for not more than 53.9 million additional shares. Performance Award ProgramPAs are granted to officers and management and are payable in shares of our common stock. The number of PA shares actually issued, if any, varies depending on the achievement of certain pre-established earnings-per-share targets over a two-year period. PA shares are accounted for at fair value based upon the closing stock price on the date of grant and fully vest at the end of the measurement period. The fair values of PAs granted for the years ended December 31, 2020, 2019, and 2018 were $137.33, $112.09, and $71.63, respectively. The number of shares ultimately issued for the PA program is dependent upon the EPS achieved during the vesting period. Pursuant to this program, approximately 1.1 million shares, 1.2 million shares, and 0.9 million shares were issued during the years ended December 31, 2020, 2019, and 2018, respectively. Approximately 0.8 million shares are expected to be issued in 2021. As of December 31, 2020, the total remaining unrecognized compensation cost related to nonvested PAs was $77.3 million, which will be amortized over the weighted-average remaining requisite service period of 12 months.Shareholder Value Award ProgramSVAs are granted to officers and management and are payable in shares of our common stock. The number of shares actually issued, if any, varies depending on our stock price at the end of the three-year vesting period compared to pre-established target stock prices. We measure the fair value of the SVA unit on the grant date using a Monte Carlo simulation model. The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. Expected volatilities utilized in the model are based on implied volatilities from traded options on our stock, historical volatility of our stock price, and other factors. Similarly, the dividend yield is based on historical experience and our estimate of future dividend yields. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair values of the SVA units granted during the years ended December 31, 2020, 2019, and 2018 were $139.14, $95.01, and $48.51, respectively, determined using the following assumptions:(Percents)202020192018Expected dividend yield2.50 %2.50 %2.50 %Risk-free interest rate1.38 2.46 2.31 Volatility20.90 21.00 22.26 Pursuant to this program, approximately 0.8 million shares, 1.0 million shares, and 0.7 million shares were issued during the years ended December 31, 2020, 2019, and 2018, respectively. Approximately 1.0 million shares are expected to be issued in 2021. As of December 31, 2020, the total remaining unrecognized compensation cost related to nonvested SVAs was $48.8 million, which will be amortized over the weighted-average remaining requisite service period of 20 months.90Relative Value Award ProgramBeginning in 2020, we granted RVAs to officers and management and are payable in shares of our common stock. The number of shares actually issued, if any, varies depending on the growth of our stock price at the end of the three-year vesting period compared to our peers. We measure the fair value of the RVA unit on the grant date using a Monte Carlo simulation model. The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. Expected volatilities utilized in the model are based on implied volatilities from traded options on our stock, historical volatility of our stock price and our peers' stock price, and other factors. Similarly, the dividend yield is based on historical experience and our estimate of future dividend yields. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair value of the RVA units granted during the year ended December 31, 2020 was $179.90, determined using the following assumptions:(Percents)2020Expected dividend yield2.50 %Risk-free interest rate1.38 Volatility19.89 As of December 31, 2020, the total remaining unrecognized compensation cost related to nonvested RVAs was $13.7 million, which will be amortized over the weighted-average remaining requisite service period of 24 months.Restricted Stock UnitsRSUs are granted to certain employees and are payable in shares of our common stock. RSU shares are accounted for at fair value based upon the closing stock price on the date of grant. The corresponding expense is amortized over the vesting period, typically three years. The fair values of RSU awards granted during the years ended December 31, 2020, 2019, and 2018 were $135.42, $108.43, and $70.95, respectively. The number of shares ultimately issued for the RSU program remains constant with the exception of forfeitures. Pursuant to this program, 1.1 million, 1.5 million, and 1.3 million shares were granted and approximately 0.6 million, 0.8 million, and 1.0 million shares were issued during the years ended December 31, 2020, 2019, and 2018, respectively. Approximately 0.6 million shares are expected to be issued in 2021. As of December 31, 2020, the total remaining unrecognized compensation cost related to nonvested RSUs was $179.2 million, which will be amortized over the weighted-average remaining requisite service period of 31 months.Note 13: Shareholders' EquityDuring 2020, 2019, and 2018, we repurchased $500.0 million, $4.40 billion and $4.15 billion, respectively, of shares associated with our share repurchase programs. As of December 31, 2020, we had $1.00 billion remaining under our $8.00 billion share repurchase program that our board authorized in June 2018.We have 5.0 million authorized shares of preferred stock. As of December 31, 2020 and 2019, no preferred stock was issued.We have an employee benefit trust that held 50.0 million shares of our common stock at both December 31, 2020 and 2019, to provide a source of funds to assist us in meeting our obligations under various employee benefit plans. The cost basis of the shares held in the trust was $3.01 billion at both December 31, 2020 and 2019, and is shown as a reduction of shareholders’ equity. Any dividend transactions between us and the trust are eliminated. Stock held by the trust is not considered outstanding in the computation of EPS. The assets of the trust were not used to fund any of our obligations under these employee benefit plans during the years ended December 31, 2020, 2019, and 2018.91Note 14: Income TaxesDeferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. Deferred taxes related to GILTI, global intangible low-taxed income, are also recognized for the future tax effects of temporary differences.We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position, based on its technical merits, will be sustained upon examination by the taxing authority. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.In December 2017, the Tax Cuts and Job Act (the 2017 Tax Act) was signed into law. The 2017 Tax Act included significant changes to the U.S. corporate income tax system, such as the reduction in the corporate income tax rate from 35 percent to 21 percent, transition to a territorial tax system, changes to business related exclusions, deductions and credits, and modifications to international tax provisions, including a one-time repatriation transition tax (also known as the ‘Toll Tax’) on unremitted foreign earnings and GILTI, a new U.S. minimum tax on the earnings of our foreign subsidiaries. In 2018, we recorded $313.3 million of income tax benefit, mainly attributable to measurement period adjustments to the Toll Tax and GILTI.Following is the composition of income tax expense:202020192018Current:Federal(1)$567.6 $280.2 $169.6 Foreign650.4 299.8 106.8 State(47.3)(14.4)4.7 Total current tax expense1,170.7 565.6 281.1 Deferred:Federal(2)(97.4)141.3 (3.7)Foreign(16.6)(24.1)248.7 State(20.5)(54.8)3.4 Total deferred tax (benefit) expense(134.5)62.4 248.4 Income taxes$1,036.2 $628.0 $529.5 (1) The 2020 and 2019 current tax expense includes $144.4 million and $153.1 million of tax benefit, respectively, from utilization of net operating loss and tax credit carryforwards. The 2018 current tax expense includes $201.5 million of tax expense related to effects of the 2017 Tax Act.(2) The 2018 deferred tax benefit includes $26.2 million of tax benefit related to effects of the 2017 Tax Act.92Significant components of our deferred tax assets and liabilities as of December 31 were as follows:20202019Deferred tax assets:Purchases of intangible assets$2,560.6 $2,512.4 Compensation and benefits1,045.6 934.3 Tax credit carryforwards and carrybacks523.5 455.8 Tax loss carryforwards and carrybacks488.3 318.8 Sales rebates and discounts461.3 197.3 Correlative tax adjustments404.2 219.1 Foreign tax redeterminations242.8 156.8 Operating lease liabilities150.7 140.6 Capitalized research and development135.2 75.7 Other605.8 595.7 Total gross deferred tax assets6,618.0 5,606.5 Valuation allowances(816.3)(616.5)Total deferred tax assets5,801.7 4,990.0 Deferred tax liabilities:Earnings of foreign subsidiaries(1,905.3)(1,776.4)Intangibles(1,465.7)(1,298.0)Inventories(623.7)(686.4)Prepaid employee benefits(410.1)(305.9)Property and equipment(315.2)(274.1)Financial instruments(216.9)(139.4)Operating lease assets(134.3)(124.7)Total deferred tax liabilities(5,071.2)(4,604.9)Deferred tax assets - net$730.5 $385.1 The deferred tax asset and related valuation allowance amounts for U.S. federal, international, and state net operating losses and tax credits shown above have been reduced for differences between financial reporting and tax return filings.At December 31, 2020, based on filed tax returns we have tax credit carryforwards and carrybacks of $887.3 million available to reduce future income taxes; $148.8 million, if unused, will expire by 2026, and $16.1 million, if unused, will expire between 2029 and 2039. The remaining portion of the tax credit carryforwards is related to federal tax credits of $84.8 million, international tax credits of $121.9 million, and state tax credits of $515.7 million, all of which are fully reserved.At December 31, 2020, based on filed tax returns we had net operating losses and other carryforwards for international and U.S. federal income tax purposes of $1.52 billion: $162.6 million will expire by 2025; $781.7 million will expire between 2026 and 2040; and $576.3 million of the carryforwards will never expire. Net operating losses and other carryforwards for international and U.S. federal income tax purposes are partially reserved. Deferred tax assets related to state net operating losses and other carryforwards of $175.6 million are fully reserved as of December 31, 2020.Domestic and Puerto Rican companies contributed approximately 39 percent, 44 percent, and 15 percent for the years ended December 31, 2020, 2019, and 2018, respectively, to consolidated income before income taxes. We have a subsidiary operating in Puerto Rico under a tax incentive grant effective through the end of 2031.93Substantially all of the unremitted earnings of our foreign subsidiaries are considered not to be indefinitely reinvested for continued use in our foreign operations. At December 31, 2020 and December 31, 2019, we accrued an immaterial amount of foreign withholding taxes and state income taxes that would be owed upon future distributions of unremitted earnings of our foreign subsidiaries that are not indefinitely reinvested. For the amount considered to be indefinitely reinvested, it is not practicable to determine the amount of the related deferred income tax liability due to the complexities in the tax laws and assumptions we would have to make.Cash payments of U.S. federal, state, and foreign income taxes, net of refunds, were as follows: 202020192018Cash payments of income taxes$954.6 $1,180.5 $1,076.7 The 2017 Tax Act provided an election to taxpayers subject to the Toll Tax to make payments over an eight year period beginning in 2018 through 2025. Having made this election, our future cash payments relating to the Toll Tax as of December 31, 2020 are as follows:TotalLess than 1 Year1-3 Years3-5 Years 2017 Tax Act Toll Tax$2,403.1$253.7$729.3$1,420.1We have additional noncurrent income tax payables of $1.69 billion unrelated to the Toll Tax; we cannot reasonably estimate the timing of future cash outflows associated with these liabilities. Following is a reconciliation of the consolidated income tax expense applying the U.S. federal statutory rate to income before income taxes to reported consolidated income tax expense: 202020192018Income tax at the U.S. federal statutory tax rate$1,518.3 $1,105.8 $772.8 Add (deduct):International operations, including Puerto Rico(297.1)(242.0)(627.1)General business credits(97.9)(108.8)(87.4)Non-deductible acquired IPR&D(1)63.2 — 309.9 2017 Tax Act— — 175.3 Other(150.3)(127.0)(14.0)Income taxes$1,036.2 $628.0 $529.5 (1) Non-deductible acquired IPR&D was related to the acquisitions of Disarm and a pre-clinical stage company in 2020 and ARMO in 2018. See Note 3 for additional information related to acquisitions.A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:202020192018Beginning balance at January 1$2,108.6 $2,034.6 $1,000.8 Additions based on tax positions related to the current year225.6 187.2 798.2 Additions for tax positions of prior years310.8 425.3 410.9 Reductions for tax positions of prior years(52.4)(100.3)(115.4)Settlements(72.0)(260.5)(33.2)Lapses of statutes of limitation(41.7)(161.5)(20.5)Changes related to the impact of foreign currency translation73.0 (16.2)(6.2)Ending balance at December 31$2,551.9 $2,108.6 $2,034.6 The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $1.67 billion and $1.53 billion at December 31, 2020 and 2019, respectively.We file U.S. federal, foreign, and various state and local income tax returns. We are no longer subject to U.S. federal income tax examination for years before 2016. In most major foreign and state jurisdictions, we are no longer subject to income tax examination for years before 2012.94The U.S. examination of tax years 2016-2018 began in the fourth quarter of 2019 and remains ongoing; therefore, the resolution of this audit period will likely extend beyond the next 12 months. For tax years 2013-2015, all matters were effectively settled in 2019. As a result, our gross uncertain tax positions were reduced by approximately $200 million, we made a cash payment of approximately $125 million, and our consolidated results were benefited by an immaterial reduction in tax expense. We recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized income tax (benefit) expense related to interest and penalties as follows:202020192018Income tax (benefit) expense$34.0 $(26.4)$25.1 At December 31, 2020 and 2019, our accruals for the payment of interest and penalties totaled $196.7 million and $150.8 million, respectively.95Note 15: Retirement BenefitsWe use a measurement date of December 31 to develop the change in benefit obligation, change in plan assets, funded status, and amounts recognized in the consolidated balance sheets at December 31 for our defined benefit pension and retiree health benefit plans, which were as follows:  Defined BenefitPension PlansRetiree HealthBenefit Plans  2020201920202019Change in benefit obligation:Benefit obligation at beginning of year$16,251.0 $13,427.1 $1,601.4 $1,540.0 Service cost325.5 250.4 40.8 36.3 Interest cost425.8 486.0 43.7 58.0 Actuarial loss1,563.1 2,631.7 142.1 54.3 Benefits paid(587.2)(584.2)(75.1)(87.3)Curtailment (gain) loss2.2 (16.8)— (0.5)Foreign currency exchange rate changes and other adjustments245.1 56.8 0.8 0.6 Benefit obligation at end of year18,225.5 16,251.0 1,753.7 1,601.4 Change in plan assets:Fair value of plan assets at beginning of year12,858.0 10,932.6 2,768.2 2,398.1 Actual return on plan assets1,802.4 2,012.0 539.0 444.1 Employer contribution318.8 429.9 (5.1)13.2 Benefits paid(587.2)(584.2)(75.1)(87.3)Foreign currency exchange rate changes and other adjustments187.0 67.7 — 0.1 Fair value of plan assets at end of year14,579.0 12,858.0 3,227.0 2,768.2 Funded status(3,646.5)(3,393.0)1,473.3 1,166.8 Unrecognized net actuarial (gain) loss6,515.5 6,177.6 (349.1)(111.6)Unrecognized prior service (benefit) cost15.4 17.4 (177.6)(236.4)Net amount recognized$2,884.4 $2,802.0 $946.6 $818.8 Amounts recognized in the consolidated balance sheet consisted of:Other noncurrent assets$299.6 $163.3 $1,697.0 $1,381.3 Other current liabilities(67.9)(65.3)(7.4)(7.3)Accrued retirement benefits(3,878.2)(3,491.0)(216.3)(207.2)Accumulated other comprehensive (income) loss before income taxes6,530.9 6,195.0 (526.7)(348.0)Net amount recognized$2,884.4 $2,802.0 $946.6 $818.8 The unrecognized net actuarial loss (gain) and unrecognized prior service cost (benefit) have not yet been recognized in net periodic pension costs and were included in accumulated other comprehensive loss at December 31, 2020 and 2019.96Effective during the third quarter of 2020, we adopted a voluntary change in our method of applying an accounting principle for certain of our retirement benefit plans. The new accounting method changes the computation of expected returns on U.S. dollar denominated investment grade debt securities and derivatives in such plans from a calculated value that includes changes in the fair values over a period of five years to actual fair value. This change in accounting principle is preferable because changes in the fair value of this class of assets will be amortized into net periodic pension and retiree health cost sooner. No change is being made to the accounting principle for the other classes of pension assets. The impact of the adoption of this change in accounting method was not material to our historical and current consolidated financial statements.A decrease in the discount rate was the primary driver for the $2.13 billion and $2.89 billion increase in the benefit obligation in 2020 and 2019, respectively.In July 2018, we announced that we would amend our defined benefit pension and retiree health benefit plans to freeze or reduce benefits for certain employees effective January 1, 2019. We remeasured the impacted pension and retiree health plans’ benefit obligations as of July 31, 2018, which resulted in a net curtailment gain of $28.0 million, which was recorded in asset impairment, restructuring, and other special charges.The following represents our weighted-average assumptions as of December 31: Defined BenefitPension PlansRetiree HealthBenefit Plans(Percents)202020192018202020192018Discount rate for benefit obligation2.4 %3.0 %4.0 %2.6 %3.3 %4.4 %Discount rate for net benefit costs3.0 4.0 3.4 3.3 4.4 3.7 Rate of compensation increase for benefit obligation3.3 3.3 3.4 Rate of compensation increase for net benefit costs3.3 3.4 3.4 Expected return on plan assets for net benefit costs7.3 7.4 7.4 6.0 6.0 8.0 We annually evaluate the expected return on plan assets in our defined benefit pension and retiree health benefit plans. In evaluating the expected rate of return, we consider many factors, with a primary analysis of current and projected market conditions; asset returns and asset allocations; and the views of leading financial advisers and economists. We may also review our historical assumptions compared with actual results, as well as the assumptions and trend rates utilized by similar plans, where applicable. Given the design of our retiree health benefit plans, healthcare-cost trend rates do not have a material impact on our financial condition or results of operations.97The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:202120222023202420252026-2030Defined benefit pension plans$639.2 $635.3 $645.8 $673.1 $689.6 $3,800.8 Retiree health benefit plans91.2 91.2 91.2 94.9 95.7 481.8 Amounts relating to defined benefit pension plans with projected benefit obligations in excess of plan assets were as follows at December 31: 20202019Projected benefit obligation$15,770.7 $14,039.7 Fair value of plan assets11,824.4 10,483.4 Amounts relating to defined benefit pension plans and retiree health benefit plans with accumulated benefit obligations in excess of plan assets were as follows at December 31:Defined BenefitPension PlansRetiree Health Benefit Plans 2020201920202019Accumulated benefit obligation$14,682.3 $13,063.7 $223.8 $214.4 Fair value of plan assets11,824.4 10,483.4 — — The total accumulated benefit obligation for our defined benefit pension plans was $17.03 billion and $15.17 billion at December 31, 2020 and 2019, respectively.98Net pension and retiree health benefit expense included the following components: Defined BenefitPension PlansRetiree HealthBenefit Plans  202020192018202020192018Components of net periodic (benefit) cost:Service cost$325.5 $250.4 $292.7 $40.8 $36.3 $41.5 Interest cost425.8 486.0 458.5 43.7 58.0 57.3 Expected return on plan assets(901.5)(839.6)(842.1)(158.1)(144.3)(177.9)Amortization of prior service (benefit) cost4.5 6.1 4.6 (59.5)(62.9)(79.5)Recognized actuarial loss (gain)396.3 284.9 332.5 (3.0)1.9 6.1 Curtailment (gain) loss— 2.2 1.3 — — (29.3)Net periodic (benefit) cost$250.6 $190.0 $247.5 $(136.1)$(111.0)$(181.8)The following represents the amounts recognized in other comprehensive income (loss) for the years ended December 31, 2020, 2019, and 2018:Defined BenefitPension PlansRetiree HealthBenefit Plans202020192018202020192018Actuarial gain (loss) arising during period$(663.0)$(1,461.0)$182.8 $238.8 $246.1 $37.5 Plan amendments during period(2.2)— (17.6)— — 14.1 Curtailment gain (loss)— 19.0 45.2 — — (31.8)Amortization of prior service (benefit) cost included in net income4.5 6.1 4.6 (59.5)(62.9)(79.5)Amortization of net actuarial loss included in net income396.3 284.9 332.5 (3.0)1.9 6.1 Foreign currency exchange rate changes and other(71.5)(7.7)47.1 2.4 3.6 (0.1)Total other comprehensive income (loss) during period$(335.9)$(1,158.7)$594.6 $178.7 $188.7 $(53.7)We have defined contribution savings plans that cover our eligible employees worldwide. The purpose of these plans is generally to provide additional financial security during retirement by providing employees with an incentive to save. Our contributions to the plans are based on employee contributions and the level of our match. Expenses under the plans totaled $164.3 million, $145.2 million, and $132.6 million for the years ended December 31, 2020, 2019, and 2018, respectively.We provide certain other postemployment benefits primarily related to disability benefits and accrue for the related cost over the service lives of employees. Expenses associated with these benefit plans for the years ended December 31, 2020, 2019, and 2018 were not material.Benefit Plan InvestmentsOur benefit plan investment policies are set with specific consideration of return and risk requirements in relationship to the respective liabilities. U.S. and Puerto Rico plans represent approximately 80 percent of our global investments. Given the long-term nature of our liabilities, these plans have the flexibility to manage an above-average degree of risk in the asset portfolios. At the investment-policy level, there are no specifically prohibited investments. However, within individual investment manager mandates, restrictions and limitations are contractually set to align with our investment objectives, ensure risk control, and limit concentrations.We manage our portfolio to minimize concentration of risk by allocating funds within asset categories. In addition, within a category we use different managers with various management objectives to eliminate any significant concentration of risk.99Our global benefit plans may enter into contractual arrangements (derivatives) to implement the local investment policy or manage particular portfolio risks. Derivatives are principally used to increase or decrease exposure to a particular public equity, fixed income, commodity, or currency market more rapidly or less expensively than could be accomplished through the use of the cash markets. The plans utilize both exchange-traded and over-the-counter instruments. The maximum exposure to either a market or counterparty credit loss is limited to the carrying value of the receivable, and is managed within contractual limits. We expect all of our counterparties to meet their obligations. The gross values of these derivative receivables and payables are not material to the global asset portfolio, and their values are reflected within the tables below.The defined benefit pension and retiree health benefit plan allocation for the U.S. and Puerto Rico currently comprises approximately 65 percent growth investments and 35 percent fixed-income investments. The growth investment allocation encompasses U.S. and international public equity securities, hedge funds, private equity-like investments, and real estate. These portfolio allocations are intended to reduce overall risk by providing diversification, while seeking moderate to high returns over the long term.Public equity securities are well diversified and invested in U.S. and international small-to-large companies across various asset managers and styles. The remaining portion of the growth portfolio is invested in private alternative investments.Fixed-income investments primarily consist of fixed-income securities in U.S. treasuries and agencies, emerging market debt obligations, corporate bonds, bank loans, mortgage-backed securities, commercial mortgage-backed obligations, and any related repurchase agreements.Hedge funds are privately owned institutional investment funds that generally have moderate liquidity. Hedge funds seek specified levels of absolute return regardless of overall market conditions, and generally have low correlations to public equity and debt markets. Hedge funds often invest substantially in financial market instruments (stocks, bonds, commodities, currencies, derivatives, etc.) using a very broad range of trading activities to manage portfolio risks. Hedge fund strategies focus primarily on security selection and seek to be neutral with respect to market moves. Common groupings of hedge fund strategies include relative value, tactical, and event driven. Relative value strategies include arbitrage, when the same asset can simultaneously be bought and sold at different prices, achieving an immediate profit. Tactical strategies often take long and short positions to reduce or eliminate overall market risks while seeking a particular investment opportunity. Event strategy opportunities can evolve from specific company announcements such as mergers and acquisitions, and typically have little correlation to overall market directional movements. Our hedge fund investments are made through limited partnership interests in fund-of-funds structures and directly into hedge funds. Plan holdings in hedge funds are valued based on net asset values (NAVs) calculated by each fund or general partner, as applicable, and we have the ability to redeem these investments at NAV.Private equity-like investment funds typically have low liquidity and are made through long-term partnerships or joint ventures that invest in pools of capital invested in primarily non-publicly traded entities. Underlying investments include venture capital (early stage investing), buyout, special situations, private debt, and private real estate investments. Private equity management firms typically acquire and then reorganize private companies to create increased long term value. Private equity-like funds usually have a limited life of approximately 10-15 years, and require a minimum investment commitment from their limited partners. Our private equity-like investments are made both directly into funds and through fund-of-funds structures to ensure broad diversification of management styles and assets across the portfolio. Plan holdings in private equity-like investments are valued using the value reported by the partnership, adjusted for known cash flows and significant events through our reporting date. Values provided by the partnerships are primarily based on analysis of and judgments about the underlying investments. Inputs to these valuations include underlying NAVs, discounted cash flow valuations, comparable market valuations, and may also include adjustments for currency, credit, liquidity and other risks as applicable. The vast majority of these private partnerships provide us with annual audited financial statements including their compliance with fair valuation procedures consistent with applicable accounting standards.Real estate is composed of public holdings. Real estate investments in registered investment companies that trade on an exchange are classified as Level 1 on the fair value hierarchy. Real estate investments in funds measured at fair value on the basis of NAV provided by the fund manager are classified as such. These NAVs are developed with inputs including discounted cash flow, independent appraisal, and market comparable analyses.Other assets include cash and cash equivalents and mark-to-market value of derivatives.100The cash value of the trust-owned insurance contract is primarily invested in investment-grade publicly traded equity and fixed-income securities.Other than hedge funds, private equity-like investments, and a portion of the real estate holdings, which are discussed above, we determine fair values based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses.The fair values of our defined benefit pension plan and retiree health plan assets as of December 31, 2020 by asset category were as follows:  Fair Value Measurements UsingAsset ClassTotalQuoted Prices in Active Markets forIdentical Assets(Level 1)SignificantObservable Inputs(Level 2)SignificantUnobservable Inputs(Level 3)Investments Valued at Net Asset Value(1)Defined Benefit Pension PlansPublic equity securities:U.S.$737.6 $476.1 $— $1.0 $260.5 International2,635.8 1,102.3 — — 1,533.5 Fixed income:Developed markets4,301.3 2.9 3,179.2 — 1,119.2 Developed markets - repurchase agreements(1,670.8)— (1,670.8)— — Emerging markets631.0 14.2 262.7 0.1 354.0 Private alternative investments:Hedge funds2,661.3 — — — 2,661.3 Equity-like funds2,844.7 — — 16.9 2,827.8 Real estate558.9 259.6 6.9 5.8 286.6 Other1,879.2 60.4 301.2 18.0 1,499.6 Total$14,579.0 $1,915.5 $2,079.2 $41.8 $10,542.5 Retiree Health Benefit PlansPublic equity securities:U.S.$68.3 $45.0 $— $0.1 $23.2 International162.3 58.1 — — 104.2 Fixed income:Developed markets101.5 — 80.3 — 21.2 Emerging markets53.5 — 24.7 — 28.8 Private alternative investments:Hedge funds229.7 — — — 229.7 Equity-like funds223.4 — — 1.6 221.8 Cash value of trust owned insurance contract2,204.6 — 2,204.6 — — Real estate25.8 24.5 0.7 0.6 — Other157.9 14.1 21.1 1.7 121.0 Total$3,227.0 $141.7 $2,331.4 $4.0 $749.9 (1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2020. The activity in the Level 3 investments during the year ended December 31, 2020 was not material.101The fair values of our defined benefit pension plan and retiree health plan assets as of December 31, 2019 by asset category were as follows:  Fair Value Measurements UsingAsset ClassTotalQuoted Prices in Active Markets for Identical Assets(Level 1)Significant Observable Inputs(Level 2)Significant Unobservable Inputs(Level 3)Investments Valued at Net Asset Value(1)Defined Benefit Pension PlansPublic equity securities:U.S.$794.2 $532.4 $— $— $261.7 International2,439.2 1,046.8 — — 1,392.4 Fixed income:Developed markets3,661.4 4.8 2,658.9 — 997.7 Developed markets - repurchase agreements(1,659.1)— (1,659.1)— — Emerging markets648.0 18.5 277.4 4.1 348.0 Private alternative investments:Hedge funds2,897.9 — — — 2,897.9 Equity-like funds2,279.3 — — 16.8 2,262.5 Real estate570.3 166.2 — — 404.1 Other1,226.8 62.9 222.6 6.6 934.7 Total$12,858.0 $1,831.7 $1,499.8 $27.5 $9,499.0 Retiree Health Benefit PlansPublic equity securities:U.S.$76.5 $52.1 $— $— $24.4 International152.6 60.8 — — 91.8 Fixed income:Developed markets82.7 — 56.3 — 26.4 Emerging markets58.5 — 27.0 0.4 31.1 Private alternative investments:Hedge funds250.8 — — — 250.8 Equity-like funds187.4 — — 1.6 185.8 Cash value of trust owned insurance contract1,832.2 — 1,832.2 — — Real estate31.3 16.2 — — 15.1 Other96.2 11.4 7.9 0.7 76.2 Total$2,768.2 $140.5 $1,923.4 $2.7 $701.6 (1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2019. The activity in the Level 3 investments during the year ended December 31, 2019 was not material.In 2021, we expect to contribute approximately $40 million to our defined benefit pension plans to satisfy minimum funding requirements for the year. We expect to contribute approximately $10 million in additional discretionary contributions in 2021.102Note 16: ContingenciesWe are involved in various lawsuits, claims, government investigations and other legal proceedings that arise in the ordinary course of business. These claims or proceedings can involve various types of parties, including governments, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others. These matters may involve patent infringement, antitrust, securities, pricing, sales and marketing practices, environmental, commercial, contractual rights, licensing obligations, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage, among others. The resolution of these matters often develops over a long period of time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. Legal proceedings that are significant or that we believe could become significant or material are described below.We believe the legal proceedings in which we are named as defendants are without merit and we are defending against them vigorously. It is not possible to determine the outcome of these matters, and we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for any of these matters; however, we believe that the resolution of all such matters will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations in any one accounting period.Litigation accruals, environmental liabilities, and the related estimated insurance recoverables are reflected on a gross basis as liabilities and assets, respectively, on our consolidated balance sheets. With respect to the product liability claims currently asserted against us, we have accrued for our estimated exposures to the extent they are both probable and reasonably estimable based on the information available to us. We accrue for certain product liability claims incurred but not filed to the extent we can formulate a reasonable estimate of their costs. We estimate these expenses based primarily on historical claims experience and data regarding product usage. Legal defense costs expected to be incurred in connection with significant product liability loss contingencies are accrued when both probable and reasonably estimable.Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of additional product liability and related claims in the future. Due to a very restrictive market for product liability insurance, we are self-insured for product liability losses for all our currently and previously marketed products. Patent LitigationAlimta Patent LitigationA number of manufacturers are seeking approvals in the U.S., a number of countries in Europe, and Japan to market generic forms of Alimta prior to the expiration of our vitamin regimen patents, alleging that those patents are invalid, not infringed, or both. We believe our Alimta vitamin regimen patents are valid and enforceable against these generic manufacturers. However, it is not possible to determine the ultimate outcome of the proceedings, and accordingly, we can provide no assurance that we will prevail. An unfavorable outcome in the U.S. could have a material adverse impact on our future consolidated results of operations and cash flows. We expect that a loss of exclusivity for Alimta in any of the below jurisdictions would result in a rapid and severe decline in future revenue for the product in the relevant market.U.S. Patent LitigationAlimta (pemetrexed) is protected by a vitamin regimen patent until 2021, plus pediatric exclusivity through May 2022. In August 2017, we filed a lawsuit in the U.S. District Court for the Southern District of Indiana against Apotex Inc. (Apotex) alleging infringement of Alimta's vitamin regimen patent for its application to market a pemetrexed product. In December 2019, the U.S. District Court for the Southern District of Indiana granted our motion for summary judgment of infringement, and in December 2020, the U.S. Court of Appeals for the Federal Circuit affirmed that ruling. Apotex did not request reconsideration or a rehearing of that ruling. However, Apotex could petition the U.S. Supreme Court to review the case. In December 2019, we settled a lawsuit we filed against Eagle Pharmaceuticals, Inc. (Eagle) in response to its application to market a product using an alternative form of pemetrexed. Per the settlement agreement, Eagle has a limited initial entry into the market with its product starting February 2022 (up to an approximate three-week supply) and subsequent unlimited entry starting April 2022. 103European Patent LitigationLegal proceedings are ongoing regarding our Alimta patents in various national courts throughout Europe. We are aware that several companies have received approval to market generic versions of pemetrexed in major European markets and that generic competitors may choose to launch at risk. Following a final decision in the Supreme Court of Germany in July 2020 overturning the lower court and upholding the validity of our Alimta patent, several generics that were on the market at risk left. We have removed the remaining generics from the market by obtaining preliminary injunctions in our favor. In September 2020, the Paris Court of First Instance in France issued a final decision upholding the validity of our Alimta patent and found infringement by Fresenius Kabi France and Fresenius Kabi Groupe France’s (collectively, Kabi) pemetrexed product. The court issued an injunction against Kabi and provisionally awarded us damages. In January 2021, that same court issued a preliminary injunction against Zentiva France S.A.S. (Zentiva), the last remaining company with a generic pemetrexed product on the French market, and provisionally awarded us damages. In October 2020, the Court of Appeal of the Netherlands overturned a lower court decision and ruled that our Alimta patent is valid and infringed and reinstated an injunction against Kabi, thereby removing Kabi's pemetrexed product from the Netherlands market. Kabi has appealed this decision to the Netherlands Supreme Court. Kabi's generic pemetrexed product was the only at risk generic on the market in the Netherlands.Our vitamin regimen patents have also been challenged in other smaller European jurisdictions. We will continue to seek to remove any generic pemetrexed products launched at risk in other European markets, seek damages with respect to such launches, and defend our patents against validity challenges.Japanese Administrative ProceedingsIn October 2020, the Japanese Patent Office (JPO) issued notices closing Hopira Inc.'s (Hospira) invalidation against our Japanese Alimta patents. As a result, Hospira filed a withdrawal notice with the JPO and the JPO accepted the withdrawal in November. This matter is now closed. Emgality Patent LitigationIn September 2018, we were named as a defendant in litigation filed by Teva Pharmaceuticals International GMBH and Teva Pharmaceuticals USA, Inc. (collectively, Teva) in the U.S. District Court for the District of Massachusetts seeking a ruling that various claims in nine different Teva patents would be infringed by our launch and continued sales of Emgality for the prevention of migraine in adults. Trial is expected in December 2021. Separately, the U.S. Patent and Trademark Office (USPTO) granted our request to initiate an inter partes review (IPR) to reexamine the validity of the nine Teva patents asserted against us in the litigation. In February 2020, the USPTO ruled in our favor and found that the claims asserted against us in six of Teva's nine patents were invalid. In March 2020, the USPTO ruled against us on the remaining three Teva patents, finding that we failed to show that the remaining three patents were unpatentable based on the subset of invalidity arguments available in an IPR proceeding. In April 2020, we appealed the USPTO’s March 2020 ruling, and Teva appealed the USPTO’s February 2020 ruling to the U.S. Court of Appeals for the Federal Circuit. The district court litigation will proceed in parallel with the IPR appeals.Jardiance Patent LitigationIn November 2018, Boehringer Ingelheim (BI), our partner in marketing and development of Jardiance, initiated U.S. patent litigation in the U.S. District Court of Delaware alleging infringement arising from Alkem Laboratories Ltd.'s (Alkem) and Ascend Laboratories, LLC's (Ascend) submissions of Abbreviated New Drug Applications (ANDA) seeking approval to market generic versions of Jardiance, Glyxambi, and Synjardy in accordance with the procedures set out in the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act). Particularly with respect to Jardiance, Alkem's and Ascend's ANDAs seek approval to market generic versions of Jardiance prior to the expiration of the relevant patents, and allege that certain patents, including in some allegations the compound patent, are invalid or would not be infringed. We are not a party to this litigation. Trial was scheduled for April 2021 but has been postponed.104Taltz Patent LitigationIn July 2018, we were named as a defendant in litigation filed by Genentech, Inc. (Genentech) in Germany seeking a ruling that Genentech’s patent would be infringed by our continued sales of Taltz in Germany. After it sold its patent rights to Novartis Pharma AG (Novartis) in June 2020, Genentech withdrew its infringement litigation and Novartis subsequently filed litigation against us in Germany asserting infringement based on sales of Taltz. In January 2021, we entered into a settlement agreement with Novartis whereby all pending litigation in Germany related to the Taltz patent has been withdrawn and this matter has concluded. We were also named in litigation in the U.K. in which Genentech asserted similar claims regarding its corresponding U.K. patent. Novartis purchased Genentech's U.K. patent rights for Taltz, sought substitution for Genentech in the U.K. litigation and then sought dismissal of all appeals. Orders to this effect were issued by the Patents Court and Court of Appeal in November 2020 and these matters have concluded.Zyprexa Canada Patent Litigation Beginning in the mid-2000’s, several generic companies in Canada challenged the validity of our Zyprexa compound patent. In 2012, the Canadian Federal Court of Appeals denied our appeal of a lower court's decision that certain patent claims were invalid for lack of utility. In 2013, Apotex Inc. and Apotex Pharmachem Inc. (collectively, Apotex) brought claims against us in the Ontario Superior Court of Justice at Toronto for damages related to our enforcement of the Zyprexa compound patent under Canadian regulations governing patented drugs. Apotex seeks compensation based on novel legal theories under the Statute of Monopolies, Trade-Mark Act, and common law. Trial is expected in 2021 or 2022.Product Liability LitigationActos® Product LiabilityWe are named along with Takeda Chemical Industries, Ltd. and Takeda affiliates (collectively, Takeda) as a defendant in four purported product liability class actions in Canada related to Actos, which we commercialized with Takeda in Canada until 2009, including one in Ontario filed December 2011 (Casseres et al. v. Takeda Pharmaceutical North America, Inc., et al.), one in Quebec filed July 2012 (Whyte et al. v. Eli Lilly et al.), one in Saskatchewan filed November 2017 (Weiler v. Takeda Canada Inc. et al.), and one in Alberta filed January 2013 (Epp v. Takeda Canada Inc. et al.). In general, plaintiffs in these actions alleged that Actos caused or contributed to their bladder cancer. Byetta® Product LiabilityFirst initiated in March 2009, we are named as a defendant in approximately 570 Byetta product liability lawsuits in the U.S. involving approximately 810 plaintiffs. Approximately 55 of these lawsuits, covering about 285 plaintiffs, are filed in California state court and coordinated in a Los Angeles Superior Court. Approximately 515 of the lawsuits, covering about 515 plaintiffs, are filed in federal court, the majority of which are coordinated in a multi-district litigation (MDL) in the U.S. District Court for the Southern District of California. Three lawsuits, representing approximately four plaintiffs, have also been filed in various state courts. Approximately 565 of the lawsuits, involving approximately 800 plaintiffs, contain allegations that Byetta caused or contributed to the plaintiffs' cancer (primarily pancreatic cancer or thyroid cancer); while six plaintiffs allege Byetta caused or contributed to pancreatitis. In addition, one case alleges that Byetta caused or contributed to ampullary cancer. The federal and state trial courts granted summary judgment in favor of us and our co-defendants on the claims alleging pancreatic cancer. The plaintiffs appealed those rulings. In November 2017, the U.S. Court of Appeals for the Ninth Circuit reversed the U.S. District Court's grant of summary judgment based on that court's discovery rulings and remanded the cases for further proceedings. In November 2018, the California Court of Appeal reversed the state court's grant of summary judgment based on that court's discovery rulings and remanded for further proceedings. We are aware of approximately 20 additional claimants who have not yet filed suit. These additional claims allege damages for pancreatic cancer or thyroid cancer. 105Cialis Product LiabilityFirst initiated in August 2015, we are named as a defendant in approximately 350 Cialis product liability lawsuits in the U.S. These cases, many of which were originally filed in various federal courts, contain allegations that Cialis caused or contributed to the plaintiffs' cancer (melanoma). In December 2016, the Judicial Panel on Multidistrict Litigation (JPML) granted the plaintiffs' petition to have filed cases and an unspecified number of future cases coordinated into a federal multidistrict litigation (MDL) in the U.S. District Court for the Northern District of California, alongside an existing coordinated proceeding involving Viagra®. The JPML ordered the transfer of the existing cases to the now-renamed MDL In re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation. In April 2020, the MDL court granted summary judgment to the defendants on all of the claims brought against them by the plaintiffs. In May 2020, plaintiffs filed an appeal in the U.S. Court of Appeals for the Ninth Circuit. Jardiance Product LiabilityFirst initiated in January 2019, we and Boehringer Ingelheim Pharmaceuticals, Inc., a subsidiary of BI, have been named as a defendant in approximately 95 product liability lawsuits in the U.S., mostly in Stamford Superior Court in Connecticut, alleging that Jardiance caused or contributed to plaintiffs’ Fournier’s gangrene. Our agreement with BI calls for BI to defend and indemnify us against any damages, costs, expenses, and certain other losses with respect to product liability claims in accordance with the terms of the agreement.Environmental ProceedingsUnder the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as "Superfund," we have been designated as one of several potentially responsible parties with respect to the cleanup of fewer than 10 sites. Under Superfund, each responsible party may be jointly and severally liable for the entire amount of the cleanup.Other Matters340B LitigationWe are the plaintiff in a lawsuit filed in January 2021 in the U.S. District Court for the Southern District of Indiana against the U.S. Department of Health and Human Services (HHS), the Secretary of HHS, the Health Resources and Services Administration (HRSA), and the Administrator of HRSA. The lawsuit challenges the HHS's December 30, 2020 advisory opinion stating that drug manufacturers are required to deliver discounts under the 340B program to all contract pharmacies. We seek a declaratory judgment that the defendants violated the Administrative Procedures Act and the U.S. Constitution, a preliminary injunction enjoining implementation of the alternative dispute resolution process created by defendants and, with it, their application of the advisory opinion, and other related relief. A hearing on our motion for preliminary injunction has been scheduled for February 26, 2021.In January 2021, we, along with other pharmaceutical manufacturers, were named as a defendant in a petition currently pending before the HHS Administration Dispute Resolution Panel. Petitioner seeks declaratory and other injunctive relief related to the 340B program.106Brazil Litigation – Cosmopolis FacilityLabor Attorney LitigationFirst initiated in 2008, our subsidiary in Brazil, Eli Lilly do Brasil Limitada (Lilly Brasil), is named in a lawsuit brought by the Labor Attorney for the 15th Region in the Labor Court of Paulinia, State of Sao Paulo, Brazil, alleging possible harm to employees and former employees caused by exposure to heavy metals at a former Lilly Brasil manufacturing facility in Cosmopolis, Brazil, operated by the company between 1977 and 2003. In May 2014, the labor court judge ruled against Lilly Brasil, ordering it to undertake several actions of unspecified financial impact, including paying lifetime health coverage for the employees and contractors who worked at the Cosmopolis facility more than six months during the affected years and their children born during and after this period. We appealed this decision. In July 2018, the appeals court affirmed the labor court's ruling with a liquidated award of 300 million Brazilian real (for moral damages, donation of equipment, and creation of a foundation) which, adjusted for inflation and interest using the current Central Bank of Brazil's special system of clearance and custody rate (SELIC), is approximately 950 million Brazilian real (approximately $180 million as of December 31, 2020). The appeals court restricted the broad health coverage awarded by the labor court to health problems that claimants could show arose from exposure to the alleged contamination. In August 2019, Lilly Brasil filed an appeal to the superior labor court. In September 2019, the appeals court stayed a number of elements of its prior decision, including the obligation to provide health coverage for contractors, their children, and children of employees who worked at the Cosmopolis facility, pending the determination of Lilly Brasil’s appeal to the superior labor court. The cost of any such health coverage has not been determined.In June 2019, the Labor Attorney filed an application in the labor court for enforcement of the healthcare coverage granted by the appeals court in its July 2018 ruling and requested restrictions on Lilly Brasil’s assets in Brazil. In July 2019, the labor court issued a ruling requiring either a freeze of Lilly Brasil’s immovable property or, alternatively, a security deposit of 500 million Brazilian real. Lilly Brasil filed a writ of mandamus challenging this ruling, but the court has stayed its decision on this writ and instead directed the parties to attend conciliation hearings, a process that concluded unsuccessfully in September 2020. Consequently, the partial stay of the proceedings relating to Lilly Brasil's application to appeal in the main proceedings has been lifted. In addition, the Labor Attorney's application for preliminary enforcement of the July 2018 healthcare coverage ruling was granted. As the conciliation hearings have been unsuccessful, we have filed a brief to strike the Labor Attorney’s application to enforce the previous healthcare coverage. Lilly Brasil is currently awaiting a determination as to whether its application seeking leave to appeal to the superior labor court has been successful.Individual Former Employee LitigationFirst initiated in 2003, we have also been named in approximately 30 lawsuits filed in the same labor court by individual former employees making similar claims. These lawsuits are each at various stages in the litigation process, with judgments being handed down in approximately half of the lawsuits, nearly all of which are on appeal in the labor courts.China NDRC Antitrust Matter The competition authority in China has investigated our distributor pricing practices in China in connection with a broader inquiry into pharmaceutical industry pricing. We have cooperated with this investigation.Eastern District of Pennsylvania Pricing (Average Manufacturer Price) InquiryIn November 2014, we, along with another pharmaceutical manufacturer, are named as co-defendants in United States et al. ex rel. Streck v. Takeda Pharm. Am., Inc., et al., which was filed in November 2014 and unsealed in the U.S. District Court for the Northern District of Illinois. The complaint alleges that the defendants should have treated certain credits from distributors as retroactive price increases and included such increases in calculating average manufacturer prices. Trial is scheduled for February 2022. 107Health Choice Alliance We are named as a defendant in a lawsuit filed in June 2017 in the U.S. District Court for the Eastern District of Texas seeking damages under the federal anti-kickback statute and state and federal false claims acts for certain patient support programs related to our products Humalog, Humulin, and Forteo. In September 2019, the U.S. District Court granted the U.S. Department of Justice’s motion to dismiss the relator’s second amended complaint. In January 2020, the relator appealed the District Court’s dismissal to the U.S. Court of Appeals for the Fifth Circuit. We are also named as a defendant in two similar lawsuits filed in Texas and New Jersey state courts in October 2019 seeking damages under the Texas Medicaid Fraud Prevention Act and New Jersey Medicaid False Claims Act, respectively. In November 2020, the Texas state court action was stayed pending a decision by the U.S. Court of Appeals for the Fifth Circuit on the aforementioned District Court appeal. Pricing Litigation, Investigations, and InquiresLitigationIn December 2017, we, along with Sanofi-Aventis U.S. LLC (Sanofi) and Novo Nordisk, Inc. (Novo Nordisk) were named as defendants in a consolidated purported class action lawsuit, In re. Insulin Pricing Litigation, in the U.S. District Court for the District of New Jersey relating to insulin pricing seeking damages under various state consumer protection laws and the Federal Racketeer Influenced and Corrupt Organization Act (federal RICO Act). Separately, in February 2018, we, along with Sanofi and Novo Nordisk, were named as defendants in MSP Recovery Claims, Series, LLC et al. v. Sanofi Aventis U.S. LLC et al., in the same court, seeking damages under various state consumer protection laws, common law fraud, unjust enrichment, and the federal RICO Act. In both In re. Insulin Pricing Litigation and the MSP Recovery Claims litigation, the court dismissed claims under the federal RICO Act and certain state laws. Also, filed in the same court in November 2020, we, along with Sanofi, Novo Nordisk, CVS, Express Scripts, and Optum, have been sued in a purported class action, FWK Holdings, LLC v. Novo Nordisk Inc., et al., for alleged violations of the federal RICO Act as well as the New Jersey RICO Act and anti-trust law. That same group of defendants, along with Medco Health and United Health Group, also have been sued in other purported class actions in the same court, Rochester Drug Co-Operative Inc. v. Eli Lilly & Co. et al. and Value Drug Co. v. Eli Lilly & Co. et al. both initiated in March 2020, for alleged violations of the federal RICO Act. In September 2020, the U.S. District Court for the District of New Jersey granted plaintiffs’ motion to consolidate FWK Holdings, LLC v. Novo Nordisk Inc., et al., Rochester Drug Co-Operative Inc. v. Eli Lilly & Co. et al., and Value Drug Co. v. Eli Lilly & Co. et al.In October 2018, the Minnesota Attorney General’s Office initiated litigation against us, Sanofi, and Novo Nordisk, State of Minnesota v. Sanofi-Aventis U.S. LLC et al., in the U.S. District Court for the District of New Jersey, alleging unjust enrichment, violations of various Minnesota state consumer protection laws, and the federal RICO Act. Additionally, in May 2019, the Kentucky Attorney General’s Office filed a complaint against us, Sanofi, and Novo Nordisk, Commonwealth of Kentucky v. Novo Nordisk, Inc. et al., in Kentucky state court, alleging violations of the Kentucky consumer protection law, false advertising, and unjust enrichment. In November 2019, Harris County in Texas initiated litigation against us, Sanofi, Novo Nordisk, Express Scripts, CVS, Optum, and Aetna, County of Harris Texas v. Eli Lilly & Co., et al., in federal court in the Southern District of Texas alleging violations of the federal RICO Act, federal and state anti-trust law, and the state deceptive trade practices-consumer protection act. Harris County also alleges common law claims such as fraud, unjust enrichment, and civil conspiracy. This lawsuit relates to our insulin products as well as Trulicity. 108Investigations, Subpoenas, and InquiriesWe received a subpoena from the New York and Vermont Attorney General Offices and civil investigative demands from the Washington, New Mexico, and Colorado Attorney General Offices relating to the pricing and sale of our insulin products. The Offices of the Attorney General in Mississippi, Washington D.C., California, Florida, Hawaii, and Nevada have requested information relating to the pricing and sale of our insulin products. We also received interrogatories and a subpoena from the California Attorney General's Office regarding our competition in the long-acting insulin market. We received two requests from the House of Representatives’ Committee on Energy and Commerce and a request from the Senate’s Committee on Health, Education, Labor, and Pensions seeking certain information related to the pricing of insulin products, among other issues. We also received requests from the House of Representatives’ Committee on Oversight and Reform and the Senate’s Committee on Finance, which seek detailed commercial information and business records. In January 2021, the Senate’s Committee on Finance released a report summarizing the findings of its investigation. We are cooperating with all of these aforementioned investigations, subpoenas, and inquiries.Research Corporation Technologies, Inc. In April 2016, we were named as a defendant in litigation filed by Research Corporation Technologies, Inc. (RCT) in the U.S. District Court for the District of Arizona. RCT is seeking damages for breach of contract, unjust enrichment, and conversion related to processes used to manufacture certain products, including Humalog and Humulin. A trial date has not been set. 109Note 17: Other Comprehensive Income (Loss)The following table summarizes the activity related to each component of other comprehensive income (loss):Continuing Operations(Amounts presented net of taxes)Foreign Currency Translation Gains (Losses)Unrealized Net Gains (Losses) on SecuritiesDefined Benefit Pension and Retiree Health Benefit PlansEffective Portion of Cash Flow HedgesDiscontinued OperationsAccumulated Other Comprehensive LossBeginning balance at January 1, 2018 (1)$(1,191.7)$113.5 $(4,311.3)$(234.3)$(71.1)$(5,694.9)Reclassification due to adoption of new accounting standard(2)— (128.9)— — — (128.9)Other comprehensive income (loss) before reclassifications(378.0)24.5 250.7 (16.3)12.2 (106.9)Net amount reclassified from accumulated other comprehensive loss— (31.2)207.9 11.7 2.1 190.5 Net other comprehensive income (loss)(378.0)(6.7)458.6 (4.6)14.3 83.6 Balance at December 31, 2018(3)(1,569.7)(22.1)(3,852.7)(238.9)(56.8)(5,740.2)Other comprehensive income (loss) before reclassifications(46.2)28.9 (967.6)14.5 (27.2)(997.6)Net amount reclassified from accumulated other comprehensive loss(62.1)(1.9)181.7 12.5 84.0 214.2 Net other comprehensive income (loss)(108.3)27.0 (785.9)27.0 56.8 (783.4)Balance at December 31, 2019(1,678.0)4.9 (4,638.6)(211.9)— (6,523.6)Other comprehensive income (loss) before reclassifications250.5 6.8 (379.7)(133.8)— (256.2)Net amount reclassified from accumulated other comprehensive loss— 3.1 267.3 13.0 — 283.4 Net other comprehensive income (loss)250.5 9.9 (112.4)(120.8)— 27.2 Ending balance at December 31, 2020$(1,427.5)$14.8 $(4,751.0)$(332.7)$— $(6,496.4)(1) Accumulated other comprehensive loss as of January 1, 2018 consists of $5.72 billion of accumulated other comprehensive loss attributable to controlling interest and $23.7 million of accumulated other comprehensive income attributable to noncontrolling interest. (2) This reclassification consists of $105.2 million of accumulated other comprehensive income attributable to controlling interest and $23.7 million of accumulated other comprehensive income attributable to noncontrolling interest. Refer to Note 1 for further details regarding the reclassification due to the adoption of ASU 2016-01. (3) Accumulated other comprehensive loss as of December 31, 2018 consists of $5.73 billion of accumulated other comprehensive loss attributable to controlling interest and $11.0 million of accumulated other comprehensive loss attributable to noncontrolling interest. 110The tax effects on the net activity related to each component of other comprehensive income (loss) for the years ended December 31, were as follows:Tax benefit (expense)202020192018Foreign currency translation gains/losses$128.3 $(18.4)$51.6 Unrealized net gains/losses on securities(4.3)(7.4)2.1 Defined benefit pension and retiree health benefit plans44.8 184.1 (85.3)Effective portion of cash flow hedges32.1 (7.3)1.3 Benefit/(provision) for income taxes allocated to other comprehensive income (loss) items$200.9 $151.0 $(30.3)Except for the tax effects of foreign currency translation gains and losses related to our foreign currency-denominated notes, cross-currency interest rate swaps, and other foreign currency exchange contracts designated as net investment hedges (see Note 7), income taxes were not provided for foreign currency translation. Generally, the assets and liabilities of foreign operations are translated into U.S. dollars using the current exchange rate. For those operations, changes in exchange rates generally do not affect cash flows; therefore, resulting translation adjustments are made in shareholders' equity rather than in the consolidated statements of operations.Reclassifications out of accumulated other comprehensive loss were as follows:Details about Accumulated Other Comprehensive Loss ComponentsYear Ended December 31,Affected Line Item in the Consolidated Statements of Operations202020192018Amortization of retirement benefit items:Prior service benefits, net$(55.0)$(56.8)$(74.9)Other—net, (income) expenseActuarial losses393.3 286.8 338.6 Other—net, (income) expenseTotal before tax338.3 230.0 263.7 Tax benefit(71.0)(48.3)(55.8)Income taxesNet of tax267.3 181.7 207.9 Other, net of tax16.1 (51.5)(19.5)Other—net, (income) expenseReclassifications from continuing operations (net of tax)283.4 130.2 188.4 Reclassifications from discontinued operations (net of tax)— 84.0 2.1 Net income from discontinued operationsTotal reclassifications for the period, net of tax$283.4 $214.2 $190.5 111Note 18: Other–Net, (Income) ExpenseOther–net, (income) expense consisted of the following:202020192018Interest expense$359.6 $400.6 $242.5 Interest income(33.0)(80.4)(159.3)Debt extinguishment loss (Note 11)— 252.5 — Gain on sale of antibiotic business in China (Note 3)— (309.8)— Retirement benefit plans(251.8)(209.9)(240.5)Other (income) expense(1,246.7)(344.6)11.7 Other–net, (income) expense$(1,171.9)$(291.6)$(145.6)For the years ended December 31, 2020 and 2019, other income was primarily related to net gains on investments (Note 7). Note 19: Discontinued OperationsOn September 24, 2018, Elanco completed its initial public offering (IPO) resulting in the issuance of 72.3 million shares of its common stock, which represented 19.8 percent of Elanco's outstanding shares, at $24 per share.In connection with the completion of the IPO, through a series of equity and other transactions, we transferred to Elanco the animal health businesses that formed its business. In exchange, Elanco transferred to us consideration of approximately $4.2 billion, which consisted primarily of the net proceeds from the IPO and the net proceeds from a $2.00 billion debt offering and a $500.0 million three-year term loan facility entered into by Elanco in August 2018. The consideration that we received was used for debt repayment, dividends, and share repurchases. The excess of the net proceeds from the IPO over the net book value of our divested interest was $629.2 million and was recorded in additional paid-in capital. Through March 11, 2019, we continued to consolidate Elanco, as we retained control over Elanco. We completed the disposition of our remaining 80.2 percent ownership of Elanco common stock through a tax-free exchange offer that closed on March 11, 2019 (the disposition date). The earnings attributable to the divested, noncontrolling interest for the period from the IPO until disposition were not material. As a result of the disposition, in the first quarter of 2019, we recognized a gain related to the disposition of approximately $3.7 billion, and we presented Elanco, including the gain related to the disposition, as discontinued operations in our consolidated financial statements for all periods presented. The following table sets summarizes revenue and net income from discontinued operations:20192018Revenue from discontinued operations$580.0 $3,062.4 Net income from discontinued operations3,680.5 81.4 The gain related to the disposition of Elanco in the consolidated statement of cash flows includes the operating results of Elanco through the disposition date, which were not material. Net cash flows of our discontinued operations for operating activities were not material for the year ended December 31, 2019. Net cash provided by operating activities related to our discontinued operations was approximately $500 million for the year ended December 31, 2018. The net cash flows of our discontinued operations for investing activities were not material for any period presented. We entered into a transitional services agreement (TSA) with Elanco that is designed to facilitate the orderly transfer of various services to Elanco. The TSA relates primarily to administrative services, which are generally to be provided over 24 months from the disposition date. This agreement is not material and does not confer upon us the ability to influence the operating and/or financial policies of Elanco subsequent to the disposition date.112Management’s ReportsManagement’s Report for Financial Statements—Eli Lilly and Company and SubsidiariesManagement of Eli Lilly and Company and subsidiaries is responsible for the accuracy, integrity, and fair presentation of the financial statements. The statements have been prepared in accordance with generally accepted accounting principles in the United States and include amounts based on judgments and estimates by management. In management’s opinion, the consolidated financial statements present fairly our financial position, results of operations, and cash flows.In addition to the system of internal accounting controls, we maintain a code of conduct (known as "The Red Book") that applies to all employees worldwide, requiring proper overall business conduct, avoidance of conflicts of interest, compliance with laws, and confidentiality of proprietary information. All employees must take training annually on The Red Book and are required to report suspected violations. A hotline number is available on our lilly.com website and on the internal LillyNow website to enable reporting of suspected violations anonymously. Employees who report suspected violations are protected from discrimination or retaliation by the company. In addition to The Red Book, the chief executive officer and all financial management must sign a financial code of ethics, which further reinforces their ethical and fiduciary responsibilities.The consolidated financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm. Their responsibility is to examine our consolidated financial statements in accordance with generally accepted auditing standards of the Public Company Accounting Oversight Board (United States). Ernst & Young’s opinion with respect to the fairness of the presentation of the statements is included in Item 8 of our annual report on Form 10-K. Ernst & Young reports directly to the audit committee of the board of directors.Our audit committee includes six nonemployee members of the board of directors, all of whom are independent from our company. The committee charter, which is available on our website, outlines the members’ roles and responsibilities. It is the audit committee’s responsibility to appoint an independent registered public accounting firm subject to shareholder ratification, pre-approve both audit and non-audit services performed by the independent registered public accounting firm, and review the reports submitted by the firm. The audit committee meets several times during the year with management, the internal auditors, and the independent public accounting firm to discuss audit activities, internal controls, and financial reporting matters, including reviews of our externally published financial results. The internal auditors and the independent registered public accounting firm have full and free access to the committee.We are dedicated to ensuring that we maintain the high standards of financial accounting and reporting that we have established. We are committed to providing financial information that is transparent, timely, complete, relevant, and accurate. Our culture demands integrity and an unyielding commitment to strong internal practices and policies. Finally, we have the highest confidence in our financial reporting, our underlying system of internal controls, and our people, who are objective in their responsibilities, operate under a code of conduct and are subject to the highest level of ethical standards.Management’s Report on Internal Control Over Financial Reporting—Eli Lilly and Company and SubsidiariesManagement of Eli Lilly and Company and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. We have global financial policies that govern critical areas, including internal controls, financial accounting and reporting, fiduciary accountability, and safeguarding of corporate assets. Our internal accounting control systems are designed to provide reasonable assurance that assets are safeguarded, that transactions are executed in accordance with management’s authorization and are properly recorded, and that accounting records are adequate for preparation of financial statements and other financial information. A staff of internal auditors regularly monitors, on a worldwide basis, the adequacy and effectiveness of internal accounting controls. The general auditor reports directly to the audit committee of the board of directors.We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control—Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 113Based on our evaluation under this framework, we concluded that our internal control over financial reporting was effective as of December 31, 2020. However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.The effectiveness of internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report, which appears herein. Their responsibility is to evaluate whether internal control over financial reporting was designed and operating effectively.David A. RicksAnat AshkenaziChairman, President, and Chief Executive OfficerSenior Vice President and Chief Financial OfficerFebruary 17, 2021 114Report of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of Eli Lilly and CompanyOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Eli Lilly and Company and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders‘ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 17, 2021 expressed an unqualified opinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.115Medicaid, Managed Care, and Medicare sales rebate accrualsDescription of the MatterAs described in Note 2 to the consolidated financial statements under the caption “Net Product Revenue,” the Company establishes provisions for sales rebate and discounts in the same period as the related sales occur. At December 31, 2020 the Company had $5,853.0 million in sales rebate and discount accruals. A large portion of these accruals are rebates associated with sales in the United States for which payment for purchase of the product is covered by Medicaid, Managed Care, and Medicare. Auditing the Medicaid, Managed Care, and Medicare sales rebate and discount liabilities is challenging because of the subjectivity of certain assumptions required to estimate the rebate liabilities. In calculating the appropriate accrual amount, the Company considers historical Medicaid, Managed Care, and Medicare rebate payments by product as a percentage of their historical sales as well as any significant changes in sales trends, the lag in payment timing, an evaluation of the current Medicaid and Medicare laws and interpretations, the percentage of products that are sold via Medicaid, Managed Care, and Medicare, and product pricing. For Medicaid, there is significant complexity associated with calculating the legislated Medicaid rebates. Management utilizes employees with legislative experience and knowledge in developing assumptions used to calculate Medicaid rebates. Similarly, for Managed Care and Medicare, given variability in prescription drug costs, continued historical year over year increases in enrollees and variability in prescription data, historical rebate information may not be predictive for management to estimate the rebate accrual and thus, management supplements its historical data analysis with qualitative adjustments based upon current utilization.How We Addressed the Matter in Our AuditWe tested the Company’s controls addressing the identified risks of material misstatement related to the valuation of the sales rebate and discount liabilities. This included testing controls over management’s review of the significant assumptions used to calculate the Medicaid, Managed Care, and Medicare rebate liabilities, including the significant assumptions discussed above. This testing also included management’s control to compare actual activity to forecasted activity and controls to ensure the data used to evaluate the significant assumptions was complete and accurate.Our audit procedures included, among others, evaluating for reasonableness the significant assumptions in light of economic trends, product profiles, and other regulatory factors. Our testing involved assessing the historical accuracy of management’s estimates by comparing actual activity to previous estimates and performing analytical procedures, based on internal and external data sources, to evaluate the completeness of the reserves. Additionally, our procedures included reviewing a sample of contracts, testing a sample of rebate payments and testing the underlying data used in management’s evaluation. For Medicaid, we involved our professional with an understanding of the statutory reimbursement requirements to assess the consistency of the Company’s calculation methodologies with the applicable government regulations and policy. For Medicare we evaluated the reasonableness of assumptions made by management in estimating the Medicare coverage gap liability.Retirement Benefits - Valuation of Alternative InvestmentsDescription of the MatterAs described in Note 15 to the consolidated financial statements under the caption “Benefit Plan Investments,” the Company’s benefit plan investment policies are set with specific consideration of return and risk requirements in relationship to the respective liabilities. At December 31, 2020 the Company had $17,806.0 million in plan assets related to the defined benefit pension plans and retiree health benefit plans. Approximately 33% of the total pension and retiree health assets are in hedge funds and private equity-like investment funds (“alternative investments”). These alternative investments are valued using significant unobservable inputs or are valued at net asset value (NAV) reported by the counterparty, adjusted as necessary.Auditing the fair value of these alternative investments is challenging because of the higher estimation uncertainty of the inputs to the fair value calculations, including the underlying net asset values (“NAVs”), discounted cash flow valuations, comparable market valuations, and adjustments for currency, credit, liquidity and other risks. Additionally, certain information regarding the fair value of these alternative investments is based on unaudited information available to management at the time of valuation. 116How We Addressed the Matter in Our AuditWe tested the Company’s controls addressing the risks of material misstatement relating to valuation of alternative investments. This included testing management’s review controls over alternative investment valuation, which included a comparison of returns to benchmarks and in-person or telephonic meetings with investment firms to discuss valuation policies and procedures, as well as portfolio performance. Our audit procedures included, among others, comparing fund returns to selected relevant benchmarks and understanding variations, obtaining the latest audited financial statements and comparing to the Company’s estimated fair values and reconciling any differences. We also inquired of management about changes to the investment portfolio and/or related investment strategies and considerations. We assessed the historical accuracy of management’s estimates by comparing actual activity to previous estimates. We evaluated for contrary evidence by confirming the fair value of the investments and ownership interest directly with the trustees and a sample of managers at year end. /s/    Ernst & Young LLPWe have served as the Company‘s auditor since 1940. Indianapolis, IndianaFebruary 17, 2021 117Report of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of Eli Lilly and CompanyOpinion on Internal Control Over Financial ReportingWe have audited Eli Lilly and Company and subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Eli Lilly and Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders‘ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 17, 2021 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.118Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/    Ernst & Young LLPIndianapolis, IndianaFebruary 17, 2021 119Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresUnder applicable Securities and Exchange Commission (SEC) regulations, management of a reporting company, with the participation of the principal executive officer and principal financial officer, must periodically evaluate the company’s “disclosure controls and procedures,” which are defined generally as controls and other procedures designed to ensure that information required to be disclosed by the reporting company in its periodic reports filed with the SEC (such as this Form 10-K) is recorded, processed, summarized, and reported on a timely basis.Our management, with the participation of David A. Ricks, president and chief executive officer, and Anat Ashkenazi, senior vice president and chief financial officer, evaluated our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020, and concluded that they were effective.Management's Report on Internal Control over Financial ReportingMr. Ricks and Ms. Ashkenazi provided a report on behalf of management on our internal control over financial reporting, in which management concluded that the company’s internal control over financial reporting is effective at December 31, 2020 based on the framework in "Internal Control—Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Due to the inherent limitations, no evaluation over internal control can provide absolute assurance that no material misstatements or fraud exist. In addition, Ernst & Young LLP, the company’s independent registered public accounting firm, issued an attestation report on the company’s internal control over financial reporting as of December 31, 2020. You can find the full text of management’s report and Ernst & Young’s attestation report in Item 8.Changes in Internal Control over Financial ReportingDuring the fourth quarter of 2020, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Item 9B.Other InformationNone.120Part IIIItem 10.Directors, Executive Officers, and Corporate GovernanceDirectors and Executive OfficersInformation relating to our board of directors is found in our Definitive Proxy Statement, to be dated on or about March 19, 2021 (Proxy Statement), under “Governance - Board Operations and Governance” and is incorporated in this Annual Report on Form 10-K by reference.Information relating to our executive officers is found at Item 1, “Business - Executive Officers of the Company” and is incorporated by reference herein. Code of EthicsInformation relating to our code of ethics is found in our Proxy Statement under “Governance - Board Oversight of Strategy, Compliance, and Risk Management - Code of Ethics” and is incorporated in this Annual Report on Form 10-K by reference.Corporate GovernanceInformation about the procedures by which shareholders can recommend nominees to our board of directors is found in our Proxy Statement under “Shareholder Engagement on Governance Issues - Shareholder Recommendations and Nominations for Director Candidates" is incorporated in this Annual Report on Form 10-K by reference.The board of directors has appointed an audit committee consisting entirely of independent directors in accordance with applicable SEC and New York Stock Exchange requirements for audit committees. Information about our audit committee is found in our Proxy Statement under “Governance - Membership and Meetings of the Board and Its Committees - Audit Committee” and is incorporated in this Annual Report on Form 10-K by reference.Item 11.Executive CompensationInformation on director compensation, executive compensation, and compensation committee matters can be found in the Proxy Statement under “Governance - Director Compensation,” “- Membership and Meetings of the Board and Its Committees - Compensation Committee,” “Compensation - Compensation Discussion and Analysis,” and “- Executive Compensation.” Such information is incorporated in this Annual Report on Form 10-K by reference. 121Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersSecurity Ownership of Certain Beneficial Owners and ManagementInformation relating to ownership of the company’s common stock by management and by persons known by the company to be the beneficial owners of more than five percent of the outstanding shares of common stock is found in the Proxy Statement under “Ownership of Company Stock” and incorporated in this Annual Report on Form 10-K by reference.Securities Authorized for Issuance Under Equity Compensation PlansThe following table presents information as of December 31, 2020 regarding the company's compensation plans under which shares of the company's common stock have been authorized for issuance.Plan category(a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights (1)(b) Weighted-average exercise price of outstanding options, warrants, and rights(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))Equity compensation plans approved by security holders— $—49,510,908 Equity compensation plan not approved by security holders— —— Total— —49,510,908 (1) 9,192,921 shares are underlying outstanding equity awards other than options.Item 13.Certain Relationships and Related Transactions, and Director IndependenceRelated Person TransactionsInformation relating to the policies and procedures for approval of related person transactions by our board of directors can be found in the Proxy Statement under “Governance - Highlights of the Company’s Corporate Governance - Conflicts of Interest and Transactions with Related Persons.” Such information is incorporated in this Annual Report on Form 10-K by reference.Director IndependenceInformation relating to director independence can be found in the Proxy Statement under “Governance - Director Independence” and is incorporated in this Annual Report on Form 10-K by reference.Item 14.Principal Accountant Fees and ServicesInformation related to the fees and services of our principal independent accountants, Ernst & Young LLP, can be found in the Proxy Statement under “Audit Matters - Item 3. Ratification of the Appointment of the Independent Auditor - Audit Committee Report - Services Performed by the Independent Auditor” and “- Independent Auditor Fees.” Such information is incorporated in this Annual Report on Form 10-K by reference.122Item 15.Exhibits and Financial Statement Schedules(a)1.    Financial StatementsThe following consolidated financial statements of the company and its subsidiaries are found at Item 8:•Consolidated Statements of Operations—Years Ended December 31, 2020, 2019, and 2018 •Consolidated Statements of Comprehensive Income (Loss)—Years Ended December 31, 2020, 2019, and 2018•Consolidated Balance Sheets—December 31, 2020 and 2019•Consolidated Statements of Shareholders' Equity—Years Ended December 31, 2020, 2019, and 2018•Consolidated Statements of Cash Flows—Years Ended December 31, 2020, 2019, and 2018•Notes to Consolidated Financial Statements(a)2.    Financial Statement SchedulesThe consolidated financial statement schedules of the company and its subsidiaries have been omitted because they are not required, are inapplicable, or are adequately explained in the financial statements.Financial statements of interests of 50 percent or less, which are accounted for by the equity method, have been omitted because they do not, considered in the aggregate as a single subsidiary, constitute a significant subsidiary.123(a)3.    Exhibits2.1Agreement and Plan of Merger, dated January 5, 2019, among the Company, Bowfin Acquisition Corporation and Loxo Oncology, Inc.3.1  Amended Articles of Incorporation3.2  Bylaws, as amended4.1  Indenture, dated February 1, 1991, between the Company and Deutsche Bank Trust Company Americas, as successor trustee to Citibank, N.A., as Trustee4.2  Tripartite Agreement dated September 13, 2007, appointing Deutsche Bank Trust Company Americas as Successor Trustee under the Indenture listed in Exhibit 4.14.3Description of the Company's Common Stock4.4Description of the Company's 1.000% Notes due 2022, 1.625% Notes due 2026, and 2.125% Notes due 20304.5Description of the Company's 6.77% Notes due 20364.6Description of the Company's 7 1/8% Notes due 20254.7Description of the Company's 0.625% Notes due 2031 and 1.700% Notes due 204910.1  Amended and Restated 2002 Lilly Stock Plan(1)10.2  Form of Performance Award under the 2002 Lilly Stock Plan(1)10.3  Form of Performance Award under the 2002 Lilly Stock Plan (with non-compete)(1)10.4Form of Performance Award under the 2002 Lilly Stock Plan (non-executive officer)(1)10.5Form of Shareholder Value Award under the 2002 Lilly Stock Plan(1)10.6Form of Shareholder Value Award under the 2002 Lilly Stock Plan (with non-compete)(1)10.7Form of Shareholder Value Award under the 2002 Lilly Stock Plan (non-executive officer)(1)10.8  Form of Relative Value Award under the 2002 Lilly Stock Plan(1)10.9  Form of Relative Value Award under the 2002 Lilly Stock Plan (with non-compete)(1)10.10  Form of Restricted Stock Unit Award under the 2002 Lilly Stock Plan(1)10.11  Restricted Stock Unit Award to Michael Harrington under the 2002 Lilly Stock Plan(1)10.12  The Lilly Deferred Compensation Plan, as amended(1)10.13The Lilly Directors' Deferral Plan, as amended(1)10.14The Eli Lilly and Company Bonus Plan, as amended(1)10.152007 Change in Control Severance Pay Plan for Select Employees, as amended(1)21  List of Subsidiaries23  Consent of Independent Registered Public Accounting Firm31.1  Rule 13a-14(a) Certification of David A. Ricks, Chairman, President, and Chief Executive Officer31.2  Rule 13a-14(a) Certification of Anat Ashkenazi, Senior Vice President and Chief Financial Officer32  Section 1350 Certification101  Interactive Data File104Cover Page Interactive Data File (formatted Inline XBRL and contained in Exhibit 101)(1) Indicates management contract or compensatory plan.124Item 16.Form 10-K SummaryNot applicable.Index to ExhibitsThe following documents are filed as part of this report:Exhibit     Location2.1Agreement and Plan of Merger, dated January 5, 2019, among the Company, Bowfin Acquisition Corporation and Loxo Oncology, Inc.Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Loxo Oncology, Inc. on January 7, 20193.1  Amended Articles of Incorporation  Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013 3.2  Bylaws, as amended  Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on February 9, 2021 4.1  Indenture, dated February 1, 1991, between the Company and Deutsche Bank Trust Company Americas, as successor trustee to Citibank, N.A., as Trustee  Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3, Registration No. 333-1869794.2  Tripartite Agreement, dated September 13, 2007, appointing Deutsche Bank Trust Company Americas as Successor Trustee under the Indenture listed in Exhibit 4.1  Incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 20084.3Description of the Company's Common StockIncorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 20194.4Description of the Company's 1.000% Notes due 2022, 1.625% Notes due 2026, and 2.125% Notes due 2030Incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 20194.5Description of the Company's 6.77% Notes due 2036Incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 20194.6Description of the Company's 7 1/8% Notes due 2025Incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 20194.7Description of the Company's 0.625% Notes due 2031 and 1.700% Notes due 2049Incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 201910.1  Amended and Restated 2002 Lilly Stock Plan  Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 201810.2  Form of Performance Award under the 2002 Lilly Stock Plan  Attached10.3Form of Performance Award under the 2002 Lilly Stock Plan (with non-compete)Attached10.4Form of Performance Award under the 2002 Lilly Stock Plan (non-executive officer)Attached10.5  Form of Shareholder Value Award under the 2002 Lilly Stock Plan  Attached12510.6Form of Shareholder Value Award under the 2002 Lilly Stock Plan (with non-compete)Attached10.7Form of Shareholder Value Award under the 2002 Lilly Stock Plan (non-executive officer)Attached10.8  Form of Relative Value Award under the 2002 Lilly Stock Plan  Attached10.9  Form of Relative Value Award under the 2002 Lilly Stock Plan (with non-compete)  Attached10.10  Form of Restricted Stock Unit Award under the 2002 Lilly Stock Plan  Attached 10.11Restricted Stock Unit Award to Michael Harrington under the 2002 Lilly Stock PlanIncorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 201910.12The Lilly Deferred Compensation Plan, as amendedIncorporated by reference to Exhibit 10.5 to the Company's annual report on Form 10-K for the year ended December 31, 201310.13The Lilly Directors' Deferral Plan, as amendedIncorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 201710.14The Eli Lilly and Company Bonus Plan, as amendedAttached10.15  2007 Change in Control Severance Pay Plan for Select Employees, as amended  Attached21  List of Subsidiaries  Attached23  Consent of Independent Registered Public Accounting Firm  Attached31.1  Rule 13a-14(a) Certification of David A. Ricks, Chairman, President, and Chief Executive Officer  Attached31.2  Rule 13a-14(a) Certification of Anat Ashkenazi, Senior Vice President and Chief Financial Officer  Attached32  Section 1350 Certification  Attached101  Interactive Data File  Attached104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)Attached126SignaturesPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.Eli Lilly and CompanyBy /s/    David A. RicksDavid A. RicksChairman, President, and Chief Executive OfficerFebruary 17, 2021 127Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 17, 2021 by the following persons on behalf of the Registrant and in the capacities indicated.SignatureTitle/s/    David A. RicksChairman, President, and Chief Executive Officer (principal executive officer)DAVID A. RICKS/s/    Anat AshkenaziSenior Vice President and Chief Financial Officer (principal financial officer)ANAT ASHKENAZI/s/    Donald A. ZakrowskiVice President, Finance, and Chief Accounting Officer (principal accounting officer)DONALD A. ZAKROWSKI/s/    Ralph AlvarezDirectorRALPH ALVAREZ/s/    Katherine Baicker, Ph.D.DirectorKATHERINE BAICKER, Ph.D./s/    Carolyn R. Bertozzi, Ph.D.DirectorCAROLYN R. BERTOZZI, Ph.D./s/    Michael L. EskewDirectorMICHAEL L. ESKEW/s/    J. Erik FyrwaldDirectorJ. ERIK FYRWALD/s/    Jamere JacksonDirectorJAMERE JACKSONDirectorKIMBERLY H. JOHNSON/s/    William G. Kaelin, Jr., M.D.DirectorWILLIAM G. KAELIN, JR., M.D./s/    Juan R. LucianoDirectorJUAN R. LUCIANO/s/    Marschall S. Runge, M.D., Ph.D.DirectorMARSCHALL S. RUNGE, M.D., Ph.D./s/    Kathi P. SeifertDirectorKATHI P. SEIFERT/s/    Gabrielle SulzbergerDirectorGABRIELLE SULZBERGER/s/    Jackson P. TaiDirectorJACKSON P. TAI/s/    Karen WalkerDirectorKAREN WALKER128Trademarks Used In This ReportTrademarks or service marks owned by Eli Lilly and Company or its affiliates, when first used in each item of this report, appear with an initial capital and are followed by the symbol ® or ™, as applicable. In subsequent uses of the marks in the item, the symbols may be omitted.Actos® is a trademark of Takeda Pharmaceutical Company Limited.Byetta® is a trademark of Amylin Pharmaceuticals, Inc.Glyxambi®, Jardiance®, Jentadueto®, Synjardy®, Trajenta®, and Trijardy® are trademarks of Boehringer Ingelheim GmbH.Posilac® is a trademark of Union Agener and Elanco US Inc.Tyvyt® is a trademark of Innovent Biologics (Suzhou) Co., Ltd. Viagra® is a trademark of Pfizer Inc.129
8-K_1018724_0001018724-20-000002.htm
Document false0001018724 0001018724 2020-01-30 2020-01-30 Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 _________________________ FORM 8-K _________________________ CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934January 30, 2020 Date of Report(Date of earliest event reported) _________________________AMAZON.COM, INC. (Exact name of registrant as specified in its charter)_________________________ Delaware 000-22513 91-1646860(State or other jurisdiction ofincorporation) (Commission File Number) (IRS Employer Identification No.)410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code)(206) 266-1000 (Registrant’s telephone number, including area code)_________________________ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Trading Symbol(s) Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share AMZN Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨ Table of ContentsTABLE OF CONTENTS ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.3  ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.3  SIGNATURES4  EXHIBIT 99.1   EXHIBIT 99.2 Table of ContentsITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.On January 30, 2020, Amazon.com, Inc. announced its fourth quarter 2019 and year ended December 31, 2019 financial results. A copy of the press release containing the announcement is included as Exhibit 99.1 and additional information regarding the inclusion of non-GAAP financial measures in certain of Amazon.com, Inc.’s public disclosures, including its fourth quarter 2019 and year ended December 31, 2019 financial results announcement, is included as Exhibit 99.2. Both of these exhibits are incorporated herein by reference.ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.(d) Exhibits. ExhibitNumberDescription  99.1Press Release dated January 30, 2020 announcing Amazon.com, Inc.’s Fourth Quarter 2019 and Year Ended December 31, 2019 Financial Results.  99.2Information Regarding Non-GAAP Financial Measures.  104The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101).3Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  AMAZON.COM, INC. (REGISTRANT)    By:/s/ Brian T. Olsavsky  Brian T. Olsavsky  Senior Vice President andChief Financial OfficerDated: January 30, 2020 4
8-K_59478_0001193125-21-357380.htm
8-K ELI LILLY & Co false 0000059478 0000059478 2021-12-15 2021-12-15 0000059478 us-gaap:CommonClassAMember 2021-12-15 2021-12-15 0000059478 lly:A1.000NotesDueJune22022Member 2021-12-15 2021-12-15 0000059478 lly:A718NotesDueJune12025Member 2021-12-15 2021-12-15 0000059478 lly:A1.625NotesDueJune22026Member 2021-12-15 2021-12-15 0000059478 lly:A2.125NotesDueJune32030Member 2021-12-15 2021-12-15 0000059478 lly:A625Notesdue2031Member 2021-12-15 2021-12-15 0000059478 lly:A5000NotesDue2033Member 2021-12-15 2021-12-15 0000059478 lly:A6.77NotesDueJanuary12036Member 2021-12-15 2021-12-15 0000059478 lly:A1625NotesDue2043Member 2021-12-15 2021-12-15 0000059478 lly:A1.700Notesdue2049Member 2021-12-15 2021-12-15 0000059478 lly:A1125NotesDue2051Member 2021-12-15 2021-12-15 0000059478 lly:A1375NotesDue2061Member 2021-12-15 2021-12-15     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): December 15, 2021     ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in its Charter)       Indiana   001-06351   35-0470950 (State or Other Jurisdictionof Incorporation)   (CommissionFile Number)   (I.R.S. EmployerIdentification Number)   Lilly Corporate CenterIndianapolis, Indiana   46285 (Address of Principal Executive Offices)   (Zip Code) Registrant’s Telephone Number, Including Area Code: (317) 276-2000 Not Applicable (Former Name or Former Address, if Changed Since Last Report.)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class    Trading Symbol(s)    Name of each exchange on which registered Common Stock (no par value)    LLY    New York Stock Exchange 1.000% Notes due 2022    LLY22    New York Stock Exchange 7 1/8% Notes due 2025    LLY25    New York Stock Exchange 1.625% Notes due 2026    LLY26    New York Stock Exchange 2.125% Notes due 2030    LLY30    New York Stock Exchange 0.625% Notes due 2031    LLY31    New York Stock Exchange 0.500% Notes due 2033    LLY33    New York Stock Exchange 6.77% Notes due 2036    LLY36    New York Stock Exchange 1.625% Notes due 2043    LLY43    New York Stock Exchange 1.700% Notes due 2049    LLY49A    New York Stock Exchange 1.125% Notes due 2051    LLY51    New York Stock Exchange 1.375% Notes due 2061    LLY61    New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐       Item 2.02 Results of Operations and Financial Condition. On December 15, 2021, Eli Lilly and Company (the “Company”) issued a press release updating its financial guidance for 2021 and announcing its financial guidance for 2022. In addition, on the same day, the Company held a teleconference for analysts and media to discuss this guidance. The teleconference was webcast on the Company’s website. The press release is attached to this Form 8-K as Exhibit 99.1. The information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing. Item 9.01 Financial Statements and Exhibits.   (d) Exhibits   Exhibit No.    Description 99.1    Press Release dated December 15, 2021 104    Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.   ELI LILLY AND COMPANY (Registrant) By:   /s/ Donald A. Zakrowski Name:   Donald A. Zakrowski Title:   Vice President, Finance, and Chief Accounting Officer Date:   December 15, 2021
8-K_1067983_0001193125-22-046708(1).htm
8-K BERKSHIRE HATHAWAY INC DE false 0001067983 0001067983 2022-02-14 2022-02-14 0001067983 brka:ClassACommonStock2Member 2022-02-14 2022-02-14 0001067983 brka:ClassBCommonStock1Member 2022-02-14 2022-02-14 0001067983 brka:M0.750SeniorNotesDue20234Member 2022-02-14 2022-02-14 0001067983 brka:M1.125SeniorNotesDue2027Member12Member 2022-02-14 2022-02-14 0001067983 brka:M1.625SeniorNotesDue20355Member 2022-02-14 2022-02-14 0001067983 brka:M1.300SeniorNotesDue20246Member 2022-02-14 2022-02-14 0001067983 brka:M2.150SeniorNotesDue20287Member 2022-02-14 2022-02-14 0001067983 brka:M0.625SeniorNotesDue20233Member 2022-02-14 2022-02-14 0001067983 brka:M0.000SeniorNotesDue20258Member 2022-02-14 2022-02-14 0001067983 brka:M2.375SeniorNotesDue20399Member 2022-02-14 2022-02-14 0001067983 brka:M0.500SeniorNotesDue204110Member 2022-02-14 2022-02-14 0001067983 brka:M2.625SeniorNotesDue205911Member 2022-02-14 2022-02-14     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) February 14, 2022     BERKSHIRE HATHAWAY INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)       DELAWARE   001-14905   47-0813844 (STATE OR OTHER JURISDICTION OF INCORPORATION)   (COMMISSION FILE NUMBER)   (I.R.S. EMPLOYER IDENTIFICATION NO.)   3555 Farnam Street Omaha, Nebraska   68131 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)   (ZIP CODE) (402) 346-1400 REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbols   Name of each exchange on which registered Class A Common Stock   BRK.A   New York Stock Exchange Class B Common Stock   BRK.B   New York Stock Exchange 0.750% Senior Notes due 2023   BRK23   New York Stock Exchange 1.125% Senior Notes due 2027   BRK27   New York Stock Exchange 1.625% Senior Notes due 2035   BRK35   New York Stock Exchange 1.300% Senior Notes due 2024   BRK24   New York Stock Exchange 2.150% Senior Notes due 2028   BRK28   New York Stock Exchange 0.625% Senior Notes due 2023   BRK23A   New York Stock Exchange 0.000% Senior Notes due 2025   BRK25   New York Stock Exchange 2.375% Senior Notes due 2039   BRK39   New York Stock Exchange 0.500% Senior Notes due 2041   BRK41   New York Stock Exchange 2.625% Senior Notes due 2059   BRK59   New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       ITEM 3.01 Notice of Delisting or Failure to Satisfy a Continue Listing Rule or Standard; Transfer of Listing As described under Item 5.02, on February 14, 2022, Thomas S. Murphy resigned from Berkshire Hathaway’s Board of Directors. Prior to Mr. Murphy’s resignation, the Board of Directors was comprised of eight independent directors and seven non-independent directors. Mr. Murphy was an independent director and as a result of Mr. Murphy’s resignation, the Board of Directors is not currently comprised of a majority of independent directors as required by Section 303A.01 of the NYSE Listed Company Manual. On February 15, 2022, as required by Section 303A.12 of the NYSE Listed Company Manual, Berkshire Hathaway submitted an interim written affirmation to the NYSE as a notice of noncompliance with Section 303A.01 of the NYSE Listed Company Manual. On February 16, 2022, the Company received an official notice of noncompliance from the NYSE. The NYSE notice stated that the Company will need to correct the noncompliance as promptly as practicable. It is the intention of the Berkshire Hathaway Board of Directors to appoint a new independent director as soon as practicable.   ITEM 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers On February 14, 2022, Thomas S. Murphy resigned from Berkshire Hathaway’s Board of Directors. Berkshire Hathaway issued a press release announcing Mr. Murphy’s resignation from Berkshire’s Board of Directors. A copy of the press release is attached as Exhibit 99.1.   ITEM 9.01 Financial Statements and Exhibits   99.1    Press Release issued by Berkshire Hathaway Inc. dated February 14, 2022 104    Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   February 18, 2022     BERKSHIRE HATHAWAY INC.       /s/ Marc D. Hamburg     By:   Marc D. Hamburg       Senior Vice President and Chief Financial Officer
8-K_320193_0001193125-15-023732.htm
8-K 1 d835617d8k.htm 8-K 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 January 28, 2015 Date of Report (Date of earliest event reported)         Apple Inc. (Exact name of registrant as specified in its charter)   California   001-36743       94-2404110 (State or other jurisdiction of incorporation)   (Commission     File Number)       (IRS. Employer Identification No.) 1 Infinite Loop Cupertino, California 95014 (Address of principal executive offices) (Zip Code) (408) 996-1010 (Registrant’s telephone number, including area code) Not applicable (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))       Item 8.01 Other Events. Apple Inc. (the “Company”) is furnishing herewith updated financial statements and other affected financial information for the periods included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2014 (the “Form 10-K”). These financial statements and other affected financial information have been updated to reflect changes made in fiscal year 2015 to the Company’s reportable operating segment data and categorization of product-level net sales reporting. In fiscal year 2015, management began reporting business performance and making decisions primarily on a geographic basis, including the results of its retail stores in each respective geographic segment. Accordingly, to align with the way the business is currently managed, the Company’s reportable operating segments now consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Retail is no longer reported as a separate reportable operating segment. Additionally, the Company began allocating certain costs to its operating segments that were previously included in other corporate expenses, including certain share-based compensation costs. The Company also changed its categorization of product-level net sales reporting to reflect its evolving products and services. Pursuant to guidance prepared by the staff of the Securities and Exchange Commission, the Company has updated the applicable items that were contained in the Form 10-K reflecting the above mentioned changes in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data” in Exhibits 99.1 and 99.2 filed in this Current Report on Form 8-K (the “Form 8-K”), respectively. The information included in this Form 8-K is presented for information purposes only in connection with the changes in the Company’s reportable operating segment data and categorization of product-level net sales reporting. There is no change to the Company’s previously reported Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Balance Sheets, Consolidated Statements of Shareholders’ Equity and Consolidated Statements of Cash Flows included in the Form 10-K. This Form 8-K does not reflect events occurring after the Company filed the Form 10-K and does not modify or update the disclosures therein in any way, other than as noted above. The Company began to report comparative results reflective of the above mentioned changes with the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended December 27, 2014.   2 Item 9.01 Financial Statements and Exhibits.   (d) Exhibits. The following exhibits are furnished herewith:   Exhibit Number    Exhibit Description 23.1    Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. 99.1    Updated Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 27, 2014, as filed with the Securities and Exchange Commission on October 27, 2014. 99.2    Updated Part II, Item 8. Financial Statements and Supplementary Data, from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 27, 2014, as filed with the Securities and Exchange Commission on October 27, 2014. 101.INS    XBRL Instance Document. 101.SCH    XBRL Taxonomy Extension Schema Document. 101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF    XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB    XBRL Taxonomy Extension Label Linkbase Document. 101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document.   3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   Apple Inc. Date: January 28, 2015 By: /s/ Luca Maestri Luca Maestri Senior Vice President, Chief Financial Officer   4 EXHIBIT INDEX   Exhibit Number    Exhibit Description 23.1    Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. 99.1    Updated Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 27, 2014, as filed with the Securities and Exchange Commission on October 27, 2014. 99.2    Updated Part II, Item 8. Financial Statements and Supplementary Data, from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 27, 2014, as filed with the Securities and Exchange Commission on October 27, 2014. 101.INS    XBRL Instance Document. 101.SCH    XBRL Taxonomy Extension Schema Document. 101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF    XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB    XBRL Taxonomy Extension Label Linkbase Document. 101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document.   5
8-K_1067983_0001193125-22-140533.htm
8-K BERKSHIRE HATHAWAY INC DE false 0001067983 --12-31 0001067983 2022-04-30 2022-04-30 0001067983 brka:ClassACommonStockMember 2022-04-30 2022-04-30 0001067983 brka:ClassBCommonStockMember 2022-04-30 2022-04-30 0001067983 brka:M0.750SeniorNotesDue20232Member 2022-04-30 2022-04-30 0001067983 brka:M0.625SeniorNotesDue20231Member 2022-04-30 2022-04-30 0001067983 brka:MOnePointThreeZeroZeroSeniorNotesDueTwoThousandTwentyFourMember 2022-04-30 2022-04-30 0001067983 brka:MZeroPointZeroZeroZeroSeniorNotesDueTwoThousandTwentyFiveMember 2022-04-30 2022-04-30 0001067983 brka:MOnePointOneTwoFiveSeniorNotesDueTwoThousandTwentySevenMember 2022-04-30 2022-04-30 0001067983 brka:MTwoPointOneFiveZeroSeniorNotesDueTwoThousandTwentyEightMember 2022-04-30 2022-04-30 0001067983 brka:MOnePointFiveZeroZeroSeniorNotesDueTwoThousandThirtyMember 2022-04-30 2022-04-30 0001067983 brka:MTwoPointZeroZeroZeroSeniorNotesDueTwoThousandThirtyFourMember 2022-04-30 2022-04-30 0001067983 brka:MOnePointSixTwoFiveSeniorNotesDueTwoThousandThirtyFiveMember 2022-04-30 2022-04-30 0001067983 brka:MTwoPointThreeSevenFiveSeniorNotesDueTwoThousandThirtyNineMember 2022-04-30 2022-04-30 0001067983 brka:MZeroPointFiveZeroZeroSeniorNotesDueTwoThousandFortyOneMember 2022-04-30 2022-04-30 0001067983 brka:MTwoPointSixTwoFiveSeniorNotesDueTwoThousandFiftyNineMember 2022-04-30 2022-04-30     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) April 30, 2022     BERKSHIRE HATHAWAY INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)       DELAWARE   001-14905   47-0813844 (STATE OR OTHER JURISDICTION OF INCORPORATION)   (COMMISSION FILE NUMBER)   (I.R.S. EMPLOYER IDENTIFICATION NO.) 3555 Farnam Street Omaha, Nebraska     68131 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)     (ZIP CODE) (402) 346-1400 REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbols   Name of each exchange on which registered Class A Common Stock   BRK.A   New York Stock Exchange Class B Common Stock   BRK.B   New York Stock Exchange 0.750% Senior Notes due 2023   BRK23   New York Stock Exchange 0.625% Senior Notes due 2023   BRK23A   New York Stock Exchange 1.300% Senior Notes due 2024   BRK24   New York Stock Exchange 0.000% Senior Notes due 2025   BRK25   New York Stock Exchange 1.125% Senior Notes due 2027   BRK27   New York Stock Exchange 2.150% Senior Notes due 2028   BRK28   New York Stock Exchange 1.500% Senior Notes due 2030   BRK30   New York Stock Exchange 2.000% Senior Notes due 2034   BRK34   New York Stock Exchange 1.625% Senior Notes due 2035   BRK35   New York Stock Exchange 2.375% Senior Notes due 2039   BRK39   New York Stock Exchange 0.500% Senior Notes due 2041   BRK41   New York Stock Exchange 2.625% Senior Notes due 2059   BRK59   New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       ITEM 2.02 Results of Operations and Financial Condition. On April 30, 2022, Berkshire Hathaway Inc. issued a press release announcing the Company’s earnings for the first quarter ended March 31, 2022. A copy of this press release is furnished with this report as an exhibit to this Form 8-K.   ITEM 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year     (a) On May 1, 2022, the Board of Directors (the “Board”) of Berkshire Hathaway Inc., a Delaware corporation (the “Company”), amended the Company’s Bylaws effective immediately to restate Section 12 – Forum for Adjudication of Disputes. The restatement of Section 12 updates certain provisions regarding the forum to be used for adjudicating derivative claims, in particular, to require adjudication of derivative claims over which the Delaware Court of Chancery lacks jurisdiction in the federal district court for the District of Delaware, and adds a federal forum selection provision requiring the adjudication of claims brought under the Securities Act of 1933 in a U.S. federal district court, unless in each case the Company consents otherwise in writing. The prior version of Section 12 required that all derivative claims, among others, be adjudicated in the Delaware Court of Chancery unless the Company consented otherwise in writing and did not address forum selection for claims brought under the Securities Act of 1933. In addition, the restatement of Section 12 made certain changes primarily to conform to updates in Delaware law. The foregoing description of the amendment to the Bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the Bylaws, attached hereto as Exhibit 3(ii) and incorporated herein by reference.   ITEM 5.07 Submission of Matters to a Vote of Security Holders On April 30, 2022, Berkshire Hathaway Inc. held an annual meeting of its shareholders. The agenda items for the meeting along with the vote of the Company’s Class A and Class B common shareholders voting together as a single class with respect to each of the agenda items are shown below. There were five items acted on at that meeting as follows: 1) Election of Directors; 2) A shareholder proposal requesting that the Company’s Board Chair be an independent director; 3) A shareholder proposal requesting an annual assessment of climate risk management; 4) A shareholder proposal requesting information regarding how the Company intends to measure, disclose and reduce greenhouse gas emissions associated with the Company’s underwriting, insurance and investment activities; and 5) A shareholder proposal requesting reporting of diversity and inclusion efforts. Following are the votes cast for and against each director.   Proposal 1 – Election of Directors             For   Against Warren E. Buffett   486,609   23,535 Charles T. Munger   485,340   24,803 Gregory E. Abel   487,521   22,623 Howard G. Buffett   497,998   12,146 Susan A. Buffett   498,171   11,972 Stephen B. Burke   455,996   54,147 Kenneth I. Chenault   466,973   43,171 Christopher C. Davis   497,062   13,082 Susan L. Decker   442,027   68,117 David S. Gottesman   455,684   54,460 Charlotte Guyman   448,463   61,681 Ajit Jain   487,598   22,546 Ronald L. Olson   494,195   15,948 Wallace R. Weitz   505,738   4,405 Meryl B. Witmer   493,297   16,846 The results of the other matters acted upon at the meeting were as follows.       For   Against   Abstain Proposal 2 – Shareholder proposal   54,425   448,868   6,851       For   Against   Abstain Proposal 3 – Shareholder proposal   135,054   373,051   2,038       For   Against   Abstain Proposal 4 – Shareholder proposal   134,702   373,462   1,980       For   Against   Abstain Proposal 5 – Shareholder proposal   131,542   376,470   2,131   ITEM 8.01 Other Events On May 3, 2022, the Company received a letter from the NYSE that acknowledged that the Company is back in compliance with the continued listing standards set forth in Section 303A of the NYSE Listed Company Manual. Specifically, on April 30, 2022, at the Company’s annual shareholder meeting, Wallace R. Weitz was elected to the Company’s Board of Directors. Mr. Weitz’s election as an independent director reestablished a majority of independent directors on the Company’s Board of Directors resolving the deficiency that the Company reported to the NYSE on February 15, 2022.   ITEM 9.01 Financial Statements and Exhibits   Exhibit 3(ii)   Bylaws (as amended on May 1, 2022) Exhibit 99.1   Berkshire Hathaway Inc. Earnings Release Dated April 30, 2022 Exhibit 104   Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   May 4, 2022       BERKSHIRE HATHAWAY INC.                   /s/ Marc D. Hamburg     By:   Marc D. Hamburg       Senior Vice President and Chief Financial Officer
8-K_1045810_0001045810-19-000168.htm
Document false0001045810 0001045810 2019-11-14 2019-11-14 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): November 14, 2019 NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)   2788 San Tomas Expressway, Santa Clara, CA 95051 (Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02 Results of Operations and Financial Condition.On November 14, 2019, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter ended October 27, 2019. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter ended October 27, 2019, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.Item 9.01 Financial Statements and Exhibits.(d) Exhibits Exhibit Description99.1 Press Release, dated November 14, 2019, entitled "NVIDIA Announces Financial Results for Third Quarter Fiscal 2020"99.2 CFO Commentary on Third Quarter Fiscal 2020 ResultsSIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   NVIDIA CorporationDate: November 14, 2019 By: /s/ Colette M. Kress  Colette M. Kress  Executive Vice President and Chief Financial Officer
8-K_320193_0001193125-14-084697.htm
8-K 1 d684095d8k.htm 8-K 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 28, 2014     APPLE INC. (Exact Name of Registrant as Specified in its Charter)   California   000-10030   94-2404110 (State or Other Jurisdiction of Incorporation or Organization)   (Commission File Number)   (I.R.S. Employer Identification No.)     1 Infinite Loop Cupertino, California 95014     (Address of Principal Executive Offices) (Zip Code)   (408) 996-1010 (Registrant’s Telephone Number, Including Area Code) Not applicable (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 240.425)   ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))       Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. (b),(c) On March 4, 2014, Apple Inc. (the “Company”) announced that Peter Oppenheimer, the Company’s Senior Vice President, Chief Financial Officer, will retire at the end of September and Luca Maestri, the Company’s Vice President of Finance and Corporate Controller, will be appointed as CFO and will transition into that role in June.   (e) 2014 Employee Stock Plan The Board of Directors (the “Board”) of the Company previously adopted, subject to shareholder approval, the Company’s 2014 Employee Stock Plan (the “2014 Plan”). The Company’s shareholders approved the 2014 Plan at the Annual Meeting of Shareholders held on February 28, 2014 (the “Annual Meeting”). The Company’s grant authority under the Company’s 2003 Employee Stock Plan (the “2003 Plan”) terminated at that time. The 2014 Plan, which became effective upon shareholder approval, permits the granting of stock options, stock appreciation rights, stock grants and restricted stock units, as well as cash bonus awards. Employees (including executive officers and directors who are also the Company’s employees) and consultants of the Company and any subsidiary of the Company are eligible to participate in the 2014 Plan. The maximum number of shares that may be issued or transferred pursuant to awards under the 2014 Plan will equal:     •   55 million shares, plus     •   the number of shares available for new award grants under the 2003 Plan on the date of the Annual Meeting (determined before giving effect to the termination of the authority to grant new awards under the 2003 Plan), plus     •   the number of any shares subject to stock options granted under the 2003 Plan and outstanding as of the date of the Annual Meeting which expire, or for any reason are cancelled or terminated, after that date without being exercised, plus     •   the number of any shares subject to restricted stock unit awards granted under the 2003 Plan that are outstanding and unvested as of the date of the Annual Meeting which are forfeited, terminated, cancelled, or otherwise reacquired after that date without having become vested or that are exchanged or withheld by the Company or one of its subsidiaries after that date to satisfy the tax withholding obligations related to the award (after giving effect to the 2:1 premium share counting ratio described below). The maximum number of shares that may be issued or transferred pursuant to awards under the 2014 Plan as a result of applying the share limit formula described above will not exceed 109,477,000 shares, which is the sum of (i) the 55 million shares referred to above, plus (ii) the 16,608,000 shares available for new award grants under the 2003 Plan on November 11, 2013, plus (iii) the 3,361,000 shares subject to stock options previously granted and outstanding under the 2003 Plan as of November 11, 2013, plus (iv) two (2) times the 17,254,000 shares subject to restricted stock units previously granted and outstanding under the 2003 Plan as of November 11, 2013. Shares issued with respect to awards granted under the 2014 Plan other than stock options or stock appreciation rights are counted against the 2014 Plan’s aggregate share limit as two shares for every one share actually issued in connection with the award. The 2014 Plan also includes other rules for counting shares against the share limits. The foregoing brief description is qualified in its entirety by the text of the 2014 Plan, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference. Grants under the 2014 Plan will be made pursuant to the Company’s Restricted Stock Unit Award Agreement and the Company’s Performance Award Agreement, forms of which are filed as Exhibits 10.2 and 10.3 hereto and incorporated herein by reference.   Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. At the Annual Meeting the shareholders of the Company approved amendments (the “Amendments”) to the Company’s Restated Articles of Incorporation (the “Articles”) to (i) facilitate the implementation of majority voting for the election of directors in an uncontested election by eliminating Article VII, which relates to the term of directors and the transition from a classified board of directors to a declassified structure, (ii) eliminate the “blank check” authority of the Board to issue preferred stock and (iii) establish a par value for the Company’s common stock of $0.00001 per share. Following the Annual Meeting, on February 28, 2014, the Company filed its Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) with the California Secretary of State, giving effect to the Amendments. The Amendments became effective on February 28, 2014. The foregoing description of the changes contained in the Articles of Incorporation is qualified in its entirety by reference to the full text of the Articles of Incorporation, a copy of which is attached hereto as Exhibit 3.1 and is incorporated herein by reference. On February 28, 2014, the Board adopted the Amended and Restated Bylaws of the Company (the “Amended and Restated Bylaws”). Sections 2.4, 2.5 and 5.11 have been amended to implement majority voting in uncontested elections of directors in accordance with Section 708.5 of the California General Corporation Law, superseding the previous plurality standard. The Amended and Restated Bylaws also include a number of ministerial, clarifying and conforming changes, including, among others, the addition of Chairman and Chief Executive Officer to the list of persons specified in Section 5.3 who may call special meetings of shareholders and changes to Sections 5.10, 10.1, 10.2 and 10.6 to conform to current California General Corporation Law. The foregoing description of the changes contained in the Amended and Restated Bylaws is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, a copy of which is attached hereto as Exhibit 3.2 and is incorporated herein by reference.   Item 5.07 Submission of Matters to a Vote of Security Holders At the Annual Meeting, the shareholders voted on the following eleven proposals and cast their votes as described below. 1. The individuals listed below were elected at the Annual Meeting to serve as directors of the Company until the next annual meeting of shareholders and until their successors are duly elected and qualified.                                                                                   For    Authority Withheld    Broker Non-Vote William Campbell    478,766,078    9,323,264    224,158,837 Timothy Cook    482,330,367    5,758,975    224,158,837 Millard Drexler    477,948,520    10,140,822    224,158,837 Al Gore    473,774,698    14,312,824    224,158,837 Robert Iger    482,170,444    5,918,898    224,158,837 Andrea Jung    471,174,705    16,914,637    224,158,837 Arthur Levinson    479,655,122    8,434,200    224,158,837 Ronald Sugar    482,310,361    5,778,981    224,158,837 2. A management proposal to amend the Articles of Incorporation to facilitate the implementation of majority voting for the election of directors in an uncontested election by eliminating Article VII, which relates to the term of directors and the transition from a classified board of directors to a declassified structure, as described in the proxy materials. This proposal was approved.   For   Against   Abstained   Broker Non-Vote 483,592,782   2,502,519   1,993,537   224,158,837 3. A management proposal to amend the Articles of Incorporation to eliminate the “blank check” authority of the Board to issue preferred stock, as described in the proxy materials. This proposal was approved.   For   Against   Abstained   Broker Non-Vote 482,637,622   3,872,558   1,579,162   224,158,837 4. A management proposal to amend the Articles of Incorporation to establish a par value for the Company’s common stock of $0.00001 per share, as described in the proxy materials. This proposal was approved.   For   Against   Abstained   Broker Non-Vote 698,057,178   7,562,831   6,628,170   0 5. A management proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2014, as described in the proxy materials. This proposal was approved.   For   Against   Abstained   Broker Non-Vote 705,481,133   3,511,751        3,255,295    0 6. A non-binding, advisory resolution to approve executive compensation, as described in the proxy materials. This proposal was approved.   For   Against   Abstained   Broker Non-Vote 467,068,345   14,821,715      6,199,282    224,158,837 7. A management proposal to approve the 2014 Plan, as described in the proxy materials. This proposal was approved.   For   Against   Abstained   Broker Non-Vote 448,891,427   36,857,353      2,340,562    224,158,837 8. A shareholder proposal to amend the Company’s Bylaws to establish a Board Committee on Human Rights, as described in the proxy materials. This proposal was not approved.   For   Against   Abstained   Broker Non-Vote 26,367,755   434,915,320   26,806,251   224,158,837 9. A shareholder proposal entitled “Report on Company Membership and Involvement with Certain Trade Associations and Business Organizations,” as described in the proxy materials. This proposal was not approved.   For   Against   Abstained   Broker Non-Vote 9,040,270     424,889,535   54,159,537   224,158,837 10. A shareholder proposal entitled “Proxy Access for Shareholders,” as described in the proxy materials. This proposal was not approved.   For   Against   Abstained   Broker Non-Vote 20,501,016   461,103,814    6,484,096    224,158,837 11. A shareholder floor proposal asking the Board “to enact a policy to use technical methods and other best practices to protect user data.” This proposal was not approved.   For   Against   Abstained   Broker Non-Vote     2,612       488,085,430         1,300         224,158,837   Item 9.01. Financial Statements and Exhibits.   (d) Exhibits.   ExhibitNo.    Description   3.1    Amended and Restated Articles of Incorporation of Apple Inc. effective as of February 28, 2014   3.2    Amended and Restated Bylaws of Apple Inc. effective as of February 28, 2014 10.1    2014 Employee Stock Plan 10.2    Form of Restricted Stock Unit Award Agreement effective as of February 28, 2014 10.3    Form of Performance Award Agreement effective as of February 28, 2014 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.         APPLE INC.       (Registrant) Date: March 5, 2014     By:   /s/ D. Bruce Sewell         D. Bruce Sewell         Senior Vice President, General Counsel and Secretary EXHIBIT INDEX   ExhibitNo.    Description   3.1    Amended and Restated Articles of Incorporation of Apple Inc. effective as of February 28, 2014   3.2    Amended and Restated Bylaws of Apple Inc. effective as of February 28, 2014 10.1    2014 Employee Stock Plan 10.2    Form of Restricted Stock Unit Award Agreement as of February 28, 2014 10.3    Form of Performance Award Agreement effective as of February 28, 2014
8-K_1730168_0001193125-21-098755.htm
8-K false 0001730168 0001730168 2021-03-29 2021-03-29 0001730168 us-gaap:CommonStockMember 2021-03-29 2021-03-29 0001730168 us-gaap:SeriesAPreferredStockMember 2021-03-29 2021-03-29     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): March 29, 2021     BROADCOM INC. (Exact Name of Registrant as Specified in Charter)       Delaware   001-38449   35-2617337 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (IRS EmployerIdentification No.) 1320 Ridder Park Drive, San Jose, California   95131 (Address of principal executive offices)   (Zip Code) (408) 433-8000 (Registrant’s telephone number, including area code)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   TradingSymbol(s)   Name of each exchangeon which registered Common Stock, $0.001 par value   AVGO   The NASDAQ Global Select Market 8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value   AVGOP   The NASDAQ Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐       Item 8.01 Other Events. Early Participation Results and Early Settlement Election of Private Exchange Offers of Certain Outstanding Notes for New Notes In a press release issued on March 29, 2021, Broadcom Inc. (“Broadcom”) announced (i) the early participation results of its private offers to exchange certain series of its outstanding notes maturing between 2024 and 2027 for new series of senior notes maturing in 2033 and 2034 (the “Exchange Notes”) and (ii) its election to have an early settlement. The foregoing description is qualified in its entirety by reference to the press release dated March 29, 2021, a copy of which is attached hereto as Exhibit 99.1. Pricing of Private Exchange Offers of Certain Outstanding Notes for New Notes Following the announcement of the early participation results of the Exchange Offers, in a press release issued on March 29, 2021, Broadcom announced the pricing terms of the Exchange Offers. The foregoing description is qualified in its entirety by reference to the press release dated March 29, 2021, a copy of which is attached hereto as Exhibit 99.2. The Exchange Notes are being sold in private placements to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States under Regulation S under the Securities Act. This Current Report on Form 8-K is not an offer to purchase or sell or a solicitation of an offer to purchase or sell, with respect to any securities. Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict” “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include risks associated with: the COVID-19 pandemic, which has had, and will likely continue to have, a negative impact on the global economy and disrupt normal business activity, and which may have an adverse effect on our results of operations; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; global economic conditions and concerns; global political and economic conditions; government regulations, trade restrictions and trade tensions; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors and resellers of our products; dependence on senior management and our ability to attract and retain qualified personnel; any acquisitions we may make, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired businesses with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions; involvement in legal or administrative proceedings; quarterly and annual fluctuations in operating results; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities, warehouses or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; market acceptance of the end products into which our products are designed; our ability to sell to new types of customers and to keep pace with technological advances; our compliance with privacy and data security laws; our ability to protect against a breach of security systems; fluctuations in foreign exchange rates; our provision for income taxes and overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Our filings with the SEC, which you may obtain for free at the SEC’s website at http://www.sec.gov, discuss some of the important risk factors that may affect our business, results of operations and financial condition. Actual results may vary from the estimates provided. We undertake no intent or obligation to publicly update or revise any of the estimates and other forward-looking statements made in this announcement, whether as a result of new information, future events or otherwise, except as required by law. Item 9.01 Financial Statements and Exhibits.   ExhibitNo.    Description 99.1    Press release, dated March 29, 2021, entitled “Broadcom Inc. Announces Early Participation Results and Early Settlement Election of its Private Exchange Offers of Certain Outstanding Notes for New Notes” 99.2    Press release, dated March 29, 2021, entitled “Broadcom Inc. Announces Pricing Terms of its Private Exchange Offers of Certain Outstanding Notes for New Notes” 104    Cover Page Interactive Data File (formatted as Inline XBRL). SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.     BROADCOM INC. Date: March 29, 2021   By:   /s/ Kirsten Spears     Name: Kirsten Spears     Title:   Chief Financial Officer
8-K_1045810_0001045810-19-000140.htm
Document false0001045810 0001045810 2019-08-15 2019-08-15 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): August 15, 2019 NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)   2788 San Tomas Expressway, Santa Clara, CA 95051 (Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02 Results of Operations and Financial Condition.On August 15, 2019, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter ended July 28, 2019. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter ended July 28, 2019, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.Item 9.01 Financial Statements and Exhibits.(d) Exhibits Exhibit Description99.1 Press Release, dated August 15, 2019, entitled "NVIDIA Announces Financial Results for Second Quarter Fiscal 2020"99.2 CFO Commentary on Second Quarter Fiscal 2020 ResultsSIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   NVIDIA CorporationDate: August 15, 2019 By: /s/ Colette M. Kress  Colette M. Kress  Executive Vice President and Chief Financial Officer
8-K_1067983_0001193125-23-285240.htm
8-K BERKSHIRE HATHAWAY INC DE false 0001067983 0001067983 2023-11-29 2023-11-29 0001067983 us-gaap:CommonStockMember 2023-11-29 2023-11-29 0001067983 us-gaap:CommonClassBMember 2023-11-29 2023-11-29 0001067983 brka:M1.125SeniorNotesDue202710Member 2023-11-29 2023-11-29 0001067983 brka:M1.625SeniorNotesDue20351Member 2023-11-29 2023-11-29 0001067983 brka:M1.300SeniorNotesDue20242Member 2023-11-29 2023-11-29 0001067983 brka:M2.150SeniorNotesDue20283Member 2023-11-29 2023-11-29 0001067983 brka:M2.375SeniorNotesDue20394Member 2023-11-29 2023-11-29 0001067983 brka:M2.625SeniorNotesDue20595Member 2023-11-29 2023-11-29 0001067983 brka:M0.000SeniorNotesDue20256Member 2023-11-29 2023-11-29 0001067983 brka:M0.500SeniorNotesDue20417Member 2023-11-29 2023-11-29 0001067983 brka:M1.500SeniorNotesDue20308Member 2023-11-29 2023-11-29 0001067983 brka:M2.000SeniorNotesDue20349Member 2023-11-29 2023-11-29     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) November 29, 2023     BERKSHIRE HATHAWAY INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)       DELAWARE   001-14905   47-0813844 (STATE OR OTHER JURISDICTION OF INCORPORATION)   (COMMISSION FILE NUMBER)   (I.R.S. EMPLOYER IDENTIFICATION NO.)   3555 Farnam Street Omaha, Nebraska   68131 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)   (ZIP CODE) (402) 346-1400 REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE   (Former name or former address, if changed since last report.)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbols   Name of each exchange on which registered Class A Common Stock   BRK.A   New York Stock Exchange Class B Common Stock   BRK.B   New York Stock Exchange 1.125% Senior Notes due 2027   BRK27   New York Stock Exchange 1.625% Senior Notes due 2035   BRK35   New York Stock Exchange 1.300% Senior Notes due 2024   BRK24   New York Stock Exchange 2.150% Senior Notes due 2028   BRK28   New York Stock Exchange 2.375% Senior Notes due 2039   BRK39   New York Stock Exchange 2.625% Senior Notes due 2059   BRK59   New York Stock Exchange 0.000% Senior Notes due 2025   BRK25   New York Stock Exchange 0.500% Senior Notes due 2041   BRK41   New York Stock Exchange 1.500% Senior Notes due 2030   BRK30   New York Stock Exchange 2.000% Senior Notes due 2034   BRK34   New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01 Other Events. On November 29, 2023, Berkshire Hathaway Inc. (“Berkshire”) issued (i) ¥73,400,000,000 aggregate principal amount of its 0.955% Senior Notes due 2026, (ii) ¥17,100,000,000 aggregate principal amount of its 1.194% Senior Notes due 2028, (iii) ¥12,300,000,000 aggregate principal amount of its 1.685% Senior Notes due 2033, (iv) ¥4,000,000,000 aggregate principal amount of its 2.240% Senior Notes due 2043 and (v) ¥15,200,000,000 aggregate principal amount of its 2.502% Senior Notes due 2058 ((i) through (v) collectively, the “Notes”) under a registration statement on Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”), filed with the Securities and Exchange Commission (the “Commission”) on January 28, 2022 (Registration No. 333-262384) (the “Registration Statement”). The Notes were sold pursuant to an underwriting agreement entered into on November 17, 2023, by and among (a) Berkshire and (b) Merrill Lynch International and Mizuho Securities USA LLC. The Notes were issued under an Indenture, dated as of January 28, 2022, by and among Berkshire, Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (the “Indenture”) and (i) an officers’ certificate dated as of November 29, 2023 by Berkshire with respect to its 0.955% Senior Notes due 2026 (the “2026 Notes Officers’ Certificate”), (ii) an officers’ certificate dated as of November 29, 2023 by Berkshire with respect to its 1.194% Senior Notes due 2028 (the “2028 Notes Officers’ Certificate”), (iii) an officers’ certificate dated as of November 29, 2023 by Berkshire with respect to its 1.685% Senior Notes due 2033 (the “2033 Notes Officers’ Certificate”), (iv) an officers’ certificate dated as of November 29, 2023 by Berkshire with respect to its 2.240% Senior Notes due 2043 (the “2043 Notes Officers’ Certificate”) and (v) an officers’ certificate dated as of November 29, 2023 by Berkshire with respect to its 2.502% Senior Notes due 2058 (the “2058 Notes Officers’ Certificate”) ((i) through (v) collectively, the “Officers’ Certificates”). The relevant terms of the Notes and the Indenture are further described under the caption “Description of the Notes” in the prospectus supplement relating to the Notes, dated November 17, 2023, filed with the Commission by Berkshire on November 20, 2023, pursuant to Rule 424(b)(5) under the Securities Act and in the section entitled “Description of the Debt Securities” in the base prospectus relating to debt securities of Berkshire, dated January 28, 2022, included in the Registration Statement, which descriptions are incorporated herein by reference. A copy of the Indenture is set forth in Exhibit 4.1 of the Registration Statement and is incorporated herein by reference. A copy of the 2026 Notes Officers’ Certificate is attached hereto as Exhibit 4.2 and is incorporated herein by reference. A copy of the 2028 Notes Officers’ Certificate is attached hereto as Exhibit 4.3 and is incorporated herein by reference. A copy of the 2033 Notes Officers’ Certificate is attached hereto as Exhibit 4.4 and is incorporated herein by reference. A copy of the 2043 Notes Officers’ Certificate is attached hereto as Exhibit 4.5 and is incorporated herein by reference. A copy of the 2058 Notes Officers’ Certificate is attached hereto as Exhibit 4.6 and is incorporated herein by reference. The descriptions of the Indenture, the Officers’ Certificates and the Notes in this report are summaries and are qualified in their entirety by the terms of the Indenture, the Officers’ Certificates and the Notes, respectively.   Item 9.01 Financial Statements and Exhibits. (d) Exhibits     1.1    Underwriting Agreement, dated November 17, 2023, by and among (a) Berkshire Hathaway Inc. and (b) Merrill Lynch International and Mizuho Securities USA LLC.   4.1    Indenture, dated as of January 28, 2022, by and among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.1 of Berkshire Hathaway Inc.’s Registration Statement on Form S-3 (Registration No. 333-262384) filed with the Commission on January 28, 2022).   4.2    Officers’ Certificate of Berkshire Hathaway Inc., dated as of November 29, 2023, including the form of Berkshire Hathaway Inc.’s 0.955% Senior Notes due 2026.     4.3    Officers’ Certificate of Berkshire Hathaway Inc., dated as of November 29, 2023, including the form of Berkshire Hathaway Inc.’s 1.194% Senior Notes due 2028.   4.4    Officers’ Certificate of Berkshire Hathaway Inc., dated as of November 29, 2023, including the form of Berkshire Hathaway Inc.’s 1.685% Senior Notes due 2033.   4.5    Officers’ Certificate of Berkshire Hathaway Inc., dated as of November 29, 2023, including the form of Berkshire Hathaway Inc.’s 2.240% Senior Notes due 2043.   4.6    Officers’ Certificate of Berkshire Hathaway Inc., dated as of November 29, 2023, including the form of Berkshire Hathaway Inc.’s 2.502% Senior Notes due 2058.   5.1    Opinion of Munger, Tolles & Olson LLP, dated November 29, 2023, with respect to the Notes. 23.1    Consent of Munger, Tolles & Olson LLP (included in Exhibit 5.1). 104    Cover Page Interactive Data File (embedded within the Inline XBRL document).   SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   November 29, 2023     BERKSHIRE HATHAWAY INC.     /s/ Marc D. Hamburg     By:   Marc D. Hamburg     Senior Vice President and Chief Financial Officer
8-K_320193_0000320193-21-000055.htm
aapl-20210428truetruetruetruetruetruetruetruetruetruefalse000032019300003201932021-04-282021-04-280000320193us-gaap:CommonStockMember2021-04-282021-04-280000320193aapl:A1.000NotesDue2022Member2021-04-282021-04-280000320193aapl:A1.375NotesDue2024Member2021-04-282021-04-280000320193aapl:A0.000Notesdue2025Member2021-04-282021-04-280000320193aapl:A0.875NotesDue2025Member2021-04-282021-04-280000320193aapl:A1.625NotesDue2026Member2021-04-282021-04-280000320193aapl:A2.000NotesDue2027Member2021-04-282021-04-280000320193aapl:A1.375NotesDue2029Member2021-04-282021-04-280000320193aapl:A3.050NotesDue2029Member2021-04-282021-04-280000320193aapl:A0.500Notesdue2031Member2021-04-282021-04-280000320193aapl:A3.600NotesDue2042Member2021-04-282021-04-28UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-KCURRENT REPORTPursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934April 28, 2021Date of Report (Date of earliest event reported)Apple Inc.(Exact name of Registrant as specified in its charter)California 001-36743 94-2404110(State or other jurisdictionof incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)One Apple Park Way Cupertino, California 95014 (Address of principal executive offices) (Zip Code)(408) 996-1010 (Registrant’s telephone number, including area code)Not applicable(Former name or former address, if changed since last report.)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredCommon Stock, $0.00001 par value per shareAAPLThe Nasdaq Stock Market LLC1.000% Notes due 2022—The Nasdaq Stock Market LLC1.375% Notes due 2024—The Nasdaq Stock Market LLC0.000% Notes due 2025—The Nasdaq Stock Market LLC0.875% Notes due 2025—The Nasdaq Stock Market LLC1.625% Notes due 2026—The Nasdaq Stock Market LLC2.000% Notes due 2027—The Nasdaq Stock Market LLC1.375% Notes due 2029—The Nasdaq Stock Market LLC3.050% Notes due 2029—The Nasdaq Stock Market LLC0.500% Notes due 2031—The Nasdaq Stock Market LLC3.600% Notes due 2042—The Nasdaq Stock Market LLCIndicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02    Results of Operations and Financial Condition.On April 28, 2021, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its second fiscal quarter ended March 27, 2021. A copy of Apple’s press release is attached hereto as Exhibit 99.1.The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01    Financial Statements and Exhibits.(d)Exhibits.ExhibitNumberExhibit Description99.1Press release issued by Apple Inc. on April 28, 2021.104Inline XBRL for the cover page of this Current Report on Form 8-K.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date:April 28, 2021Apple Inc.By:/s/ Luca MaestriLuca MaestriSenior Vice President,Chief Financial Officer
8-K_1018724_0001018724-24-000081.htm
amzn-202404300001018724false00010187242024-04-302024-04-30Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 _________________________ FORM 8-K _________________________ CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934April 30, 2024 Date of Report(Date of earliest event reported) _________________________AMAZON.COM, INC. (Exact name of registrant as specified in its charter)_________________________ Delaware000-2251391-1646860(State or other jurisdiction ofincorporation)(Commission File Number)(IRS Employer Identification No.)410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code)(206) 266-1000 (Registrant’s telephone number, including area code)_________________________ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per shareAMZNNasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐Table of ContentsTABLE OF CONTENTS ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.3ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.3SIGNATURES4EXHIBIT 99.1EXHIBIT 99.2Table of ContentsITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.On April 30, 2024, Amazon.com, Inc. announced its first quarter 2024 financial results. A copy of the press release containing the announcement is included as Exhibit 99.1 and additional information regarding the inclusion of non-GAAP financial measures in certain of Amazon.com, Inc.’s public disclosures, including its first quarter 2024 financial results announcement, is included as Exhibit 99.2. Both of these exhibits are incorporated herein by reference.ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.(d) Exhibits. ExhibitNumberDescription99.1Press Release dated April 30, 2024 announcing Amazon.com, Inc.’s First Quarter 2024 Financial Results.99.2Information Regarding Non-GAAP Financial Measures.104The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101).3Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AMAZON.COM, INC. (REGISTRANT)By:/s/ Brian T. OlsavskyBrian T. OlsavskySenior Vice President andChief Financial OfficerDated: April 30, 2024 4
8-K_1018724_0001193125-21-018066.htm
8-K Table of Contents AMAZON COM INC false 0001018724 0001018724 2021-01-26 2021-01-26     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 January 26, 2021 Date of Report (Date of earliest event reported)     AMAZON.COM, INC. (Exact name of registrant as specified in its charter)       Delaware   000-22513   91-1646860 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code) (206) 266-1000 (Registrant’s telephone number, including area code)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:     ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)     ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)     ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))     ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered Common Stock, par value $.01 per share   AMZN   Nasdaq Global Select Market     Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company                                ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐       Table of Contents TABLE OF CONTENTS     ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.      3   SIGNATURES      4   Table of Contents ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS. On January 26, 2021, Rosalind G. Brewer informed Amazon.com, Inc. that she is resigning from the Board of Directors effective February 16, 2021.   3 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   AMAZON.COM, INC. (REGISTRANT) By:   /s/ David A. Zapolsky     David A. Zapolsky     Senior Vice President Dated: January 26, 2021   4
8-K_1045810_0001045810-23-000221.htm
nvda-202310230001045810false00010458102023-10-232023-10-23UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): October 23, 2023 NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)2788 San Tomas Expressway, Santa Clara, CA 95051 (Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).      Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 8.01 Other Events On October 23, 2023, the United States Government informed NVIDIA Corporation, or the Company, that the licensing requirements of the interim final rule entitled “Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections”, dated October 18, 2023, applicable to products having a “total processing performance” of 4800 or more and designed or marketed for datacenters, is effective immediately, impacting shipments of the Company’s A100, A800, H100, H800, and L40S products. These licensing requirements were originally to be effective after a 30-day period, as first described in the Company's Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on October 17, 2023. Given the strength of demand for the Company’s products worldwide, the Company does not anticipate that the accelerated timing of the licensing requirements will have a near-term meaningful impact on its financial results. Certain statements in this Current Report on Form 8-K including statements regarding the near-term impact of the accelerated timing of licensing requirements on the Company’s financial results are forward-looking statements that are subject to risks and uncertainties that could cause results to be materially different than expectations. Important factors that could cause actual results to differ materially include: global economic conditions; our reliance on third parties to manufacture, assemble, package and test our products; the impact of technological development and competition; development of new products and technologies or enhancements to our existing product and technologies; market acceptance of our products or our partners’ products; design, manufacturing or software defects; changes in consumer preferences or demands; changes in industry standards and interfaces; unexpected loss of performance of our products or technologies when integrated into systems; as well as other factors detailed from time to time in the most recent reports NVIDIA files with the Securities and Exchange Commission, or SEC, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of reports filed with the SEC are posted on the company’s website and are available from NVIDIA without charge. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, NVIDIA disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NVIDIA CorporationDate: October 24, 2023By: /s/ Colette M. Kress      Colette M. KressExecutive Vice President and Chief Financial Officer
8-K_1045810_0001045810-18-000058.htm
8-K 1 form8-k2018annualmeetingre.htm FORM 8-K Document UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K______________CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): May 16, 2018NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdictionof incorporation)(CommissionFile Number)(IRS EmployerIdentification No.)2788 San Tomas Expressway, Santa Clara, CA(Address of principal executive offices)95051(Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company oIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o      Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.(e) Amendment and Restatement of Amended and Restated 2007 Equity Incentive Plan On May 16, 2018, at the 2018 Annual Meeting of Stockholders of NVIDIA Corporation, or the 2018 Annual Meeting, our stockholders approved an amendment and restatement of the NVIDIA Corporation Amended and Restated 2007 Equity Incentive Plan, or the 2007 Plan, to increase the available share reserve by 23,000,000 shares as described in our definitive proxy statement for the 2018 Annual Meeting filed with the Securities and Exchange Commission on April 6, 2018, or the Proxy Statement. The 2007 Plan previously had been approved, subject to stockholder approval, by the Compensation Committee of the Board of Directors of NVIDIA, or the Committee. A summary of the 2007 Plan is set forth in our Proxy Statement. That summary and the foregoing description of the 2007 Plan are qualified in their entirety by reference to the text of the 2007 Plan, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.Amendment and Restatement of 2012 Employee Stock Purchase PlanAt the 2018 Annual Meeting, our stockholders also approved an amendment and restatement of the NVIDIA Corporation Amended and Restated 2012 Employee Stock Purchase Plan, or the 2012 Plan, to increase the available share reserve by 13,500,000 shares as described in the Proxy Statement. The 2012 Plan previously had been approved, subject to stockholder approval, by the Committee. A summary of the 2012 Plan is set forth in our Proxy Statement. That summary and the foregoing description of the 2012 Plan are qualified in their entirety by reference to the text of the 2012 Plan, which is filed as Exhibit 10.2 hereto and incorporated herein by reference.Item 5.07. Submission of Matters to a Vote of Security Holders.At the 2018 Annual Meeting, the following proposals were adopted by the margin indicated. Proxies for the 2018 Annual Meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, and there was no solicitation in opposition of management’s solicitation.1.    The election of eleven (11) directors to serve for a one-year term until the 2019 Annual Meeting of Stockholders of NVIDIA Corporation. The results of the voting were as follows:a. Robert K. Burgess     Number of shares For389,082,026     Number of shares Withheld1,757,716     Number of shares Abstaining1,032,012     Number of Broker Non-Votes111,817,277b. Tench Coxe     Number of shares For367,590,677     Number of shares Withheld21,761,378     Number of shares Abstaining2,519,699     Number of Broker Non-Votes111,817,277c. Persis S. Drell     Number of shares For389,844,378     Number of shares Withheld984,285     Number of shares Abstaining1,043,091     Number of Broker Non-Votes111,817,277d. James C. Gaither     Number of shares For364,954,464     Number of shares Withheld24,263,401     Number of shares Abstaining2,653,889     Number of Broker Non-Votes111,817,277e. Jen-Hsun Huang     Number of shares For387,514,044     Number of shares Withheld2,653,201     Number of shares Abstaining1,704,509     Number of Broker Non-Votes111,817,277f. Dawn Hudson     Number of shares For390,611,730     Number of shares Withheld832,521     Number of shares Abstaining427,503     Number of Broker Non-Votes111,817,277g. Harvey C. Jones     Number of shares For362,206,296     Number of shares Withheld27,091,626     Number of shares Abstaining2,573,832     Number of Broker Non-Votes111,817,277h. Michael G. McCaffery     Number of shares For390,603,365     Number of shares Withheld790,154     Number of shares Abstaining478,235     Number of Broker Non-Votes111,817,277i. Mark L. Perry     Number of shares For378,876,107     Number of shares Withheld11,027,438     Number of shares Abstaining1,968,209     Number of Broker Non-Votes111,817,277j. A. Brooke Seawell     Number of shares For367,828,829     Number of shares Withheld21,519,148     Number of shares Abstaining2,523,777     Number of Broker Non-Votes111,817,277k. Mark A. Stevens     Number of shares For386,368,413     Number of shares Withheld4,988,443     Number of shares Abstaining514,898     Number of Broker Non-Votes111,817,2772.    The approval, on an advisory basis, of the compensation of our named executive officers as disclosed in the Proxy Statement. The results of the voting were as follows:     Number of shares For382,656,840     Number of shares Against8,325,994     Number of shares Abstaining888,920     Number of Broker Non-Votes111,817,2773.    The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered accounting firm for our fiscal year ending January 27, 2019. The results of the voting were as follows:     Number of shares For494,844,879     Number of shares Against7,744,702     Number of shares Abstaining1,099,450     Number of Broker Non-Votes__4.    The approval of the 2007 Plan. The results of the voting were as follows:     Number of shares For374,422,831     Number of shares Against16,581,237     Number of shares Abstaining867,686     Number of Broker Non-Votes111,817,2775.    The approval of the 2012 Plan. The results of the voting were as follows:     Number of shares For387,376,942     Number of shares Against3,763,309     Number of shares Abstaining731,503     Number of Broker Non-Votes111,817,277Item 9.01. Financial Statements and Exhibits.(d) ExhibitsExhibitNumber                                                           Description  .10.1 Amended and Restated 2007 Equity Incentive Plan 10.2 Amended and Restated 2012 Employee Stock Purchase PlanSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  NVIDIA CorporationDate: May 21, 2018By: /s/ Rebecca Peters  Rebecca Peters Vice President, Corporate Affairs and Assistant Secretary 
8-K_1730168_0001193125-20-146131.htm
8-K false 0001730168 0001730168 2020-05-19 2020-05-19 0001730168 us-gaap:CommonStockMember 2020-05-19 2020-05-19 0001730168 us-gaap:SeriesAPreferredStockMember 2020-05-19 2020-05-19     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549   FORM 8-K   CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): May 19, 2020   BROADCOM INC. (Exact Name of Registrant as Specified in Charter)   Delaware   001-38449   35-2617337 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (IRS EmployerIdentification No.) 1320 Ridder Park Drive, San Jose, California   95131 (Address of principal executive offices)   (Zip Code) (408) 433-8000 (Registrant’s telephone number, including area code)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act: Title of each class   Trading Symbol(s)   Name of each exchange on which registered Common Stock, $0.001 par value   AVGO   The NASDAQ Global Select Market 8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value   AVGOP   The NASDAQ Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐     Item 8.01 Other Events. Early Participation Results and Early Settlement Election of Private Exchange Offers of Certain Outstanding Notes for New Notes In a press release issued on May 19, 2020, Broadcom Inc. (“Broadcom”) announced (i) the early participation results of its private offers to exchange certain series of its outstanding notes maturing between 2021 and 2024 for new series of senior notes maturing in 2026 and 2028 (the “Exchange Notes”) and (ii) its election to have an early settlement. The foregoing description is qualified in its entirety by reference to the press release dated May 19, 2020, a copy of which is attached hereto as Exhibit 99.1. Pricing of Private Exchange Offers of Certain Outstanding Notes for New Notes Following the announcement of the early participation results of the Exchange Offers, in a press release issued on May 19, 2020, Broadcom announced the pricing terms of the Exchange Offers. The foregoing description is qualified in its entirety by reference to the press release dated May 19, 2020, a copy of which is attached hereto as Exhibit 99.2. The Exchange Notes are being sold in private placements to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States under Regulation S under the Securities Act. This Current Report on Form 8-K is not an offer to purchase or sell or a solicitation of an offer to purchase or sell, with respect to any securities. Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements (including within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict”, “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include risks associated with: our acquisition of Symantec Corporation’s Enterprise Security business (“Symantec Business”), including (1) potential difficulties in employee retention, (2) unexpected costs, charges or expenses, and (3) our ability to successfully integrate the Symantec Business and achieve the anticipated benefits of the transaction; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; global economic conditions and concerns; international political and economic conditions; any acquisitions we may make, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired businesses with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions, including our recent acquisition of the Symantec Business; government regulations and trade restrictions; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors and resellers of our products; dependence on senior management and our ability to attract and retain qualified personnel; involvement in legal or administrative proceedings; quarterly and annual fluctuations in operating results; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities, warehouses or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; sales to our government clients; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; market acceptance of the end products into which our products are designed; our ability to sell to new types of customers and to keep pace with technological advances; our compliance with privacy and data security laws; our ability to protect against a breach of security systems; changes in accounting standards; fluctuations in foreign exchange rates; our provision for income taxes and overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Item 9.01 Financial Statements and Exhibits. ExhibitNo.     Description             99.1     Press release, dated May 19, 2020, entitled “Broadcom Inc. Announces Early Participation Results and Early Settlement Election of its Private Exchange Offers of Certain Outstanding Notes for New Notes”             99.2     Press release, dated May 19, 2020, entitled “Broadcom Inc. Announces Pricing Terms of its Private Exchange Offers of Certain Outstanding Notes for New Notes”             104     Cover Page Interactive Data File (formatted as Inline XBRL). SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.     BROADCOM INC.               Date: May 19, 2020     By:   /s/ Thomas H. Krause, Jr.     Name:   Thomas H. Krause, Jr.     Title:   Chief Financial Officer
8-K_1018724_0001193125-22-296602.htm
8-K AMAZON COM INC false 0001018724 0001018724 2022-12-01 2022-12-01     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 December 1, 2022 Date of Report (Date of earliest event reported)     AMAZON.COM, INC. (Exact name of registrant as specified in its charter)       Delaware   000-22513   91-1646860 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code) (206) 266-1000 (Registrant’s telephone number, including area code)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered Common Stock, par value $.01 per share   AMZN   Nasdaq Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       TABLE OF CONTENTS   ITEM 8.01.  OTHER EVENTS.      3   ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.      4   SIGNATURES      5   EXHIBIT 1.1    EXHIBIT 4.1    EXHIBIT 4.2    EXHIBIT 4.3    EXHIBIT 4.4    EXHIBIT 4.5    EXHIBIT 4.6    EXHIBIT 5.1    EXHIBIT 23.1      ITEM 8.01. OTHER EVENTS. On December 1, 2022, Amazon.com, Inc. (the “Company”) closed the sale of $1,250,000,000 aggregate principal amount of its 4.700% notes due 2024 (the “2024 Notes”), $1,250,000,000 aggregate principal amount of its 4.600% notes due 2025 (the “2025 Notes”), $2,000,000,000 aggregate principal amount of its 4.550% notes due 2027 (the “2027 Notes”), $1,500,000,000 aggregate principal amount of its 4.650% notes due 2029 (the “2029 Notes”), and $2,250,000,000 aggregate principal amount of its 4.700% notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, 2025 Notes, 2027 Notes, and 2029 Notes, the “Notes”) pursuant to an Underwriting Agreement dated November 29, 2022 (the “Underwriting Agreement”) among the Company and J.P. Morgan Securities LLC, Barclays Capital Inc., BofA Securities, Inc., and SG Americas Securities, LLC, as managers of the several underwriters named in Schedule II therein. The sale of the Notes was registered under the Company’s registration statement on Form S-3 filed on June 1, 2020 (File No. 333-238831). The aggregate public offering price of the Notes was $8.246 billion and the estimated net proceeds from the offering were approximately $8.235 billion, after deducting underwriting discounts from the public offering price and before deducting offering expenses payable by us. The Notes were issued pursuant to an Indenture dated as of November 29, 2012 between the Company and Wells Fargo Bank, National Association, as trustee (the “Prior Trustee”), as amended and supplemented by Supplemental Indenture No. 1, dated as of April 13, 2022, among the Company, the Prior Trustee, and Computershare Trust Company, National Association, as successor trustee, together with the officers’ certificate dated as of December 1, 2022 issued pursuant thereto establishing the terms of each series of the Notes (the “Officers’ Certificate”). The foregoing descriptions of the Underwriting Agreement and the Officers’ Certificate are qualified in their entirety by the terms of such documents, which are filed as Exhibit 1.1 and Exhibit 4.1, respectively, and incorporated herein by reference. The foregoing description of the Notes is qualified in its entirety by reference to the full text of the form of 2024 Note, form of 2025 Note, form of 2027 Note, form of 2029 Note, and form of 2032 Note, which are filed hereto as Exhibit 4.2, Exhibit 4.3, Exhibit 4.4, Exhibit 4.5, and Exhibit 4.6, respectively, and incorporated herein by reference.   3 ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (d) Exhibits.   Exhibit Number    Description   1.1    Underwriting Agreement, dated as of November 29, 2022, among Amazon.com, Inc. and J.P. Morgan Securities LLC, Barclays Capital Inc., BofA Securities, Inc., and SG Americas Securities, LLC, as managers of the several underwriters named in Schedule II therein.   4.1    Officers’ Certificate of Amazon.com, Inc., dated as of December 1, 2022.   4.2    Form of 4.700% Note due 2024 (included in Exhibit 4.1).   4.3    Form of 4.600% Note due 2025 (included in Exhibit 4.1).   4.4    Form of 4.550% Note due 2027 (included in Exhibit 4.1).   4.5    Form of 4.650% Note due 2029 (included in Exhibit 4.1).   4.6    Form of 4.700% Note due 2032 (included in Exhibit 4.1).   5.1    Opinion of Gibson, Dunn & Crutcher LLP. 23.1    Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1). 104    The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101).   4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.         AMAZON.COM, INC. (REGISTRANT)     By:   /s/ Antonio Masone Dated: December 1, 2022       Antonio Masone             Vice President and Treasurer   5
8-K_320193_0000320193-22-000107.htm
aapl-20221027false000032019300003201932022-10-272022-10-270000320193us-gaap:CommonStockMember2022-10-272022-10-270000320193aapl:A1.000NotesDue2022Member2022-10-272022-10-270000320193aapl:A1.375NotesDue2024Member2022-10-272022-10-270000320193aapl:A0.000Notesdue2025Member2022-10-272022-10-270000320193aapl:A0.875NotesDue2025Member2022-10-272022-10-270000320193aapl:A1.625NotesDue2026Member2022-10-272022-10-270000320193aapl:A2.000NotesDue2027Member2022-10-272022-10-270000320193aapl:A1.375NotesDue2029Member2022-10-272022-10-270000320193aapl:A3.050NotesDue2029Member2022-10-272022-10-270000320193aapl:A0.500Notesdue2031Member2022-10-272022-10-270000320193aapl:A3.600NotesDue2042Member2022-10-272022-10-27UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-KCURRENT REPORTPursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934October 27, 2022Date of Report (Date of earliest event reported)Apple Inc.(Exact name of Registrant as specified in its charter)California 001-36743 94-2404110(State or other jurisdictionof incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)One Apple Park Way Cupertino, California 95014 (Address of principal executive offices) (Zip Code)(408) 996-1010 (Registrant’s telephone number, including area code)Not applicable(Former name or former address, if changed since last report.)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredCommon Stock, $0.00001 par value per shareAAPLThe Nasdaq Stock Market LLC1.000% Notes due 2022—The Nasdaq Stock Market LLC1.375% Notes due 2024—The Nasdaq Stock Market LLC0.000% Notes due 2025—The Nasdaq Stock Market LLC0.875% Notes due 2025—The Nasdaq Stock Market LLC1.625% Notes due 2026—The Nasdaq Stock Market LLC2.000% Notes due 2027—The Nasdaq Stock Market LLC1.375% Notes due 2029—The Nasdaq Stock Market LLC3.050% Notes due 2029—The Nasdaq Stock Market LLC0.500% Notes due 2031—The Nasdaq Stock Market LLC3.600% Notes due 2042—The Nasdaq Stock Market LLCIndicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02    Results of Operations and Financial Condition.On October 27, 2022, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its fourth fiscal quarter ended September 24, 2022. A copy of Apple’s press release is attached hereto as Exhibit 99.1.The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01    Financial Statements and Exhibits.(d)Exhibits.ExhibitNumberExhibit Description99.1Press release issued by Apple Inc. on October 27, 2022.104Inline XBRL for the cover page of this Current Report on Form 8-K.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date:October 27, 2022Apple Inc.By:/s/ Luca MaestriLuca MaestriSenior Vice President,Chief Financial Officer
8-K_59478_0000059478-21-000168.htm
lly-202108030000059478false00000594782021-08-032021-08-030000059478us-gaap:CommonClassAMember2021-08-032021-08-030000059478lly:A1.000NotesDueJune22022Member2021-08-032021-08-030000059478lly:A718NotesDueJune12025Member2021-08-032021-08-030000059478lly:A1.625NotesDueJune22026Member2021-08-032021-08-030000059478lly:A2.125NotesDueJune32030Member2021-08-032021-08-030000059478lly:A625Notesdue2031Member2021-08-032021-08-030000059478lly:A6.77NotesDueJanuary12036Member2021-08-032021-08-030000059478lly:A1.700Notesdue2049Member2021-08-032021-08-03 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-K CURRENT REPORTPursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934Date of Report (Date of Earliest Event Reported): August 3, 2021ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in its Charter) Indiana 001-06351 35-0470950(State or Other Jurisdictionof Incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)  Lilly Corporate CenterIndianapolis,Indiana46285(Address of Principal Executive Offices)(Zip Code) Registrant’s Telephone Number, Including Area Code: (317) 276-2000 Not Applicable (Former Name or Former Address, if Changed Since Last Report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act: Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock (no par value)LLYNew York Stock Exchange1.000% Notes due 2022LLY22New York Stock Exchange7 1/8% Notes due 2025LLY25New York Stock Exchange1.625% Notes due 2026LLY26New York Stock Exchange2.125% Notes due 2030LLY30New York Stock Exchange0.625% Notes due 2031LLY31New York Stock Exchange6.77% Notes due 2036LLY36New York Stock Exchange1.700% Notes due 2049LLY49ANew York Stock ExchangeIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02. Results of Operations and Financial ConditionThe information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.Attached hereto as Exhibit 99.1 and incorporated by reference into this Item 2.02 is a copy of the press release, dated August 3, 2021, announcing the financial results of Eli Lilly and Company for the quarter ended June 30, 2021, including, among other things, unaudited financial results for that period.Item 9.01. Financial Statements and Exhibits.Exhibit No.Description99.1Press Release of Eli Lilly and Company, dated August 3, 2021.104Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ELI LILLY AND COMPANY(Registrant)By:/s/ Donald A. ZakrowskiName:Donald A. ZakrowskiTitle:Vice President, Finance, and Chief Accounting OfficerDate: August 3, 2021
8-K_1045810_0001045810-22-000073.htm
nvda-202205250001045810false00010458102022-05-252022-05-25UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): May 25, 2022 NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)   2788 San Tomas Expressway, Santa Clara, CA 95051 (Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).      Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02 Results of Operations and Financial Condition.On May 25, 2022, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter ended May 1, 2022. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter ended May 1, 2022, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.Item 9.01. Financial Statements and Exhibits.(d) Exhibits Exhibit Description99.1 Press Release, dated May 25, 2022, entitled "NVIDIA Announces Financial Results for First Quarter Fiscal 2023"99.2 CFO Commentary on First Quarter Fiscal 2023 ResultsSIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  NVIDIA CorporationDate: May 25, 2022By: /s/ Colette M. Kress Colette M. Kress Executive Vice President and Chief Financial Officer
8-K_1730168_0001730168-22-000101.htm
avgo-202210310001730168FALSE00017301682022-10-312022-10-31UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): October 31, 2022 Broadcom Inc. (Exact Name of Registrant as Specified in Charter)  Delaware001-3844935-2617337(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer Identification No.)1320 Ridder Park DriveSan Jose,California95131-2313(Address of principal executive offices including zip code)(408)433-8000( Registrant’s telephone number, including area code)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par valueAVGOThe NASDAQ Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of CertainOfficers; Compensatory Arrangements of Certain Officers.On October 31, 2022 (the “Grant Date”), in connection with the annual equity incentive award grant review and in consultation with its independent compensation consultant, the independent members of the Board of Directors (the “Board”) of Broadcom Inc. (the “Company”) granted Hock E. Tan, the Company’s President and Chief Executive Officer, an award of performance stock units (the “PSUs”) with vesting contingent on both achievement of formidable stock price performance milestones and continued service requirements over a five-year period (the “Tan PSU Award”). In addition, the Compensation Committee of the Board (the “Compensation Committee”), in consultation with its independent compensation consultant, granted Charlie B. Kawwas, Ph.D., the Company’s President of the Semiconductor Solutions Group, on the Grant Date an award of PSUs with similar vesting terms as are in the Tan PSU Award contingent on both achievement of formidable stock performance milestones and continued service requirements over a five-year period (the “Kawwas PSU Award,” and together with the Tan PSU Award, the “PSU Awards”). Leading Broadcom through the Next Stage of GrowthThe Board approved the Tan PSU Award to incentivize achievement of the Company’s long-term growth strategy and drive substantial return to stockholders by (i) aligning Mr. Tan’s interests with those of the Company’s stockholders by shifting material elements of Mr. Tan’s compensation opportunity to performance-based compensation and (ii) providing a significant incentive for Mr. Tan to continue to lead the Company, while executing critical growth initiatives, including the pending acquisition of VMware, Inc. Under Mr. Tan’s leadership, the Company increased total shareholder return by over 3,500% since its initial public offering in 2009. Mr. Tan has been and continues to be the driving force behind the Company’s transformation from a semiconductor company into the world’s leading infrastructure technology company that is poised to continue its platform expansion to accelerate innovation and address the most complex information technology infrastructure needs. The Board believes that Mr. Tan’s leadership is a key factor for the Company’s ongoing success and growth potential, and thus, a long-term equity incentive program that motivates Mr. Tan to realize the Company’s success and growth potential is in the best interests of all of its stockholders. The Compensation Committee approved the Kawwas PSU Award to reflect Dr. Kawwas’ promotion as the Company’s President of the Semiconductor Solutions Group in July 2022 and increased responsibilities in overseeing the Company’s broad semiconductor portfolio in addition to continuing to oversee the Company’s worldwide semiconductor sales and global operations, and to provide a significant incentive for Dr. Kawwas to continue to contribute towards the achievement of the Company’s long-term performance goals. In approving the PSU Awards, the Board and the Compensation Committee recognized, among other things, the unique blend of leadership, experience and knowledge that Mr. Tan and Dr. Kawwas bring to the Company and the continued importance of their strategic contributions in leading the Company’s long-term growth strategy that creates substantial value for the Company and its stockholders.Incentive Opportunities Aligned with StockholdersThe Board designed the PSU Awards to be 100% at risk and to deliver value to Mr. Tan and Dr. Kawwas only if the Company’s stockholders have also received significant and sustained value appreciation during the five-year performance period (the “Performance Period”). The shares of the Company’s common stock (the “Shares”) under the PSU Awards can be earned only during the period beginning after the third anniversary of the Grant Date and concluding on the fifth anniversary of the Grant Date (the “Earning Period”) (i) if the Company’s consecutive 20-trading days closing stock price average (the “Average Stock Price”) meets or exceeds the pre-set stock price hurdles during the Earning Period and (ii) there is no termination of employment, consultancy or Board membership (the “Termination of Services”), except as otherwise set forth below. The Shares under the PSU Awards will vest on the fifth anniversary of the Grant Date, without any interim vesting opportunities and except as otherwise set forth below. Terms of the PSU AwardsThe Tan PSU Award provides Mr. Tan with an opportunity to earn up to 1,000,000 Shares and the Kawwas PSU Award provides Dr. Kawwas with an opportunity to earn up to 300,000 Shares on the fifth anniversary of the Grant Date if the Average Stock Price meets or exceeds the pre-set stock price hurdles during the Earning Period as set forth below.For Mr. Tan, the Shares under the Tan PSU Award will vest on the fifth anniversary of the Grant Date if the following occurs during the Earning Period: (i) if the Average Stock Price equals or exceeds $825, 333,333 Shares will vest; (ii) if the Average Stock Price equals or exceeds $950, another 333,334 Shares will vest; and (iii) if the Average Stock Price equals or exceeds $1,125, another 333,333 Shares will vest (the “Tan Milestones”). For Dr. Kawwas, the Shares under the Kawwas PSU Award will vest on the fifth anniversary of the Grant Date if the following occurs during the Earning Period: (i) if the Average Stock Price equals or exceeds $825, 100,000 Shares will vest; (ii) if the Average Stock Price equals or exceeds $950, another 100,000 Shares will vest; and (iii) if the Average Stock Price equals or exceeds $1,125, another 100,000 Shares will vest (the “Kawwas Milestones,” and together with the Tan Milestones, the “Milestones”). These stock price hurdles reflect a 75.5%, 102.1% and 139.3% increase to the Grant Date closing stock price over a five-year period. If the Average Stock Price does not equal or exceed $825 during the Earning Period, the PSU Awards will be forfeited in full on the fifth anniversary of the Grant Date. There will be no linear interpolation between the Milestones; no additional Shares will vest if a stock price hurdle is attained more than once; no cash dividend equivalent rights will be credited or paid; and the maximum aggregate amount of Shares that may vest will not exceed the maximum number of Shares provided above for Mr. Tan and Dr. Kawwas. The grant date fair value of the maximum vesting opportunities for these PSU Awards (per the Accounting Standards Codification Topic Number 718) is estimated to be $161 million for Mr. Tan and $48 million for Dr. Kawwas. In the event Mr. Tan or Dr. Kawwas incurs a Termination of Services during the Performance Period, 100% of the PSU Awards will be forfeited and the Shares will not be issued, except as otherwise set forth below.If, prior to the Earning Period, Mr. Tan or Dr. Kawwas incurs a Termination of Services (i) by the executive for Good Reason (as defined in Mr. Tan’s and Dr. Kawwas’ Severance Benefit Agreement), (ii) by the Company without Cause (as defined in Mr. Tan’s and Dr. Kawwas’ Severance Benefit Agreement), or (iii) due to death or Permanent Disability (as defined in the PSU Awards) (each, a “Covered Termination”), the Performance Period will end and the Average Stock Price will be subject to a compound annual growth rate (CAGR) calculation. For the Shares to be issuable, the calculated CAGR must equal or exceed 11.9%, 15.1% or 19.1% (the “CAGR Milestones”), and the issuable Shares will be pro rated. If, during the Earning Period, Mr. Tan or Dr. Kawwas incurs a Covered Termination or, in the case of Mr. Tan, retirement, the Earning Period will end and the Average Stock Price will be determined; provided, however, in the event of retirement, the issuable Shares will be pro rated. In the event of both a Change in Control (as defined in the PSU Awards) and a Covered Termination, the Performance Period will end within ten days prior to the closing of the Change in Control, the Average Stock Price will be determined based on the greater of (i) the Average Stock Price ending on (and including) the last trading day of the shortened Performance Period and (ii) the price per Share paid by the successor in the Change in Control transaction, and the issuable Shares will vest. If, however, a Change in Control and a Covered Termination occur prior to the Earning Period, the determination of issuable Shares will be subject to the CAGR Milestones. The foregoing description of the PSU Awards does not purport to be complete and is qualified in its entirety by reference to the form of PSU Award Agreement, which is attached as Exhibit 10.1 to this report and incorporated by reference herein.Item 9.01    Financial Statements and Exhibits.(d) Exhibits Exhibit No.Description10.1Form of Performance Stock Unit Award Agreement (Price Contingency) under Broadcom Inc. 2012 Stock Incentive Plan.104Cover Page Interactive Data File (formatted as Inline XBRL).SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date: November 2, 2022  Broadcom Inc.By:/s/ Kirsten SpearsName:Kirsten SpearsTitle:Vice President, Chief Financial Officer and Chief Accounting Officer
8-K_59478_0001193125-23-048910.htm
8-K ELI LILLY & Co false 0000059478 0000059478 2023-02-23 2023-02-23 0000059478 us-gaap:CommonClassAMember 2023-02-23 2023-02-23 0000059478 lly:A718NotesDueJune12025Member 2023-02-23 2023-02-23 0000059478 lly:A1.625NotesDueJune22026Member 2023-02-23 2023-02-23 0000059478 lly:A2.125NotesDueJune32030Member 2023-02-23 2023-02-23 0000059478 lly:A625Notesdue2031Member 2023-02-23 2023-02-23 0000059478 lly:A5000NotesDue2033Member 2023-02-23 2023-02-23 0000059478 lly:A6.77NotesDueJanuary12036Member 2023-02-23 2023-02-23 0000059478 lly:A1625BritishPoundDenominatedNotesDue2043Member 2023-02-23 2023-02-23 0000059478 lly:A1.700Notesdue2049Member 2023-02-23 2023-02-23 0000059478 lly:A1125NotesDue2051Member 2023-02-23 2023-02-23 0000059478 lly:A1375NotesDue2061Member 2023-02-23 2023-02-23     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): February 23, 2023     ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in its Charter)       Indiana   001-06351   35-0470950 (State or Other Jurisdiction of Incorporation)   (Commission File Number)   (I.R.S. Employer Identification No.)   Lilly Corporate Center Indianapolis, Indiana   46285 (Address of Principal Executive Offices)   (Zip Code) Registrant’s Telephone Number, Including Area Code: (317) 276-2000 Not Applicable (Former Name or Former Address, if Changed Since Last Report.)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbol(s)   Name of each exchange on which registered Common Stock (no par value)   LLY   New York Stock Exchange 7 1/8% Notes due 2025   LLY25   New York Stock Exchange 1.625% Notes due 2026   LLY26   New York Stock Exchange 2.125% Notes due 2030   LLY30   New York Stock Exchange 0.625% Notes due 2031   LLY31   New York Stock Exchange 0.500% Notes due 2033   LLY33   New York Stock Exchange 6.77% Notes due 2036   LLY36   New York Stock Exchange 1.625% Notes due 2043   LLY43   New York Stock Exchange 1.700% Notes due 2049   LLY49A   New York Stock Exchange 1.125% Notes due 2051   LLY51   New York Stock Exchange 1.375% Notes due 2061   LLY61   New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01. Other Events. On February 23, 2023, Eli Lilly and Company (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein, for the issuance and sale by the Company of $750,000,000 aggregate principal amount of its 5.000% Notes due 2026 (the “2026 Notes”), $1,000,000,000 aggregate principal amount of its 4.700% Notes due 2033 (the “2033 Notes”), $1,250,000,000 aggregate principal amount of its 4.875% Notes due 2053 (the “2053 Notes”) and $1,000,000,000 aggregate principal amount of its 4.950% Notes due 2063 (the “2063 Notes” and, collectively with the 2026 Notes, the 2033 Notes and the 2053 Notes, the “Notes”). Each series of Notes will be issued pursuant to an Indenture (the “Indenture”), dated February 1, 1991, between the Company and Deutsche Bank Trust Company Americas (as successor to Citibank, N.A.), as trustee, and an officers’ certificate setting forth the terms of the Notes (including the forms of such Notes as exhibits). The offering of the Notes was registered on a Registration Statement on Form S-3 (File No. 333-262943). The 2026 Notes accrue interest at a rate of 5.000% per annum, payable semi-annually, and, except as contemplated in the following paragraph, mature on February 27, 2026. The 2033 Notes accrue interest at a rate of 4.700% per annum, payable semi-annually, and, except as contemplated in the following paragraph, mature on February 27, 2033. The 2053 Notes accrue interest at a rate of 4.875% per annum, payable semi-annually, and, except as contemplated in the following paragraph, mature on February 27, 2053. The 2063 Notes accrue interest at a rate of 4.950% per annum, payable semi-annually, and, except as contemplated in the following paragraph, mature on February 27, 2063. Upon the closing of the offering of the Notes, which is expected to occur on February 27, 2023, the Company will realize, after deduction of underwriting discounts and before deduction of estimated offering expenses payable by the Company, net proceeds of approximately $3.96 billion. Upon the occurrence of an Event of Default (as defined in the Indenture) with respect to a series of Notes, the principal amount of the Notes of that series may be declared, and become, immediately due and payable. The Company may, at its election, redeem the Notes, in whole or in part, from time to time at the redemption prices and on the terms and conditions set forth in the Notes. The above description of the Underwriting Agreement and the Notes is qualified in its entirety by reference to the Underwriting Agreement, the form of officers’ certificate, the Indenture and the forms of the Notes filed as exhibits hereto, which exhibits are incorporated by reference herein. Item 9.01 Financial Statements and Exhibits. (d) Exhibits     1.1    Underwriting Agreement, dated February 23, 2023, among Eli Lilly and Company and J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein.   4.1*    Indenture, dated February 1, 1991, among Eli Lilly and Company and Deutsche Bank Trust Company Americas, as successor to Citibank, N.A., as Trustee.   4.2±    Tripartite Agreement, dated September 13, 2007, appointing Deutsche Bank Trust Company Americas as Successor Trustee under the Indenture listed above.   4.3    Form of Officers’ Certificate setting forth the terms and form of the Notes.   4.4    Form of 5.000% Note due 2026 (included in Exhibit 4.3 above).   4.5    Form of 4.700% Note due 2033 (included in Exhibit 4.3 above).   4.6    Form of 4.875% Note due 2053 (included in Exhibit 4.3 above).   4.7    Form of 4.950% Note due 2063 (included in Exhibit 4.3 above).   5.1    Opinion of Kirkland & Ellis LLP.   5.2    Opinion of Jonathan Groff, Esq. 23.1    Consent of Kirkland & Ellis LLP (included as part of Exhibit 5.1). 23.2    Consent of Jonathan Groff, Esq. (included as part of Exhibit 5.2). 104    Cover Page Interactive Data File (embedded within the Inline XBRL document).   * Incorporated by reference to the same-numbered exhibit of the Company’s Registration Statement on Form S-3 (File No. 333-186979), filed with the Securities and Exchange Commission (“SEC”) on March 1, 2013.   ± Incorporated by reference to the same-numbered exhibit of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-06351), filed with the SEC on February 27, 2009. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.   ELI LILLY AND COMPANY (Registrant) By:   /s/ Philip Johnson Name:   Philip Johnson Title:   Group Vice President, Treasurer and Head of Corporate Transactions Dated:   February 24, 2023
8-K_1045810_0001045810-16-000243.htm
8-K 1 form8-kq117.htm FORM 8-K SEC Document UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-KCURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): May 12, 2016NVIDIA CORPORATION(Exact name of registrant as specified in its charter)  Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)    2701 San Tomas Expressway, Santa Clara, CA95050 (Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))SECTION 2 - Financial Information  Item 2.02 Results of Operations and Financial Condition. On May 12, 2016, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter ended May 1, 2016. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.  Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter ended May 1, 2016, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.  The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.SECTION 9 - Financial Statements and Exhibits  Item 9.01 Financial Statements and Exhibits.  (d) Exhibits Exhibit Description99.1 Press Release, dated May 1, 2016, entitled "NVIDIA Announces Financial Results for First Quarter Fiscal 2017"99.2 CFO Commentary on First Quarter Fiscal Year 2017 ResultsSIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.     NVIDIA CorporationDate: May 12, 2016 By: /s/ Colette M. Kress  Colette M. Kress  Executive Vice President and Chief Financial OfficerEXHIBIT INDEXExhibit Description99.1 Press Release, dated May 1, 2016, entitled "NVIDIA Announces Financial Results for First Quarter Fiscal 2017"99.2 CFO Commentary on First Quarter Fiscal Year 2017 Results
8-K_1730168_0001730168-20-000201.htm
avgo-202012100001730168FALSE00017301682020-12-102020-12-100001730168us-gaap:CommonStockMember2020-12-102020-12-100001730168us-gaap:SeriesAPreferredStockMember2020-12-102020-12-10UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): December 10, 2020  Broadcom Inc. (Exact Name of Registrant as Specified in Charter)  Delaware001-3844935-2617337(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. EmployerIdentification No.)1320 Ridder Park Drive,San Jose, California95131-2313(Address of principal executive offices)(Zip Code)(408)433-8000( Registrant’s telephone number, including area code)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par valueAVGOThe NASDAQ Global Select Market8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par valueAVGOPThe NASDAQ Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Item 2.02    Results of Operations and Financial Condition.On December 10, 2020, Broadcom Inc. (“Broadcom” or the “Company”) issued a press release announcing its unaudited financial results for the fourth fiscal quarter ended November 1, 2020. The Company will host an investor conference call on December 10, 2020 at 2:00 p.m. Pacific Time to discuss these results.The foregoing description is qualified in its entirety by reference to the press release dated December 10, 2020, a copy of which is attached hereto as Exhibit 99.1. Item 7.01    Regulation FD.The Company will be presenting to investors at the JP Morgan Tech Forum on January 12, 2021.Item 8.01     Other Events.On December 10, 2020, the Company announced that the Board of Directors has declared a quarterly cash dividend on the Company’s 8.00% Mandatory Convertible Preferred Stock, Series A (the "Mandatory Convertible Preferred Stock"), of $20.00 per share. This dividend is payable on December 31, 2020 to Mandatory Convertible Preferred Stock holders of record at the close of business (5:00 p.m., Eastern Time) on December 15, 2020. The Company also announced that the Board of Directors has declared a quarterly cash dividend on the Company's common stock of $3.60 per share. This dividend is payable on December 31, 2020 to common stockholders of record at the close of business (5:00 p.m., Eastern Time) on December 21, 2020.Item 9.01    Financial Statements and Exhibits.(d) Exhibits Exhibit No.Description99.1Press release, dated December 10, 2020, entitled “Broadcom Inc. Announces Fourth Quarter and Fiscal Year 2020 Financial Results and Quarterly Dividends.”104Cover Page Interactive Data File (formatted as Inline XBRL).The information contained in Items 2.02 and 7.01 of this report, including Exhibit 99.1, shall not be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.Cautionary Note Regarding Forward-Looking StatementsThis report contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict” “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.Particular uncertainties that could materially affect future results include risks associated with: the COVID-19 pandemic, which has, and will likely continue to, negatively impact the global economy and disrupt normal business activity, and which may have an adverse effect on our results of operations; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; global economic conditions and concerns; global political and economic conditions; government regulations, trade restrictions and trade tensions; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors and resellers of our products; dependence on senior management and our ability to attract and retain qualified personnel; any acquisitions we may make, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired businesses with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions; involvement in legal or administrative proceedings; quarterly and annual fluctuations in operating results; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities, warehouses or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; market acceptance of the end products into which our products are designed; our ability to sell to new types of customers and to keep pace with technological advances; our compliance with privacy and data security laws; our ability to protect against a breach of security systems; fluctuations in foreign exchange rates; our provision for income taxes and overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Our filings with the SEC, which you may obtain for free at the SEC’s website at http://www.sec.gov, discuss some of the important risk factors that may affect our business, results of operations and financial condition. Actual results may vary from the estimates provided. We undertake no intent or obligation to publicly update or revise any of the estimates and other forward-looking statements made in this announcement, whether as a result of new information, future events or otherwise, except as required by law.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date: December 10, 2020  Broadcom Inc.By:/s/ Kirsten SpearsName:Kirsten SpearsTitle:Vice President, Chief Financial Officer and Chief Accounting Officer
8-K_1730168_0001193125-18-143404.htm
8-K 1 d544654d8k.htm FORM 8-K Form 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 30, 2018     Broadcom Inc. (Exact name of registrant as specified in its charter)       Delaware   001-38449   35-2617337 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 1320 Ridder Park Drive San Jose, California   95131 (Address of principal executive offices)   (Zip Code) Registrant’s telephone number, including area code: (408) 433-8000     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company   ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐       Item 7.01. Regulation FD. On April 30, 2018, Broadcom Inc. (“Broadcom” or the “Company”) issued a press release providing certain guidance information for the second and third quarters of fiscal year 2018. The foregoing description is qualified in its entirety by reference to the press release, dated April 30, 2018, a copy of which is attached hereto as Exhibit 99.1.   Item 9.01. Financial Statements and Exhibits. (d) Exhibits.   Exhibit No.    Description 99.1    Press release, dated April 30, 2018. The information contained in Item 7.01 of this report, including Exhibit 99.1, shall not be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Cautionary Note Regarding Forward-Looking Statements This communication, and any documents to which the Company refers you to in this communication, contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict”, “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside Broadcom’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include risks associated with: any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; any acquisitions we may make, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired companies with our existing businesses and our ability to achieve the growth prospects and synergies expected by such acquisitions; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; our significant indebtedness, including the need to generate sufficient cash flows to service and repay such debt; dependence on a small number of markets and the rate of growth in these markets; dependence on and risks associated with distributors of our products; dependence on senior management; quarterly and annual fluctuations in our operating results; global economic conditions and concerns; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; cyclicality in the semiconductor industry or in our target markets; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our filings with the Securities and Exchange Commission (“SEC”), which you may obtain for free at the SEC’s website at http://www.sec.gov, discuss some of the important risk factors that may affect our business, results of operations and financial condition. We undertake no intent or obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 30, 2018   Broadcom Inc.   By:   /s/ Thomas H. Krause, Jr. Name:   Thomas H. Krause, Jr. Title:   Chief Financial Officer
8-K_59478_0000059478-19-000335.htm
Document false--12-310000059478 0000059478 2019-12-20 2019-12-20 0000059478 us-gaap:CommonClassAMember 2019-12-20 2019-12-20 0000059478 lly:A625Notesdue2031Member 2019-12-20 2019-12-20 0000059478 lly:A1.625NotesDueJune22026Member 2019-12-20 2019-12-20 0000059478 lly:A1.700Notesdue2049Member 2019-12-20 2019-12-20 0000059478 lly:A2.125NotesDueJune32030Member 2019-12-20 2019-12-20 0000059478 lly:A718NotesDueJune12025Member 2019-12-20 2019-12-20 0000059478 lly:A6.77NotesDueJanuary12036Member 2019-12-20 2019-12-20 0000059478 lly:A1.000NotesDueJune22022Member 2019-12-20 2019-12-20   UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549 ________________FORM 8-K  CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934________________Date of report (Date of earliest event reported): December 20, 2019 ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in Charter)       Indiana 001-06351 35-0470950(State or Other Jurisdictionof Incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)  Lilly Corporate Center Indianapolis, Indiana 46285 (Address of Principal Executive Offices, and Zip Code)(317) 276-2000 Registrant’s Telephone Number, Including Area CodeNot Applicable (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock (no par value)LLYNew York Stock Exchange1.000% Notes due 2022LLY22New York Stock Exchange7 1/8% Notes due 2025LLY25New York Stock Exchange1.625% Notes due 2026LLY26New York Stock Exchange2.125% Notes due 2030LLY30New York Stock Exchange0.625% Notes due 2031LLY31New York Stock Exchange6.77% Notes due 2036LLY36New York Stock Exchange1.700% Notes due 2049LLY49ANew York Stock ExchangeItem 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year(a) Amendment to the Bylaws to Update Emergency Succession AuthorityOn December 16, 2019, the Board of Directors of Eli Lilly and Company (the “Company”) approved amendments to the Company’s bylaws (the “Bylaws”) regarding the temporary authority to assume the duties and exercise the powers of the Chief Executive Officer in the event of the sudden death or incapacity of the incumbent. Such temporary authority is granted only until the Board of Directors appoints a successor or determines that the incumbent is able to resume the office. The amendments are set forth below and attached. Deletions are indicated by strikeouts and new language is indicated by underlining. A black-line version of the Bylaws is filed as an exhibit to this Form 8-K. SECTION 3.6. Chairman of the Board of Directors. The Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors if present and shall have such powers and perform such duties as are assigned to him or her by the Bylaws and by the Board of Directors. At any time in which the Chairman of the Board is unable to discharge the powers and duties of the office, then until such time as the Board shall appoint a new Chairman or determines that the Chairman is able to resume office, temporary authority to perform such duties and exercise such powers shall be granted to the Chief Executive Officer, or if he or she is unable to perform such duties and exercise such powers, to the Board’s presiding or lead director (if one shall have been previously selected).SECTION 3.7. Chief Executive Officer. The Chief Executive Officer shall, subject to the control of the Board of Directors, have general supervision over the management and direction of the business of the Corporation. He or she shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer shall have such other powers and perform such other duties as are assigned to him or her by the Bylaws or the Board of Directors. At any time in which the Chief Executive Officer is unable to discharge the powers and duties of the office, then until such time as the Board shall appoint a new Chief Executive Officer or determines that the Chief Executive Officer is able to resume office, temporary authority to perform such duties and exercise such powers shall be granted in the following manner:(a)    First, to the President; or if he or she is unable to discharge such powers and duties, (b)To the Chief Financial Officer executive officer in charge of the Corporation’s largest business unit, measured by total revenue on a consolidated basis for the most recently completed fiscal year; or if he or she is unable to discharge such powers and duties,(c)To the executive officer serving as chief scientific officer Chief Financial Officer; or if he or she is unable to discharge such powers and duties,(d)To the executive officer in charge of the Corporation’s largest business unit, measured by total revenue on a consolidated basis for the most recently completed fiscal year. (b) Amendment to the Bylaws to Implement a Proxy AccessOn December 16, 2019, the Board of Directors of the Company amended and restated the Company’s Bylaws to implement a “proxy access” bylaw, effective immediately. Section 1.10 of the Bylaws permits a shareholder or a group of up to twenty shareholders that has owned 3% or more of the outstanding capital stock of the Company continuously for at least three years to nominate and include in the Company’s annual meeting proxy materials director candidates constituting up to the greater of (i) two directors or (ii) 20% of the number of the Company’s directors then serving on the Board, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in the Bylaws. The Bylaws also contain related conforming changes. The foregoing description of the amendments to the Bylaws is qualified in its entirety by reference to the full black-lined text of the Bylaws, which are filed as Exhibit 3.1 hereto, and incorporated herein by reference. Deletions are indicated by strikeouts and new language is indicated by underlining. Item 9.01. Financial Statements and ExhibitsExhibit Number    Description3.1Eli Lilly and Company Bylaws as amended December 16, 2019-Blackline104Cover page interactive data file (embedded within the Inline XBRL document)SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ELI LILLY AND COMPANY(Registrant)By:     /s/ Bronwen L. Mantlo    Name: Bronwen L. MantloTitle:     Corporate SecretaryDated: December 20, 2019
8-K_320193_0001628280-17-004663.htm
8-K 1 a8-kq22017412017.htm 8-K Document  UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 8-KCURRENT REPORTPursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934May 2, 2017 Date of Report (Date of earliest event reported)   Apple Inc.(Exact name of Registrant as specified in its charter)California 001-36743 94-2404110(State or other jurisdictionof incorporation) (CommissionFile Number) (IRS. EmployerIdentification No.)1 Infinite LoopCupertino, California 95014(Address of principal executive offices) (Zip Code)(408) 996-1010(Registrant’s telephone number, including area code)Not applicable(Former name or former address, if changed since last report.)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Item 2.02Results of Operations and Financial Condition.On May 2, 2017, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its second fiscal quarter ended April 1, 2017 and a related data sheet. A copy of Apple’s press release is attached hereto as Exhibit 99.1 and a copy of the related data sheet is attached hereto as Exhibit 99.2.The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01Financial Statements and Exhibits. (d)Exhibits.ExhibitNumber  Exhibit Description  99.1  Press release issued by Apple Inc. on May 2, 2017.  99.2  Data sheet issued by Apple Inc. on May 2, 2017.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: May 2, 2017 Apple Inc.         By: /s/ Luca Maestri     Luca MaestriSenior Vice President,Chief Financial OfficerExhibit Index ExhibitNumber  Exhibit Description  99.1  Press release issued by Apple Inc. on May 2, 2017.  99.2  Data sheet issued by Apple Inc. on May 2, 2017.
8-K_1730168_0001193125-19-074832.htm
8-K 1 d642515d8k.htm 8-K 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): March 13, 2019     BROADCOM INC. (Exact Name of Registrant as Specified in Charter)       Delaware   001-38449   35-2617337 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (IRS EmployerIdentification No.) 1320 Ridder Park Drive, San Jose, California   95131 (Address of principal executive offices)   (Zip Code) (408) 433-8000 (Registrant’s telephone number, including area code)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐       Item 2.02 Results of Operations and Financial Condition On March 14, 2019, Broadcom Inc. (“Broadcom” or the “Company”) issued a press release announcing its unaudited financial results for the first fiscal quarter ended February 3, 2019. The Company will host an investor conference call on March 14, 2019 at 2:00 p.m. Pacific Time to discuss these results. The foregoing description is qualified in its entirety by reference to the press release dated March 14, 2019, a copy of which is attached hereto as Exhibit 99.1.   Item 5.05 Amendment to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics. On March 13, 2019, the Board of Directors of the Company (the “Board”) approved amendments to the Company’s Code of Ethics and Business Conduct (the “Code of Conduct”), which applies to all directors, officers and employees of the Company and its controlled subsidiaries. The following is a summary of the substantive amendments to the Code of Conduct: (i) a new section describing legal restrictions and compliance requirements applicable to persons lobbying or conducting business on behalf of the Company with government agencies, and (ii) a new section that reinforces the Company’s commitment to human rights by clarifying that suppliers are expected to acknowledge and implement the Broadcom Supplier Environmental and Social Responsibility Code of Conduct (which provides clarity with respect to the Company’s expectations of its suppliers’ labor, health and safety, and environmental practices), or a code with substantially equivalent terms, and affirms that the Company’s government contractors comply with U.S. Federal government requirements against trafficking in persons. The amendments took effect upon adoption by the Board. The foregoing summary of the amendments to the Code of Conduct is qualified in its entirety by reference to the full text of the Code of Conduct, as so amended, which is available in the “Investors Center – Governance” section of our website at www.broadcom.com.   Item 8.01. Other Events. On March 14, 2019, the Company announced that the Board has declared a quarterly cash dividend on the Company’s common stock of $2.65 per share. The dividend is payable on March 29, 2019 to stockholders of record at the close of business (5:00 p.m.), Eastern Time, on March 21, 2019.   Item 9.01 Financial Statements and Exhibits. (d) Exhibits   ExhibitNo.    Description 99.1    Press release, dated March 14, 2019, entitled “Broadcom Inc. Announces First Quarter Fiscal Year 2019 Financial Results and Quarterly Dividend” The information contained in Items 2.02 of this report, including Exhibit 99.1, shall not be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict” “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include risks associated with: our acquisition of CA, Inc., or CA, including (1) potential difficulties in employee retention, (2) unexpected costs, charges or expenses, and (3) our ability to successfully integrate CA’s business and achieve the anticipated benefits of the transaction; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; any other acquisitions we may make, including integrating acquired companies with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; our dependency on a limited number of suppliers; dependence on and risks associated with distributors of our products; dependence on senior management and our ability to attract and retain qualified personnel; global economic conditions and concerns; quarterly and annual fluctuations in operating results; the amount and frequency of our stock repurchases; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; sales to our government clients; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; our ability to protect against a breach of security systems; changes in accounting standards; fluctuations in foreign exchange rates; our provision for income taxes and our overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our filings with the SEC, which you may obtain for free at the SEC’s website at http://www.sec.gov, discuss some of the important risk factors that may affect our business, results of operations and financial condition. Actual results may vary from the estimates provided. We undertake no intent or obligation to publicly update or revise any of the estimates and other forward-looking statements made in this report, whether as a result of new information, future events or otherwise, except as required by law. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.       BROADCOM INC. Date: March 14, 2019     By:   /s/ Thomas H. Krause, Jr.       Name: Thomas H. Krause, Jr.       Title:   Chief Financial Officer
8-K_1652044_0001193125-22-192153.htm
8-K NASDAQ NASDAQ false 0001652044 0001652044 2022-07-12 2022-07-12 0001652044 us-gaap:CommonClassAMember 2022-07-12 2022-07-12 0001652044 goog:CapitalClassCMember 2022-07-12 2022-07-12     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) July 12, 2022     ALPHABET INC. (Exact name of registrant as specified in its charter)       Delaware   001-37580   61-1767919 (State or other jurisdictionof incorporation)   (Commission File Number)   (IRS EmployerIdentification No.) 1600 Amphitheatre Parkway Mountain View, CA 94043 (Address of principal executive offices, including zip code) (650) 253-0000 (Registrant’s telephone number, including area code) Not Applicable (Former name or former address, if changed since last report)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):     ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)     ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)     ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))     ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   TradingSymbol(s)   Name of each exchangeon which registered Class A Common Stock, $0.001 par value   GOOGL   Nasdaq Stock Market LLC     (Nasdaq Global Select Market) Class C Capital Stock, $0.001 par value   GOOG   Nasdaq Stock Market LLC none   none   (Nasdaq Global Select Market) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01. Other Events. On July 12, 2022, Sundar Pichai, Chief Executive Officer of Alphabet Inc. and Google LLC (“Google”), shared the following message with Google employees: Hi Googlers, Hard to believe we’re already through the first half of 2022. It’s the right opportunity to thank everyone for the great work so far this year, and to share how my Leads and I are thinking about H2. The uncertain global economic outlook has been top of mind. Like all companies, we’re not immune to economic headwinds. Something I cherish about our culture is that we’ve never viewed these types of challenges as obstacles. Instead, we’ve seen them as opportunities to deepen our focus and invest for the long term. In these moments, I turn to our mission: to organize the world’s information and make it universally accessible and useful. It’s what inspired me to join the company 18 years ago, and what makes me so optimistic about the impact we are able to have on the world. Knowledge and computing are how we drive our mission forward. That’s the lens we use to decide where to invest — whether it’s in areas like Search, Cloud, YouTube, Platforms and Hardware, the teams that support them, or in the AI that enables more helpful products and services. We help people and society when we focus on what we do best, and do it really well. The investments we’ve made in the first half of the year reflect this vision. In Q2 alone, we added approximately 10,000 Googlers, and have a strong number of commitments for Q3 start dates which reflects, in part, the seasonal college recruiting calendar. These are extraordinary numbers, and they show our excitement about long-term opportunities, even in uncertain times. Because of the hiring progress achieved so far this year, we’ll be slowing the pace of hiring for the rest of the year, while still supporting our most important opportunities. For the balance of 2022 and 2023, we’ll focus our hiring on engineering, technical and other critical roles, and make sure the great talent we do hire is aligned with our long-term priorities. Moving forward, we need to be more entrepreneurial, working with greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days. In some cases, that means consolidating where investments overlap and streamlining processes. In other cases, that means pausing development and re-deploying resources to higher priority areas. Making the company more efficient is up to all of us — we’ll be creating more ways for you all to engage and share ideas to help, so stay tuned. Scarcity breeds clarity — this is something we have been saying since the earliest days of Google. It’s what drives focus and creativity that ultimately leads to better products that help people all over the world. That’s the opportunity in front of us today, and I’m excited for us to rise to the moment again. -Sundar SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.         ALPHABET INC. Date: July 12, 2022       /s/ Kathryn W. Hall       Kathryn W. Hall       Assistant Secretary
8-K_1730168_0001193125-19-172516.htm
8-K 1 d763344d8k.htm 8-K 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 11, 2019     BROADCOM INC. (Exact Name of Registrant as Specified in Charter)       Delaware   001-38449   35-2617337 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (IRS EmployerIdentification No.) 1320 Ridder Park Drive, San Jose, California   95131 (Address of principal executive offices)   (Zip Code) (408) 433-8000 (Registrant’s telephone number, including area code)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered Common Stock, $0.001 par value   AVGO   The Nasdaq Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐       Item 2.02. Results of Operations and Financial Condition On June 13, 2019, Broadcom Inc. (“Broadcom” or the “Company”) issued a press release announcing its unaudited financial results for the second fiscal quarter ended May 5, 2019. The Company will host an investor conference call on June 13, 2019 at 2:00 p.m. Pacific Time to discuss these results. The foregoing description is qualified in its entirety by reference to the press release dated June 13, 2019, a copy of which is attached hereto as Exhibit 99.1.   Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. New Director Appointment Effective June 11, 2019, the Company’s Board of Directors (the “Board”) appointed Justine F. Page as an independent director of the Company. Ms. Page served as the Chief Financial Officer, Vice President of Finance, Treasurer, and Secretary of Integrated Circuit Systems, Inc., from May 1999 to September 2005 when ICS merged with Integrated Device Technologies, Inc., following which Ms. Page retired. She joined ICS in 1993, holding titles including Director of Finance and Administration and Assistant Treasurer. From June 2008 until April 2017, Ms. Page served on the board of our predecessors, including Avago Technologies and Broadcom Limited, and served as chairperson of its Audit Committee and a member of its Nominating and Corporate Governance Committee. Ms. Page also served as a director and chairperson of the audit committee of SunEdison Semiconductor Limited from May 2014 until December 2016, and served as a director of Techwell, Inc. from January 2006 until July 2010, where she also served as the chairperson of the audit committee. Ms. Page holds a B.A. degree in accounting from Immaculata College and a Master of Taxation degree from Villanova University. Ms. Page’s qualifications to serve on our Board include her career in senior financial management positions with, and on the board of directors of, semiconductor companies, and her education and training as an accounting professional. Ms. Page will participate in the non-employee director compensation arrangements generally applicable to all of the Company’s non-employee directors. Under the terms of those arrangements, as currently in effect, Ms. Page received an initial restricted stock unit award with a value of $183,333 on June 11, 2019, her first date of service as a director, which will vest in full on the earlier of (i) the first anniversary of the grant date and (ii) the date on which the Company’s annual meeting of stockholders immediately following the grant date is held, subject to her continuing service on the vesting date. The number of shares subject to this award was determined by dividing the value of the award by the average of the Company’s per share closing market prices, as quoted on the Nasdaq Global Select Market, over the 30 calendar days immediately preceding June 11, 2019. In addition, Ms. Page will be entitled to receive the annual cash and equity compensation payable to other non-employee directors of the Company. Details regarding the Company’s non-employee director compensation program are set forth in the Company’s Proxy Statement related to its 2019 Annual Meeting of Stockholders, filed with the Securities and Exchange Commission on February 19, 2019. Committee Changes Effective June 11, 2019, the Board appointed Ms. Page as the Chairman of the Audit Committee and as a member of the Executive Committee. In connection with Ms. Page’s appointment to the Audit Committee, Peter Marks stepped down from the Audit Committee and the Board appointed Mr. Marks as a member of the Compensation Committee.   Item 8.01. Other Events. On June 13, 2019, the Company announced that the Board has declared a quarterly cash dividend on the Company’s common stock of $2.65 per share. The dividend is payable on July 2, 2019 to stockholders of record at the close of business (5:00 p.m.), Eastern Time, on June 24, 2019. Item 9.01. Financial Statements and Exhibits. (d) Exhibits   ExhibitNo.    Description 99.1    Press release, dated June 13, 2019, entitled “Broadcom Inc. Announces Second Quarter Fiscal Year 2019 Financial Results, Quarterly Dividend and Updated Guidance” The information contained in Items 2.02 of this report, including Exhibit 99.1, shall not be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict” “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include risks associated with: our acquisition of CA, Inc. (“CA”) including (1) potential difficulties in employee retention, (2) unexpected costs, charges or expenses, and (3) our ability to successfully integrate CA’s business and achieve the anticipated benefits of the transaction; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; any other acquisitions we may make, including integrating acquired companies with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions; global economic conditions and concerns; government regulations and trade restrictions; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors of our products; dependence on senior management and our ability to attract and retain qualified personnel; international political and economic conditions; our dependency on a limited number of suppliers; quarterly and annual fluctuations in operating results; the amount and frequency of our stock repurchases; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities or other significant operations; our ability to improve our manufacturing efficiency and quality; involvement in legal or administrative proceedings; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; sales to our government clients; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; our ability to protect against a breach of security systems; changes in accounting standards; fluctuations in foreign exchange rates; our provision for income taxes and overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our filings with the SEC, which you may obtain for free at the SEC’s website at http://www.sec.gov, discuss some of the important risk factors that may affect our business, results of operations and financial condition. Actual results may vary from the estimates provided. We undertake no intent or obligation to publicly update or revise any of the estimates and other forward-looking statements made in this report, whether as a result of new information, future events or otherwise, except as required by law. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.       BROADCOM INC. Date: June 13, 2019     By:   /s/ Thomas H. Krause, Jr.       Name: Thomas H. Krause, Jr.       Title:   Chief Financial Officer
8-K_1067983_0001193125-24-193776.htm
8-K BERKSHIRE HATHAWAY INC DE false 0001067983 0001067983 2024-08-03 2024-08-03 0001067983 brk59:Class160ACommonStockMember 2024-08-03 2024-08-03 0001067983 brk59:Class160BCommonStockMember 2024-08-03 2024-08-03 0001067983 brk59:M0.000SeniorNotesDue2025Member 2024-08-03 2024-08-03 0001067983 brk59:M1.125SeniorNotesDue2027Member 2024-08-03 2024-08-03 0001067983 brk59:M2.150SeniorNotesDue2028Member 2024-08-03 2024-08-03 0001067983 brk59:M1.500SeniorNotesDue2030Member 2024-08-03 2024-08-03 0001067983 brk59:M2.000SeniorNotesDue2034Member 2024-08-03 2024-08-03 0001067983 brk59:M1.625SeniorNotesDue2035Member 2024-08-03 2024-08-03 0001067983 brk59:M2.375SeniorNotesDue2039Member 2024-08-03 2024-08-03 0001067983 brk59:M0.500SeniorNotesDue2041Member 2024-08-03 2024-08-03 0001067983 brk59:M2.625SeniorNotesDue2059Member 2024-08-03 2024-08-03     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) August 3, 2024     BERKSHIRE HATHAWAY INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)       DELAWARE   001-14905   47-0813844 (STATE OR OTHER JURISDICTION OF INCORPORATION)   (COMMISSION FILE NUMBER)   (I.R.S. EMPLOYER IDENTIFICATION NO.)   3555 Farnam Street   Omaha, Nebraska   68131 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)   (ZIP CODE) (402) 346-1400 REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbols   Name of each exchange on which registered Class A Common Stock   BRK.A   New York Stock Exchange Class B Common Stock   BRK.B   New York Stock Exchange 0.000% Senior Notes due 2025   BRK25   New York Stock Exchange 1.125% Senior Notes due 2027   BRK27   New York Stock Exchange 2.150% Senior Notes due 2028   BRK28   New York Stock Exchange 1.500% Senior Notes due 2030   BRK30   New York Stock Exchange 2.000% Senior Notes due 2034   BRK34   New York Stock Exchange 1.625% Senior Notes due 2035   BRK35   New York Stock Exchange 2.375% Senior Notes due 2039   BRK39   New York Stock Exchange 0.500% Senior Notes due 2041   BRK41   New York Stock Exchange 2.625% Senior Notes due 2059   BRK59   New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐       ITEM 2.02 Results of Operations and Financial Condition. On August 3, 2024, Berkshire Hathaway Inc. issued a press release announcing the Company’s earnings for the second quarter and first six months ended June 30, 2024. A copy of this press release is furnished with this report as an exhibit to this Form 8-K.   ITEM 9.01 Financial Statements and Exhibits      Exhibit 99.1    Berkshire Hathaway Inc. Earnings Release Dated August 3, 2024    Exhibit 104    Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   August 5, 2024   BERKSHIRE HATHAWAY INC.     /s/ Marc D. Hamburg     By: Marc D. Hamburg     Senior Vice President and Chief Financial Officer  
8-K_1067983_0001193125-19-006899.htm
8-K 1 d682139d8k.htm 8-K 8-K     SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) January 11, 2019     BERKSHIRE HATHAWAY INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)       DELAWARE   001-14905   47-0813844 (STATE OR OTHER JURISDICTION OF INCORPORATION)   (COMMISSION FILE NUMBER)   (I.R.S. EMPLOYER IDENTIFICATION NO.)   3555 Farnam Street Omaha, Nebraska   68131 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)   (ZIP CODE) (402) 346-1400 REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01 Other Events. On January 11, 2019 Berkshire Hathaway Finance Corporation (“BHFC”) issued $1,250,000,000 aggregate principal amount of its 4.250% Senior Notes due 2049 (the “Notes”) under a registration statement on Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”), filed with the Securities and Exchange Commission (the “Commission”) on January 26, 2016 (Registration No. 333-209122) (the “Registration Statement”). The Notes, which will be fully and unconditionally guaranteed by Berkshire Hathaway Inc. (“Berkshire”), were sold pursuant to an underwriting agreement entered into on January 3, 2019, by and between (a) BHFC and Berkshire and (b) Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC. The Notes are issued under an Indenture, dated as of January 26, 2016, by and among Berkshire, as issuer and guarantor, BHFC, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Indenture”) and an officers’ certificate dated as of January 11, 2019 by BHFC with respect to the Notes (the “Officers’ Certificate”). The relevant terms of the Notes and the Indenture are further described under the caption “Description of the Notes and Guarantees” in the prospectus supplement relating to the Notes, dated January 3, 2019, filed with the Commission by Berkshire on January 7, 2019, pursuant to Rule 424(b)(2) under the Securities Act and in the section entitled “Description of the Debt Securities” in the base prospectus relating to debt securities of BHFC, dated January 26, 2016, included in the Registration Statement, which descriptions are incorporated herein by reference. A copy of the Indenture is set forth in Exhibit 4.1 of the Registration Statement and is incorporated herein by reference. A copy of the Officers’ Certificate is attached hereto as Exhibit 4.2 and is incorporated herein by reference. The descriptions of the Indenture, the Officers’ Certificate and the Notes in this report are summaries and are qualified in their entirety by the terms of the Indenture, the Officers’ Certificate and the Notes, respectively. Item 9.01 Financial Statements and Exhibits. (d) Exhibits   1.1    Underwriting Agreement, dated January 3, 2019, by and between (a) Berkshire Hathaway Finance Corporation and Berkshire Hathaway Inc. and (b) Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC. 4.1    Indenture, dated as of January 26, 2016, by and among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Berkshire’s Registration Statement on Form S-3 (Registration No. 333-209122) filed with the Commission on January 26, 2016). 4.2    Officers’ Certificate of Berkshire Hathaway Finance Corporation, dated as of January 11, 2019, including the form of Berkshire Hathaway Finance Corporation’s 4.250% Senior Notes due 2049. 5.1    Opinion of Munger, Tolles & Olson LLP, dated January 11, 2019, with respect to the Notes. 23.1    Consent of Munger, Tolles & Olson LLP (included in Exhibit 5.1). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   January 11, 2019       BERKSHIRE HATHAWAY INC.       /s/ Marc D. Hamburg       By: Marc D. Hamburg       Senior Vice President and Chief Financial Officer Exhibit Index   1.1    Underwriting Agreement, dated January 3, 2019, by and between (a) Berkshire Hathaway Finance Corporation and Berkshire Hathaway Inc. and (b) Goldman Sachs  & Co. LLC, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC. 4.1    Indenture, dated as of January  26, 2016, by and among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Berkshire’s Registration Statement on Form S-3 (Registration No. 333-209122) filed with the Commission on January 26, 2016). 4.2    Officers’ Certificate of Berkshire Hathaway Finance Corporation, dated as of January 11, 2019, including the form of Berkshire Hathaway Finance Corporation’s 4.250% Senior Notes due 2049. 5.1    Opinion of Munger, Tolles & Olson LLP, dated January 11, 2019, with respect to the Notes. 23.1    Consent of Munger, Tolles & Olson LLP (included in Exhibit 5.1).
8-K_789019_0000950170-24-008809.htm
8-K false00007890190000789019msft:NotesThreePointOneTwoFivePercentDueDecemberSixTwentyTwentyEightMember2024-01-302024-01-300000789019us-gaap:CommonStockMember2024-01-302024-01-300000789019msft:NotesTwoPointSixTwoFivePercentDueMayTwoTwentyThirtyThreeMember2024-01-302024-01-3000007890192024-01-302024-01-30   UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) January 30, 2024 Microsoft Corporation           Washington   001-37845 91-1144442 (State or Other Jurisdictionof Incorporation)   (CommissionFile Number) (IRS EmployerIdentification No.)       One Microsoft Way, Redmond, Washington 98052-6399 (425) 882-8080 www.microsoft.com/investor Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))   Securities registered pursuant to Section 12(b) of the Act:         Title of each class   Trading Symbol   Name of exchange on which registered           Common stock, $0.00000625 par value per share   MSFT   Nasdaq 3.125% Notes due 2028   MSFT   Nasdaq 2.625% Notes due 2033   MSFT   Nasdaq Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨   Item 2.02. Results of Operations and Financial Condition On January 30, 2024, Microsoft Corporation issued a press release announcing its financial results for the fiscal quarter ended December 31, 2023. A copy of the press release is furnished as Exhibit 99.1 to this report. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 9.01. Financial Statements and Exhibits (d) Exhibits: 99.1 Press release, dated January 30, 2024, issued by Microsoft Corporation   104 Cover Page Interactive Data File (embedded within the Inline XBRL document)     SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.         MICROSOFT CORPORATION   (Registrant)     Date: January 30, 2024 /s/ ALICE L. JOLLA   Alice L. Jolla   Corporate Vice President and Chief Accounting Officer  
8-K_320193_0001193125-17-181867.htm
8-K 1 d583637d8k.htm FORM 8-K Form 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 May 17, 2017 Date of Report (date of earliest event reported)       Apple Inc. (Exact name of Registrant as specified in its charter)   California   001-36743   94-2404110 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 1 Infinite Loop Cupertino, California 95014 (Address of principal executive offices) (Zip Code) (408) 996-1010 (Registrant’s telephone number, including area code) Not applicable (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company      ☐ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01 Other Events. On May 24, 2017, Apple Inc. (“Apple”) consummated the issuance and sale of €1,250,000,000 aggregate principal amount of Apple’s 0.875% Notes due 2025 (the “2025 Notes”) and €1,250,000,000 aggregate principal amount of Apple’s 1.375% Notes due 2029 (the “2029 Notes” and, together with the 2025 Notes, the “Notes”), pursuant to an underwriting agreement (the “Underwriting Agreement”) dated May 17, 2017 between Apple and Goldman Sachs & Co. LLC, as representative of the several underwriters named therein. The Notes are being issued pursuant to an indenture, dated as of April 29, 2013 (the “Indenture”), between Apple and The Bank of New York Mellon Trust Company, N.A., as trustee, together with the officer’s certificate, dated May 24, 2017 (the “Officer’s Certificate”), issued pursuant to the Indenture establishing the terms of each series of Notes. The Notes are being issued pursuant to Apple’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on April 28, 2016 (Reg. No. 333-210983) (the “Registration Statement”). Interest on the Notes will be paid annually on May 24 of each year, beginning on May 24, 2018, and on the applicable maturity date for each such series of Notes. The 2025 Notes will mature on May 24, 2025 and the 2029 Notes will mature on May 24, 2029. The Notes will be Apple’s senior unsecured obligations and will rank equally with Apple’s other unsecured and unsubordinated debt from time to time outstanding. The foregoing description of the Notes and related agreements is qualified in its entirety by the terms of the Underwriting Agreement, the Indenture and the Officer’s Certificate (including the forms of the Notes). Apple is furnishing the Underwriting Agreement and the Officer’s Certificate (including the forms of the Notes) attached hereto as Exhibits 1.1 and 4.1 through 4.3, respectively, and they are incorporated herein by reference. The Indenture is filed as Exhibit 4.1 to Apple’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on April 29, 2013 (Reg. No. 333-188191). The computation of Apple’s ratio of earnings to fixed charges is filed as Exhibit 12.1 to Apple’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2017. An opinion regarding the legality of the Notes is filed as Exhibit 5.1, and is incorporated by reference into the Registration Statement; and a consent relating to the incorporation of such opinion is incorporated by reference into the Registration Statement and is filed as Exhibit 23.1 by reference to its inclusion within Exhibit 5.1.   Item 9.01 Financial Statements and Exhibits.   (d) Exhibits   Exhibit Number    Exhibit Description 1.1    Underwriting Agreement, dated May 17, 2017, between Apple Inc. and Goldman Sachs & Co. LLC, as representative of the several underwriters named therein 4.1    Officer’s Certificate of Apple Inc., dated May 24, 2017 4.2    Form of Global Note representing the 2025 Notes (included in Exhibit 4.1) 4.3    Form of Global Note representing the 2029 Notes (included in Exhibit 4.1) 5.1    Opinion of Hogan Lovells US LLP 23.1    Consent of Hogan Lovells US LLP (included in the opinion filed as Exhibit 5.1) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   Date: May 24, 2017     Apple Inc.     By:   /s/ Luca Maestri       Luca Maestri Senior Vice President, Chief Financial Officer EXHIBIT INDEX   Exhibit Number    Exhibit Description 1.1    Underwriting Agreement, dated May 17, 2017, between Apple Inc. and Goldman Sachs & Co. LLC, as representative of the several underwriters named therein 4.1    Officer’s Certificate of Apple Inc., dated May 24, 2017 4.2    Form of Global Note representing the 2025 Notes (included in Exhibit 4.1) 4.3    Form of Global Note representing the 2029 Notes (included in Exhibit 4.1) 5.1    Opinion of Hogan Lovells US LLP 23.1    Consent of Hogan Lovells US LLP (included in the opinion filed as Exhibit 5.1)
8-K_1652044_0001193125-24-160721.htm
8-K false 0001652044 0001652044 2024-06-07 2024-06-07 0001652044 us-gaap:CommonClassAMember 2024-06-07 2024-06-07 0001652044 goog:CapitalClassCMember 2024-06-07 2024-06-07   UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549   FORM 8-K   CURRENT REPORTPursuant to Section 13 or 15(d)of The Securities Exchange Act of 1934Date of Report (Date of earliest event reported)June 7, 2024   ALPHABET INC.(Exact name of registrant as specified in its charter)     Delaware   001-37580   61-1767919 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (IRS EmployerIdentification No.) 1600 Amphitheatre ParkwayMountain View, CA 94043(Address of principal executive offices, including zip code)(650) 253-0000(Registrant’s telephone number, including area code)Not Applicable(Former name or former address, if changed since last report)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):  ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:  Title of each class   TradingSymbol(s)   Name of each exchangeon which registered Class A Common Stock, $0.001 par value   GOOGL   Nasdaq Stock Market LLC     (Nasdaq Global Select Market) Class C Capital Stock, $0.001 par value   GOOG   Nasdaq Stock Market LLC     (Nasdaq Global Select Market) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐    Item 5.07. Submission of Matters to a Vote of Security Holders. At the Annual Meeting of Stockholders of Alphabet Inc. (“Alphabet”) held on June 7, 2024 (the “2024 Annual Meeting”), Alphabet’s stockholders voted on fourteen proposals as set forth below, all of which are described in detail in Alphabet’s definitive proxy statement on Form 14A filed with the U.S. Securities and Exchange Commission on April 26, 2024 (the “2024 Proxy Statement”). Holders of the shares of Class A common stock were entitled to one vote per share held as of the close of business on April 9, 2024 (the “Record Date”) and holders of the shares of Class B common stock were entitled to ten votes per share held as of the Record Date. Holders of the shares of Class A common stock and holders of the shares of Class B common stock voted together as a single class on all matters (including the election of directors) submitted to a vote of stockholders at the 2024 Annual Meeting. The number of votes cast for and against and the number of abstentions and broker non-votes with respect to each matter voted upon are set forth below.1. The individuals listed below were elected at the 2024 Annual Meeting to serve as directors of Alphabet until the next annual meeting of stockholders or until their respective successors have been duly elected and qualified:  Director Nominee    For    Against    Abstentions    BrokerNon-Votes Larry Page    12,400,507,912    247,959,437    3,988,926    584,773,150 Sergey Brin    12,400,675,664    247,747,348    4,033,263    584,773,150 Sundar Pichai    12,463,917,269    183,878,409    4,660,597    584,773,150 John L. Hennessy    10,506,960,562    2,133,340,772    12,154,941    584,773,150 Frances H. Arnold    11,172,122,754    1,474,814,286    5,519,235    584,773,150 R. Martin “Marty” Chávez    12,555,102,460    91,221,825    6,131,990    584,773,150 L. John Doerr    10,910,364,774    1,735,826,984    6,264,517    584,773,150 Roger W. Ferguson Jr.    12,500,632,560    145,773,092    6,050,623    584,773,150 K. Ram Shriram    10,988,363,051    1,657,829,583    6,263,641    584,773,150 Robin L. Washington    10,933,643,709    1,708,372,427    10,440,139    584,773,150 2. The ratification of the appointment of Ernst & Young LLP as Alphabet’s independent registered public accounting firm for the fiscal year ending December 31, 2024 was approved. There were no broker non-votes on this matter.  For   Against   Abstentions 12,902,023,738   329,291,800   5,913,887   2 3. A stockholder proposal regarding “Bylaw amendment: stockholder approval of director compensation” was not approved.  For   Against   Abstentions   Broker Non-Votes 76,397,228   12,547,705,720   28,353,327   584,773,150 4. A stockholder proposal regarding an EEO policy risk report was not approved.  For   Against   Abstentions   Broker Non-Votes 28,683,052   12,587,699,628   36,073,595   584,773,150 5. A stockholder proposal regarding a report on electromagnetic radiation and wireless technologies risks was not approved.  For   Against   Abstentions   Broker Non-Votes 103,784,542   12,493,375,195   55,296,538   584,773,150 6. A stockholder proposal regarding a policy for director transparency on political and charitable giving was not approved.  For   Against   Abstentions   Broker Non-Votes 35,754,406   12,597,275,138   19,426,731   584,773,150 7. A stockholder proposal regarding a report on climate risks to retirement plan beneficiaries was not approved.  For   Against   Abstentions   Broker Non-Votes 462,115,889   11,814,630,531   375,709,855   584,773,150 8. A stockholder proposal regarding a lobbying report was not approved.  For   Against   Abstentions   Broker Non-Votes 1,927,513,885   10,628,195,314   96,747,076   584,773,150   3 9. A stockholder proposal regarding equal shareholder voting was not approved.  For   Against   Abstentions   Broker Non-Votes 3,957,900,469   8,675,994,919   18,560,887   584,773,150 10. A stockholder proposal regarding a report on reproductive healthcare misinformation risks was not approved.  For   Against   Abstentions   Broker Non-Votes 811,397,714   11,784,118,483   56,940,078   584,773,150 11. A stockholder proposal regarding AI principles and Board oversight was not approved.  For   Against   Abstentions   Broker Non-Votes 934,927,468   11,693,251,050   24,277,757   584,773,150 12. A stockholder proposal regarding a report on generative AI misinformation and disinformation risks was not approved.  For   Against   Abstentions   Broker Non-Votes 2,222,509,279   10,395,758,258   34,188,738   584,773,150 13. A stockholder proposal regarding a human rights assessment of AI-driven targeted ad policies was not approved.  For   Against   Abstentions   Broker Non-Votes 2,342,253,100   10,275,882,466   34,320,709   584,773,150 14. A stockholder proposal regarding a report on online safety for children was not approved.  For   Against   Abstentions   Broker Non-Votes 1,788,616,887   10,768,198,081   95,641,307   584,773,150   4 SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.        ALPHABET INC. June 13, 2024                 /s/ Kathryn W. Hall               Kathryn W. Hall               Assistant Secretary 5
8-K_1652044_0001193125-23-011424.htm
8-K false 0001652044 0001652044 2023-01-20 2023-01-20 0001652044 us-gaap:CommonClassAMember 2023-01-20 2023-01-20 0001652044 goog:CapitalClassCMember 2023-01-20 2023-01-20     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 20, 2023     ALPHABET INC. (Exact name of registrant as specified in its charter)       Delaware   001-37580   61-1767919 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 1600 Amphitheatre Parkway Mountain View, CA 94043 (Address of principal executive offices, including zip code) (650) 253-0000 (Registrant’s telephone number, including area code) Not Applicable (Former name or former address, if changed since last report)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):     ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)     ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)     ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))     ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbol(s)   Name of each exchange on which registered Class A Common Stock, $0.001 par value   GOOGL   Nasdaq Stock Market LLC (Nasdaq Global Select Market) Class C Capital Stock, $0.001 par value   GOOG   Nasdaq Stock Market LLC (Nasdaq Global Select Market) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company   ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐       Item 7.01. Regulation FD Disclosure. On January 20, 2023, Sundar Pichai, Chief Executive Officer of Alphabet Inc. and Google LLC (“Google”), shared the following message with Google employees: Googlers, I have some difficult news to share. We’ve decided to reduce our workforce by approximately 12,000 roles. We’ve already sent a separate email to employees in the U.S. who are affected. In other countries, this process will take longer due to local laws and practices. This will mean saying goodbye to some incredibly talented people we worked hard to hire and have loved working with. I’m deeply sorry for that. The fact that these changes will impact the lives of Googlers weighs heavily on me, and I take full responsibility for the decisions that led us here. Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today. I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI. To fully capture it, we’ll need to make tough choices. So, we’ve undertaken a rigorous review across product areas and functions to ensure that our people and roles are aligned with our highest priorities as a company. The roles we’re eliminating reflect the outcome of that review. They cut across Alphabet, product areas, functions, levels and regions. To the Googlers who are leaving us: Thank you for working so hard to help people and businesses everywhere. Your contributions have been invaluable and we are grateful for them. While this transition won’t be easy, we’re going to support employees as they look for their next opportunity (you can find more detail here). In the U.S.:     •   We’ll pay employees during the full notification period (minimum 60 days).     •   We’ll also offer a severance package starting at 16 weeks salary plus two weeks for every additional year at Google, and accelerate at least 16 weeks of GSU vesting.     •   We’ll pay 2022 bonuses and remaining vacation time.     •   We’ll be offering 6 months of healthcare, job placement services, and immigration support for those affected.     •   Outside the U.S., we’ll support employees in line with local practices. As an almost 25-year-old company, we’re bound to go through difficult economic cycles. These are important moments to sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities. Being constrained in some areas allows us to bet big on others. Pivoting the company to be AI-first years ago led to groundbreaking advances across our businesses and the whole industry. Thanks to those early investments, Google’s products are better than ever. And, we’re getting ready to share some entirely new experiences for users, developers and businesses, too. We have a substantial opportunity in front of us with AI across our products and are prepared to approach it boldly and responsibly. All this work is a continuation of the “healthy disregard for the impossible” that’s been core to our culture from the beginning. When I look around Google today, I see that same spirit and energy driving our efforts. That’s why I remain optimistic about our ability to deliver on our mission, even on our toughest days. Today is certainly one of them. I’m sure you have many questions about how we’ll move forward. We’ll be organizing a town hall on Monday. Check your calendar for details. Until then, please take good care of yourselves as you absorb this difficult news. As part of that, if you are just starting your work day, please feel free to work from home today. -Sundar SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.       ALPHABET INC. Date: January 20, 2023     /s/ Kathryn W. Hall     Kathryn W. Hall     Assistant Secretary
8-K_789019_0001193125-21-044940.htm
8-K MICROSOFT CORP false 0000789019 0000789019 2021-02-16 2021-02-16 0000789019 us-gaap:CommonStockMember 2021-02-16 2021-02-16 0000789019 msft:NotesTwoPointOneTwoFivePercentDueDecemberSixTwentyTwentyOneMember 2021-02-16 2021-02-16 0000789019 msft:NotesThreePointOneTwoFivePercentDueDecemberSixTwentyTwentyEightMember 2021-02-16 2021-02-16 0000789019 msft:NotesTwoPointSixTwoFivePercentDueMayTwoTwentyThirtyThreeMember 2021-02-16 2021-02-16   UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) February 16, 2021     Microsoft Corporation (Exact name of registrant as specified in its charter)         Washington   001-37845   91-1144442 (State or Other Jurisdiction of Incorporation)   (Commission File Number)   (IRS Employer Identification No.)   One Microsoft Way, Redmond, Washington   98052-6399 (address) (425) 882-8080 www.microsoft.com/investor Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class      Trading Symbol   Name of exchange on which registered Common stock, $0.00000625 par value per share      MSFT   NASDAQ 2.125% Notes due 2021      MSFT   NASDAQ 3.125% Notes due 2028      MSFT   NASDAQ 2.625% Notes due 2033      MSFT   NASDAQ Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐     Item 8.01. Other Events On February 16, 2021, Microsoft Corporation issued a press release announcing that it has commenced registered exchange offers for certain of its outstanding debt securities. The press release is attached as Exhibit 99.1 and is incorporated herein by reference. Item 9.01. Financial Statements and Exhibits (d) Exhibits:   99.1    Press Release dated February 16, 2021 104    Cover Page Interactive Data File (embedded within the Inline XBRL document) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.       MICROSOFT CORPORATION   (Registrant) Date: February 16, 2021   /S/ ALICE L. JOLLA   Alice L. Jolla   Corporate Vice President and Chief Accounting Officer
8-K_1730168_0001193125-18-257622.htm
8-K 1 d614644d8k.htm 8-K 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 24, 2018     BROADCOM INC. (Exact Name of Registrant as Specified in Charter)       Delaware   001-38449   35-2617337 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 1320 Ridder Park Drive, San Jose, California   95131 (Address of principal executive offices)   (Zip Code) (408) 433-8000 (Registrant’s telephone number, including area code)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01 Other Events. On August 24, 2018, Broadcom Inc. (“Broadcom”) issued a press release announcing that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired with respect to Broadcom’s proposed acquisition of CA, Inc. The foregoing description is qualified in its entirety by reference to the press release, dated August 24, 2018, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.   Item 9.01 Financial Statements and Exhibits. (d)    Exhibits   Exhibit No.    Description 99.1    Press Release, dated August 24, 2018. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.       BROADCOM INC. Date: August 24, 2018     By:   /s/ Thomas H. Krause, Jr.       Name:   Thomas H. Krause, Jr.       Title:   Chief Financial Officer
8-K_789019_0001193125-20-207517.htm
8-K MICROSOFT CORP false 0000789019 0000789019 2020-08-02 2020-08-02 0000789019 us-gaap:CommonStockMember 2020-08-02 2020-08-02 0000789019 msft:NotesTwoPointOneTwoFivePercentDueDecemberSixTwentyTwentyOneMember 2020-08-02 2020-08-02 0000789019 msft:NotesThreePointOneTwoFivePercentDueDecemberSixTwentyTwentyEightMember 2020-08-02 2020-08-02 0000789019 msft:NotesTwoPointSixTwoFivePercentDueMayTwoTwentyThirtyThreeMember 2020-08-02 2020-08-02   UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) August 3, 2020 (August 2, 2020)     Microsoft Corporation (Exact name of registrant as specified in its charter)       Washington   001-37845   91-1144442 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.)   One Microsoft Way, Redmond, Washington   98052-6399 (Address of Principal Executive Offices)   (Zip Code) Registrant’s telephone number, including area code: (425) 882-8080 www.microsoft.com/investor Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class    Trading Symbol(s)    Name of each exchange on which registered Common stock, $0.00000625 par value per share    MSFT    NASDAQ 2.125% Notes due 2021    MSFT    NASDAQ 3.125% Notes due 2028    MSFT    NASDAQ 2.625% Notes due 2033    MSFT    NASDAQ Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐     Item 7.01 Regulation FD Disclosure. On August 2, Microsoft Corporation (“Microsoft”) issued a public statement announcing that Microsoft intends to explore a proposal to acquire the TikTok service in the United States from Bytedance Ltd. A copy of the public statement is furnished as Exhibit 99.1 to this report. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 9.01 Financial Statements and Exhibits. (d) Exhibits.   99.1   Public Statement, dated August 2, 2020, issued by Microsoft Corporation. 104   Cover Page Interactive Data File (embedded within the Inline XBRL document) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.       MICROSOFT CORPORATION   (Registrant) Date: August 3, 2020   /S/ KEITH R. DOLLIVER   Keith R. Dolliver   VP and Deputy General Counsel
8-K_1018724_0001193125-19-097640.htm
8-K 1 d697549d8k.htm 8-K 8-K Table of Contents     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 April 4, 2019 Date of Report (Date of earliest event reported)     AMAZON.COM, INC. (Exact name of registrant as specified in its charter)       Delaware   000-22513   91-1646860 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code) (206) 266-1000 (Registrant’s telephone number, including area code)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).   Emerging growth company     ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐       Table of Contents TABLE OF CONTENTS   ITEM 8.01. OTHER EVENTS.      3   SIGNATURES      4   Table of Contents ITEM 8.01. OTHER EVENTS. On April 4, 2019, Jeffrey P. Bezos informed Amazon.com, Inc. (the “Company”) that following court approval of a divorce decree, shares representing approximately 4.0 percent of the Company’s outstanding common stock will be registered in MacKenzie T. Bezos’ name as separate property (the “Shares”). A petition for divorce was filed on April 4, 2019, and the divorce decree is expected to be issued in approximately 90 days. Mr. Bezos will continue to exercise sole voting authority over the Shares (together with any additional shares issued to Ms. Bezos in connection with any stock split, stock dividend, recapitalization, reorganization, or the like) pursuant to a voting agreement and proxy between Mr. and Ms. Bezos, except that any of the Shares that Ms. Bezos sells in the open market or that Ms. Bezos contributes to an organization that qualifies under Section 501  (c) (3) of the Internal Revenue Code with the belief that such organization intends to sell such Shares in the open market will cease to be subject to the voting agreement and proxy. In the event of any other transfer of any of the Shares, Ms. Bezos shall, prior to and as a pre-condition to such transfer, cause the proposed transferee to enter into a voting agreement on the same terms and conditions, including granting a proxy to Mr. Bezos to vote such Shares. Unless otherwise agreed by Mr. Bezos, the voting agreement and proxy will terminate only upon the death or a determination of legal incapacity of Mr. Bezos.   3 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   AMAZON.COM, INC. (REGISTRANT) By:   /s/ David A. Zapolsky     David A. Zapolsky     Senior Vice President Dated: April 4, 2019   4
8-K_1045810_0001045810-20-000007.htm
Document false0001045810 0001045810 2020-02-13 2020-02-13 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): February 13, 2020 NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)   2788 San Tomas Expressway, Santa Clara, CA 95051 (Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02 Results of Operations and Financial Condition.On February 13, 2020, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter and fiscal year ended January 26, 2020. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter and fiscal year ended January 26, 2020, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.Item 9.01 Financial Statements and Exhibits.(d) Exhibits Exhibit Description99.1 Press Release, dated February 13, 2020, entitled "NVIDIA Announces Financial Results for Fourth Quarter and Fiscal 2020"99.2 CFO Commentary on Fourth Quarter and Fiscal 2020 ResultsSIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   NVIDIA CorporationDate: February 13, 2020 By: /s/ Colette M. Kress  Colette M. Kress  Executive Vice President and Chief Financial Officer
8-K_59478_0001193125-20-227026.htm
8-K ELI LILLY & Co false 0000059478 0000059478 2020-08-20 2020-08-20 0000059478 us-gaap:CommonClassAMember 2020-08-20 2020-08-20 0000059478 lly:A1.000NotesDueJune22022Member 2020-08-20 2020-08-20 0000059478 lly:A718NotesDueJune12025Member 2020-08-20 2020-08-20 0000059478 lly:A1.625NotesDueJune22026Member 2020-08-20 2020-08-20 0000059478 lly:A2.125NotesDueJune32030Member 2020-08-20 2020-08-20 0000059478 lly:A625Notesdue2031Member 2020-08-20 2020-08-20 0000059478 lly:A6.77NotesDueJanuary12036Member 2020-08-20 2020-08-20 0000059478 lly:A1.700Notesdue2049Member 2020-08-20 2020-08-20     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 20, 2020     ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in its Charter)       Indiana   001-06351   35-0470950 (State or Other Jurisdiction of Incorporation)   (Commission File Number)   (I.R.S. Employer Identification No.)   Lilly Corporate Center Indianapolis, Indiana   46285 (Address of Principal Executive Offices)   (Zip Code) Registrant’s Telephone Number, Including Area Code: (317) 276-2000 Not Applicable (Former Name or Former Address, if Changed Since Last Report.)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbol(s)   Name of each exchange on which registered Common Stock (no par value)   LLY   New York Stock Exchange 1.000% Notes due 2022   LLY22   New York Stock Exchange 7 1/8% Notes due 2025   LLY25   New York Stock Exchange 1.625% Notes due 2026   LLY26   New York Stock Exchange 2.125% Notes due 2030   LLY30   New York Stock Exchange 0.625% Notes due 2031   LLY31   New York Stock Exchange 6.77% Notes due 2036   LLY36   New York Stock Exchange 1.700% Notes due 2049   LLY49A   New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01 Other Events On August 20, 2020, Eli Lilly and Company (the “Company”) entered into an Underwriting Agreement (the “Underwriting Agreement”) with BNP Paribas Securities Corp., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein, for the issuance and sale by the Company of $850,000,000 in aggregate principal amount of its 2.500% Notes due 2060 (the “2060 Notes”) and $250,000,000 in aggregate principal amount of its 2.250% Notes due 2050 (the “New 2050 Notes” and, together with the 2060 Notes, the “Notes”). Each series of Notes will be issued pursuant to an Indenture (the “Indenture”), dated February 1, 1991, between the Company and Deutsche Bank Trust Company Americas, as successor to Citibank, N.A., as trustee, and an officers’ certificate setting forth the terms of the Notes (including the form of such Notes as an exhibit). The offering of the Notes was registered on a Registration Statement on Form S-3 (File No. 333-229735). The 2060 Notes will accrue interest at a rate of 2.500% per annum, payable semi-annually, and, except as contemplated in the following paragraph, will mature on September 15, 2060. The New 2050 Notes will have the same terms as, and will be treated as the same series with, the $1,000,000,000 in aggregate principal amount of the Company’s 2.250% notes due 2050 issued by the Company under the Indenture on May 5, 2020. Accordingly, the New 2050 Notes will accrue interest at a rate of 2.250% per annum, payable semi-annually, and, except as contemplated in the following paragraph, will mature on May 15, 2050. Upon the issuance of the New 2050 Notes, the outstanding aggregate principal amount of the Company’s 2.250% notes will be $1,250,000,000. Upon the closing of the offering of the Notes, which is expected to occur on August 25, 2020, the Company will realize, after deduction of the underwriting discount and before deduction of offering expenses and excluding accrued interest payable by purchasers of the New 2050 Notes, net proceeds of approximately $1.07 billion. Upon the occurrence of an Event of Default (as defined in the Indenture) with respect to a series of Notes, the principal amount of the Notes of that series may be declared, and become, immediately due and payable. The Company may, at its election, redeem the Notes, in whole or in part, from time to time at the redemption prices and on the terms and conditions set forth in the Notes. The above description of the Underwriting Agreement and the Notes is qualified in its entirety by reference to the Underwriting Agreement, the forms of officers’ certificates, the Indenture and the forms of the Notes filed as exhibits hereto, which exhibits are incorporated by reference herein. Item 9.01 Financial Statements and Exhibits. (d) Exhibits       1.1    Underwriting Agreement, dated August 20, 2020, among the Company and BNP Paribas Securities Corp., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein.     4.1*    Indenture, dated February 1, 1991, between the Company and Deutsche Bank Trust Company Americas, as successor to Citibank, N.A., as Trustee.     4.2±    Tripartite Agreement, dated September 13, 2007, appointing Deutsche Bank Trust Company Americas as Successor Trustee under the Indenture listed above.     4.3#    Form of Officers’ Certificate setting forth the terms and form of the New 2050 Notes.     4.4    Form of Officers’ Certificate setting forth the terms and form of the 2060 Notes and certain matters with respect to the New 2050 Notes.     4.5    Form of New 2050 Note (included in Exhibit 4.3 above).     4.6    Form of 2060 Note (included in Exhibit 4.4 above).     5.1    Opinion of Covington & Burling LLP.     5.2    Opinion of Crystal T. Williams, Esq.   23.1    Consent of Covington & Burling LLP (included as part of Exhibit 5.1).   23.2    Consent of Crystal T. Williams, Esq. (included as part of Exhibit 5.2). 104    Cover Page Interactive Data File (embedded within the Inline XBRL document).   * Incorporated by reference to the same-numbered exhibit of the Company’s Registration Statement on Form S-3 (File No. 333-186979), filed with the Securities and Exchange Commission (“SEC”) on March 1, 2013. ± Incorporated by reference to the same-numbered exhibit of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-06351), filed with the SEC on February 27, 2009. # Incorporated by reference to the same-numbered exhibit of the Company’s Current Report on Form 8-K (File No. 001-06351), filed with the SEC on April 28, 2020. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.   ELI LILLY AND COMPANY (Registrant) By:   /s/ Crystal T. Williams Name:   Crystal T. Williams Title:   Assistant General Counsel and Assistant   Corporate Secretary Dated:   August 21, 2020
8-K_789019_0001193125-20-050232.htm
8-K false 0000789019 0000789019 2020-02-26 2020-02-26 0000789019 us-gaap:CommonStockMember 2020-02-26 2020-02-26 0000789019 msft:NotesTwoPointOneTwoFivePercentDueDecemberSixTwentyTwentyOneMember 2020-02-26 2020-02-26 0000789019 msft:NotesThreePointOneTwoFivePercentDueDecemberSixTwentyTwentyEightMember 2020-02-26 2020-02-26 0000789019 msft:NotesTwoPointSixTwoFivePercentDueMayTwoTwentyThirtyThreeMember 2020-02-26 2020-02-26   UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549   FORM 8-K   CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) February 26, 2020   Microsoft Corporation   Washington   001-37845   91-1144442 (State or Other Jurisdiction of Incorporation)   (Commission File Number)   (IRS Employer Identification No.) One Microsoft Way, Redmond, Washington   98052-6399 (425) 882-8080 www.microsoft.com/investor Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act: Title of each class   Trading Symbol   Name of exchange on which registered Common stock, $0.00000625 par value per share   MSFT   NASDAQ 2.125% Notes due 2021   MSFT   NASDAQ 3.125% Notes due 2028   MSFT   NASDAQ 2.625% Notes due 2033   MSFT   NASDAQ Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐   Item 7.01. Regulation FD Disclosure On February 26, 2020, Microsoft Corporation issued a press release updating its revenue guidance for its More Personal Computing segment for the quarter ending March 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 9.01. Financial Statements and Exhibits (d) Exhibits:   99.1     Press release, dated February 26, 2020, issued by Microsoft Corporation             104     Cover Page Interactive Data File (embedded within the Inline XBRL document) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   MICROSOFT CORPORATION   (Registrant)       Date: February 26, 2020   /s/ Frank H. Brod   Frank H. Brod   Corporate Vice President, Finance and Administration; Chief Accounting Officer
8-K_320193_0001193125-14-271698.htm
8-K 1 d758295d8k.htm 8-K 8-K     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 July 15, 2014 Date of Report (Date of earliest event reported)     APPLE INC. (Exact name of registrant as specified in its charter)   California   000-10030   94-2404110 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 1 Infinite Loop Cupertino, California 95014 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (408) 996-1010 Not applicable (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))       Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers (b), (d) On July 15, 2014, the Board of Directors of Apple Inc. (“Apple”) appointed Susan L. Wagner to the Board concurrently with the retirement of William V. Campbell. Mr. Campbell served on the Audit and Finance Committee and the Nominating and Corporate Governance Committee of the Board. As a non-employee director, Ms. Wagner receives a $50,000 annual retainer for her service on the Board, paid in quarterly installments, and participates in Apple’s 1997 Director Stock Plan, as amended (the “Director Plan”), which was filed with the Securities and Exchange Commission on January 28, 2014 as Exhibit 10.3 to Apple’s Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2013. Upon her appointment, Ms. Wagner received an automatic initial grant of 1,646 restricted stock units under the Director Plan. In connection with her appointment, Apple and Ms. Wagner will enter into Apple’s standard indemnification agreement for directors, the form of which was filed with the SEC on July 22, 2009 as Exhibit 10.2 to Apple’s Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2009. There are no transactions between Ms. Wagner and Apple that would be required to be reported under Item 404(a) of Regulation S-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.       APPLE INC. (Registrant) Date: July 17, 2014     By:   /s/ D. Bruce Sewell         D. Bruce Sewell Senior Vice President, General Counsel and Secretary
8-K_1652044_0001193125-24-168745.htm
8-K false 0001652044 0001652044 2024-06-26 2024-06-26 0001652044 us-gaap:CommonClassAMember 2024-06-26 2024-06-26 0001652044 goog:CapitalClassCMember 2024-06-26 2024-06-26   UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549   FORM 8-K   CURRENT REPORTPursuant to Section 13 or 15(d)of The Securities Exchange Act of 1934Date of Report (Date of earliest event reported)June 26, 2024   ALPHABET INC.(Exact name of registrant as specified in its charter)     Delaware   001-37580   61-1767919 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (IRS EmployerIdentification No.) 1600 Amphitheatre ParkwayMountain View, CA 94043(Address of principal executive offices, including zip code)(650) 253-0000(Registrant’s telephone number, including area code)Not Applicable(Former name or former address, if changed since last report)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):    ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)     ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)     ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))     ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:  Title of each class   TradingSymbol(s)   Name of each exchangeon which registered Class A Common Stock, $0.001 par value   GOOGL   Nasdaq Stock Market LLC     (Nasdaq Global Select Market) Class C Capital Stock, $0.001 par value   GOOG   Nasdaq Stock Market LLC     (Nasdaq Global Select Market) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐    Item 8.01 Other Events Alphabet Inc. (the “Company”) has received notice of an unsolicited mini-tender offer by Tutanota LLC to purchase up to 400,000 shares of Alphabet’s Class A common stock at a price of $180 per share in cash. This offer to purchase up to 400,000 shares by Tutanota LLC represents less than 0.01 percent of the shares of Alphabet’s Class A common stock outstanding as of the June 10, 2024 offer date.On June 26, 2024, the Company issued the release attached to this Report as Exhibit 99.1, informing its stockholders that the Company does not endorse Tutanota LLC’s unsolicited mini-tender offer, and expresses no opinion whether or not stockholders should tender their shares. Stockholders who have already tendered their shares may withdraw them at any time prior to the expiration of the offer, in accordance with Tutanota LLC’s offering documents. The offer is currently scheduled to expire at 5:00 p.m., New York City time, on July 12, 2024, but Tutanota LLC may extend the offer period at its discretion. The Company is not affiliated, or associated in any way, with Tutanota LLC, its mini-tender offer or its offer documentation.  Item 9.01. Financial Statements and Exhibits.(d) Exhibits  ExhibitNo.    Description 99.1    Press release of Alphabet Inc. dated June 26, 2024  2 SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.        ALPHABET INC. June 26, 2024           /s/ Kathryn W. Hall       Kathryn W. Hall       Assistant Secretary 3
8-K_1730168_0001140361-23-054354.htm
false000173016800017301682023-11-222023-11-22 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 8-K ____________________ CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 22, 2023 ____________________ Broadcom Inc. (Exact Name of Registrant as Specified in Charter) ____________________ Delaware 001-38449 35-2617337 (State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 1320 Ridder Park Drive San Jose, California 95131-2313 (Address of principal executive offices including zip code) (408) 433-8000 (Registrant’s telephone number, including area code) ____________________ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered Common Stock, $0.001 par value   AVGO   The Nasdaq Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐   Item 2.01 Completion of Acquisition or Disposition of Assets. On November 22, 2023, Broadcom Inc. (“Broadcom”) completed its acquisition of VMware, Inc. (“VMware”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of May 26, 2022, by and among Broadcom, VMware, Verona Holdco, Inc., a direct wholly owned subsidiary of VMware (“Holdco”), Verona Merger Sub, Inc., a direct wholly owned subsidiary of Holdco (“Merger Sub 1”), Barcelona Merger Sub 2, Inc., a direct wholly owned subsidiary of Broadcom (“Merger Sub 2”), and Barcelona Merger Sub 3, LLC, a direct wholly owned subsidiary of Broadcom (“Merger Sub 3”). Pursuant to and subject to the terms and conditions of the Merger Agreement, (i) Merger Sub 1 merged with and into VMware (the “First Merger”), with VMware continuing as the surviving corporation in the First Merger (the “Surviving Company”) and becoming a wholly owned subsidiary of Holdco; (ii) following the First Merger, the Surviving Company was converted from a Delaware corporation into a Delaware limited liability company (the “Conversion”); (iii) following the Conversion, Merger Sub 2 merged with and into Holdco (the “Second Merger”), with Holdco continuing as the surviving corporation in the Second Merger (the “Holdco Surviving Company”) and becoming a wholly owned subsidiary of Broadcom; and (iv) following the Second Merger, the Holdco Surviving Company merged with and into Merger Sub 3, with Merger Sub 3 continuing as the surviving limited liability company and as a wholly owned subsidiary of Broadcom (the “Third Merger” and together with the First Merger, the Conversion and the Second Merger, the “Mergers”). Each share of Class A common stock, par value $0.01 per share, of VMware (each, a “VMware Common Share”) issued and outstanding immediately prior to the effective time of the Mergers (the “Effective Time”), other than VMware Common Shares owned or held in treasury by VMware or owned by Merger Sub 2 or in the treasury of the Surviving Company (which were cancelled), any VMware Common Shares owned by any wholly owned subsidiary of VMware, and any VMware Common Shares held by stockholders who properly exercised and perfected appraisal rights under Delaware law, was indirectly converted into the right to receive, at the election of the holder of such VMware Common Share, and subject to proration in accordance with the Merger Agreement as described below, one of the following forms of consideration (the “Merger Consideration”): • $142.50 in cash, without interest (the “Cash Consideration”) per VMware Common Share; or • 0.25200 of a share of common stock, par value $0.001 per share, of Broadcom (each, a “Broadcom Common Share”) per VMware Common Share (the “Stock Consideration”). The Merger Consideration was subject to proration, such that the total number of VMware Common Shares entitled to receive the Cash Consideration and the total number of VMware Common Shares entitled to receive the Stock Consideration were, in each case, equal to 50% of the aggregate number of VMware Common Shares issued and outstanding immediately prior to the Effective Time. No fractional Broadcom Common Shares were issued. The results of the Merger Consideration elections were reported in a press release issued by Broadcom and VMware on October 30, 2023. As of the Effective Time, each VMware restricted stock unit award held by a non-employee member of the VMware Board of Directors and each in-the-money VMware stock option vested and was converted into the right to receive, in respect of each underlying share (or in the case of a stock option, each net option share, as calculated pursuant to the Merger Agreement), an amount equal to 50% of the Cash Consideration and a number of Broadcom Common Shares equal to 50% of the Stock Consideration, without interest and less applicable tax withholding. Each outstanding VMware restricted stock unit award not held by a non-employee member of the VMware Board of Directors and each outstanding VMware performance-based restricted stock unit award was converted into a Broadcom restricted stock unit award based on an equity award exchange ratio calculated as the sum of (i) 50% of the Stock Consideration and (ii) 50% of the Cash Consideration divided by the volume weighted average sale price of a Broadcom Common Share over the ten consecutive trading days ending on the second to last trading day immediately preceding the Effective Time. With respect to performance-based restricted stock unit awards, the level of achievement of the applicable performance goals was determined at the Effective Time in the manner described in the Merger Agreement.   2 Broadcom funded the Cash Consideration through a combination of cash on hand and borrowings under the Credit Agreement referred to below. The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which was filed as Exhibit 2.1 to Broadcom’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 26, 2022 and which is incorporated herein by reference. Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. As previously reported, on August 15, 2023, Broadcom entered into a senior unsecured term loan credit agreement (the “Credit Agreement”). On November 22, 2023, Broadcom borrowed the full $28,390,625,000 available under the Credit Agreement to fund the Cash Consideration, to provide working capital to Broadcom and its subsidiaries, to refinance existing indebtedness of VMware and its subsidiaries and to pay related costs and expenses. The description of the Credit Agreement is set forth under Item 1.01 in Broadcom’s Current Report on Form 8-K filed on August 16, 2023 (the “Prior 8-K”), which description is incorporated herein by reference. In addition, the Credit Agreement was filed as Exhibit 10.1 to the Prior 8-K and is incorporated herein by reference. Item 8.01 Other Events. On November 22, 2023, Broadcom issued a press release announcing the completion of its acquisition of VMware. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Cautionary Statement Regarding Forward-Looking Statements This Current Report on Form 8-K relates to a business combination transaction between Broadcom and VMware. This Current Report on Form 8-K includes forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended. These forward-looking statements include, but are not limited to, statements that relate to the expected future business and financial performance, the anticipated benefits of the transaction, the anticipated impact of the transaction on the combined business, and the expected amount and timing of the synergies from the transaction. These forward-looking statements are identified by words such as “will,” “expect,” “believe,” “anticipate,” “estimate,” “should,” “intend,” “plan,” “potential,” “predict,” “project,” “aim,” and similar words or phrases. These forward-looking statements are based on current expectations and beliefs of Broadcom management and current market trends and conditions. These forward-looking statements involve risks and uncertainties that are outside Broadcom’s control and may cause actual results to differ materially from those contained in forward-looking statements, including, but not limited to: the effect of the transaction on our ability to maintain relationships with customers, suppliers and other business partners or operating results and business; the ability to implement plans, achieve forecasts and meet other expectations with respect to the business after the completion of the transaction and realize expected synergies; business disruption following the transaction; difficulties in retaining and hiring key personnel and employees due to the transaction and business combination; the diversion of management time on transaction-related issues; significant indebtedness, including indebtedness incurred in connection with the transaction, and the need to generate sufficient cash flows to service and repay such debt; the disruption of current plans and operations; the outcome of legal proceedings related to the transaction; the ability to successfully integrate VMware’s operations; cyber-attacks, information security and data privacy; global political and economic conditions, including cyclicality in the semiconductor industry and in Broadcom’s other target markets, rising interest rates, the impact of inflation and challenges in manufacturing and the global supply chain; the impact of public health crises, such as pandemics (including COVID-19) and epidemics and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets; and events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature.   3 For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to Broadcom’s periodic reports and other filings with the SEC, including the risk factors identified in Broadcom’s most recent Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. The forward-looking statements included in this Current Report on Form 8-K are made only as of the date hereof. Broadcom does not undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances, except as required by law. Item 9.01 Financial Statements and Exhibits. (a)   Financial Statements of Businesses Acquired Financial statements, to the extent required by this Item 9.01, will be filed by amendment to this Current Report on Form 8-K no later than 71 days following the date that this Current Report on Form 8-K is required to be filed. (b)   Pro Forma Financial Information Financial statements, to the extent required by this Item 9.01, will be filed by amendment to this Current Report on Form 8-K no later than 71 days following the date that this Current Report on Form 8-K is required to be filed. (d)  Exhibits Exhibit No.   Description       2.1   Agreement and Plan of Merger, dated as of May 26, 2022, by and among Broadcom Inc., VMware, Inc., Verona Holdco, Inc., Verona Merger Sub, Inc., Barcelona Merger Sub 2, Inc. and Barcelona Merger Sub 3, LLC (incorporated by reference to Exhibit 2.1 to Broadcom Inc.’s Form 8-K filed on May 26, 2022).       10.1   Credit Agreement, dated as of August 15, 2023, among Broadcom, the lenders and other parties party thereto, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Broadcom Inc.’s Form 8-K filed on August 16, 2023).       99.1   Press Release issued by Broadcom dated November 22, 2023.       104   Cover Page Interactive Data File (formatted as Inline XBRL).   4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: November 22, 2023   Broadcom Inc.         By: /s/ Kirsten M. Spears   Name: Kirsten M. Spears   Title: Chief Financial Officer and Chief Accounting Officer 5
8-K_1018724_0001018724-20-000015.htm
Document false--12-310001018724 0001018724 2020-05-27 2020-05-27 Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 _________________________ FORM 8-K _________________________ CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934May 27, 2020 Date of Report(Date of earliest event reported) _________________________AMAZON.COM, INC. (Exact name of registrant as specified in its charter)_________________________ Delaware 000-22513 91-1646860(State or other jurisdiction ofincorporation) (Commission File Number) (IRS Employer Identification No.)410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code)(206) 266-1000 (Registrant’s telephone number, including area code)_________________________ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Trading Symbol(s) Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share AMZN Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐ Table of ContentsTABLE OF CONTENTS ITEM 5.03. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR. 3  ITEM 5.07. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.3  ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. 5  SIGNATURES6  EXHIBIT 3.1   EXHIBIT 3.2 Table of ContentsITEM 5.03. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.On May 27, 2020, the shareholders of Amazon.com, Inc. (the “Company”) approved an amendment to the Company’s Restated Certificate of Incorporation (the “Certificate”) to lower the stock ownership threshold from 30% to 25% for shareholders to request that the Company call a special meeting of shareholders. The Board of Directors of the Company approved a corresponding amendment to Section 2.2.2 of the Company’s Amended and Restated Bylaws (the “Bylaws”), effective May 28, 2020. This description of the amendments to the Certificate and the Bylaws is not complete and is qualified in its entirety by reference to the text of the Certificate and the Bylaws, copies of which are filed as Exhibit 3.1 and Exhibit 3.2, respectively, to this Form 8-K.ITEM 5.07. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.On May 27, 2020, the Company held its Annual Meeting of Shareholders.The following nominees were elected as directors, each to hold office until the next Annual Meeting of Shareholders or until his or her successor is elected and qualified, by the vote set forth below:Nominee For Against Abstain BrokerNon-VotesJeffrey P. Bezos 358,730,743 8,196,701 1,954,131 65,004,317Rosalind G. Brewer 367,245,268 1,007,075 629,232 65,004,317Jamie S. Gorelick 361,883,175 4,407,847 2,590,553 65,004,317Daniel P. Huttenlocher 367,085,886 1,097,529 698,160 65,004,317Judith A. McGrath 363,221,298 3,639,975 2,020,302 65,004,317Indra K. Nooyi 366,888,067 1,340,374 653,134 65,004,317Jonathan J. Rubinstein 365,093,290 3,083,630 704,655 65,004,317Thomas O. Ryder 337,609,773 30,585,339 686,463 65,004,317Patricia Q. Stonesifer 360,752,549 7,491,161 637,865 65,004,317Wendell P. Weeks 365,887,030 2,312,118 682,427 65,004,317The appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2020 was ratified by the vote set forth below:For Against Abstain BrokerNon-Votes421,878,194 11,109,633 898,065 —The compensation of our named executive officers as disclosed in the proxy statement was approved in an advisory vote, as set forth below:For Against Abstain BrokerNon-Votes358,836,322 9,102,824 942,429 65,004,317The amendment to our Certificate to lower the stock ownership threshold from 30% to 25% for shareholders to request a special meeting was approved by the vote set forth below:For Against Abstain BrokerNon-Votes349,780,387 18,480,761 620,427 65,004,317A shareholder proposal requesting a report on effects of food waste was not approved, as set forth below:For Against Abstain BrokerNon-Votes116,962,195 247,667,816 4,251,564 65,004,3173Table of ContentsA shareholder proposal requesting a report on customer use of certain technologies was not approved, as set forth below:For Against Abstain BrokerNon-Votes117,311,297 248,500,568 3,069,710 65,004,317A shareholder proposal requesting a report on potential customer misuse of certain technologies was not approved, as set forth below:For Against Abstain BrokerNon-Votes117,000,777 248,814,931 3,065,867 65,004,317A shareholder proposal requesting a report on efforts to restrict certain products was not approved, as set forth below:For Against Abstain BrokerNon-Votes127,815,408 238,031,481 3,034,686 65,004,317A shareholder proposal requesting a mandatory independent board chair policy was not approved, as set forth below:For Against Abstain BrokerNon-Votes59,580,412 297,823,276 11,477,887 65,004,317A shareholder proposal requesting an alternative report on gender/racial pay was not approved, as set forth below:For Against Abstain BrokerNon-Votes55,887,151 309,753,503 3,240,921 65,004,317A shareholder proposal requesting a report on certain community impacts was not approved, as set forth below:For Against Abstain BrokerNon-Votes22,446,883 342,993,280 3,441,412 65,004,317A shareholder proposal requesting a report on viewpoint discrimination was not approved, as set forth below:For Against Abstain BrokerNon-Votes5,530,109 360,515,412 2,836,054 65,004,317A shareholder proposal requesting a report on promotion data was not approved, as set forth below:For Against Abstain BrokerNon-Votes44,559,366 320,298,657 4,023,552 65,004,317A shareholder proposal requesting an additional reduction in threshold for calling special shareholder meetings was not approved, as set forth below:For Against Abstain BrokerNon-Votes135,083,275 232,676,983 1,121,317 65,004,3174Table of ContentsA shareholder proposal requesting a specific supply chain report format was not approved, as set forth below:For Against Abstain BrokerNon-Votes110,682,462 245,542,645 12,656,468 65,004,317A shareholder proposal requesting additional reporting on lobbying was not approved, as set forth below:For Against Abstain BrokerNon-Votes110,288,556 256,505,478 2,087,541 65,004,317ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.(d) Exhibits. ExhibitNumberDescription  3.1Restated Certificate of Incorporation of the Company.3.2Amended and Restated Bylaws of the Company.104The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101).5Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AMAZON.COM, INC. (REGISTRANT)    By:/s/ David A. Zapolsky  David A. Zapolsky  Senior Vice PresidentDated: May 29, 20206
8-K_59478_0000059478-19-000269.htm
Document false0000059478LILLY ELI & CO 0000059478 2019-10-23 2019-10-23 0000059478 us-gaap:CommonClassAMember 2019-10-23 2019-10-23 0000059478 lly:A1.000NotesDueJune22022Member 2019-10-23 2019-10-23 0000059478 lly:A1.625NotesDueJune22026Member 2019-10-23 2019-10-23 0000059478 lly:A718NotesDueJune12025Member 2019-10-23 2019-10-23 0000059478 lly:A6.77NotesDueJanuary12036Member 2019-10-23 2019-10-23 0000059478 lly:A2.125NotesDueJune32030Member 2019-10-23 2019-10-23   UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549 FORM 8-K  CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934Date of report (Date of earliest event reported): October 23, 2019  ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in Charter)        Indiana 001-06351 35-0470950(State or Other Jurisdictionof Incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)  Lilly Corporate Center Indianapolis, Indiana 46285 (Address of Principal Executive Offices, and Zip Code)(317) 276-2000 Registrant’s Telephone Number, Including Area CodeNot Applicable (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock (no par value)LLYThe New York Stock Exchange1.000% Notes Due June 2, 2022LLY22The New York Stock Exchange7.125% Notes Due June 1, 2025LLY25The New York Stock Exchange1.625% Notes Due June 2, 2026LLY26The New York Stock Exchange2.125% Notes Due June 3, 2030LLY30The New York Stock Exchange6.77% Notes Due January 1, 2036LLY36The New York Stock ExchangeItem 2.02. Results of Operations and Financial ConditionAttached hereto as Exhibit 99.1 and incorporated by reference into this Item 2.02 is a copy of the press release, dated October 23, 2019, announcing the results of operations of Eli Lilly and Company (the “Company”) for the three-month and nine-month periods ended September 30, 2019 (the “Reported Periods”), including, among other things, unaudited operating results for the Reported Periods.Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain OfficersSection (b):  On October 23, 2019, the company announced that Enrique Conterno, senior vice president, president of Lilly Diabetes, and president of Lilly USA, informed the board of directors of his intent to retire from the company, effective December 31, 2019. A copy of the press release announcing Mr. Conterno's retirement is filed as Exhibit 99.2 to this Form 8-K.Section (e) On October 21, 2019, the Compensation Committee of the Board of Directors of the Company terminated the Company’s Executive Officer Incentive Plan (the “Plan”), effective January 1, 2020. The Plan was approved by shareholders in April 2011 and was designed to facilitate the tax deductibility of annual incentive awards to executive officers under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). In light of the changes to Section 162(m) under the Tax Cuts and Jobs Act of 2017, the Plan no longer limits the federal income tax deduction for compensation paid under the Plan to executive officers. Executive officers will continue to participate in the Eli Lilly and Company Bonus Plan. Item 8.01. Other EventsThe information contained in Exhibit 99.1 (other than the quote from David A. Ricks, the Company’s Chief Executive Officer, the Company’s non-GAAP financial results for the Reported Periods, the Company’s non-GAAP guidance for 2019 and the reconciliations related thereto) is hereby incorporated by reference.Item 9.01. Financial Statements and ExhibitsExhibit Number    Description99.1        Press release dated October 23, 2019, together with related attachments99.2        Retirement press release104        Cover Page Interactive Data File (embedded within the Inline XBRL document)EXHIBIT INDEXExhibit NumberExhibit99.1Press release dated October 23, 2019, together with related attachments99.2Retirement press release104Cover Page Interactive Data File (embedded within the Inline XBRL document)SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ELI LILLY AND COMPANY(Registrant)By:    /s/ Donald A. Zakrowski                    Name:    Donald A. ZakrowskiTitle:     Vice President, Finance and Chief Accounting OfficerDated: October 23, 2019
8-K_320193_0001193125-19-292676.htm
8-K false 0000320193 0000320193 2019-11-07 2019-11-07 0000320193 us-gaap:CommonStockMember 2019-11-07 2019-11-07 0000320193 aapl:A1.000NotesDue2022Member 2019-11-07 2019-11-07 0000320193 aapl:A1.375NotesDue2024Member 2019-11-07 2019-11-07 0000320193 aapl:A0.875NotesDue2025Member 2019-11-07 2019-11-07 0000320193 aapl:A1.625NotesDue2026Member 2019-11-07 2019-11-07 0000320193 aapl:A2.000NotesDue2027Member 2019-11-07 2019-11-07 0000320193 aapl:A1.375NotesDue2029Member 2019-11-07 2019-11-07 0000320193 aapl:A3.050NotesDue2029Member 2019-11-07 2019-11-07 0000320193 aapl:A3.600NotesDue2042Member 2019-11-07 2019-11-07     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 8-K   CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 November 7, 2019 Date of Report (Date of earliest event reported)   Apple Inc. (Exact name of Registrant as specified in its charter)   California   001-36743   94-2404110 (State or other jurisdiction of incorporation)   (Commission File Number)   (I.R.S. Employer Identification No.) One Apple Park Way Cupertino, California 95014 (Address of principal executive offices) (Zip Code) (408) 996-1010 (Registrant’s telephone number, including area code) Not applicable (Former name or former address, if changed since last report.)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))   Securities registered pursuant to Section 12(b) of the Act: Title of each class   Trading symbol(s)   Name of each exchange on which registered Common Stock, $0.00001 par value per share   AAPL   The Nasdaq Stock Market LLC 1.000% Notes due 2022   —   The Nasdaq Stock Market LLC 1.375% Notes due 2024   —   The Nasdaq Stock Market LLC 0.875% Notes due 2025   —   The Nasdaq Stock Market LLC 1.625% Notes due 2026   —   The Nasdaq Stock Market LLC 2.000% Notes due 2027   —   The Nasdaq Stock Market LLC 1.375% Notes due 2029   —   The Nasdaq Stock Market LLC 3.050% Notes due 2029   —   The Nasdaq Stock Market LLC 3.600% Notes due 2042   —   The Nasdaq Stock Market LLC   Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐     Item 8.01 Other Events. On November 15, 2019, Apple Inc. (“Apple”) consummated the issuance and sale of €1,000,000,000 aggregate principal amount of its 0.000% Notes due 2025 (the “2025 Notes”) and €1,000,000,000 aggregate principal amount of its 0.500% Notes due 2031 (the “2031 Notes” and, together with the 2025 Notes, the “Notes”), pursuant to an underwriting agreement (the “Underwriting Agreement”) dated November 7, 2019 among Apple and Goldman Sachs & Co. LLC, Barclays Bank PLC, BNP Paribas and J.P. Morgan Securities plc, as representatives of the several underwriters named therein. The Notes are being issued pursuant to an indenture, dated as of November 5, 2018 (the “Indenture”), between Apple and The Bank of New York Mellon Trust Company, N.A., as trustee, together with the officer’s certificate, dated November 15, 2019 (the “Officer’s Certificate”), issued pursuant to the Indenture establishing the terms of each series of Notes. The Notes are being issued pursuant to Apple’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on November 5, 2018 (Reg. No. 333-228159) (the “Registration Statement”). Interest on the Notes will be paid annually in arrears on November 15 of each year, beginning on November 15, 2020. The 2025 Notes will mature on November 15, 2025 and the 2031 Notes will mature on November 15, 2031. The Notes will be Apple’s senior unsecured obligations and will rank equally with Apple’s other unsecured and unsubordinated debt from time to time outstanding. The foregoing description of the Notes and related agreements is qualified in its entirety by the terms of the Underwriting Agreement, the Indenture and the Officer’s Certificate (including the forms of the Notes). Apple is furnishing the Underwriting Agreement and the Officer’s Certificate (including the forms of the Notes) attached hereto as Exhibits 1.1 and 4.1 through 4.3, respectively, and they are incorporated herein by reference. The Indenture is filed as Exhibit 4.1 to the Registration Statement. An opinion regarding the legality of the Notes is filed as Exhibit 5.1, and is incorporated by reference into the Registration Statement; and a consent relating to the incorporation of such opinion is incorporated by reference into the Registration Statement and is filed as Exhibit 23.1 by reference to its inclusion within Exhibit 5.1. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. Exhibit Number     Exhibit Description               1.1     Underwriting Agreement, dated November 7, 2019, among Apple Inc. and Goldman Sachs & Co. LLC, Barclays Bank PLC, BNP Paribas and J.P. Morgan Securities plc, as representatives of the several underwriters named therein               4.1     Officer’s Certificate of Apple Inc., dated November 15, 2019               4.2     Form of Global Note representing the 2025 Notes (included in Exhibit 4.1)               4.3     Form of Global Note representing the 2031 Notes (included in Exhibit 4.1)               5.1     Opinion of Latham & Watkins LLP             23.1     Consent of Latham & Watkins LLP (included in the opinion filed as Exhibit 5.1)             104     Inline XBRL for the cover page of this Current Report on Form 8-K. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: November 15, 2019     Apple Inc.                   By:   /s/ Luca Maestri       Luca Maestri       Senior Vice President, Chief Financial Officer
8-K_1067983_0001193125-15-094006.htm
8-K 1 d890665d8k.htm FORM 8-K Form 8-K     SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) March 16, 2015     BERKSHIRE HATHAWAY INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)       DELAWARE   001-14905   47-0813844 (STATE OR OTHER JURISDICTION OF INCORPORATION)   (COMMISSION FILE NUMBER)   (I.R.S. EMPLOYER IDENTIFICATION NO.) 3555 Farnam Street Omaha, Nebraska   68131 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)   (ZIP CODE) (402) 346-1400 REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))       Item 8.01 Other Events. On March 16, 2015, Berkshire Hathaway Inc. (“Berkshire”) issued (i) €750,000,000 aggregate principal amount of its 0.75% Senior Notes due 2023, (ii) €1,250,000,000 aggregate principal amount of its 1.125% Senior Notes due 2027, and (iii) €1,000,000,000 aggregate principal amount of its 1.625% Senior Notes due 2035 ((i), (ii), and (iii) collectively, the “Notes”) under a registration statement on Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”), filed with the Securities and Exchange Commission (the “Commission”) on January 28, 2013 (Registration No. 333-186257) (the “Registration Statement”). The Notes were sold pursuant to an underwriting agreement entered into on March 5, 2015, by and between (a) Berkshire and (b) Deutsche Bank AG, London Branch, Goldman, Sachs & Co., Merrill Lynch International and Wells Fargo Securities International Limited. The Notes are issued under an Indenture, dated as of February 1, 2010, by and among Berkshire, Berkshire Hathaway Finance Corporation, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Indenture”), and officers’ certificates dated as of March 16, 2015 by Berkshire with respect to the Notes (the “Officers’ Certificates”). The relevant terms of the Notes and the Indenture are further described under the caption “Description of the Notes” in the prospectus supplement, dated March 5, 2015, filed with the Commission by Berkshire on March 6, 2015, pursuant to Rule 424(b)(2) under the Securities Act of 1933, as amended, and in the section entitled “Description of the Debt Securities” in the base prospectus, dated January 28, 2013, included in the Registration Statement, which descriptions are incorporated herein by reference. A copy of the Indenture is set forth in Exhibit 4.1 of Berkshire’s registration statement on Form S-3 under the Securities Act filed with the Commission on February 1, 2010 (Registration No. 333-164611) and is incorporated herein by reference. Copies of the Officers’ Certificates (including the forms of the Notes) are attached hereto as Exhibits 4.2, 4.3, and 4.4 and are incorporated herein by reference. The descriptions of the Indenture, the Officers’ Certificates and the Notes in this report are summaries and are qualified in their entirety by the terms of the Indenture, the Officers’ Certificates and the Notes, respectively. Item 9.01 Financial Statements and Exhibits. (d) Exhibits     1.1 Underwriting Agreement, dated March 5, 2015, by and between (a) Berkshire Hathaway Inc. and (b) Deutsche Bank AG, London Branch, Goldman, Sachs & Co., Merrill Lynch International and Wells Fargo Securities International Limited.   4.1 Indenture, dated as of February 1, 2010, among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Berkshire’s Registration Statement on Form S-3 (Registration No. 333-164611) filed with the Commission on February 1, 2010).   4.2 Officers’ Certificate of Berkshire Hathaway Inc., dated as of March 16, 2015, including the form of Berkshire Hathaway Inc.’s 0.75% Senior Notes due 2023.   4.3 Officers’ Certificate of Berkshire Hathaway Inc., dated as of March 16, 2015, including the form of Berkshire Hathaway Inc.’s 1.125% Senior Notes due 2027.   4.4 Officers’ Certificate of Berkshire Hathaway Inc., dated as of March 16, 2015, including the form of Berkshire Hathaway Inc.’s 1.625% Senior Notes due 2035.   5.1 Opinion of Munger, Tolles & Olson LLP, dated March 16, 2015. 23.1 Consent of Munger, Tolles & Olson LLP (included in Exhibit 5.1). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   March 16, 2015 BERKSHIRE HATHAWAY INC. /s/ Marc D. Hamburg By: Marc D. Hamburg Senior Vice President and Chief Financial Officer   [8-K Signature Page] Exhibit Index     1.1 Underwriting Agreement, dated March 5, 2015, by and between (a) Berkshire Hathaway Inc. and (b) Deutsche Bank AG, London Branch, Goldman, Sachs & Co., Merrill Lynch International and Wells Fargo Securities International Limited.   4.1 Indenture, dated as of February 1, 2010, among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Berkshire’s Registration Statement on Form S-3 (Registration No. 333-164611) filed with the Commission on February 1, 2010).   4.2 Officers’ Certificate of Berkshire Hathaway Inc., dated as of March 16, 2015, including the form of Berkshire Hathaway Inc.’s 0.75% Senior Notes due 2023.   4.3 Officers’ Certificate of Berkshire Hathaway Inc., dated as of March 16, 2015, including the form of Berkshire Hathaway Inc.’s 1.125% Senior Notes due 2027.   4.4 Officers’ Certificate of Berkshire Hathaway Inc., dated as of March 16, 2015, including the form of Berkshire Hathaway Inc.’s 1.625% Senior Notes due 2035.   5.1 Opinion of Munger, Tolles & Olson LLP, dated March 16, 2015. 23.1 Consent of Munger, Tolles & Olson LLP (included in Exhibit 5.1).
8-K_320193_0001193125-21-032394.htm
8-K false 0000320193 0000320193 2021-02-01 2021-02-01 0000320193 us-gaap:CommonStockMember 2021-02-01 2021-02-01 0000320193 aapl:A1.000NotesDue2022Member 2021-02-01 2021-02-01 0000320193 aapl:A1.375NotesDue2024Member 2021-02-01 2021-02-01 0000320193 aapl:A0.000Notesdue2025Member 2021-02-01 2021-02-01 0000320193 aapl:A0.875NotesDue2025Member 2021-02-01 2021-02-01 0000320193 aapl:A1.625NotesDue2026Member 2021-02-01 2021-02-01 0000320193 aapl:A2.000NotesDue2027Member 2021-02-01 2021-02-01 0000320193 aapl:A1.375NotesDue2029Member 2021-02-01 2021-02-01 0000320193 aapl:A3.050NotesDue2029Member 2021-02-01 2021-02-01 0000320193 aapl:A0.500Notesdue2031Member 2021-02-01 2021-02-01 0000320193 aapl:A3.600NotesDue2042Member 2021-02-01 2021-02-01     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549     FORM 8-K     CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 February 1, 2021 Date of Report (Date of earliest event reported)       Apple Inc. (Exact name of Registrant as specified in its charter)       California   001-36743   94-2404110 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (I.R.S. EmployerIdentification No.) One Apple Park Way Cupertino, California 95014 (Address of principal executive offices) (Zip Code) (408) 996-1010 (Registrant’s telephone number, including area code) Not applicable (Former name or former address, if changed since last report.)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:     ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)     ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)     ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))     ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))     Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Tradingsymbol(s)   Name of each exchangeon which registered Common Stock, $0.00001 par value per share   AAPL   The Nasdaq Stock Market LLC 1.000% Notes due 2022   —   The Nasdaq Stock Market LLC 1.375% Notes due 2024   —   The Nasdaq Stock Market LLC 0.000% Notes due 2025   —   The Nasdaq Stock Market LLC 0.875% Notes due 2025   —   The Nasdaq Stock Market LLC 1.625% Notes due 2026   —   The Nasdaq Stock Market LLC 2.000% Notes due 2027   —   The Nasdaq Stock Market LLC 1.375% Notes due 2029   —   The Nasdaq Stock Market LLC 3.050% Notes due 2029   —   The Nasdaq Stock Market LLC 0.500% Notes due 2031   —   The Nasdaq Stock Market LLC 3.600% Notes due 2042   —   The Nasdaq Stock Market LLC     Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       Item 8.01 Other Events. On February 8, 2021, Apple Inc. (“Apple”) consummated the issuance and sale of $2,500,000,000 aggregate principal amount of its 0.700% Notes due 2026 (the “2026 Notes”), $2,500,000,000 aggregate principal amount of its 1.200% Notes due 2028 (the “2028 Notes”), $2,750,000,000 aggregate principal amount of its 1.650% Notes due 2031 (the “2031 Notes”), $1,500,000,000 aggregate principal amount of its 2.375% Notes due 2041 (the “2041 Notes”), $3,000,000,000 aggregate principal amount of its 2.650% Notes due 2051 (the “2051 Notes”) and $1,750,000,000 aggregate principal amount of its 2.800% Notes due 2061 (the “2061 Notes” and, together with the 2026 Notes, the 2028 Notes, the 2031 Notes, the 2041 Notes and the 2051 Notes, the “Notes”), pursuant to an underwriting agreement (the “Underwriting Agreement”) dated February 1, 2021 among Apple and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein. The Notes are being issued pursuant to an indenture, dated as of November 5, 2018 (the “Indenture”), between Apple and The Bank of New York Mellon Trust Company, N.A., as trustee, together with the officer’s certificate, dated February 8, 2021 (the “Officer’s Certificate”), issued pursuant to the Indenture establishing the terms of each series of Notes. The Notes are being issued pursuant to Apple’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on November 5, 2018 (Reg. No. 333-228159) (the “Registration Statement”). Interest on the Notes will be paid semi-annually in arrears on February 8 and August 8 of each year, beginning on August 8, 2021. The 2026 Notes will mature on February 8, 2026. The 2028 Notes will mature on February 8, 2028. The 2031 Notes will mature on February 8, 2031. The 2041 Notes will mature on February 8, 2041. The 2051 Notes will mature on February 8, 2051. The 2061 Notes will mature on February 8, 2061. The Notes will be Apple’s senior unsecured obligations and will rank equally with Apple’s other unsecured and unsubordinated debt from time to time outstanding. The foregoing description of the Notes and related agreements is qualified in its entirety by the terms of the Underwriting Agreement, the Indenture and the Officer’s Certificate (including the forms of the Notes). Apple is furnishing the Underwriting Agreement and the Officer’s Certificate (including the forms of the Notes) attached hereto as Exhibits 1.1 and 4.1 through 4.7, respectively, and they are incorporated herein by reference. The Indenture is filed as Exhibit 4.1 to the Registration Statement. An opinion regarding the legality of the Notes is filed as Exhibit 5.1, and is incorporated by reference into the Registration Statement; and a consent relating to the incorporation of such opinion is incorporated by reference into the Registration Statement and is filed as Exhibit 23.1 by reference to its inclusion within Exhibit 5.1.   Item 9.01 Financial Statements and Exhibits.   (d) Exhibits.   ExhibitNumber    Exhibit Description   1.1    Underwriting Agreement, dated February 1, 2021, among Apple Inc. and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein   4.1    Officer’s Certificate of Apple Inc., dated February 8, 2021   4.2    Form of Global Note representing the 2026 Notes (included in Exhibit 4.1)   4.3    Form of Global Note representing the 2028 Notes (included in Exhibit 4.1)   4.4    Form of Global Note representing the 2031 Notes (included in Exhibit 4.1)   4.5    Form of Global Note representing the 2041 Notes (included in Exhibit 4.1)   4.6    Form of Global Note representing the 2051 Notes (included in Exhibit 4.1)   4.7    Form of Global Note representing the 2061 Notes (included in Exhibit 4.1)   5.1    Opinion of Latham & Watkins LLP 23.1    Consent of Latham & Watkins LLP (included in the opinion filed as Exhibit 5.1) 104    Inline XBRL for the cover page of this Current Report on Form 8-K. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   Date: February 8, 2021     Apple Inc.     By:   /s/ Luca Maestri       Luca Maestri       Senior Vice President,Chief Financial Officer
8-K_59478_0000059478-20-000106.htm
Document false0000059478 0000059478 2020-05-04 2020-05-04 0000059478 us-gaap:CommonClassAMember 2020-05-04 2020-05-04 0000059478 lly:A625Notesdue2031Member 2020-05-04 2020-05-04 0000059478 lly:A1.625NotesDueJune22026Member 2020-05-04 2020-05-04 0000059478 lly:A1.700Notesdue2049Member 2020-05-04 2020-05-04 0000059478 lly:A2.125NotesDueJune32030Member 2020-05-04 2020-05-04 0000059478 lly:A718NotesDueJune12025Member 2020-05-04 2020-05-04 0000059478 lly:A6.77NotesDueJanuary12036Member 2020-05-04 2020-05-04 0000059478 lly:A1.000NotesDueJune22022Member 2020-05-04 2020-05-04   UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549 ________________FORM 8-K  CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934________________Date of report (Date of earliest event reported): May 4, 2020 ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in Charter)       Indiana 001-06351 35-0470950(State or Other Jurisdictionof Incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)  Lilly Corporate Center Indianapolis, Indiana 46285 (Address of Principal Executive Offices, and Zip Code)(317) 276-2000 Registrant’s Telephone Number, Including Area CodeNot Applicable (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock (no par value)LLYNew York Stock Exchange1.000% Notes due 2022LLY22New York Stock Exchange7 1/8% Notes due 2025LLY25New York Stock Exchange1.625% Notes due 2026LLY26New York Stock Exchange2.125% Notes due 2030LLY30New York Stock Exchange0.625% Notes due 2031LLY31New York Stock Exchange6.77% Notes due 2036LLY36New York Stock Exchange1.700% Notes due 2049LLY49ANew York Stock ExchangeItem 5.07. Submission of Matters to a Vote of Security HoldersWe held our annual meeting of shareholders on May 4, 2020. Voting results for each matter submitted to a vote at the 2020 annual meeting are provided below.a)The five nominees for director were elected to serve three-year terms ending at our annual meeting of shareholders in 2023, as follows:NomineeForAgainstAbstainBroker NonvoteMichael L. Eskew617,446,430157,986,9536,848,24883,997,305William G. Kaelin, Jr., M.D.777,855,5793,365,1691,060,88383,997,305David A. Ricks750,096,92328,729,4843,455,22483,997,305Marschall S. Runge777,672,4543,511,5491,097,62883,997,305Karen Walker778,027,6593,287,919966,05383,997,305b)By the following vote, the shareholders approved an advisory vote on compensation paid to our named executive officers:For:755,616,425Against:24,214,028Abstain:2,451,178Broker Nonvote:83,997,305c)The appointment of Ernst & Young as our principal independent auditor for the fiscal year ended December 31, 2020 was ratified by the following shareholder vote:For:834,009,593Against:31,453,606Abstain:815,737d)The proposal to amend the Articles of Incorporation to eliminate the classified board structure did not receive the required vote of 80% of outstanding shares. The shareholders voted as follows:For:660,018,302Against:120,829,680Abstain:1,433,649Broker Nonvote:83,997,305e)The proposal to amend the Articles of Incorporation to eliminate supermajority voting provisions did not receive the required vote of 80% of outstanding shares. The shareholders voted as follows:For:659,920,224Against:120,983,970Abstain:1,377,437Broker Nonvote:83,997,305f)By the following vote, a shareholder proposal requesting a report regarding direct and indirect lobbying activities and expenditures was not approved:For:231,433,414Against:547,788,772Abstain:3,059,445Broker Nonvote:83,997,305g)By the following vote, a shareholder proposal requesting a report on the effectiveness of the forced swim test was not approved:For:26,506,363Against:746,454,137Abstain:9,321,131Broker Nonvote:83,997,305h)By the following vote, a shareholder proposal requesting to amend the bylaws to require an independent board chair was not approved:For:264,884,806Against:515,409,053Abstain:1,987,772Broker Nonvote:83,997,305i)By the following vote, a shareholder proposal requesting disclosures of specific minimum qualifications and board nominee skills, experience, and ideological perspective was not approved:For:8,063,981Against:771,219,809Abstain:2,997,841Broker Nonvote:83,997,305j)By the following vote, a shareholder proposal requesting to publish feasibility report on incorporating public concern over drug prices into senior executive compensation arrangements was not approved:For:184,652,906Against:570,094,648Abstain:27,534,077Broker Nonvote:83,997,305k)By the following vote, a shareholder proposal requesting the implementation of a bonus deferral policy was not approved:For:242,987,647Against:536,897,512Abstain:2,396,472Broker Nonvote:83,997,305l)By the following vote, a shareholder proposal requesting board adopt a policy disclosing clawbacks on executive incentive compensation due to misconduct was not approved:For:273,782,771Against:506,300,278Abstain:2,198,582Broker Nonvote:83,997,305As of the record date of the meeting, 957,038,447 shares of common stock were issued and outstanding.EXHIBIT INDEXExhibit NumberExhibit104Cover Page Interactive Data File (embedded within the Inline XBRL document)SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ELI LILLY AND COMPANY(Registrant)By:     /s/ Crystal T. WilliamsName:  Crystal T. WilliamsTitle:     Assistant SecretaryDated: May 5, 2020
8-K_1652044_0001193125-24-154725.htm
8-K false 0001652044 0001652044 2024-06-05 2024-06-05 0001652044 us-gaap:CommonClassAMember 2024-06-05 2024-06-05 0001652044 goog:CapitalClassCMember 2024-06-05 2024-06-05   UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549   FORM 8-K   CURRENT REPORTPursuant to Section 13 or 15(d)of The Securities Exchange Act of 1934Date of Report (Date of earliest event reported)June 5, 2024   ALPHABET INC.(Exact name of registrant as specified in its charter)     Delaware   001-37580   61-1767919 (State or other jurisdictionof incorporation)   (CommissionFile Number)   (IRS EmployerIdentification No.) 1600 Amphitheatre ParkwayMountain View, CA 94043(Address of principal executive offices, including zip code)(650) 253-0000(Registrant’s telephone number, including area code)Not Applicable(Former name or former address, if changed since last report)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):    ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)     ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)     ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))     ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:  Title of each class   TradingSymbol(s)   Name of each exchangeon which registered Class A Common Stock, $0.001 par value   GOOGL   Nasdaq Stock Market LLC     (Nasdaq Global Select Market) Class C Capital Stock, $0.001 par value   GOOG   Nasdaq Stock Market LLC     (Nasdaq Global Select Market) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐    Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. On June 5, 2024, Alphabet Inc. (“Alphabet”) announced the appointment of Anat Ashkenazi, age 51, as the new Chief Financial Officer and Senior Vice President of Alphabet and Google LLC, effective July 31, 2024.Ms. Ashkenazi has served as Executive Vice President and Chief Financial Officer of Eli Lilly and Company, where she has worked for over 23 years. Ms. Ashkenazi joined Eli Lilly in 2001 and has had a diverse career spanning financial, strategy and operations roles. Prior to serving as Executive Vice President and Chief Financial Officer, Ms. Ashkenazi served in the role of Senior Vice President, Controller and Chief Financial Officer of Lilly Research Laboratories. She also held roles as the chief financial officer for a number of global divisions within Eli Lilly, including Oncology, Diabetes, Global Manufacturing & Quality, and Research & Development. Ms. Ashkenazi holds an MBA from Tel Aviv University and a BA in economics and business administration from the Hebrew University.Alphabet will separately provide the information called for in Item 5.02(c)(3) of Form 8-K. A copy of the release announcing her appointment is attached hereto as Exhibit 99.1.  Item 9.01. Financial Statements and Exhibits.(d) Exhibits  ExhibitNo.    Description 99.1    Press release of Alphabet Inc. dated June 5, 2024 104    Cover Page Interactive Data File (formatted as inline XBRL) 2 SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.        ALPHABET INC. June 5, 2024           /s/ Kathryn W. Hall       Kathryn W. Hall       Assistant Secretary 3
8-K_59478_0000059478-24-000185.htm
lly-202408080000059478false00000594782024-08-082024-08-080000059478us-gaap:CommonClassAMember2024-08-082024-08-080000059478lly:A718NotesDueJune12025Member2024-08-082024-08-080000059478lly:A1.625NotesDueJune22026Member2024-08-082024-08-080000059478lly:A2.125NotesDueJune32030Member2024-08-082024-08-080000059478lly:A625Notesdue2031Member2024-08-082024-08-080000059478lly:A500NotesDue2033Member2024-08-082024-08-080000059478lly:A6.77NotesDueJanuary12036Member2024-08-082024-08-080000059478lly:A1625NotesDue2043Member2024-08-082024-08-080000059478lly:A1.700Notesdue2049Member2024-08-082024-08-080000059478lly:A1125NotesDue2051Member2024-08-082024-08-080000059478lly:A1375NotesDue2061Member2024-08-082024-08-08 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-K CURRENT REPORTPursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934Date of Report (Date of Earliest Event Reported): August 8, 2024ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in its Charter) Indiana 001-06351 35-0470950(State or Other Jurisdictionof Incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)  Lilly Corporate CenterIndianapolis,Indiana46285(Address of Principal Executive Offices)(Zip Code) Registrant’s Telephone Number, Including Area Code: (317) 276-2000 Not Applicable (Former Name or Former Address, if Changed Since Last Report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act: Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock (no par value)LLYNew York Stock Exchange7 1/8% Notes due 2025LLY25New York Stock Exchange1.625% Notes due 2026LLY26New York Stock Exchange2.125% Notes due 2030LLY30New York Stock Exchange0.625% Notes due 2031LLY31New York Stock Exchange0.500% Notes due 2033LLY33New York Stock Exchange6.77% Notes due 2036LLY36New York Stock Exchange1.625% Notes due 2043LLY43New York Stock Exchange1.700% Notes due 2049LLY49ANew York Stock Exchange1.125% Notes due 2051LLY51New York Stock Exchange1.375% Notes due 2061LLY61New York Stock ExchangeIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02. Results of Operations and Financial Condition.The information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933 or the Exchange Act, except as otherwise expressly stated in such filing.Attached hereto as Exhibit 99.1 and incorporated by reference into this Item 2.02 is a copy of the press release, dated August 8, 2024, announcing the financial results of Eli Lilly and Company for the quarter ended June 30, 2024.Item 9.01. Financial Statements and Exhibits.Exhibit No.Description99.1Press Release of Eli Lilly and Company, dated August 8, 2024.104Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ELI LILLY AND COMPANY(Registrant)By:/s/ Donald A. ZakrowskiName:Donald A. ZakrowskiTitle:Senior Vice President, Finance, and Chief Accounting OfficerDate: August 8, 2024
8-K_320193_0001140361-24-038403.htm
truetruetruetruetruetruetruetruefalse000032019309-2800003201932024-08-202024-08-200000320193aapl:Zero875NotesDue2025Member2024-08-202024-08-200000320193aapl:Three600NotesDue2042Member2024-08-202024-08-200000320193aapl:One375NotesDue2029Member2024-08-202024-08-200000320193aapl:Zero000NotesDue2025Member2024-08-202024-08-200000320193aapl:Two000NotesDue2027Member2024-08-202024-08-200000320193us-gaap:CommonStockMember2024-08-202024-08-200000320193aapl:Zero500NotesDue2031Member2024-08-202024-08-200000320193aapl:Three050NotesDue2029Member2024-08-202024-08-200000320193aapl:One625NotesDue2026Member2024-08-202024-08-20  UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 August 20, 2024 Date of Report (Date of earliest event reported) Apple Inc. (Exact name of Registrant as specified in its charter)   California 001-36743 94-2404110 (State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.) One Apple Park Way Cupertino, California 95014 (Address of principal executive offices) (Zip Code) (408) 996-1010 (Registrant’s telephone number, including area code) Not applicable  (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class Trading symbol(s) Name of each exchange on which registered Common Stock, $0.00001 par value per share AAPL The Nasdaq Stock Market LLC 0.000% Notes due 2025 — The Nasdaq Stock Market LLC 0.875% Notes due 2025 — The Nasdaq Stock Market LLC 1.625% Notes due 2026 — The Nasdaq Stock Market LLC 2.000% Notes due 2027 — The Nasdaq Stock Market LLC 1.375% Notes due 2029 — The Nasdaq Stock Market LLC 3.050% Notes due 2029 — The Nasdaq Stock Market LLC 0.500% Notes due 2031 — The Nasdaq Stock Market LLC 3.600% Notes due 2042 — The Nasdaq Stock Market LLC   Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).   Emerging growth company ☐ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.   On August 20, 2024, the Board of Directors of Apple Inc. (“Apple”) approved and adopted amended and restated bylaws (the “Amended and Restated Bylaws”), which became effective the same day, to revise procedural mechanics and disclosure requirements applicable to shareholder nominations of directors and submissions of proposals regarding other business at shareholder meetings, including to define certain terms, clarify or limit the scope of information and disclosures required regarding proposing shareholders, proposed nominees, and other related persons, and make certain ministerial and conforming changes.   The foregoing description is a summary and is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, a copy of which is attached as Exhibit 3.2 hereto and is incorporated by reference herein.   Item 9.01 Financial Statements and Exhibits.   (d)          Exhibits.   Exhibit   Exhibit Number   Exhibit Description 3.2   Amended and Restated Bylaws of Apple Inc., effective as of August 20, 2024. 104   Inline XBRL for the cover page of this Current Report on Form 8-K. SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   Date: August 23, 2024 Apple Inc.         By: /s/ Katherine Adams     Katherine Adams     Senior Vice President, General Counsel and Secretary
8-K_1018724_0001104659-23-065457.htm
0001018724 false AMAZON COM INC 0001018724 2023-05-24 2023-05-24 iso4217:USD xbrli:shares iso4217:USD xbrli:shares Table of Contents     UNITED STATES  SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549       FORM 8-K       CURRENT REPORT   Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934   May 24, 2023  Date of Report  (Date of earliest event reported)       AMAZON.COM, INC. (Exact name of registrant as specified in its charter)       Delaware   000-22513   91-1646860 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.)   410 Terry Avenue North, Seattle, Washington 98109-5210  (Address of principal executive offices, including Zip Code)   (206) 266-1000  (Registrant’s telephone number, including area code)       Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))   Securities registered pursuant to Section 12(b) of the Act:   Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered Common Stock, par value $.01 per share   AMZN   Nasdaq Global Select Market   Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).   Emerging growth company                                     ¨        If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨     Table of Contents   TABLE OF CONTENTS       ITEM 5.07.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 3     SIGNATURES 6   Table of Contents   ITEM 5.07. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.   On May 24, 2023, Amazon.com, Inc. (the “Company”) held its Annual Meeting of Shareholders.   The following nominees were elected as directors, each to hold office until the next Annual Meeting of Shareholders or until his or her successor is elected and qualified, by the vote set forth below:   Nominee  For   Against   Abstain   Broker Non-Votes   Jeffrey P. Bezos   6,980,639,941    367,108,287    20,661,618    1,298,652,951  Andrew R. Jassy   7,283,404,084    72,396,902    12,608,860    1,298,652,951  Keith B. Alexander   7,228,610,746    124,509,220    15,289,880    1,298,652,951  Edith W. Cooper   5,973,207,683    1,374,647,815    20,554,348    1,298,652,951  Jamie S. Gorelick   7,063,104,316    290,448,441    14,857,089    1,298,652,951  Daniel P. Huttenlocher   5,951,607,777    1,395,865,502    20,936,567    1,298,652,951  Judith A. McGrath   5,236,121,158    2,112,024,911    20,263,777    1,298,652,951  Indra K. Nooyi   7,180,632,749    134,049,727    53,727,370    1,298,652,951  Jonathan J. Rubinstein   7,071,567,313    281,676,345    15,166,188    1,298,652,951  Patricia Q. Stonesifer   7,004,215,383    349,470,037    14,724,426    1,298,652,951  Wendell P. Weeks   7,241,737,701    111,441,435    15,230,710    1,298,652,951    The appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2023 was ratified by the vote set forth below:   For   Against   Abstain   Broker Non-Votes   8,361,401,059    287,140,557    18,521,181   —   The compensation of our named executive officers as disclosed in the proxy statement was approved in an advisory vote, as set forth below:   For   Against   Abstain   Broker Non-Votes   5,020,199,106    2,322,673,390    25,537,350    1,298,652,951   An advisory vote on the frequency of future advisory votes on executive compensation received the following votes:   One Year   Two Years   Three Years   Abstain   Broker Non-Votes   7,270,477,259    11,671,932    67,529,229    18,731,426    1,298,652,951   In light of these voting results, the Company plans to hold future advisory votes on executive compensation annually until the next required vote on the frequency of such advisory votes, or until the Board of Directors of the Company otherwise determines that a different frequency is in the best interests of the Company and its shareholders.   The Company’s 1997 Stock Incentive Plan, as amended and restated, was reapproved for purposes of French tax law, as set forth below:   For   Against   Abstain   Broker Non-Votes  6,869,340,693   480,249,860   18,819,293   1,298,652,951   3 Table of Contents   A shareholder proposal requesting a report on retirement plan options was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  490,423,709   6,284,800,004   593,186,133   1,298,652,951   A shareholder proposal requesting a report on customer due diligence was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  2,498,413,873   4,811,115,673   58,880,300   1,298,652,951   A shareholder proposal requesting reporting on content and product removal/restrictions was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  754,724,764   6,436,676,008   177,009,074   1,298,652,951   A shareholder proposal requesting a report on content removal requests was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  117,299,300   7,173,178,675   77,931,871   1,298,652,951   A shareholder proposal requesting additional reporting on stakeholder impacts was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  1,988,671,364   5,130,034,783   249,703,699   1,298,652,951   A shareholder proposal requesting alternative tax reporting was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  1,293,326,053   6,014,635,870   60,447,923   1,298,652,951   A shareholder proposal requesting additional reporting on climate lobbying was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  1,734,559,291   5,532,969,634   100,880,921   1,298,652,951   A shareholder proposal requesting additional reporting on gender/racial pay was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  2,138,766,104   5,174,973,947   54,669,795   1,298,652,951   A shareholder proposal requesting an analysis of costs associated with diversity, equity, and inclusion programs was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  60,804,059   7,256,490,940   51,114,847   1,298,652,951   A shareholder proposal requesting an amendment to our bylaws to require shareholder approval for certain future amendments was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  844,044,010   6,473,633,410   50,732,426   1,298,652,951   4 Table of Contents   A shareholder proposal requesting additional reporting on freedom of association was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  2,551,640,467   4,757,532,187   59,237,192   1,298,652,951   A shareholder proposal requesting a new policy regarding our executive compensation process was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  476,336,491   6,798,711,183   93,362,172   1,298,652,951   A shareholder proposal requesting additional reporting on animal welfare standards was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  410,038,754   6,878,186,316   80,184,776   1,298,652,951   A shareholder proposal requesting an additional Board committee was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  462,033,238   6,819,293,663   87,082,945   1,298,652,951   A shareholder proposal requesting an alternative director candidate policy was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes  1,349,994,843   5,968,467,387   49,947,616   1,298,652,951   A shareholder proposal requesting a report on warehouse working conditions was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes   2,590,684,742    4,722,460,838    55,264,266    1,298,652,951   A shareholder proposal requesting a report on packaging materials was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes   2,345,678,911    4,921,660,303    101,070,632    1,298,652,951   A shareholder proposal requesting a report on customer use of certain technologies was not approved, as set forth below:   For   Against   Abstain   Broker Non-Votes   2,739,606,457    4,569,643,496    59,159,893    1,298,652,951   5 Table of Contents   SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.     AMAZON.COM, INC. (REGISTRANT)         By:  /s/ David A. Zapolsky     David A. Zapolsky     Senior Vice President   Dated: May 26, 2023   6  
8-K_1067983_0001193125-21-303124.htm
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)       DELAWARE   001-14905   47-0813844 (STATE OR OTHER JURISDICTION OF INCORPORATION)   (COMMISSION FILE NUMBER)   (I.R.S. EMPLOYER IDENTIFICATION NO.)   3555 Farnam Street   Omaha, Nebraska   68131 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)   (ZIP CODE) (402) 346-1400 REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE (Former name or former address, if changed since last report.)     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbols   Name of each exchange on which registered Class A Common Stock   BRK.A   New York Stock Exchange Class B Common Stock   BRK.B   New York Stock Exchange 0.750% Senior Notes due 2023   BRK23   New York Stock Exchange 1.125% Senior Notes due 2027   BRK27   New York Stock Exchange 1.625% Senior Notes due 2035   BRK35   New York Stock Exchange 1.300% Senior Notes due 2024   BRK24   New York Stock Exchange 2.150% Senior Notes due 2028   BRK28   New York Stock Exchange 0.625% Senior Notes due 2023   BRK23A   New York Stock Exchange 0.000% Senior Notes due 2025   BRK25   New York Stock Exchange 2.375% Senior Notes due 2039   BRK39   New York Stock Exchange 0.500% Senior Notes due 2041   BRK41   New York Stock Exchange 2.625% Senior Notes due 2059   BRK59   New York Stock Exchange Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐       ITEM 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers On October 20, 2021, Susan A. Buffett and Christopher C. Davis were each elected to Berkshire’s Board of Directors following the Board of Directors unanimous approval of a resolution to increase the number of members of the Board of Directors to fifteen. There were no arrangements or understandings between Ms. Buffett or Mr. Davis and any of the members of the Board of Directors in connection with their election. At this date, there has been no determination as to what committees of the Board of Directors that Ms. Buffett or Mr. Davis will be named. Berkshire Hathaway issued a press release announcing Ms. Buffett’s and Mr. Davis’s election to Berkshire’s Board of Directors. A copy of the press release is attached as Exhibit 99.1.   ITEM 9.01 Financial Statements and Exhibits   99.1    Press Release issued by Berkshire Hathaway Inc. dated October 20, 2021 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   October 20, 2021     BERKSHIRE HATHAWAY INC.     /s/ Marc D. Hamburg     By:   Marc D. Hamburg     Senior Vice President and Chief Financial Officer
10-K_1067983_0001564590-21-009611.htm
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srt:ParentCompanyMember us-gaap:SeniorNotesMember brka:InsuranceAndOtherMember brka:DebtDueTwoThousandTwentyThreeToTwoThousandSixtyMember srt:MaximumMember 2020-01-01 2020-12-31 0001067983 srt:ParentCompanyMember us-gaap:SeniorNotesMember brka:InsuranceAndOtherMember brka:DebtDueTwoThousandTwentyThreeToTwoThousandSixtyMember 2020-12-31 0001067983 srt:ParentCompanyMember brka:BerkshireHathawayFinanceCorporationMember 2020-12-31   UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from              to              Commission file number 001-14905 BERKSHIRE HATHAWAY INC. (Exact name of Registrant as specified in its charter)   Delaware   47-0813844 State or other jurisdiction of incorporation or organization   (I.R.S. Employer Identification No.) 3555 Farnam Street, Omaha, Nebraska   68131 (Address of principal executive office)   (Zip Code) Registrant’s telephone number, including area code (402) 346-1400 Securities registered pursuant to Section 12(b) of the Act:   Title of each class   Trading Symbols   Name of each exchange on which registered Class A Common Stock Class B Common Stock 0.750% Senior Notes due 2023 1.125% Senior Notes due 2027 1.625% Senior Notes due 2035 1.300% Senior Notes due 2024 2.150% Senior Notes due 2028 0.625% Senior Notes due 2023 0.000% Senior Notes due 2025 2.375% Senior Notes due 2039 0.500% Senior Notes due 2041 2.625% Senior Notes due 2059   BRK.A BRK.B BRK23 BRK27 BRK35 BRK24 BRK28 BRK23A BRK25 BRK39 BRK41 BRK59   New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange   Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☑    No  ☐ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☑ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐ Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑    No  ☐ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer  ☑ Accelerated filer  ☐ Non-accelerated filer  ☐ Smaller reporting company  ☐ Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☑     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☑ State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2020: $336,500,000,000* Indicate the number of shares outstanding of each of the Registrant’s classes of common stock:   February 16, 2021—Class A common stock, $5 par value 640,586 shares February 16, 2021—Class B common stock, $0.0033 par value 1,336,348,609 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Registrant’s Annual Meeting to be held May 1, 2021 are incorporated in Part III.   * This aggregate value is computed at the last sale price of the common stock as reported on the New York Stock Exchange on June 30, 2020. It does not include the value of Class A common stock and Class B common stock held by Directors and Executive Officers of the Registrant and members of their immediate families, some of whom may not constitute “affiliates” for purpose of the Securities Exchange Act of 1934.       Table of Contents       Page No.   Part I       Item 1. Business Description K-1 Item 1A. Risk Factors K-22 Item 1B. Unresolved Staff Comments K-26 Item 2. Description of Properties K-26 Item 3. Legal Proceedings K-28 Item 4. Mine Safety Disclosures K-29   Part II       Item 5. Market for Registrant’s Common Equity, Related Security Holder Matters and IssuerPurchases of Equity Securities K-29 Item 6. Selected Financial Data K-32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations K-33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk K-66 Item 8. Financial Statements and Supplementary Data K-67   Consolidated Balance Sheets— December 31, 2020 and December 31, 2019 K-70   Consolidated Statements of Earnings— Years Ended December 31, 2020, December 31, 2019, and December 31, 2018 K-72   Consolidated Statements of Comprehensive Income—Years Ended December 31, 2020, December 31, 2019, and December 31, 2018 K-73   Consolidated Statements of Changes in Shareholders’ Equity—Years Ended December 31, 2020, December 31, 2019, and December 31, 2018 K-73   Consolidated Statements of Cash Flows—Years Ended December 31, 2020, December 31, 2019, and December 31, 2018 K-74   Notes to Consolidated Financial Statements K-75       Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure K-116 Item 9A. Controls and Procedures K-116 Item 9B. Other Information K-116   Part III       Item 10. Directors, Executive Officers and Corporate Governance K-116 Item 11. Executive Compensation K-116 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters K-116 Item 13. Certain Relationships and Related Transactions and Director Independence K-116 Item 14. Principal Accountant Fees and Services K-116   Part IV       Item 15. Exhibits and Financial Statement Schedules K-116     Exhibit Index K-120 Signatures K-122           Part I Item 1. Business Description Berkshire Hathaway Inc. (“Berkshire,” “Company” or “Registrant”) is a holding company owning subsidiaries engaged in a large number of diverse business activities. The most important of these are insurance businesses conducted on both a primary basis and a reinsurance basis, a freight rail transportation business and a group of utility and energy generation and distribution businesses. Berkshire also owns and operates numerous other businesses engaged in a variety of activities, as identified herein. Berkshire is domiciled in the state of Delaware, and its corporate headquarters is in Omaha, Nebraska. Berkshire’s operating businesses are managed on an unusually decentralized basis. There are few centralized or integrated business functions. Berkshire’s corporate senior management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. Berkshire’s senior management is also responsible for establishing and monitoring Berkshire’s corporate governance practices, including monitoring governance efforts, including those at the operating businesses, and participating in the resolution of governance-related issues as needed. Berkshire’s Board of Directors is responsible for assuring an appropriate successor to the Chief Executive Officer. The Berkshire Code of Business Conduct and Ethics emphasizes, among other things, the commitment to ethics and compliance with the law and provides basic standards for ethical and legal behavior of its employees. Berkshire and its consolidated subsidiaries employed approximately 360,000 people worldwide at the end of 2020. Human capital and resources are an integral and essential component of Berkshire’s businesses. Consistent with Berkshire’s decentralized management philosophy, Berkshire’s operating businesses establish specific policies and practices for their businesses concerning the attraction and retention of personnel within the organizations. Such policies and practices generally address, among other things: maintaining a safe work environment for employees, customers and other business partners, offering competitive compensation to employees, including health insurance and retirement benefits and incentives, providing learning and career development opportunities, and hiring practices intended to identify qualified candidates and promote diversity and inclusion in the workforce. Insurance and Reinsurance Businesses Berkshire’s insurance and reinsurance business activities are conducted through numerous domestic and foreign-based insurance entities. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty and life, accident and health risks worldwide. Berkshire’s insurance businesses employed approximately 51,000 people at the end of 2020. In direct or primary insurance activities, the insurer assumes the risk of loss from persons or organizations that are directly subject to the risks. Such risks may relate to property, casualty (or liability), life, accident, health, financial or other perils that may arise from an insurable event. In reinsurance activities, the reinsurer assumes defined portions of risks that other direct insurers or reinsurers assumed in their own insuring activities. Reinsurance contracts are normally classified as treaty or facultative contracts. Treaty reinsurance refers to reinsurance coverage for all or a portion of a specified group or class of risks ceded by the direct insurer, while facultative reinsurance involves coverage of specific individual underlying risks. Reinsurance contracts are further classified as quota-share or excess. Under quota-share (proportional or pro-rata) reinsurance, the reinsurer shares proportionally in the original premiums and losses of the direct insurer or reinsurer. Excess (or non-proportional) reinsurance provides for the indemnification of the direct insurer or reinsurer for all or a portion of the loss in excess of an agreed upon amount or “retention.” Both quota-share and excess reinsurance contracts may provide for aggregate limits of indemnification. Insurance and reinsurance are generally subject to regulatory oversight throughout the world. Except for regulatory considerations, there are virtually no barriers to entry into the insurance and reinsurance industry. Competitors may be domestic or foreign, as well as licensed or unlicensed. The number of competitors within the industry is not known. Insurers and reinsurers compete on the basis of reliability, financial strength and stability, financial ratings, underwriting consistency, service, business ethics, price, performance, capacity, policy terms and coverage conditions. K-1   Insurers based in the United States (“U.S.”) are subject to regulation by their states of domicile and by those states in which they are licensed to write policies on an admitted basis. The primary focus of regulation is to assure that insurers are financially solvent and that policyholder interests are otherwise protected. States establish minimum capital levels for insurance companies and establish guidelines for permissible business and investment activities. States have the authority to suspend or revoke a company’s authority to do business as conditions warrant. States regulate the payment of dividends by insurance companies to their shareholders and other transactions with affiliates. Dividends, capital distributions and other transactions of extraordinary amounts are subject to prior regulatory approval. Insurers may market, sell and service insurance policies in the states where they are licensed. These insurers are referred to as admitted insurers. Admitted insurers are generally required to obtain regulatory approval of their policy forms and premium rates. Non-admitted insurance markets have developed to provide insurance that is otherwise unavailable through admitted insurers. Non-admitted insurance, often referred to as “excess and surplus” lines, is procured by either state-licensed surplus lines brokers who place risks with insurers not licensed in that state or by the insured party’s direct procurement from non-admitted insurers. Non-admitted insurance is subject to considerably less regulation with respect to policy rates and forms. Reinsurers are normally not required to obtain regulatory approval of premium rates or reinsurance contracts. The insurance regulators of every state participate in the National Association of Insurance Commissioners (“NAIC”). The NAIC adopts forms, instructions and accounting procedures for use by U.S. insurers and reinsurers in preparing and filing annual statutory financial statements. However, an insurer’s state of domicile has ultimate authority over these matters. In addition to its activities relating to the annual statement, the NAIC develops or adopts statutory accounting principles, model laws, regulations and programs for use by its members. Such matters deal with regulatory oversight of solvency, risk management, compliance with financial regulation standards and risk-based capital reporting requirements. U.S. states, through the NAIC, and international insurance regulators through the International Association of Insurance Supervisors (“IAIS”) have been developing standards and best practices focused on establishing a common set of principles (“Insurance Core Principles”) and framework (“ComFrame”) for the regulation of large multi-national insurance groups. The standards address a variety of topics regarding supervision, coordination of regulators, insurance capital standards, risk management and governance. While the IAIS standards do not have legal effect, the states and the NAIC are implementing various regulatory tools and mandates that are responsive to certain IAIS standards. For example, the U.S. state regulators now require insurance groups to file an annual report, called an Own Risk Solvency Assessment or ORSA, with the group’s lead regulator. U.S. state regulators formed supervisory colleges intended to promote communication and cooperation amongst the various domestic international insurance regulators. The Nebraska Department of Insurance acts as the lead group wide supervisor for our group of insurance companies and chairs the Berkshire supervisory college. The NAIC is also developing further tools, including a group capital calculation tool and various liquidity assessments, that could be imposed on insurance groups in the future. Berkshire’s insurance companies maintain capital strength at exceptionally high levels, which differentiates them from their competitors. Collectively, the combined statutory surplus of Berkshire’s U.S.-based insurers was approximately $237 billion at December 31, 2020. Berkshire’s major insurance subsidiaries are rated AA+ by Standard & Poor’s and A++ (superior) by A.M. Best with respect to their financial condition and claims paying ability. The Terrorism Risk Insurance Act of 2002 established within the Department of the Treasury a Terrorism Insurance Program (“Program”) for commercial property and casualty insurers by providing federal reinsurance of insured terrorism losses. The Program currently extends to December 31, 2027 through other Acts, most recently the Terrorism Risk Insurance Program Reauthorization Act of 2019 (the “2019 TRIA Reauthorization”). Hereinafter these Acts are collectively referred to as TRIA. Under TRIA, the Department of the Treasury is charged with certifying “acts of terrorism.” Coverage under TRIA occurs if the industry insured loss for certified events occurring during the calendar year exceeds $200 million in 2020, or any calendar year thereafter. To be eligible for federal reinsurance, insurers must make available insurance coverage for acts of terrorism, by providing policyholders with clear and conspicuous notice of the amount of premium that will be charged for this coverage and of the federal share of any insured losses resulting from any act of terrorism. Assumed reinsurance is specifically excluded from TRIA participation. TRIA currently also excludes certain forms of direct insurance (such as personal and commercial auto, burglary, theft, surety and certain professional liability lines). Reinsurers are not required to offer terrorism coverage and are not eligible for federal reinsurance of terrorism losses. K-2   During 2020 and thereafter, in the event of a certified act of terrorism, the federal government will reimburse insurers (conditioned on their satisfaction of policyholder notification requirements) for 80% of their insured losses in excess of an insurance group’s deductible. Under the Program, the deductible is 20% of the aggregate direct subject earned premium for relevant commercial lines of business in the immediately preceding calendar year. The aggregate deductible in 2021 for Berkshire’s insurance group is expected to approximate $1.4 billion. There is also an aggregate program limit of $100 billion on the amount of the federal government coverage for each TRIA year. The extent of insurance regulation varies significantly among the countries in which our non-U.S. operations conduct business. While each country imposes licensing, solvency, auditing, and financial reporting requirements, the type and extent of the requirements differ substantially. For example:   • in some countries, insurers are required to prepare and file monthly and/or quarterly financial reports, and in others, only annual reports;   • some regulators require intermediaries to be involved in the sale of insurance products, whereas other regulators permit direct sales contact between the insurer and the customer;   • the extent of restrictions imposed upon an insurer's use of local and offshore reinsurance vary;   • policy form filing and rate regulation vary by country;   • the frequency of contact and periodic on-site examinations by insurance authorities differ by country;   • the scope and prescriptive requirements of an insurer’s risk management and governance framework vary significantly by country; and   • regulatory requirements relating to insurer dividend policies vary by country. Significant variations can also be found in the size, structure, and resources of the local regulatory departments that oversee insurance activities. Certain regulators prefer close relationships with all subject insurers and others operate a risk-based approach. Berkshire’s insurance group operates in some countries through subsidiaries and in some countries through branches of subsidiaries. Berkshire insurance subsidiaries are located in several countries, including Germany, the United Kingdom (“UK”), Ireland, Australia and South Africa, and also maintain branches in other countries, including Canada, various members of the European Union (“EU”), Australia, New Zealand, Singapore, Hong Kong, Macau and Dubai. Most of these foreign jurisdictions impose local capital requirements. Other legal requirements include discretionary licensing procedures, local retention of funds and records, and data privacy and protection program requirements. Berkshire’s international insurance companies are also subject to multinational application of certain U.S. laws. There are various regulatory bodies and initiatives that impact Berkshire in multiple international jurisdictions and the potential for significant effect on the Berkshire insurance group could be heightened as a result of recent industry and economic developments. On June 23, 2016, the UK voted in a national referendum to withdraw from the EU (“Brexit”), which resulted in the UK’s withdrawal from the EU on January 31, 2020. In anticipation of the UK leaving the EU, Berkshire Hathaway European Insurance DAC in Ireland was established to permit property and casualty insurance and reinsurance businesses to continue to operate in the EU following Brexit. Following the withdrawal of the UK from the EU as a result of Brexit, Berkshire expects to continue to maintain a substantial presence in London. Berkshire’s insurance underwriting operations include the following groups: (1) GEICO, (2) Berkshire Hathaway Primary Group and (3) Berkshire Hathaway Reinsurance Group. Except for retroactive reinsurance and periodic payment annuity products that generate significant amounts of up-front premiums along with estimated claims expected to be paid over very long time periods (creating “float,” see Investments section below), Berkshire expects to achieve a net underwriting profit over time and to reject inadequately priced risks. Underwriting profit is defined as earned premiums less associated incurred losses, loss adjustment expenses and underwriting and policy acquisition expenses. Underwriting profit does not include income earned from investments. Additional information related to each of Berkshire’s underwriting groups follows. GEICO—GEICO is headquartered in Chevy Chase, Maryland. GEICO’s insurance subsidiaries consist of Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, GEICO Casualty Company, GEICO Advantage Insurance Company, GEICO Choice Insurance Company, GEICO Secure Insurance Company, GEICO County Mutual Insurance Company and GEICO Marine Insurance Company. The GEICO companies primarily offer private passenger automobile insurance to individuals in all 50 states and the District of Columbia. GEICO also provides insurance for motorcycles, all-terrain vehicles, recreational vehicles, boats and small commercial fleets and acts as an agent for other insurers who offer homeowners, renters, life and identity management insurance to individuals who desire insurance coverages other than those offered by GEICO. GEICO’s marketing is primarily through direct response methods in which applications for insurance are submitted directly to the companies via the Internet or by telephone, and to a lesser extent, through captive agents. GEICO conducts business through regional service centers and claims adjustment and other facilities in 39 states. K-3   The automobile insurance business is highly competitive in the areas of price and service. GEICO competes for private passenger automobile insurance customers in the preferred, standard and non-standard risk markets with other companies that sell directly to the customer as well as with companies that use agency sales forces, including State Farm, Allstate, Progressive and USAA. GEICO’s advertising campaigns and competitive rates contributed to a cumulative increase in voluntary policies-in-force of approximately 36% over the past five years. According to the most recently published A.M. Best data for 2019, the five largest automobile insurers had a combined market share in 2019 of approximately 58% based on written premiums, with GEICO’s market share being second largest at approximately 13.8%. Since that data was published, GEICO’s management estimates its current market share may have declined, depending on how the effects of pandemic-related premium credit programs will be reflected in A.M. Best’s measurements. Seasonal variations in GEICO’s insurance business are not significant. However, extraordinary weather conditions or other factors may have a significant effect upon the frequency or severity of automobile claims. State insurance departments stringently regulate private passenger auto insurance. As a result, it is difficult for insurance companies to differentiate their products. Competition for private passenger automobile insurance, which is substantial, tends to focus on price and level of customer service provided. GEICO’s cost-efficient direct response marketing methods and emphasis on customer satisfaction enable it to offer competitive rates and value to its customers. GEICO primarily uses its own claims staff to manage and settle claims. The name and reputation of GEICO are material assets and management protects it and other service marks through appropriate registrations. Berkshire Hathaway Primary Group—The Berkshire Hathaway Primary Group (“BH Primary”) is a collection of independently managed insurers that provide a wide variety of insurance coverages to policyholders located principally in the United States. These various operations are discussed below. NICO and certain affiliates (“NICO Primary”) underwrite commercial motor vehicle and general liability insurance on an admitted basis and on an excess and surplus basis. Insurance coverages are offered nationwide primarily through insurance agents and brokers. The Berkshire Hathaway Homestate Companies (“BHHC”) is a group of insurers offering workers’ compensation, commercial auto and commercial property coverages to a diverse client base. BHHC has a national reach, with the ability to provide first-dollar and small to large deductible workers’ compensation coverage to employers in all states, except those where coverage is available only through state-operated workers’ compensation funds. NICO Primary and BHHC are each based in Omaha, Nebraska. Berkshire Hathaway Specialty Insurance (“BH Specialty”) offers commercial property, casualty, healthcare professional liability, executive and professional, surety, travel, medical stop loss and homeowner’s insurance through Berkshire Hathaway Specialty Insurance Company and other Berkshire insurance affiliates. BH Specialty writes primary and excess policies on an admitted and surplus basis in the U.S., and on a local or foreign non-admitted basis outside the U.S. BH Specialty is based in Boston, Massachusetts, with regional offices currently in several U.S. cities. BH Specialty also maintains international offices located in Australia, New Zealand, Canada and several countries in Asia, Europe and the Middle East. BH Specialty writes business through wholesale and retail insurance brokers, as well as managing general agents. MedPro Group (“MedPro”) is a leading provider of healthcare liability (“HCL”) insurance in the United States. MedPro provides customized HCL insurance, claims, patient safety and risk solutions to physicians, surgeons, dentists and other healthcare professionals, as well as hospitals, senior care and other healthcare facilities. Additionally, MedPro provides HCL insurance solutions to the international markets through other Berkshire insurance affiliates, delivers liability insurance to other professionals, and offers specialized accident and health insurance solutions to colleges and other customers through its subsidiaries and other Berkshire affiliates. MedPro is based in Fort Wayne, Indiana. U.S. Liability Insurance Company (“USLI”) includes a group of five specialty insurers that underwrite commercial, professional and personal lines insurance on an admitted basis, as well as an excess and surplus basis. USLI markets policies in all 50 states and the District of Columbia and Canada through wholesale and retail insurance agents. USLI companies also underwrite and market a wide variety of specialty insurance products. USLI is based in Wayne, Pennsylvania. The Berkshire Hathaway GUARD Insurance Companies (“GUARD”) is a group of five insurance companies that provide workers’ compensation, business owners’, commercial auto, commercial package and homeowners’ products to over 350,000 small and mid-sized businesses. GUARD also offers complementary professional liability and umbrella products nationwide. Policies are offered through independent agents and retail and wholesale brokers. GUARD is based in Wilkes-Barre, Pennsylvania. Central States Indemnity Company of Omaha, based in Omaha, Nebraska, primarily writes credit card credit insurance, Medicare Supplement insurance and agricultural equipment insurance. On October 1, 2018, NICO acquired MLMIC Insurance Company (“MLMIC”). MLMIC has been the leading writer of medical professional liability insurance in New York State for over 40 years. MLMIC distributes its policies mostly on a K-4   direct basis to medical and dental professionals, health care providers and hospitals. In October 2019, Berkshire sold its 81% interest in Applied Underwriters, Inc. Berkshire Hathaway Reinsurance Group—Berkshire’s combined global reinsurance business, referred to as the Berkshire Hathaway Reinsurance Group (“BHRG”), offers a wide range of coverages on property, casualty, life and health risks to insurers and reinsurers worldwide. Reinsurance business is written through National Indemnity Company (“NICO”), domiciled in Nebraska, its subsidiaries and various other insurance subsidiaries wholly owned by Berkshire (collectively, the “NICO Group”) and General Re Corporation, domiciled in Delaware, and its subsidiaries (collectively the “General Re Group”). BHRG’s underwriting operations in the U.S. are based in Stamford, Connecticut. BHRG also conducts business activities globally in 23 countries. The type and volume of business written is dependent on market conditions, including prevailing premium rates and coverage terms. The level of underwriting activities often fluctuates significantly from year to year depending on the perceived level of price adequacy in specific insurance and reinsurance markets as well as from the timing of particularly large reinsurance transactions. Property/casualty The NICO Group offers traditional property/casualty reinsurance on both an excess-of-loss and a quota-share basis, catastrophe excess-of-loss treaty and facultative reinsurance, and primary insurance on an excess-of-loss basis for large or unusual risks for clients worldwide. The type and volume of business written by the NICO Group may vary significantly from period to period resulting from changes in perceived premium rate adequacy and from unique or large transactions. A significant portion of NICO Group’s annual reinsurance premium volume currently derives from a 20% quota-share agreement with Insurance Australia Group Limited (“IAG”) that expires July 1, 2025. IAG is a multi-line insurer in Australia, New Zealand and other Asia-Pacific countries. The General Re Group conducts a global property and casualty reinsurance business. Reinsurance contracts are written on both a quota-share and excess basis for multiple lines of business. Contracts are primarily in the form of treaties, and to a lesser degree, on a facultative basis. General Re Group conducts business in North America primarily through General Reinsurance Corporation (“GRC”), which is licensed in the District of Columbia and all states, except Hawaii, where it is an accredited reinsurer. GRC conducts operations in North America from its headquarters in Stamford, Connecticut and through 13 branch offices in the U.S. and Canada. In North America, the General Re Group includes General Star National Insurance Company, General Star Indemnity Company and Genesis Insurance Company, which offer a broad array of specialty and surplus lines and property, casualty and professional liability coverages. Such business is marketed through a select group of wholesale brokers, managing general underwriters and program administrators, and offer solutions for the unique needs of public entity, commercial and captive customers. General Re Group’s international reinsurance business is conducted on a direct basis through General Reinsurance AG (“GRAG”), based in Cologne, Germany, and through several other subsidiaries and branches in 22 countries. International business is also written through brokers, including Faraday Underwriting Limited (“Faraday”), a wholly-owned subsidiary. Faraday owns the managing agent of Syndicate 435 at Lloyd’s of London and provides capacity and participates in 100% of the results of Syndicate 435. Life/health The General Re Group also conducts a global life and health reinsurance business. In the U.S. and internationally, the General Re Group writes life, disability, supplemental health, critical illness and long-term care coverages. The life/health business is marketed on a direct basis. Approximately 35% of the aggregate life/health net premiums written by the General Re Group were in the Asia Pacific compared to 26% in the United States, 22% in Western Europe and 17% throughout the rest of the world. Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”), a subsidiary of NICO, and its affiliates write reinsurance covering various forms of traditional life insurance exposures and, on a limited basis, health insurance exposures. BHLN and its affiliates have also periodically reinsured certain guaranteed minimum death, income, and similar benefit risks on closed-blocks of variable annuity reinsurance contracts. K-5   Retroactive reinsurance NICO also periodically writes retroactive reinsurance contracts. Retroactive reinsurance contracts indemnify ceding companies against the adverse development of claims arising from loss events that have already occurred under property and casualty policies issued in prior years. Coverages under such contracts are provided on an excess basis (above a stated retention) or for losses payable after the inception of the contract with no additional ceding company retention. Contracts are normally subject to aggregate limits of indemnification, which can be exceptionally large in amount. For instance, an excess contract written in January 2017 provides indemnification for 80% of up to $25 billion in excess of $25 billion retained by the ceding company. Significant amounts of asbestos, environmental and latent injury claims may arise under these contracts. The concept of time-value-of-money is an important element in establishing retroactive reinsurance contract prices and terms since loss payments may occur over decades. Normally, expected ultimate losses payable under these policies are expected to exceed premiums, thus producing underwriting losses. Nevertheless, this business is written, in part, because of the large amounts of policyholder funds generated for investment, the economic benefit of which will be reflected through investment results in future periods. Periodic payment annuity BHLN writes periodic payment annuity insurance policies and reinsures existing annuity-like obligations. Under these policies, BHLN receives upfront premiums and agrees in the future to make periodic payments that often extend for decades. These policies, generally relate to the settlement of underlying personal injury or workers’ compensation cases of other insurers, known as structured settlements. Consistent with retroactive reinsurance contracts, time-value-of-money concepts are an important factor in establishing annuity premiums and underwriting losses are expected from the periodic accretion of time-value discounted liabilities. Investments of insurance businesses—Berkshire’s insurance subsidiaries hold significant levels of invested assets. Investment portfolios are primarily managed by Berkshire’s Chief Executive Officer. Investments include a very large portfolio of publicly traded equity securities, which are concentrated in relatively few issuers, as well as fixed maturity securities and cash and short-term investments. Generally, there are no targeted allocations by investment type or attempts to match investment asset and insurance liability durations. However, investment portfolios have historically included a much greater proportion of equity securities than is customary in the insurance industry. Invested assets derive from shareholder capital as well as funds provided from policyholders through insurance and reinsurance business (“float”). Float is the approximate amount of net policyholder funds generated through underwriting activities that is available for investment. The major components of float are unpaid losses and loss adjustment expenses, life, annuity and health benefit liabilities, unearned premiums and other policyholder liabilities less premium and reinsurance receivables, deferred policy acquisition costs and deferred charges on reinsurance contracts. On a consolidated basis, float has grown from approximately $88 billion at the end of 2015 to approximately $138 billion at the end of 2020. The cost of float can be measured as the net pre-tax underwriting loss as a percentage of average float. In four of the past five years, Berkshire’s cost of float was negative, as its insurance businesses produced net underwriting gains. Railroad Business—Burlington Northern Santa Fe Burlington Northern Santa Fe, LLC (“BNSF”) is based in Fort Worth, Texas, and through BNSF Railway Company (“BNSF Railway”) operates one of the largest railroad systems in North America. BNSF Railway had approximately 35,000 employees at the end of 2020. BNSF also operates a relatively smaller third-party logistics services business. In serving the Midwest, Pacific Northwest, Western, Southwestern and Southeastern regions and ports of the United States, BNSF transports a range of products and commodities derived from manufacturing, agricultural and natural resource industries. Freight revenues are covered by contractual agreements of varying durations or common carrier published prices or company quotations. BNSF’s financial performance is influenced by, among other things, general and industry economic conditions at the international, national and regional levels. BNSF’s primary routes, including trackage rights, allow it to access major cities and ports in the western and southern United States as well as parts of Canada and Mexico. In addition to major cities and ports, BNSF Railway efficiently serves many smaller markets by working closely with approximately 200 shortline railroads. BNSF Railway has also entered into marketing agreements with other rail carriers, expanding the marketing reach for each railroad and their customers. For the year ending December 31, 2020, approximately 37% of freight revenues were derived from consumer products, 26% from industrial products, 24% from agricultural products and 13% from coal. K-6   Regulatory Matters BNSF is subject to federal, state and local laws and regulations generally applicable to its businesses. Rail operations are subject to the regulatory jurisdiction of the Surface Transportation Board (“STB”), the Federal Railroad Administration of the United States Department of Transportation (“DOT”), the Occupational Safety and Health Administration (“OSHA”), as well as other federal and state regulatory agencies and Canadian regulatory agencies for operations in Canada. The STB has jurisdiction over disputes and complaints involving certain rates, routes and services, the sale or abandonment of rail lines, applications for line extensions and construction, and the merger with or acquisition of control of rail common carriers. The outcome of STB proceedings can affect the profitability of BNSF Railway’s business. The DOT and OSHA have jurisdiction under several federal statutes over a number of safety and health aspects of rail operations, including the transportation of hazardous materials. BNSF Railway is required to transport these materials to the extent of its common carrier obligation. State agencies regulate some aspects of rail operations with respect to health and safety in areas not otherwise preempted by federal law. Environmental Matters BNSF’s rail operations, as well as those of its competitors, are also subject to extensive federal, state and local environmental regulation covering discharges to the ground or waters, air emissions, toxic substances and the generation, handling, storage, transportation and disposal of waste and hazardous materials. Such regulations effectively increase the costs and liabilities associated with rail operations. Environmental risks are also inherent in rail operations, which frequently involve transporting chemicals and other hazardous materials. Many of BNSF’s land holdings are or have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. Under federal (in particular, the Comprehensive Environmental Response, Compensation and Liability Act) and state statutes, BNSF may be held jointly and severally liable for cleanup and enforcement costs associated with a particular site without regard to fault or the legality of the original conduct. BNSF may also be subject to claims by third parties for investigation, cleanup, restoration or other environmental costs under environmental statutes or common law with respect to properties they own that have been impacted by BNSF operations. Competition The business environment in which BNSF operates is highly competitive. Depending on the specific market, deregulated motor carriers and other railroads, as well as river barges, ships and pipelines, may exert pressure on price and service levels. The presence of advanced, high service truck lines with expedited delivery, subsidized infrastructure and minimal empty mileage continues to affect the market for non-bulk, time-sensitive freight. The potential expansion of longer combination vehicles could further encroach upon markets traditionally served by railroads. In order to remain competitive, BNSF Railway and other railroads seek to develop and implement operating efficiencies to improve productivity. As railroads streamline, rationalize and otherwise enhance their franchises, competition among rail carriers intensifies. BNSF Railway’s primary rail competitor in the Western region of the United States is the Union Pacific Railroad Company. Other Class I railroads and numerous regional railroads and motor carriers also operate in parts of the same territories served by BNSF Railway. Utilities and Energy Businesses—Berkshire Hathaway Energy Berkshire currently owns 91.1% of the outstanding common stock of Berkshire Hathaway Energy Company (“BHE”). BHE is a global energy company with subsidiaries that generate, transmit, store, distribute and supply energy. BHE’s locally managed businesses are organized as separate operating units. BHE’s domestic regulated energy interests are comprised of four regulated utility companies serving approximately 5.2 million retail customers, five interstate natural gas pipeline companies with approximately 21,300 miles of operated pipeline having a design capacity of approximately 21 billion cubic feet of natural gas per day and ownership interests in electricity transmission businesses. BHE’s Great Britain electricity distribution subsidiaries serve about 3.9 million electricity end-users and its electricity transmission-only business in Alberta, Canada serves approximately 85% of Alberta’s population. BHE’s interests also include a diversified portfolio of independent power projects, a liquefied natural gas export, import and storage facility, the largest residential real estate brokerage firm in the United States, and one of the largest residential real estate brokerage franchise networks in the United States. BHE employs approximately 24,000 people in connection with its various operations. K-7   General Matters PacifiCorp is a regulated electric utility company headquartered in Oregon, serving electric customers in portions of Utah, Oregon, Wyoming, Washington, Idaho and California. The combined service territory’s diverse regional economy ranges from rural, agricultural and mining areas to urban, manufacturing and government service centers. No single segment of the economy dominates the combined service territory, which helps mitigate PacifiCorp’s exposure to economic fluctuations. In addition to retail sales, PacifiCorp sells electricity on a wholesale basis. MidAmerican Energy Company (“MEC”) is a regulated electric and natural gas utility company headquartered in Iowa, serving electric and natural gas customers primarily in Iowa and also in portions of Illinois, South Dakota and Nebraska. MEC has a diverse retail customer base consisting of urban and rural residential customers and a variety of commercial and industrial customers. In addition to retail sales and natural gas transportation, MEC sells electricity principally to markets operated by regional transmission organizations and natural gas on a wholesale basis. NV Energy, Inc. (“NV Energy”) is an energy holding company headquartered in Nevada, primarily consisting of two regulated utility subsidiaries, Nevada Power Company (“Nevada Power”) and Sierra Pacific Power Company (“Sierra Pacific”) (collectively, the “Nevada Utilities”). Nevada Power serves retail electric customers in southern Nevada and Sierra Pacific serves retail electric and natural gas customers in northern Nevada. The Nevada Utilities’ combined service territory’s economy includes gaming, mining, recreation, warehousing, manufacturing and governmental services. In addition to retail sales and natural gas transportation, the Nevada Utilities sell electricity and natural gas on a wholesale basis. As vertically integrated utilities, BHE’s domestic utilities own approximately 29,000 net megawatts of generation capacity in operation and under construction. The domestic utilities business is subject to seasonal variations principally related to the use of electricity for air conditioning and natural gas for heating. Typically, regulated electric revenues are higher in the summer months, while regulated natural gas revenues are higher in the winter months. The Great Britain distribution companies consist of Northern Powergrid (Northeast) plc and Northern Powergrid (Yorkshire) plc, which own a substantial electricity distribution network that delivers electricity to end-users in northeast England in an area covering approximately 10,000 square miles. The distribution companies primarily charge supply companies regulated tariffs for the use of their distribution systems. AltaLink L.P. (“AltaLink”) is a regulated electric transmission-only utility company headquartered in Calgary, Alberta. AltaLink’s high voltage transmission lines and related facilities transmit electricity from generating facilities to major load centers, cities and large industrial plants throughout its 87,000 square mile service territory. The natural gas pipelines consist of BHE GT&S, LLC (“BHE GT&S”), Northern Natural Gas Company (“Northern Natural”) and Kern River Gas Transmission Company (“Kern River”). BHE GT&S was acquired on November 1, 2020. BHE GT&S, based in Virginia, operates three interstate natural gas pipeline systems that consist of approximately 5,400 miles of natural gas transmission, gathering and storage pipelines and operates seventeen underground natural gas storage fields in the eastern region of the United States. BHE GT&S’s large underground natural gas storage assets and pipeline systems are part of an interconnected gas transmission network that provides transportation services to utilities and numerous other customers. BHE GT&S is also an industry leader in liquefied natural gas solutions through its investments in and ownership of several liquefied natural gas facilities located throughout the eastern region of the United States. Northern Natural, based in Nebraska, operates the largest interstate natural gas pipeline system in the United States, as measured by pipeline miles, reaching from west Texas to Michigan’s Upper Peninsula. Northern Natural’s pipeline system consists of approximately 14,500 miles of natural gas pipelines. Northern Natural’s extensive pipeline system, which is interconnected with many interstate and intrastate pipelines in the national grid system, has access to supplies from multiple major supply basins and provides transportation services to utilities and numerous other customers. Northern Natural also operates three underground natural gas storage facilities and two liquefied natural gas storage peaking units. Northern Natural’s pipeline system experiences significant seasonal swings in demand and revenue, with the highest demand typically occurring during the months of November through March. Kern River, based in Utah, operates an interstate natural gas pipeline system that consists of approximately 1,400 miles and extends from supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River transports natural gas for electric and natural gas distribution utilities, major oil and natural gas companies or affiliates of such companies, electric generating companies, energy marketing and trading companies, and financial institutions. BHE Renewables, based in Iowa, owns interests in independent power projects having approximately 4,700 net megawatts of generation capacity that are in service in California, Texas, Illinois, Nebraska, New York, Arizona, Minnesota, Kansas, Hawaii and the Philippines. These independent power projects sell power generated primarily from wind, solar, geothermal and hydro sources under long-term contracts. Additionally, BHE Renewables has invested over $6 billion in 32 wind projects sponsored by third parties, commonly referred to as tax equity investments. K-8   Regulatory Matters PacifiCorp, MEC and the Nevada Utilities are subject to comprehensive regulation by various federal, state and local agencies. The Federal Energy Regulatory Commission (“FERC”) is an independent agency with broad authority to implement provisions of the Federal Power Act, the Natural Gas Act, the Energy Policy Act of 2005 and other federal statutes. The FERC regulates rates for wholesale sales of electricity; transmission of electricity, including pricing and regional planning for the expansion of transmission systems; electric system reliability; utility holding companies; accounting and records retention; securities issuances; construction and operation of hydroelectric facilities; and other matters. The FERC also has the enforcement authority to assess civil penalties of up to $1.3 million per day per violation of rules, regulations and orders issued under the Federal Power Act. MEC is also subject to regulation by the Nuclear Regulatory Commission pursuant to the Atomic Energy Act of 1954, as amended, with respect to its 25% ownership of the Quad Cities Nuclear Station. With certain limited exceptions, BHE’s domestic utilities have an exclusive right to serve retail customers within their service territories and, in turn, have an obligation to provide service to those customers. In some jurisdictions, certain classes of customers may choose to purchase all or a portion of their energy from alternative energy suppliers, and in some jurisdictions retail customers can generate all or a portion of their own energy. Historically, state regulatory commissions have established retail electric and natural gas rates on a cost-of-service basis, designed to allow a utility the opportunity to recover what each state regulatory commission deems to be the utility’s reasonable costs of providing services, including a fair opportunity to earn a reasonable return on its investments based on its cost of debt and equity. The retail electric rates of PacifiCorp, MEC and the Nevada Utilities are generally based on the cost of providing traditional bundled services, including generation, transmission and distribution services; however, rates are available for transmission and distribution-only services. Northern Powergrid (Northeast) and Northern Powergrid (Yorkshire) each charge fees for the use of their distribution systems that are controlled by a formula prescribed by the British electricity regulatory body, the Gas and Electricity Markets Authority. The current eight-year price control period runs from April 1, 2015 through March 31, 2023. AltaLink is regulated by the Alberta Utilities Commission (“AUC”), pursuant to the Electric Utilities Act (Alberta), the Public Utilities Act (Alberta), the Alberta Utilities Commission Act (Alberta) and the Hydro and Electric Energy Act (Alberta). The AUC is an independent quasi-judicial agency, which regulates and oversees Alberta’s electricity transmission sector with broad authority that may impact many of AltaLink’s activities, including its tariffs, rates, construction, operations and financing. Under the Electric Utilities Act, AltaLink prepares and files applications with the AUC for approval of tariffs to be paid by the Alberta Electric System Operator (“AESO”) for the use of its transmission facilities, and the terms and conditions governing the use of those facilities. The AESO is an independent system operator in Alberta, Canada that oversees Alberta’s integrated electrical system (“AIES”) and wholesale electricity market. The AESO is responsible for directing the safe, reliable and economic operation of the AIES, including long-term transmission system planning. The natural gas pipelines are subject to regulation by various federal and state agencies. The natural gas pipeline and storage operations of BHE GT&S, Northern Natural and Kern River are regulated by the FERC pursuant to the Natural Gas Act and the Natural Gas Policy Act of 1978. Under this authority, the FERC regulates, among other items, (a) rates, charges, terms and conditions of service, (b) the construction and operation of interstate pipelines, storage and related facilities, including the extension, expansion or abandonment of such facilities and (c) the construction and operation of liquefied natural gas import/export facilities. Interstate natural gas pipeline companies are also subject to regulations administered by the Office of Pipeline Safety within the Pipeline and Hazardous Materials Safety Administration, an agency of the DOT. Federal pipeline safety regulations are issued pursuant to the Natural Gas Pipeline Safety Act of 1968, as amended, which establishes safety requirements in the design, construction, operation and maintenance of interstate natural gas pipeline facilities. Environmental Matters BHE and its energy businesses are subject to federal, state, local and foreign laws and regulations regarding climate change, renewable portfolio standards, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations, such as the Federal Clean Air Act, provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. The Federal Clean Air Act, as well as state laws and regulations impacting air emissions, provides a framework for protecting and improving the nation’s air quality and controlling sources of air emissions. These laws and regulations continue to be promulgated and implemented and will impact the operation of BHE’s generating facilities and require them to reduce emissions at those facilities to comply with the requirements. K-9   Renewable portfolio standards have been established by certain state governments and generally require electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date. Utah, Oregon, Washington, California, Iowa and Nevada have adopted renewable portfolio standards. In addition, the potential adoption of state or federal clean energy standards, which include low-carbon, non-carbon and renewable electricity generating resources, may also impact electricity generators and natural gas providers. In December 2015, an international agreement was negotiated by 195 nations to create a universal framework for coordinated action on climate change in what is referred to as the Paris Agreement. The Paris Agreement reaffirms the goal of limiting global temperature increase well below 2 degrees Celsius, while urging efforts to limit the increase to 1.5 degrees Celsius; establishes commitments by all parties to make nationally determined contributions and pursue domestic measures aimed at achieving the commitments; commits all countries to submit emissions inventories and report regularly on their emissions and progress made in implementing and achieving their nationally determined commitments; and commits all countries to submit new commitments every five years, with the expectation that the commitments will get more aggressive. In the context of the Paris Agreement, the United States agreed to reduce greenhouse gas emissions 26% to 28% by 2025 from 2005 levels. The Paris Agreement formally entered into force November 4, 2016. The United States completed its withdrawal from the Paris Agreement on November 4, 2020. President Biden accepted the terms of the climate agreement on January 21, 2021, and the United States completed its reentry on February 19, 2021. On October 10, 2017, the Environmental Protection Agency (“EPA”) issued a proposal to repeal the Clean Power Plan, which was intended to achieve an overall reduction in carbon dioxide emissions from existing fossil-fueled electric generating units of 32% below 2005 levels. On June 19, 2019, the EPA repealed the Clean Power Plan and issued the Affordable Clean Energy rule, which fully replaced the Clean Power Plan. In the Affordable Clean Energy rule, the EPA determined that the best system of emissions reduction for existing coal fueled power plants is heat rate improvements and identified a set of candidate technologies and measures that could improve heat rates. Measures taken to meet the standards of performance must be achieved at the source itself. The EPA’s repeal and replacement of the Clean Power Plan is not expected to have a material impact on BHE and its energy subsidiaries. Increasingly, states are adopting legislation and regulations to reduce greenhouse gas emissions, and local governments and consumers are seeking increasing amounts of clean and renewable energy. BHE and its energy subsidiaries continue to focus on delivering reliable, affordable, safe and clean energy to its customers and on actions to mitigate greenhouse gas emissions. For example, through December 31, 2020, BHE’s cumulative investment in wind, solar, geothermal and biomass generation is approximately $34 billion. Non-Energy Businesses HomeServices of America, Inc. (“HomeServices”) is the largest residential real estate brokerage firm in the United States. In addition to providing traditional residential real estate brokerage services, HomeServices offers other integrated real estate services, including mortgage originations and mortgage banking, title and closing services, property and casualty insurance, home warranties, relocation services and other home-related services. It operates under 46 brand names with over 43,000 real estate agents in nearly 900 brokerage offices in 30 states and the District of Columbia. HomeServices’ franchise network currently includes approximately 370 franchisees in over 1,600 brokerage offices throughout the United States and Europe with over 53,000 real estate agents under two brand names. In exchange for certain fees, HomeServices provides the right to use the Berkshire Hathaway HomeServices or Real Living brand names and other related service marks, as well as providing orientation programs, training and consultation services, advertising programs and other services. HomeServices’ principal sources of revenue are dependent on residential real estate sales, which are generally higher in the second and third quarters of each year. This business is highly competitive and subject to general real estate market conditions. Manufacturing Businesses Berkshire’s numerous and diverse manufacturing subsidiaries are grouped into three categories: (1) industrial products, (2) building products and (3) consumer products. Berkshire’s industrial products businesses manufacture specialty chemicals, metal cutting tools, components for aerospace and power generation applications, and a variety of other products primarily for industrial use. The building products group produces prefabricated and site-built residential homes, flooring products, insulation, roofing and engineered products, building and engineered components, paint and coatings and bricks and masonry products. The consumer products group manufactures recreational vehicles, alkaline batteries, various apparel products, jewelry and custom picture framing products. Information concerning the major activities of these three groups follows. Berkshire’s manufacturing businesses employed approximately 179,000 people at the end of 2020. K-10   Industrial products Precision Castparts Precision Castparts Corp. (“PCC”) manufactures complex metal components and products, provides high-quality investment castings, forgings, fasteners/fastener systems and aerostructures for critical aerospace and power and energy applications. PCC also manufactures seamless pipe for coal-fired, industrial gas turbine (“IGT”) and nuclear power plants; downhole casing and tubing, fittings and various mill forms in a variety of nickel and steel alloys for severe-service oil and gas environments; investment castings and forgings for general industrial, armament, medical and other applications; nickel and titanium alloys in all standard mill forms from large ingots and billets to plate, foil, sheet, strip, tubing, bar, rod, extruded shapes, rod-in-coil, wire and welding consumables, as well as cobalt alloys, for the aerospace, chemical processing, oil and gas, pollution control and other industries; revert management solutions; fasteners for automotive and general industrial markets; specialty alloys for the investment casting and forging industries; heat treating and destructive testing services for the investment cast products and forging industries; grinder pumps and affiliated components for low-pressure sewer systems; critical auxiliary equipment and gas monitoring systems for the power generation industry; and metalworking tools for the fastener market and other applications. Investment casting technology involves a multi-step process that uses ceramic molds in the manufacture of metal components with more complex shapes, closer tolerances and finer surface finishes than parts manufactured using other methods. PCC uses this process to manufacture products for aircraft engines, IGT and other aeroderivative engines, airframes, medical implants, armament, unmanned aerial vehicles and other industrial applications. PCC also manufactures high temperature carbon and ceramic composite components, including ceramic matrix composites, for use in next-generation aerospace engines. PCC uses forging processes to manufacture components for the aerospace and power generation markets, including seamless pipe for coal-fired, industrial gas turbine and nuclear power plants, and downhole casings and tubing pipe for severe service oil and gas markets. PCC manufactures high-performance, nickel-based alloys used to produce forged components for aerospace and non-aerospace applications in such markets as oil and gas, chemical processing and pollution control. These titanium products are used to manufacture components for the commercial and military aerospace, power generation, energy and other industrial end markets. PCC is also a leading developer and manufacturer of highly engineered fasteners, fastener systems, aerostructures and precision components, primarily for critical aerospace applications. These products are produced for the aerospace and power and energy markets, as well as for construction, automotive, heavy truck, farm machinery, mining and construction equipment, shipbuilding, machine tools, medical equipment, appliance and recreation markets. PCC has several significant customers, including aerospace original equipment manufacturers (Boeing and Airbus) and aircraft engine manufacturer suppliers (General Electric, Rolls Royce and Pratt &Whitney). The majority of PCC’s sales are from customer orders or demand schedules pursuant to long-term agreements. Contractual terms may provide for termination by the customer, subject to payment for work performed. PCC typically does not experience significant order cancellations, although periodically it receives requests for delays in delivery schedules. In 2020, delay requests increased due to the COVID-19 pandemic. The effects of the COVID-19 pandemic and the grounding of the Boeing 737 MAX produced significant adverse effects on the PCC aerospace business in 2020. The sudden and material reductions in air travel led to aircraft build rate reductions and customer destocking at extraordinary rates. Aircraft build rates have not yet begun to recover in any meaningful way. During 2020, PCC significantly reduced its worldwide workforce by about 40% since the end of 2019 to help align operations to reduced aircraft build rates. The restructuring actions taken began to improve margins in late 2020 from the low margins experienced earlier in the year and further margin improvements are expected going forward. PCC is subject to substantial competition in all of its markets. Components and similar products may be produced by competitors, who use either the same types of manufacturing processes as PCC or other processes. Although PCC believes its manufacturing processes, technology and experience provide advantages to its customers, such as high quality, competitive prices and physical properties that often meet more stringent demands, alternative forms of manufacturing can be used to produce many of the same components and products. Despite intense competition, PCC is a leading supplier in most of its principal markets. Several factors, including long-standing customer relationships, technical expertise, state-of-the-art facilities and dedicated employees, aid PCC in maintaining competitive advantages. Several raw materials used in PCC products, including certain metals such as nickel, titanium, cobalt, tantalum and molybdenum, are found in only a few parts of the world. These metals are required for the alloys used in manufactured products. The availability and costs of these metals may be influenced by private or governmental cartels, changes in world politics, labor relations between the metal producers and their workforces and inflation. K-11   Lubrizol Corporation The Lubrizol Corporation (“Lubrizol”) is a specialty chemical and performance materials company that produces and supplies technologies for the global transportation, industrial and consumer markets. Lubrizol currently operates two businesses: (1) Lubrizol Additives, which includes engine lubricant additives, driveline lubricant additives and industrial specialties products; and (2) Lubrizol Advanced Materials, which includes Engineered Materials (engineered polymers and performance coatings) and Life Sciences (beauty and personal care, health and home care solutions). Lubrizol Additives products are used in a broad range of applications including engine oils, transmission fluids, gear oils, specialty driveline lubricants, fuels, metalworking fluids, compressor lubricants and greases for transportation and industrial applications. Lubrizol Advanced Materials products are used in many different types of applications including over-the-counter pharmaceutical products, medical devices, performance coatings, personal care products, sporting goods and plumbing and fire sprinkler systems. Lubrizol is an industry leader in many of the markets in which it competes. Lubrizol’s principal lubricant additives competitors are Infineum International Ltd., Chevron Oronite Company and Afton Chemical Corporation. Advanced Materials competes in many markets with a variety of competitors in each product line. With its considerable patent portfolio, Lubrizol uses its technological leadership position in product development and applies its science capabilities and formulation and market expertise to improve the quality and value of its products. Lubrizol leverages its scientific and applications knowledge to meet and exceed customer performance and sustainability requirements. While Lubrizol typically has patents that expire each year, it invests resources to protect its intellectual property and to develop or acquire innovative products for the markets it serves. Lubrizol uses many specialty and commodity chemical raw materials in its manufacturing processes. Raw materials are primarily feedstocks derived from petroleum and petrochemicals and, generally, are obtainable from several sources. The materials that Lubrizol chooses to purchase from a single source typically are subject to long-term supply contracts to ensure supply reliability. Lubrizol operates its business on a global basis through more than 100 offices, laboratories, production facilities and warehouses on six continents, the most significant of which are North America, Europe, Asia and South America. Lubrizol markets its products worldwide through a direct sales organization and sales agents and distributors. Lubrizol’s customers principally consist of major global and regional oil companies and industrial and consumer products companies that are located throughout the world. Some of its largest customers also may be suppliers. During 2020, no single customer accounted for more than 10% of Lubrizol’s consolidated revenues. In 2020, the global pandemic had an adverse effect on many of the markets that Lubrizol serves, including the transportation and industrial markets. This was offset in part by strong demand for Lubrizol’s technology that is used in personal care applications, such as hand sanitizers. Lubrizol continues to expend necessary capital to upgrade and optimize operations, ensure compliance with health, safety and environmental requirements, and increase global manufacturing capacity, while reducing the environmental footprint of its operations. Lubrizol also makes a significant investment in its human capital to ensure that it attracts, develops and retains a talented and diverse employee workforce. Lubrizol is subject to foreign, federal, state and local laws to protect the environment, limit manufacturing waste and emissions, ensure product and employee safety and regulate trade. The company believes that its policies, practices and procedures are designed to limit the risks of non-compliance with laws and consequent financial liability. Nevertheless, the operation of manufacturing plants entails ongoing environmental and other risks, and significant costs or liabilities could be incurred in the future. IMC International Metalworking Companies IMC International Metalworking Companies (“IMC”) is one of the world’s three largest multinational manufacturers of consumable precision carbide metal cutting tools for applications in a broad range of industrial end markets. IMC’s principal brand names include ISCAR®, TaeguTec®, Ingersoll®, Tungaloy®, Unitac®, UOP®, It.te.di®, Qutiltec®, Tool—Flo®, PCT® and IMCO®. IMC’s primary manufacturing facilities are located in Israel, the United States, South Korea, Japan, Germany, Italy, Switzerland, India and China. IMC has five primary product lines: milling tools, gripping tools, turning/thread tools, drilling tools and tooling. The main products are split within each product line between consumable cemented tungsten carbide inserts and steel tool holders. Inserts comprise the vast majority of sales and earnings. Metal cutting inserts are used by industrial manufacturers to cut metals and are consumed during their use in cutting applications. IMC manufactures hundreds of types of highly engineered inserts within each product line that are tailored to maximize productivity and meet the technical requirements of customers. IMC’s staff of scientists and engineers continuously develop and innovate products that address end user needs and requirements. K-12   IMC’s global sales and marketing network operates in virtually every major manufacturing center around the world, staffed with highly skilled engineers and technical personnel. IMC’s customer base is very diverse, with its primary customers being large, multinational businesses in the automotive, aerospace, engineering and machinery industries. IMC operates a regional central warehouse system with locations in Israel, the United States, Belgium, Korea, Japan, China and Brazil. Additional small quantities of products are maintained at local IMC offices to provide on-time customer support and inventory management. IMC competes in the metal cutting tools segment of the global metalworking tools market. The segment includes hundreds of participants who range from small, private manufacturers of specialized products for niche applications and markets to larger, global multinational businesses (such as Sandvik and Kennametal, Inc.) with a wide assortment of products and extensive distribution networks. Other manufacturing companies such as Kyocera, Mitsubishi, Sumitomo, Ceratizit and Korloy also play a significant role in the cutting tool market. Marmon Holdings Marmon Holdings, Inc. (“Marmon”) is a global industrial organization comprising 11 diverse business sectors and more than 100 autonomous manufacturing and service businesses. Marmon’s manufacturing and service operations are conducted at approximately 400 manufacturing, distribution and service facilities located primarily in the United States, as well as 22 other countries worldwide. Marmon’s business sectors are described as follows. Foodservice Technologies manufactures beverage dispensing and cooling equipment, hot and cold food preparation and holding equipment and related products for restaurants, global brand owners and other foodservice providers. Operations are based in the U.S. with manufacturing in the U.S., Mexico, China, the U.K., Germany and Italy. Products are sold primarily throughout the U.S., Europe and Asia. Water Technologies manufactures water treatment equipment for residential, commercial and industrial applications worldwide. Operations are based primarily in the U.S., Canada, China, Singapore, India and Mexico with business centers located in Belgium, France, Poland, Germany, the U.K., Italy, Switzerland and U.A.E. Transportation Products serves the automotive, heavy-duty highway transportation, and aerospace industries with precision-molded plastic components; fastener thread solutions; metal tubing; auto aftermarket transmission and chassis products; platform and lowbed trailers; and truck and trailer components. Operations and business are conducted primarily in the U.S., Mexico, Canada, Europe and Asia. Retail Solutions provides retail environment design services; in-store digital merchandising, dispensing and display fixtures; shopping, material handling and security carts. Operations and business are conducted in the U.S., U.K. and Czech Republic. Metal Services provides specialty metal pipe, tubing and related value-added services to customers across a broad range of industries. Operations are based in the U.S., Canada and Mexico and business is conducted primarily in those countries. Electrical produces electrical wire for use in residential and commercial buildings, and specialty wire and cable for use in energy, transit, aerospace, defense, communication and other industrial applications. Operations are based in the U.S., Canada, India and England. Business is conducted globally and primarily in the U.S., Canada, India, the U.K., U.A.E. and China. Plumbing & Refrigeration supplies copper tubing and copper, brass, aluminum and stainless-steel fittings and components for the plumbing, HVAC and refrigeration markets; custom coils for the HVAC market; and aluminum and brass forgings for many commercial and industrial applications. Business and operations are conducted primarily in the U.S. Industrial Products supplies construction fasteners; gloves and other protective wear; gear drives, gearboxes, fan drives and pump drives for various markets; wind machines for agricultural use; and wheels, axles, and gears for rail, mining and other applications. Operations are primarily based in the U.S., Canada and China and business is conducted in those countries. Rail & Leasing manufactures, leases and maintains railcars; leases intermodal tank containers; manufactures mobile railcar movers; provides in-plant rail switching and loading services; performs track construction and maintenance; and manufactures steel tank heads and cylinders. Union Tank Car Company (“UTLX”) is the largest component of Rail & Leasing and is a leading designer, builder and full-service lessor of railroad tank cars and other specialized railcars. Together with its Canadian affiliate Procor, UTLX owns a fleet of approximately 124,000 railcars for lease to customers in chemical, petrochemical, energy and agricultural/food industries. UTLX manufactures tank cars in the U.S. and performs railcar maintenance services at more than 100 locations across North America. K-13   UTLX has a diversified customer base, both geographically and across industries. UTLX, while subject to cyclicality and significant competition in most of its markets, competes by offering a broad range of high-quality products and services targeted at its niche markets. Railcars are typically leased for multiple-year terms and most of the leases are renewed upon expiration. Due to selective ongoing capital investment, utilization rates (the number of railcars on lease as a percentage of the total fleet) of the railcar fleet are generally high. Intermodal tank containers are leased through EXSIF Worldwide. EXSIF is a leading international lessor of intermodal tank containers with a fleet of approximately 69,000 units, primarily serving chemical producers and logistics operators. Crane Services is a provider of mobile cranes and operators in North America and Australia. Sterling Crane, Joyce Crane, Freo Group, and WGC Cranes operate a combined fleet of approximately 1,200 cranes primarily serving the energy, mining, petrochemical and infrastructure markets. Medical (formed in 2019 through the acquisition of the Colson Medical Companies) develops, manufactures and distributes a wide range of innovative medical devices in the extremities fixation, craniomaxillofacial surgery, neurosurgery, biologics, aesthetics and powered instruments markets. The sector’s leading-edge medical technology and products are used globally to help improve patient care and outcomes. Operations are based in the U.S., Europe and China. Business is conducted primarily in North and South America, Europe, Asia and Australia. Other industrial products CTB International Corp. (“CTB”), headquartered in Milford, Indiana, is a leading global designer, manufacturer and marketer of a wide range of agricultural systems and solutions for preserving grain, producing poultry, pigs and eggs, and for processing poultry, fish, vegetables and other foods. CTB operates from facilities located around the globe and supports customers through a worldwide network of independent distributors and dealers. CTB competes with a variety of manufacturers and suppliers, many of which offer only a limited number of the products offered by CTB and two of which offer products across many of CTB’s product lines. Competition is based on the price, value, reputation, quality and design of the products offered and the customer service provided by distributors, dealers and manufacturers of the products. CTB’s leading brand names, distribution network, diversified product line, product support and high-quality products enable it to compete effectively. CTB manufactures its products primarily from galvanized steel, steel wire, stainless steel and polymer materials and supplies of these materials have been sufficient in recent years. LiquidPower Specialty Products Inc. (“LSPI”), headquartered in Houston, Texas, is a global leader in the science of drag reduction application (“DRA’) technology by maximizing the flow potential of pipelines, increasing operational flexibility and throughput capacity, and efficiencies for customers. LSPI develops innovative flow improver solutions with customers in over 40 countries on six continents, treating over 50 million barrels of hydrocarbon liquids per day. LSPI’s DRA offering is part of a comprehensive, full-service solution that encompasses industry-leading technology, quality manufacturing, technical support and consulting, a reliable supply chain, injection equipment and field service. The Scott Fetzer companies are a group of businesses that manufacture, distribute, service and finance a wide variety of products for residential, industrial and institutional use. Building Products Clayton Homes Clayton Homes, Inc. (“Clayton”), headquartered near Knoxville, Tennessee, is a vertically integrated housing company offering traditional site-built homes and off-site built housing – including modular homes, manufactured homes, CrossMod™ homes and tiny homes. In 2020, Clayton delivered 46,765 off-site built and 9,475 site-built homes. Clayton also offers home financing and insurance products and competes on price, service, location and delivery capabilities. All Clayton Built® off-site homes are designed, engineered and assembled in the United States. As of December 2020, off-site backlog was $1.3 billion, up 237% from prior year. Clayton sells its homes through independent and company owned home centers, realtors and subdivision channels. Clayton considers its ability to make financing available to retail purchasers, a factor affecting the market acceptance of its off-site built homes. Clayton’s financing programs utilize proprietary loan underwriting guidelines, which include ability to repay calculations, including debt to income limits, consideration of residual income and credit score requirements, which are considered in evaluating loan applicants. Since 2015, Clayton’s site-built division, Clayton Properties Group, has expanded through the acquisition of nine builders across 14 states with a total of 312 subdivisions, supplementing the portfolio of housing products offered to customers. Clayton’s site-builders currently own and control a total of 62,514 homesites, with a home order backlog of approximately $2.2 billion. K-14   Shaw Industries Shaw Industries Group, Inc. (“Shaw”), headquartered in Dalton, Georgia, is a leading manufacturer and distributor of carpet and flooring products. Shaw designs and manufactures over 3,800 styles of tufted carpet, wood and resilient flooring for residential and commercial use under about 30 brand and trade names and under certain private labels. Shaw also provides project management and installation services. Shaw’s manufacturing operations are fully integrated from the processing of raw materials used to make fiber through the finishing of carpet. In 2018, Shaw acquired Sanquahar Tile Services in Scotland, which manufactures and distributes carpet tile throughout Europe. Shaw also manufactures or distributes a variety of hardwood, wood plastic composite (WPC), stone plastic composite (SPC) and vinyl and laminate floor products (“hard surfaces”). Shaw’s soft and hard surface products are sold in a broad range of patterns, colors and textures. Shaw operates Shaw Sports Turf and Southwest Greens International, LLC, which provide synthetic sports turf, golf greens and landscape turf products. Shaw products are sold wholesale to over 47,000 retailers, distributors and commercial users throughout the United States, Canada and Mexico and are also exported to various overseas markets. Shaw’s wholesale products are marketed domestically by over 2,100 salaried and commissioned sales personnel directly to retailers and distributors and to large national accounts. Shaw’s seven carpet, nine hard surface, one sample full-service distribution facility, three sample satellite locations and 30 redistribution centers, along with centralized management information systems, enable it to provide prompt and efficient delivery of its products to both its retail customers and wholesale distributors. Substantially all carpet manufactured by Shaw is tufted carpet made from nylon, polypropylene and polyester. In the tufting process, yarn is inserted by multiple needles into a synthetic backing, forming loops, which may be cut or left uncut, depending on the desired texture or construction. During 2020, Shaw processed approximately 97% of its requirements for carpet yarn in its own yarn processing facilities. The availability of raw materials is adequate but costs are impacted by petro-chemical and natural gas price changes. Raw material cost changes are periodically factored into selling prices to customers. The soft floor covering industry is highly competitive with only a handful of key players domestically where the majority of Shaw’s business occurs. There are numerous manufacturers, domestically and internationally, that are engaged in hard surface floor covering production, distribution and sales. According to industry estimates, carpet accounts for approximately 44% of the total United States consumption of all flooring types. The principal competitive measures within the floor covering industry are quality, style, price and service. Johns Manville Johns Manville (“JM”), headquartered in Denver, Colorado, is a leading manufacturer and marketer of premium-quality products for building insulation, mechanical and industrial insulation, commercial roofing and roof insulation, as well as fibers and nonwovens for commercial, industrial and residential applications. JM serves markets that include aerospace, automotive and transportation, air handling, appliance, HVAC, pipe and equipment, filtration, waterproofing, building, flooring, interiors and wind energy. Fiberglass is the basic material in a majority of JM’s products, although JM also manufactures a significant portion of its products with other materials to satisfy the broader needs of its customers. Raw materials are readily available in sufficient quantities from various sources for JM to maintain and expand its current production levels. JM regards its patents and licenses as valuable, however it does not consider any of its businesses to be materially dependent on any single patent or license. JM operates over 40 manufacturing facilities in North America, Europe and China and conducts research and development at its technical center in Littleton, Colorado and at other facilities in the U.S. and Europe. Fiberglass is made from earthen raw materials and recycled glass, together with proprietary agents to bind many of its glass fibers. JM’s products also contain materials other than fiberglass, including various chemical and petrochemical-based materials used in roofing and other specialized products. JM uses recycled material when available and suitable to satisfy the broader needs of its customers. The raw materials used in these various products are readily available in sufficient quantities from various sources to maintain and expand its current production levels. JM’s operations are subject to a variety of federal, state and local environmental laws and regulations, which regulate or impose liability for the discharge of materials into the air, land and water and govern the use and disposal of hazardous substances and use of chemical substances generally. The most relevant of the federal laws are the Federal Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act, which are administered by the EPA. Canadian, European and Asian regulatory authorities have also adopted their own environmental laws and regulations. JM continually monitors new and pending regulations and assesses their potential impact on the business. K-15   JM sells its products through a wide variety of channels including contractors, distributors, retailers, manufacturers and fabricators. JM operates in highly competitive markets, with competitors comprising primarily several large global and national manufacturers and smaller regional manufacturers. JM holds leadership positions in the key markets that it serves. JM’s products compete primarily on value, differentiation and customization, and breadth of product line. Sales of JM’s products are moderately seasonal due to increases in construction activity that typically occur in the second and third quarters of the calendar year. JM sees a marketplace trend in customer purchasing decisions being influenced by the sustainable and energy efficient attributes of its products, services and operations. MiTek Industries, Inc. MiTek Industries, Inc. (“MiTek”), based in Chesterfield, Missouri, operates in two separate markets: residential and commercial. MiTek operates worldwide with sales in over 100 countries and with manufacturing facilities and/or sales/engineering offices located in 21 countries. In the residential segment, MiTek is a leading supplier of engineered connector products, construction hardware, engineering software and services and computer-driven manufacturing machinery to the truss component market of the building components industry. MiTek’s primary customers are component manufacturers who manufacture prefabricated roof and floor trusses and wall panels for the residential building market. MiTek also sells construction hardware to commercial distributors and do-it-yourself retail stores. MiTek’s commercial businesses provide products and services sold to the commercial construction industry. Commercial products include curtain wall systems, masonry and stone anchoring systems, light gauge steel framing products, engineering services for a proprietary high-performance steel frame connection and a comprehensive range of ductwork for the ventilation market, customized air handling systems for commercial, institutional and industrial markets, design and supply of nuclear safety related HVAC systems and components, energy recovery and dehumidification systems for commercial applications and pre-engineered and pre-fabricated custom structural mezzanines and platforms for distribution and manufacturing facilities. A significant raw material used by MiTek is hot dipped galvanized sheet steel. While supplies are presently adequate, variations in supply have historically occurred, producing significant variations in cost and availability. Benjamin Moore Benjamin Moore & Co. (“Benjamin Moore”), headquartered in Montvale, New Jersey, is one of North America's leading manufacturers of premium quality residential, commercial and industrial maintenance coatings. Benjamin Moore is committed to innovation and sustainable manufacturing practices. The Benjamin Moore premium portfolio spans the brand’s flagship paint lines including Aura®, Regal® Select, Ultra Spec®, ben®, ADVANCE®, ARBORCOAT® and more. The Benjamin Moore diversified brands include specialty and architectural paints from Coronado®, Insl-x® and Lenmar®. Benjamin Moore coatings are available from its more than 7,500 independently owned and operated paint, decorating and hardware retailers throughout the United States and Canada as well as 75 countries globally. In July 2019, Benjamin Moore announced the expansion of its relationship with Ace Hardware (“Ace”), through which Benjamin Moore has become the preferred paint supplier for approximately 3,300 Ace Hardware stores, which are included in the count above. Through this agreement, these Ace stores are afforded the opportunity to carry a full line premium assortment of Benjamin Moore products or a streamlined offering of Regal® Select and ben®, or ben® only branded products. As part of the expansion, Benjamin Moore assumed responsibility for manufacturing Clark+Kensington® and Royal®, as well as the balance of Ace’s private label paint brands. In addition, Benjamin Moore operates an online “pick up in store” program, which allows consumers to place orders via an e-commerce site or, for national accounts and government agencies, via its customer information center. These orders may be picked up at the customer’s nearest retailer or delivered. For national accounts, drop-ship orders can be fulfilled by Benjamin Moore if a minimum gallon threshold is met. Benjamin Moore competes with numerous manufacturers, distributors and paint, coatings and related products retailers. Product quality, product innovation, breadth of product line, technical expertise, service and price determine the competitive advantage. Competitors include other paint and decorating stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated direct outlets, such as Sherwin-Williams Company, PPG Industries, Inc., The Valspar Corporation, The Home Depot, Inc. and Lowe’s Companies, Inc. The most significant raw materials in Benjamin Moore products are titanium dioxide, monomers, polymers and pigments. Historically, these materials have been generally available, with pricing and availability subject to fluctuation. K-16   Acme Brick Acme Brick Company (“Acme”), headquartered in Fort Worth, Texas, manufactures and distributes clay bricks (Acme Brick®) and concrete block (Featherlite). In addition, Acme distributes numerous other building products of other manufacturers, including floor and wall tile, wood flooring and other masonry products. Products are sold primarily in the South Central and South Eastern United States through company-operated sales offices. Acme distributes products primarily to homebuilders and masonry and general contractors. In 2018 and 2019, Acme closed multiple underperforming manufacturing and sales facilities. Acme operates 12 clay brick manufacturing sites located in four states, three concrete block facilities and a quarrying operation all located in Texas. The demand for Acme’s products is seasonal, with higher sales in the warmer weather months, and is subject to the level of construction activity, which is cyclical. Acme also owns and leases properties and mineral rights that supply raw materials used in many of its manufactured products. Acme’s raw materials supply is believed to be adequate. The brick industry is subject to the EPA Maximum Achievable Control Technology Standards (“MACT”). As required under the 1990 Clean Air Act, the EPA developed a list of source categories that require the development of National Emission Standards for Hazardous Air Pollutants, which are also referred to as MACT Standards (“Rule”). Key elements of the MACT Rule include emission limits established for certain hazardous air pollutants and acidic gases. Acme’s brick plants are in compliance with the current Rule. Consumer Products Apparel Fruit of the Loom (“FOL”), headquartered in Bowling Green, Kentucky, is primarily a manufacturer and distributor of basic apparel, underwear, casualwear, athletic apparel and sports equipment. Products under the Fruit of the Loom® and JERZEES® labels are primarily sold in the mass merchandise, mid-tier chains and wholesale markets. In the Vanity Fair Brands product line, Vassarette®, Curvation® and Radiant® by Vanity Fair are sold in the mass merchandise market, while Vanity Fair® and Lily of France® products are sold to mid-tier chains and department stores. FOL also markets and sells apparel, sports equipment and balls to team dealers and athletic apparel, sports equipment and balls to sporting goods retailers under the Russell Athletic® and Spalding® brands. Additionally, Spalding® markets and sells balls and sports equipment in the mass merchandise market and dollar store channels. In 2020, approximately 58% of FOL’s sales were to five customers. FOL generally performs its own knitting, cloth finishing, cutting, sewing and packaging for apparel. For the North American market, which is FOL’s predominant sales region, the majority of FOL’s cloth manufacturing is performed in Honduras. Labor-intensive cutting, sewing and packaging operations are located in Central America, the Caribbean and Vietnam. For the European market, products are either sourced from third-party contractors in Europe or Asia or sewn in Morocco from textiles internally produced in Morocco. Manufacturing of bras, athletic equipment, sporting goods and other athletic apparel lines are generally sourced from third-party contractors located primarily in Asia. U.S. grown cotton and polyester fibers are the main raw materials used in the manufacturing of FOL’s apparel products and are purchased from a limited number of third-party suppliers. In 2015, FOL entered into an eight-year agreement with one key supplier to provide the majority of FOL’s yarn. Management currently believes there are readily available alternative sources of raw materials and yarn. However, if relationships with suppliers cannot be maintained or delays occur in obtaining alternative sources of supply, production could be adversely affected, which could have a corresponding adverse effect on results of operations. Additionally, raw materials are subject to price volatility caused by weather, supply conditions, government regulations, economic climate and other unpredictable factors. FOL has secured contracts to purchase cotton, either directly or through the yarn suppliers, to meet a large percentage of its production plans for 2021. FOL’s markets are highly competitive, consisting of many domestic and foreign manufacturers and distributors. Competition is generally based upon product features, quality, customer service and price. Garan, headquartered in New York, New York designs, manufactures, imports and sells apparel primarily for children, including boys, girls, toddlers and infants. Products are sold under its own trademark Garanimals® and customer private label brands. Garan conducts its business through operating subsidiaries located in the United States, Central America and Asia. Garan’s products are sold through its distribution centers in the United States. Fechheimer Brothers manufactures, distributes and sells uniforms, principally for the public service and safety markets, including police, fire, postal and military markets. Fechheimer Brothers is based in Cincinnati, Ohio. K-17   The BH Shoe Holdings Group, headquartered in Greenwich, Connecticut, manufactures and distributes work, rugged outdoor and casual shoes and western-style footwear under a number of brand names, including Justin, Tony Lama®, Chippewa®, BØRN®, B•Ø•C®, Carolina®, EuroSofft, Söfft, Double-H Boots®, Nursemates® and Comfortiva®. Brooks Sports, headquartered in Seattle, Washington, markets and sells performance running footwear and apparel to specialty and national retailers and directly to consumers under the Brooks® brand. A significant volume of the shoes sold by Berkshire’s shoe businesses are manufactured or purchased from sources located outside the United States. Products are sold worldwide through a variety of channels including department stores, footwear chains, specialty stores, catalogs and the Internet, as well as through company-owned retail stores. Other consumer products Forest River, Inc. (“Forest River”) is a manufacturer of recreational vehicles (“RV”), utility cargo trailers, buses and pontoon boats, headquartered in Elkhart, Indiana with products sold in the United States and Canada through an independent dealer network. Forest River has numerous manufacturing facilities located in seven states. Forest River is a leading manufacturer of RVs with numerous brand names, including Forest River, Coachmen RV and Prime Time. Utility cargo trailers are sold under a variety of brand names. Buses are sold under several brand names, including Starcraft Bus. Pontoon boats are sold under the Berkshire, South Bay and Trifecta brand names. The RV industry is very competitive. Competition is based primarily on price, design, quality and service. The industry has consolidated over the past several years and is currently concentrated in a few companies, the largest of which had a market share of approximately 42% based on industry data as of December 2020. Forest River held a market share of approximately 37% at that time. The Duracell Company (“Duracell’), headquartered in Chicago, Illinois, is a leading manufacturer of high-performance alkaline batteries. Duracell manufactures batteries in the U.S., Europe and China and provides a network of worldwide sales and distribution centers. Costco and Walmart are significant customers, representing approximately 23% of Duracell’s annual revenue. There are several competitors in the battery manufacturing market with Duracell holding an approximately 31% market share of the global alkaline battery market. Management believes there are currently sufficient sources of raw materials available, which are primarily steel, zinc and manganese. Albecca Inc. (“Albecca”), headquartered in Norcross, Georgia, operates in the U.S., Canada and 12 other countries, with products primarily under the Larson-Juhl® name. Albecca designs, manufactures and distributes a complete line of high quality, branded custom framing products, including wood and metal moulding, matboard, foamboard, glass and framing supplies. Complementary to its framing products, Albecca offers art printing and fulfillment services. Richline Group, Inc., headquartered in New York, New York, operates five strategic business units: Richline Jewelry, Richline Digital, LeachGarner, Rio Grande and Inverness. Each business unit is a manufacturer and/or distributor of precious metal and non-precious metal products to specific target markets including large jewelry chains, department stores, shopping networks, mass merchandisers, e-commerce retailers and artisans plus worldwide manufacturers and wholesalers and the medical, electronics and aerospace industries. Service and Retailing Businesses Service Businesses Berkshire’s service businesses provide grocery and foodservice distribution, professional aviation training programs, shared aircraft ownership programs and distribution of electronic components. Other service businesses include franchising and servicing of quick service restaurants, media businesses (television and information distribution), as well as logistics businesses. Berkshire’s service businesses employed approximately 45,000 people at the end of 2020. Information concerning these activities follows. McLane Company McLane Company, Inc. (“McLane”) provides wholesale distribution services in all 50 states to customers that include convenience stores, discount retailers, wholesale clubs, drug stores, military bases, quick service restaurants and casual dining restaurants. McLane provides wholesale distribution services to Walmart, which accounted for approximately 18% of McLane’s revenues in 2020. McLane’s other significant customers include 7-Eleven (approximately 13% of revenues) and Yum! Brands, (approximately 11% of revenues). McLane’s business model is based on a high volume of sales, rapid inventory turnover and stringent expense controls. Operations are currently divided into three business units: grocery distribution, foodservice distribution and beverage distribution. K-18   McLane’s grocery distribution unit, based in Temple, Texas, maintains a dominant market share within the convenience store industry and serves most of the national convenience store chains and major oil company retail outlets. Grocery operations provide products to approximately 50,000 retail locations nationwide, including Walmart. McLane’s grocery distribution unit operates 25 distribution facilities in 20 states. McLane’s foodservice distribution unit, based in Carrollton, Texas, focuses on serving the quick service and casual dining restaurant industry with high quality, timely-delivered products. Operations are conducted through 46 facilities in 22 states. The foodservice distribution unit services approximately 33,200 restaurants nationwide. Through its subsidiaries, McLane also operates wholesale distributors of distilled spirits, wine and beer. The beverage unit operates as Empire Distributors and operations are conducted through 14 distribution centers in Georgia, North Carolina, Tennessee and Colorado. Empire Distributors services approximately 25,600 retail locations in the southeastern United States and Colorado. FlightSafety International FlightSafety International Inc. (“FlightSafety”) is an industry leading provider of professional aviation training services and flight simulation products. FlightSafety and FlightSafety Textron Aviation Training, a joint venture with Textron which began operations in 2019, provide high technology training to pilots, aircraft maintenance technicians, flight attendants and dispatchers who operate and support a wide variety of business, commercial and military aircraft. The training is provided using a large fleet of advanced full flight simulators at learning centers and training locations in the United States, Australia, Brazil, Canada, France, Hong Kong, Japan, Norway, South Africa and the United Kingdom. The vast majority of the instructors, training programs and flight simulators are qualified by the United States Federal Aviation Administration and other aviation regulatory agencies around the world. FlightSafety is also a leader in the design and manufacture of full flight simulators, visual systems, displays and other advanced technology training devices. This equipment is used to support FlightSafety training programs and is offered for sale to airlines and government and military organizations around the world. Manufacturing facilities are located in Oklahoma, Missouri and Texas. FlightSafety strives to maintain and manufacture simulators and develop courseware using state-of-the-art technology and invests in research and development as it builds new equipment and training programs. NetJets NetJets Inc. (“NetJets”) is the world’s leading provider of shared ownership programs for general aviation aircraft. NetJets’ global headquarters is located in Columbus, Ohio, with most of its logistical and flight operations based at John Glenn Columbus International Airport. NetJets’ European operations are based in Lisbon, Portugal. The shared ownership concept is designed to meet the travel needs of customers who require the scale, flexibility and access of a large fleet that whole aircraft ownership cannot deliver. In addition, shared ownership programs are available for corporate flight departments seeking to outsource their general aviation needs or add capacity for peak periods and for others that previously chartered aircraft. With a focus on safety and service, NetJets’ programs are designed to offer customers guaranteed availability of aircraft, predictable operating costs and increased liquidity. NetJets’ shared aircraft ownership programs permit customers to acquire a specific percentage of a certain aircraft type and allows customers to utilize the aircraft for a specified number of flight hours annually. In addition, NetJets offers prepaid flight cards and other aviation solutions and services for aircraft management, customized aircraft sales and acquisition, ground support and flight operation services under a number of programs including NetJets Shares™, NetJets Leases™ and the Marquis Jet Card®. NetJets is subject to the rules and regulations of the United States Federal Aviation Administration, the Portuguese Civil Aviation Authority and the European Union Aviation Safety Agency. Regulations address aircraft registration, maintenance requirements, pilot qualifications and airport operations, including flight planning and scheduling as well as security issues and other matters. NetJets maintains a comprehensive training and development program in compliance with regulatory requirements for pilots, flight attendants, maintenance mechanics, and other flight operations specialists. TTI, Inc. TTI, Inc. (“TTI”), headquartered in Fort Worth, Texas, is a global specialty distributor of passive, interconnect, electromechanical, discrete, and semiconductor components used by customers in the manufacturing and assembling of electronic products. TTI’s customer base includes original equipment manufacturers, electronic manufacturing services, original design manufacturers and military and commercial customers, as well as design and system engineers. TTI’s distribution agreements with the industry’s leading suppliers allow it to uniquely leverage its product cost and to expand its business by providing new lines and products to its customers. TTI operates sales offices and distribution centers from more than 100 locations throughout North America, Europe, Asia and Israel. K-19   TTI services a variety of industries including telecommunications, medical devices, computers and office equipment, military/aerospace, automotive and industrial electronics. TTI’s core customers include businesses in the design through production stages in the electronic component supply chain, which supports its high-volume business, and its Mouser subsidiary, which supports a broader base of customers with lower volume purchases through internet-based marketing. Other services XTRA Corporation (“XTRA”), headquartered in St. Louis, Missouri, is a leading transportation equipment lessor operating under the XTRA Lease® brand name. XTRA manages a diverse fleet of approximately 86,000 units located at 48 facilities throughout the United States. The fleet includes over-the-road and storage trailers, chassis, temperature-controlled vans and flatbed trailers. XTRA is one of the largest lessors (in terms of units available) of over-the-road trailers in North America. Transportation equipment customers lease equipment to cover cyclical, seasonal and geographic needs and as a substitute for purchasing equipment. Therefore, as a provider of marginal capacity to its customers, XTRA’s utilization rates and operating results tend to be cyclical. In addition, transportation providers often use leasing to maximize their asset utilization and reduce capital expenditures. By maintaining a large fleet, XTRA is able to provide customers with a broad selection of equipment and quick response times. International Dairy Queen develops and services a worldwide system of over 7,000 franchised restaurants operating primarily under the names DQ Grill and Chill®, Dairy Queen® and Orange Julius® that offer various dairy desserts, beverages, prepared foods and blended fruit drinks. Business Wire provides electronic dissemination of full-text news releases to the media, online services and databases and the global investment community in 150 countries and in 45 languages. Approximately 93% of Business Wire’s revenues derive from its core news distribution business. CORT Business Services Corporation is a leading national provider of rental furniture and related services in the “rent-to-rent” segment of the furniture rental industry. CORT’s primary revenue streams include furniture rental to individuals, businesses, government agencies, the trade show and events industry and retail sales of used furniture. WPLG, Inc. is an ABC affiliate broadcast station in Miami, Florida and Charter Brokerage is a leading non-asset based third party logistics provider to the petroleum and chemical industries. Until March 2020, other services included the newspaper publishing businesses conducted through The Buffalo News and BH Media Group, Inc. These operations were sold in 2020. Retailing Businesses Berkshire’s retailing businesses include automotive, home furnishings and several other operations that sell various consumer products to consumers. Information regarding each of these operations follows. Berkshire’s retailing businesses employed approximately 25,000 people at the end of 2020. Berkshire Hathaway Automotive The Berkshire Hathaway Automotive Group, Inc. (“BHA”) is one of the largest automotive retailers in the United States, currently operating 104 new vehicle franchises through 81 dealerships located primarily in major metropolitan markets in the United States. The dealerships sell new and used vehicles, vehicle maintenance and repair services, extended service contracts, vehicle protection products and other aftermarket products. BHA also arranges financing for its customers through third-party lenders. BHA operates 29 collision centers directly connected to the dealerships’ operations and owns and operates two auto auctions and a fluid maintenance products distribution company. Dealership operations are highly concentrated in the Arizona and Texas markets, with approximately 70% of dealership-related revenues derived from sales in these markets. BHA currently maintains franchise agreements with 27 different vehicle manufacturers, although it derives a significant portion of its revenue from the Toyota/Lexus, General Motors, Ford/Lincoln, Nissan/Infiniti and Honda/Acura brands. Approximately 90% of BHA’s annual revenues are from dealerships representing these manufacturers. The retail automotive industry is highly competitive. BHA faces competition from other large public and private dealership groups, as well as individual franchised dealerships and competition via the Internet. Given the pricing transparency available via the Internet, and the fact that franchised dealers acquire vehicles from the manufacturers on the same terms irrespective of volume, the location and quality of the dealership facility, customer service and transaction speed are key differentiators in attracting customers. BHA’s overall relationships with the automobile manufacturers are governed by framework agreements. The framework agreements contain provisions relating to the management, operation, acquisition and the ownership structure of BHA’s dealerships. Failure to meet the terms of these agreements could adversely impact BHA’s ability to acquire additional dealerships representing those manufacturers. Additionally, these agreements contain limitations on the number of dealerships from a specific manufacturer that may be owned by BHA. K-20   Individual dealerships operate under franchise agreements with the manufacturer, which grants the dealership entity a non-exclusive right to sell the manufacturer’s brand of vehicles and offer related parts and service within a specified market area, as well as the right to use the manufacturer’s trademarks. The agreements contain various requirements and restrictions related to the management and operation of the franchised dealership and provide for termination of the agreement by the manufacturer or non-renewal for a variety of causes. The states generally have automotive dealership franchise laws that provide substantial protection to the franchisee, and it is difficult for a manufacturer to terminate or not renew a franchise agreement outside of bankruptcy or with “good cause” under the applicable state franchise law. BHA also develops, underwrites and administers various vehicle protection plans as well as life and accident and health insurance plans sold to consumers through BHA’s dealerships and third-party dealerships. BHA also develops proprietary training programs and materials and provides ongoing monitoring and training of the dealership’s finance and insurance personnel. Home furnishings retailing The home furnishings businesses consist of Nebraska Furniture Mart (“NFM”), R.C. Willey Home Furnishings (“R.C. Willey”), Star Furniture Company (“Star”) and Jordan’s Furniture, Inc. (“Jordan’s”). These businesses offer a wide selection of furniture, bedding and accessories. In addition, NFM and R.C. Willey sell a full line of major household appliances, electronics, computers and other home furnishings and offer customer financing to complement their retail operations. An important feature of each of these businesses is their ability to control costs and to produce high business volume by offering significant value to their customers. NFM operates its business from four retail complexes with almost 4.5 million square feet of retail, warehouse and administrative facilities located in Omaha, Nebraska, Clive, Iowa, Kansas City, Kansas and The Colony, Texas. NFM also owns Homemakers Furniture located in Urbandale, Iowa, which has approximately 600,000 square feet of retail, warehouse and administrative space. NFM is the largest furniture retailer in each of these markets. R.C. Willey, based in Salt Lake City, Utah, currently operates twelve full-line retail home furnishings stores and three distribution centers. These facilities include approximately 1.5 million square feet of retail space with six stores located in Utah, one store in Meridian, Idaho, three stores in Nevada (Las Vegas and Reno) and two stores in the Sacramento, California area. Jordan’s operates a retail furniture business from seven locations with approximately 890,000 square feet of retail space in stores located in Massachusetts, New Hampshire, Rhode Island, Maine and Connecticut. The retail stores are supported by an 800,000 square foot distribution center in Taunton, Massachusetts. Jordan’s is the largest furniture retailer, as measured by sales, in Massachusetts and New Hampshire. Jordan’s is well known in its markets for its unique store arrangements and advertising campaigns. Star has operated home furnishings retail stores in Texas for many years. Star’s retail facilities currently include about 700,000 square feet of retail space in 11 locations in Texas, including eight in Houston. Other retailing Borsheim Jewelry Company, Inc. (“Borsheims”) operates from a single store in Omaha, Nebraska. Borsheims is a high-volume retailer of fine jewelry, watches, crystal, china, stemware, flatware, gifts and collectibles. Helzberg’s Diamond Shops, LLC. (“Helzberg”) is based in North Kansas City, Missouri, and operates a chain of 213 retail jewelry stores in 36 states, which includes approximately 500,000 square feet of retail space. Helzberg’s stores are located in malls, lifestyle centers, power strip centers and outlet malls, and all stores operate under the name Helzberg Diamonds® or Helzberg Diamonds Outlet®. The Ben Bridge Corporation (“Ben Bridge Jeweler”), based in Seattle, Washington, operates 75 retail jewelry stores under three different brand names, located primarily in major shopping malls in 10 western states and in British Columbia, Canada. Thirty-six of its retail locations are upscale jewelry stores selling loose diamonds, finished jewelry and high-end timepieces. Thirty-eight of its retail locations are concept stores operating under a franchise agreement that sell only Pandora jewelry. One store is a Breitling concept store, selling only Breitling timepieces. See’s Candies (“See’s”) produces boxed chocolates and other confectionery products with an emphasis on quality and distinctiveness in two large kitchens in Los Angeles and San Francisco and one smaller facility in Burlingame, California. See’s operates approximately 250 retail and quantity discount stores located mainly in California and other Western states, as well as over 110 seasonal in-line locations. See’s revenues are highly seasonal with approximately half of its annual revenues earned in the fourth quarter. The Pampered Chef, Ltd. (“Pampered Chef”) is a premier direct seller of distinctive high-quality kitchenware products with sales and operations in the United States, Canada, Germany, Austria and France and operations in China. Pampered Chef’s product portfolio consists of approximately 650 Pampered Chef® branded kitchenware items in categories ranging from stoneware and cutlery to grilling and entertaining. Pampered Chef’s products are available through its sales force of independent cooking consultants and online. K-21   Oriental Trading Company (“OTC”) is a leading multi-channel retailer and online destination for value-priced party supplies, arts and crafts, toys and novelties, school supplies, educational games, patient giveaways and personalized products. OTC, headquartered in Omaha, Nebraska, serves a broad base of nearly four million customers annually, including consumers, schools, churches, non-profit organizations, medical and dental offices and other businesses. OTC offers a unique assortment of over 50,000 products and utilizes sophisticated digital and print marketing efforts to drive significant traffic and industry leading customer satisfaction. Detlev Louis Motorrad (“Louis”), headquartered in Hamburg, Germany, is a leading retailer of motorcycle apparel and equipment in Europe. Louis carries over 32,000 different products from more than 600 manufacturers, primarily covering the clothing, technical equipment and leisure markets. Louis has over 80 stores in Germany, Austria, Switzerland and the Netherlands and also sells through catalogs and via the Internet throughout most of Europe. Additional information with respect to Berkshire’s businesses Revenue, earnings before taxes and identifiable assets attributable to Berkshire’s reportable business segments are included in Note 27 to Berkshire’s Consolidated Financial Statements contained in Item 8, Financial Statements and Supplementary Data. Additional information regarding Berkshire’s investments in fixed maturity and equity securities is included in Notes 3 and 4, respectively, to Berkshire’s Consolidated Financial Statements. Berkshire owns 26.6% of the outstanding common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the largest food and beverage companies in the world, with sales in numerous countries within developed and emerging markets and territories. Kraft Heinz manufactures and markets food and beverage products, including condiments and sauces, cheese and dairy meals, meats, refreshment beverages, coffee and other grocery products, throughout the world, under a diverse mix of iconic and emerging brands. Berkshire subsidiaries also own a 50% joint venture interest in Berkadia Commercial Mortgage LLC (“Berkadia”), a 38.6% interest in Pilot Travel Centers LLC (“Pilot”) and a 50% joint venture interest in Electric Transmission Texas, LLC (“ETT”). Information concerning these investments is included in Note 5 to Berkshire’s Consolidated Financial Statements. Berkshire maintains a website (http://www.berkshirehathaway.com) where its annual reports, certain corporate governance documents, press releases, interim shareholder reports and links to its subsidiaries’ websites can be found. Berkshire’s periodic reports filed with the SEC, which include Form 10-K, Form 10-Q, Form 8-K and amendments thereto, may be accessed by the public free of charge from the SEC and through Berkshire. Electronic copies of these reports can be accessed at the SEC’s website (http://www.sec.gov) and indirectly through Berkshire’s website (http://www.berkshirehathaway.com). Copies of these reports may also be obtained, free of charge, upon written request to: Berkshire Hathaway Inc., 3555 Farnam Street, Omaha, NE 68131, Attn: Corporate Secretary. Item 1A. Risk Factors Berkshire and its subsidiaries (referred to herein as “we,” “us,” “our” or similar expressions) are subject to certain risks and uncertainties in its business operations which are described below. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties that are presently unknown or are currently deemed immaterial may also impair our business operations. General Business Risks Terrorist acts could hurt our operating businesses. A cyber, biological, nuclear or chemical attack could produce significant losses to our worldwide operations. Our business operations could be adversely affected from such acts through the loss of human resources or destruction of production facilities and information systems. We share the risk with all businesses. Cyber security risks We rely on technology in virtually all aspects of our business. Like those of many large businesses, certain of our information systems have been subject to computer viruses, malicious codes, unauthorized access, phishing efforts, denial-of-service attacks and other cyber-attacks and we expect to be subject to similar attacks in the future as such attacks become more sophisticated and frequent. A significant disruption or failure of our technology systems could result in service interruptions, safety failures, security events, regulatory compliance failures, an inability to protect information and assets against unauthorized users and other operational difficulties. Attacks perpetrated against our systems could result in loss of assets and critical information and expose us to remediation costs and reputational damage. K-22   Although we have taken steps intended to mitigate these risks, including business continuity planning, disaster recovery planning and business impact analysis, a significant disruption or cyber intrusion could adversely affect our results of operations, financial condition and liquidity. Additionally, if we are unable to acquire, develop, implement, adopt or protect rights around new technology, we may suffer a competitive disadvantage, which could also have an adverse effect on our results of operations, financial condition and/or liquidity. Cyber-attacks could further adversely affect our ability to operate facilities, information technology and business systems or compromise confidential customer and employee information. Political, economic, social or financial market instability or damage to or interference with our operating assets, customers or suppliers from cyber-attacks may result in business interruptions, lost revenues, higher commodity prices, disruption in fuel supplies, lower energy consumption, unstable markets, increased security, repair or other costs, or may materially adversely affect us in ways that cannot be predicted at this time. Any of these risks could materially affect our consolidated financial results. Furthermore, instability in the financial markets resulting from terrorism, sustained or significant cyber-attacks or war could also have a material adverse effect on our ability to raise capital. We share these risks with all businesses. We are dependent on a few key people for our major investment and capital allocation decisions. Major investment decisions and all major capital allocation decisions are made by Warren E. Buffett, Chairman of the Board of Directors and Chief Executive Officer, age 90, in consultation with Charles T. Munger, Vice Chairman of the Board of Directors, age 97. If for any reason the services of our key personnel, particularly Mr. Buffett, were to become unavailable, there could be a material adverse effect on our operations. However, Berkshire’s Board of Directors has identified certain current Berkshire managers who, in their judgment, are capable of succeeding Mr. Buffett and has agreed on a replacement for Mr. Buffett should a replacement be needed currently. The Board continually monitors this risk and could alter its current view regarding a replacement for Mr. Buffett in the future. We believe that the Board’s succession plan, together with the outstanding managers running our numerous and highly diversified operating units helps to mitigate this risk. In 2018, Berkshire’s Board of Directors appointed Mr. Gregory Abel as Vice Chairman of Berkshire’s non-insurance operations and Mr. Ajit Jain as Vice Chairman of Berkshire’s insurance operations. Mr. Abel and Mr. Jain each report directly to Mr. Buffett and Mr. Buffett continues to be responsible for major capital allocation and investment decisions. We need qualified personnel to manage and operate our various businesses. In our decentralized business model, we need qualified and competent management to direct day-to-day business activities of our operating subsidiaries and to manage changes in future business operations due to changing business or regulatory environments. Our operating subsidiaries also need qualified and competent personnel in executing their business plans and serving their customers, suppliers and other stakeholders. Our inability to recruit and retain qualified and competent managers and personnel could negatively affect the operating results, financial condition and liquidity of our subsidiaries and Berkshire as a whole. Investments are unusually concentrated in equity securities and fair values are subject to loss in value. We concentrate a high percentage of the equity security investments of our insurance subsidiaries in a relatively small number of equity securities. A significant decline in the fair values of our larger investments in equity securities may produce a material decline in our consolidated shareholders’ equity and our consolidated earnings. Since a large percentage of our equity securities are held by our insurance subsidiaries, significant decreases in the fair values of these investments will produce significant declines in the statutory surplus of our insurance business. Our large statutory surplus is a competitive advantage, and a long-term material decline could have an adverse effect on our claims-paying ability ratings and our ability to write new insurance business thus potentially reducing our future underwriting profits. Over ten years ago, we assumed the risk of potentially significant losses under a number of equity index put option contracts, which contain equity price risks. Most of the contracts remaining at year end 2020 will expire by February 2023. Risks of losses under these contracts are based on declines in equity prices of stocks comprising certain major U.S. and international stock indexes. We received considerable cash premiums as compensation for accepting these risks. Absent major reductions in future equity securities prices, our ultimate payment obligations are not likely to be significant. Nevertheless, there can be no assurance that equity securities prices will not decline significantly resulting in significant settlement payments upon contract expirations. K-23   Competition and technology may erode our business franchises and result in lower earnings. Each of our operating businesses face intense competition within markets in which they operate. While we manage our businesses with the objective of achieving long-term sustainable growth by developing and strengthening competitive advantages, many factors, including technological changes, may erode or prevent the strengthening of competitive advantages. Accordingly, our future operating results will depend to some degree on our operating units successfully protecting and enhancing their competitive advantages. If our operating businesses are unsuccessful in these efforts, our periodic operating results in the future may decline. Unfavorable general economic conditions may significantly reduce our operating earnings and impair our ability to access capital markets at a reasonable cost. Our operating businesses are subject to normal economic cycles affecting the general economy or the specific industries in which they operate. Significant deteriorations of economic conditions over a prolonged period could produce a material adverse effect on one or more of our significant operations. In addition, our utilities and energy businesses and our railroad business regularly utilize debt as a component of their capital structures and depend on having access to borrowed funds through the capital markets at reasonable rates. To the extent that access to the capital markets is restricted or the cost of funding increases, these operations could be adversely affected. Epidemics, pandemics or other outbreaks, including COVID-19, could hurt our operating businesses. The outbreak of COVID-19 has adversely affected, and in the future it or other epidemics, pandemics or outbreaks may adversely affect, our operations, including our equity securities portfolio. This is or may be due to closures or restrictions requested or mandated by governmental authorities, disruption to supply chains and workforce, reduction of demand for our products and services, credit losses when customers and other counterparties fail to satisfy their obligations to us, and volatility in global equity securities markets, among other factors. We share most of these risks with all businesses. Regulatory changes may adversely impact our future operating results. Over time, in response to financial markets crises, global economic recessions, and social and environmental issues, regulatory initiatives were adopted in the United States and elsewhere. Such initiatives addressed for example, the regulation of banks and other major financial institutions, products and environmental and global-warming matters. These initiatives impact all of our businesses, albeit in varying ways. Increased regulatory compliance costs could have a significant negative impact on our operating businesses, as well as on the businesses in which we have a significant, but not controlling economic interests. We cannot predict whether such initiatives will have a material adverse impact on our consolidated financial position, results of operations and/or cash flows. Data privacy regulations have recently been enacted in various jurisdictions in the U.S. and throughout the world. These regulations address numerous aspects related to the security of personal information that is stored in our information systems, networks and facilities. Failure to comply with these regulations could result in reputational damage and significant penalties. Risks unique to our regulated businesses Our tolerance for risk in our insurance businesses may result in significant underwriting losses. When properly paid for the risk assumed, we have been and will continue to be willing to assume more risk from a single event than any other insurer has knowingly assumed. Accordingly, we could incur a significant loss from a single catastrophe event resulting from a natural disaster or man-made catastrophes such as terrorism or cyber-attacks. We employ various disciplined underwriting practices intended to mitigate potential losses and attempt to take into account all possible correlations and avoid writing groups of policies from which pre-tax losses from a single catastrophe event might aggregate above $10 billion. Currently, we estimate that our aggregate exposure from a single event under outstanding policies is significantly below $10 billion. However, despite our efforts, it is possible that losses could manifest in ways that we do not anticipate and that our risk mitigation strategies are not designed to address. Additionally, various provisions of our policies, such as limitations or exclusions from coverage, negotiated to limit our risks, may not be enforceable in the manner we intend. Our tolerance for significant insurance losses may result in lower reported earnings in a future period. K-24   The degree of estimation error inherent in the process of estimating property and casualty insurance loss reserves may result in significant underwriting losses. The principal cost associated with the property and casualty insurance business is claims. In writing property and casualty insurance policies, we receive premiums today and promise to pay covered losses in the future. However, it will take decades before all claims that have occurred as of any given balance sheet date will be reported and settled. Although we believe that liabilities for unpaid losses are adequate, we will not know whether these liabilities or the premiums charged for the coverages provided were sufficient until well after the balance sheet date. Estimating insurance claim costs is inherently imprecise. Our estimated unpaid losses arising under contracts covering property and casualty insurance risks are large ($120.8 billion at December 31, 2020), and a small percentage increase to those liabilities can result in materially lower reported earnings. Changes in regulations and regulatory actions can adversely affect our operating results and our ability to allocate capital. Our insurance businesses are subject to regulation in the jurisdictions in which we operate. Such regulations may relate to among other things, the types of business that can be written, the rates that can be charged for coverage, the level of capital that must be maintained, and restrictions on the types and size of investments that can be made. Regulations may also restrict the timing and amount of dividend payments to Berkshire by these businesses. U.S. state insurance regulators and international insurance regulators are also actively developing various regulatory mechanisms to address the regulation of large internationally active insurance groups, including regulations concerning group capital, liquidity, governance and risk management. Accordingly, changes in regulations related to these or other matters or regulatory actions imposing restrictions on our insurance businesses may adversely impact our results of operations and restrict our ability to allocate capital. Our railroad business conducted through BNSF is also subject to a significant number of laws and regulations with respect to rates and practices, taxes, railroad operations and a variety of health, safety, labor, environmental and other matters. Failure to comply with applicable laws and regulations could have a material adverse effect on BNSF’s business. Governments may change the legislative and/or regulatory framework within which BNSF operates, without providing any recourse for any adverse effects that the change may have on the business. Complying with legislative and regulatory changes may pose significant operating and implementation risks and require significant capital expenditures. BNSF derives significant amounts of revenue from the transportation of energy-related commodities, particularly coal. To the extent that changes in government policies limit or restrict the usage of coal as a source of fuel in generating electricity or alternate fuels, such as natural gas, or displace coal on a competitive basis, revenues and earnings could be adversely affected. As a common carrier, BNSF is also required to transport toxic inhalation hazard chemicals and other hazardous materials. A release of hazardous materials could expose BNSF to significant claims, losses, penalties and environmental remediation obligations. Changes in the regulation of the rail industry could negatively impact BNSF’s ability to determine prices for rail services and to make capital improvements to its rail network, resulting in an adverse effect on our results of operations, financial condition and/or liquidity. Our utilities and energy businesses operated under BHE are highly regulated by numerous federal, state, local and foreign governmental authorities in the jurisdictions in which they operate. These laws and regulations are complex, dynamic and subject to new interpretations or change. Regulations affect almost every aspect of our utilities and energy businesses. Regulations broadly apply and may limit management’s ability to independently make and implement decisions regarding numerous matters including: acquiring businesses; constructing, acquiring, disposing or retiring of operating assets; operating and maintaining generating facilities and transmission and distribution system assets; complying with pipeline safety and integrity and environmental requirements; setting rates charged to customers; establishing capital structures and issuing debt; transacting between our domestic utilities and our other subsidiaries and affiliates; and paying dividends or similar distributions. Failure to comply with or reinterpretations of existing regulations and new legislation or regulations, such as those relating to air and water quality, renewable portfolio standards, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters, or changes in the nature of the regulatory process may have a significant adverse impact on our financial results. K-25   Our railroad business requires significant ongoing capital investment to improve and maintain its railroad network so that transportation services can be safely and reliably provided to customers on a timely basis. Our utilities and energy businesses also require significant amounts of capital to construct, operate and maintain generation, transmission and distribution systems to meet their customers’ needs and reliability criteria. Additionally, system assets may need to be operational for long periods of time in order to justify the financial investment. The risk of operational or financial failure of capital projects is not necessarily recoverable through rates that are charged to customers. Further, a significant portion of costs of capital improvements may be funded through debt issued by BNSF and BHE and their subsidiaries. Disruptions in debt capital markets that restrict access to funding when needed could adversely affect the results of operations, liquidity and/or capital resources of these businesses. Item 1B. Unresolved Staff Comments None. Item 2. Description of Properties The properties used by Berkshire’s business segments are summarized in this section. Berkshire’s railroad and utilities and energy businesses, in particular, utilize considerable physical assets in their businesses. Railroad Business—Burlington Northern Santa Fe Through BNSF Railway, BNSF operates approximately 32,500 route miles of track (excluding multiple main tracks, yard tracks and sidings) in 28 states, and also operates in three Canadian provinces. BNSF owns over 23,000 route miles, including easements, and operates over 9,000 route miles of trackage rights that permit BNSF to operate its trains with its crews over other railroads’ tracks. As of December 31, 2020, the total BNSF Railway system, including single and multiple main tracks, yard tracks and sidings, consisted of over 50,000 operated miles of track. BNSF operates various facilities and equipment to support its transportation system, including its infrastructure, locomotives and freight cars. It also owns or leases other equipment to support rail operations, such as vehicles. Support facilities for rail operations include yards and terminals throughout its rail network, system locomotive shops to perform locomotive servicing and maintenance, a centralized network operations center for train dispatching and network operations monitoring and management, computers, telecommunications equipment, signal systems and other support systems. Transfer facilities are maintained for rail-to-rail as well as intermodal transfer of containers, trailers and other freight traffic and include approximately 25 intermodal hubs located across the system. BNSF owns or holds under non-cancelable leases exceeding one year approximately 7,700 locomotives and 66,000 freight cars, in addition to maintenance of way and other equipment. In the ordinary course of business, BNSF incurs significant costs in repairing and maintaining its properties. In 2020, BNSF recorded approximately $2 billion in repairs and maintenance expense. K-26   Utilities and Energy Businesses—Berkshire Hathaway Energy BHE’s energy properties consist of the physical assets necessary to support its electricity and natural gas businesses. Properties of BHE’s electricity businesses include electric generation, transmission and distribution facilities, as well as coal mining assets that support certain of BHE’s electric generating facilities. Properties of BHE’s natural gas businesses include natural gas distribution facilities, interstate pipelines, storage facilities, liquefied natural gas facilities, compressor stations and meter stations. The transmission and distribution assets are primarily within each of BHE’s utility service territories. In addition to these physical assets, BHE has rights-of-way, mineral rights and water rights that enable BHE to utilize its facilities. Pursuant to separate financing agreements, the majority of these properties are pledged or encumbered to support or otherwise provide the security for the related subsidiary debt. BHE or its affiliates own or have interests in the following types of operating electric generating facilities at December 31, 2020:   Energy Source   Entity   Location by Significance   Facility Net Capacity (MW) (1)     Net Owned Capacity (MW) (1)   Natural gas   PacifiCorp, MEC, NV Energy and BHE Renewables   Nevada, Utah, Iowa, Illinois, Washington, Wyoming, Oregon, Texas, New York and Arizona     11,171       10,892   Wind   PacifiCorp, MEC and BHE Renewables   Iowa, Wyoming, Texas, Nebraska, Washington, California, Illinois, Oregon, Kansas and Montana     10,302       10,302   Coal   PacifiCorp, MEC and NV Energy   Wyoming, Iowa, Utah, Nevada, Colorado and Montana     13,249       8,198   Solar   BHE Renewables and NV Energy   California, Texas, Arizona, Minnesota and Nevada     1,699       1,551   Hydroelectric   PacifiCorp, MEC and BHE Renewables   Washington, Oregon, The Philippines, Idaho, California, Utah, Hawaii, Montana, Illinois and Wyoming     1,299       1,277   Nuclear   MEC   Illinois     1,815       454   Geothermal   PacifiCorp and BHE Renewables   California and Utah     377       377           Total     39,912       33,051     (1) Facility Net Capacity in megawatts (MW) represents the lesser of nominal ratings or any limitations under applicable interconnection, power purchase, or other agreements for intermittent resources and the total net dependable capability available during summer conditions for all other units. An intermittent resource’s nominal rating is the manufacturer’s contractually specified capability (in MW) under specified conditions. Net Owned Capacity indicates BHE’s ownership of Facility Net Capacity. As of December 31, 2020, BHE’s subsidiaries also have electric generating facilities that are under construction in Iowa, Wyoming and Montana having total Facility Net Capacity and Net Owned Capacity of 603 MW. PacifiCorp, MEC and NV Energy own electric transmission and distribution systems, including approximately 27,600 miles of transmission lines and approximately 1,650 substations and gas distribution facilities, including approximately 27,600 miles of gas mains and service lines. Northern Powergrid (Northeast) and Northern Powergrid (Yorkshire) operate an electricity distribution network that includes approximately 17,300 miles of overhead lines, approximately 42,800 miles of underground cables and approximately 770 major substations. AltaLink’s electricity transmission system includes approximately 8,200 miles of transmission lines and approximately 310 substations. The BHE GT&S pipeline system consists of approximately 5,400 miles of natural gas transmission, gathering and storage pipelines. BHE GT&S provides natural gas storage and transportation service to on-system customers in Maryland, New York, Ohio, Pennsylvania, South Carolina, Virginia and West Virginia. Additionally, through multiple interconnects with other pipelines, BHE GT&S provides services to off-system customers broadly in the Northeast, Southeast and Mid-Atlantic regions. Storage services are provided through the operation of 17 underground natural gas storage fields located in Pennsylvania, West Virginia and New York. BHE GT&S also operates, as the general partner, and owns a 25% limited partnership interest in one liquefied natural gas export, import and storage facility in Maryland and operates and has ownership interests in three modular liquefied natural gas facilities in Alabama, Florida and Pennsylvania. K-27   Northern Natural’s pipeline system consists of approximately 14,500 miles of natural gas pipelines, including approximately 6,000 miles of mainline transmission pipelines and approximately 8,500 miles of branch and lateral pipelines. Northern Natural’s end-use and distribution market area includes points in Iowa, Nebraska, Minnesota, Wisconsin, South Dakota, Michigan and Illinois and its natural gas supply and delivery service area includes points in Kansas, Texas, Oklahoma and New Mexico. Storage services are provided through the operation of one underground natural gas storage field in Iowa, two underground natural gas storage facilities in Kansas and two liquefied natural gas storage peaking units, one in Iowa and one in Minnesota. Kern River’s system consists of approximately 1,400 miles of natural gas pipelines, which extends from the system’s point of origination in Wyoming through the Central Rocky Mountains into California. Other Segments Significant physical properties used by Berkshire’s other business segments are summarized below:                   Number of Properties   Business   Country   Locations   Property/Facility type   Owned     Leased   Insurance:                             GEICO   U.S.       Offices and claims centers     10       122   BHRG   U.S.       Offices     1       30       Non-U.S.   Locations in 22 countries   Offices     1       37   BH Primary   U.S.       Offices     7       51       Non-U.S.   Locations in 7 countries   Offices     —       16                                 Manufacturing   U.S.       Manufacturing facility     485       119               Offices/Warehouses     207       443               Retail/Showroom     261       213               Housing communities     312       —       Non-U.S.   Locations in 63 countries   Manufacturing facility     199       124               Offices/Warehouses     88       448               Retail/Showroom     —       4                                 Service   U.S.       Training facilities/Hangars     19       94               Offices/Distribution     15       144               Production facilities     4       3               Leasing/Showroom/Retail     31       48       Non-U.S.   Locations in 18 countries   Training facilities/Hangars     2       12               Offices/Distribution     —       48                                 McLane Company   U.S.       Distribution centers     59       26               Offices     4       1                                 Retailing   U.S.       Offices/Warehouses     21       26               Retail/Showroom     142       543       Non-U.S.   Locations in 6 countries   Offices/Warehouses     1       9               Retail/Offices     —       93     Item 3. Legal Proceedings Berkshire and its subsidiaries are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. We do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations. K-28   Item 4. Mine Safety Disclosures Information regarding the Company’s mine safety violations and other legal matters disclosed in accordance with Section 1503 (a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form 10-K. Executive Officers of the Registrant Following is a list of the Registrant’s named executive officers:   Name    Age    Position with Registrant      Since   Warren E. Buffett   90   Chairman and Chief Executive Officer   1970 Charles T. Munger   97   Vice Chairman   1978 Gregory E. Abel   58   Vice Chairman – Non-Insurance Operations   2018 Ajit Jain   69   Vice Chairman – Insurance Operations   2018 Marc D. Hamburg   71   Senior Vice-President – Chief Financial Officer   1992   Each executive officer serves, in accordance with the by-laws of the Registrant, until the first meeting of the Board of Directors following the next annual meeting of shareholders and until a successor is chosen and qualified or until such executive officer sooner dies, resigns, is removed or becomes disqualified. FORWARD-LOOKING STATEMENTS Investors are cautioned that certain statements contained in this document as well as some statements in periodic press releases and some oral statements of Berkshire officials during presentations about Berkshire or its subsidiaries are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects and possible future Berkshire actions, which may be provided by management, are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about Berkshire and its subsidiaries, economic and market factors and the industries in which we do business, among other things. These statements are not guarantees of future performance and we have no specific intention to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changes in market prices of our investments in fixed maturity and equity securities, losses realized from derivative contracts, the occurrence of one or more catastrophic events, such as an earthquake, hurricane, act of terrorism or cyber attack that causes losses insured by our insurance subsidiaries and/or losses to our business operations, the frequency and severity of epidemics, pandemics or other outbreaks, including COVID-19, that negatively affect our operating results and restrict our access to borrowed funds through the capital markets at reasonable rates, changes in laws or regulations affecting our insurance, railroad, utilities and energy and finance subsidiaries, changes in federal income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries in which we do business. Part II Item 5. Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities Market Information Berkshire’s Class A and Class B common stock are listed for trading on the New York Stock Exchange, trading symbols: BRK.A and BRK.B, respectively. Shareholders Berkshire had approximately 1,600 record holders of its Class A common stock and 18,900 record holders of its Class B common stock at February 16, 2021. Record owners included nominees holding at least 351,000 shares of Class A common stock and 1,332,000,000 shares of Class B common stock on behalf of beneficial-but-not-of-record owners. Dividends Berkshire has not declared a cash dividend since 1967. K-29   Common Stock Repurchase Program Berkshire’s common stock repurchase program permits Berkshire to repurchase its Class A and Class B shares at any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charles Munger, Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. Repurchases may be in the open market or through privately negotiated transactions. Information with respect to Berkshire’s Class A and Class B common stock repurchased during the fourth quarter of 2020 follows.   Period Total number of shares purchased   Average price paid per share   Total number of shares purchased as part of publicly announced program   Maximum number or value of shares that yet may be repurchased under the program October                     Class A common stock   1,894   $ 316,292.44     1,894   * Class B common stock   11,097,536   $ 209.92     11,097,536   * November                     Class A common stock   2,244   $ 341,117.06     2,244   * Class B common stock   7,423,729   $ 219.12     7,423,729   * December                     Class A common stock   1,787   $ 342,577.29     1,787   * Class B common stock   12,605,335   $ 225.73     12,605,335   *   * The program does not specify a maximum number of shares to be repurchased or obligate Berkshire to repurchase any specific dollar amount or number of Class A or Class B shares and there is no expiration date to the repurchase program. Berkshire will not repurchase its common stock if the repurchases reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings to less than $20 billion. K-30   Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities (Continued) Stock Performance Graph The following chart compares the subsequent value of $100 invested in Berkshire common stock on December 31, 2015 with a similar investment in the Standard & Poor’s 500 Stock Index and in the Standard & Poor’s Property – Casualty Insurance Index**.       * Cumulative return for the Standard & Poor’s indices based on reinvestment of dividends. ** It would be difficult to develop a peer group of companies similar to Berkshire. The Corporation owns subsidiaries engaged in a number of diverse business activities of which the most important is the property and casualty insurance business and, accordingly, management has used the Standard & Poor’s Property—Casualty Insurance Index for comparative purposes. K-31   Item 6. Selected Financial Data Selected Financial Data for the Past Five Years (dollars in millions except per-share data)       2020     2019     2018     2017     2016   Revenues:                                         Insurance premiums earned   $ 63,401     $ 61,078     $ 57,418     $ 60,597     $ 45,881   Sales and service revenues     127,044       134,989       133,336       130,243       123,053   Leasing revenue     5,209       5,856       5,732       2,552       2,553   Railroad, utilities and energy revenues     41,764       43,453       43,673       40,005       37,447   Interest, dividend and other investment income     8,092       9,240       7,678       6,536       6,180   Total revenues   $ 245,510     $ 254,616     $ 247,837     $ 239,933     $ 215,114                                             Investment and derivative gains/losses   $ 40,746     $ 72,607     $ (22,455 )   $ 2,128     $ 8,304                                             Earnings:                                         Net earnings attributable to Berkshire Hathaway (1)   $ 42,521     $ 81,417     $ 4,021     $ 44,940     $ 24,074   Net earnings per share attributable to Berkshire    Hathaway shareholders (2)   $ 26,668     $ 49,828     $ 2,446     $ 27,326     $ 14,645                                             Year-end data:                                         Total assets   $ 873,729     $ 817,729     $ 707,794     $ 702,095     $ 620,854   Notes payable and other borrowings:                                         Insurance and other     41,522       37,590       34,975       40,409       42,559   Railroad, utilities and energy     75,373       65,778       62,515       62,178       59,085                                             Berkshire Hathaway shareholders’ equity     443,164       424,791       348,703       348,296       282,070   Class A equivalent common shares outstanding, in    thousands     1,544       1,625       1,641       1,645       1,644   Berkshire Hathaway shareholders’ equity per    outstanding Class A equivalent common share   $ 287,031     $ 261,417     $ 212,503     $ 211,750     $ 171,542     (1) Includes after-tax investment and derivative gains/losses of $31.6 billion in 2020, $57.4 billion in 2019, $(17.7) billion in 2018, $1.4 billion in 2017 and $6.5 billion in 2016. Beginning in 2018, investment gains/losses include the changes in fair values of equity securities during the period. Previously, investment gains/losses of equity securities were recognized in earnings when securities were sold. Net earnings in 2017 includes a one-time net benefit of $29.1 billion attributable to the enactment of the Tax Cuts and Jobs Act of 2017. (2) Represents net earnings per average equivalent Class A share outstanding. Net earnings per average equivalent Class B common share outstanding is equal to 1/1,500 of such amount. K-32   Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net earnings attributable to Berkshire Hathaway shareholders for each of the past three years are disaggregated in the table that follows. Amounts are after deducting income taxes and exclude earnings attributable to noncontrolling interests (in millions).       2020     2019     2018   Insurance – underwriting   $ 657     $ 325     $ 1,566   Insurance – investment income     5,039       5,530       4,554   Railroad     5,161       5,481       5,219   Utilities and energy     3,091       2,840       2,621   Manufacturing, service and retailing     8,300       9,372       9,364   Investment and derivative gains/losses     31,591       57,445       (17,737 ) Other*     (11,318 )     424       (1,566 ) Net earnings attributable to Berkshire Hathaway shareholders   $ 42,521     $ 81,417     $ 4,021     * Includes goodwill and indefinite-lived intangible asset impairment charges of $11.0 billion in 2020, $435 million in 2019 and $3.0 billion in 2018, which includes our share of charges recorded by Kraft Heinz. Through our subsidiaries, we engage in a number of diverse business activities. We manage our operating businesses on an unusually decentralized basis. There are few centralized or integrated business functions. Our senior corporate management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. The business segment data (Note 27 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion. As the COVID-19 pandemic accelerated beginning in the second half of March, most of our businesses were negatively affected, with the effects to date ranging from relatively minor to severe. Revenues and earnings of most of our manufacturing, service and retailing businesses declined considerably, and in certain instances severely, in the second quarter due to closures of facilities where crowds gather, such as retail stores, restaurants and entertainment venues as well as from public travel restrictions and from closures of certain of our businesses. In each of the third and fourth quarters of 2020, several of these businesses experienced significant increases in revenues and earnings as compared to the second quarter. Our businesses that were deemed essential continued to operate through the pandemic, including our railroad, utilities and energy, insurance and certain of our manufacturing, wholesale distribution and service businesses. In response to the effects of the pandemic, our businesses implemented various business continuity plans to protect our employees and customers. Such plans include a variety of actions, such as temporarily closing certain retail stores, manufacturing facilities and service centers of businesses that were not subject to government mandated closure. Our businesses also implemented practices to protect employees while at work. Such practices included work-from-home, staggered or reduced work schedules, increased cleaning and sanitation of workspaces, providing employee health screenings, eliminating non-essential travel and face-to-face meetings and providing general health reminders intended to lower the risk of spreading COVID-19. We also took actions in response to the economic losses from reductions in consumer demand for products and services we offer and our temporary inability to produce goods and provide services at certain of our businesses. These actions included employee furloughs, wage and salary reductions, capital spending reductions and other actions intended to help mitigate the economic losses and preserve capital and liquidity. Certain of our businesses undertook and may continue to undertake restructuring activities to resize their operations to better fit expected customer demand. We cannot reliably predict future economic effects of the pandemic or when business activities at all of our numerous and diverse operations will normalize. Nor can we predict how these events will alter the future consumption patterns of consumers and businesses we serve. Our insurance businesses generated after-tax earnings from underwriting of $657 million in 2020, $325 million in 2019 and $1.6 billion in 2018. In each year, we generated underwriting earnings from primary insurance and underwriting losses from reinsurance. Insurance underwriting results included after-tax losses from significant catastrophe events of approximately $750 million in 2020, $800 million in 2019 and $1.3 billion in 2018. Underwriting results in 2020 also reflected the effects of the pandemic, arising from premium reductions from the GEICO Giveback program, reduced claims frequencies for private passenger automobile insurance and increased loss estimates for certain commercial insurance and property and casualty reinsurance business. K-33   Management’s Discussion and Analysis (Continued) Results of Operations (Continued) After-tax earnings from insurance investment income in 2020 declined $491 million (8.9%) versus 2019, reflecting lower interest income primarily attributable to declines in interest rates on our substantial holdings of cash and U.S. Treasury Bills. After-tax earnings from insurance investment income in 2019 increased 21.4% over 2018, attributable to increases in interest and dividend income. After-tax earnings of our railroad business decreased 5.8% in 2020 as compared to 2019. Earnings in 2020 reflected lower railroad operating revenues from lower shipping volumes, attributable to the negative effects of the COVID-19 pandemic, partly offset by lower operating costs and the effects of productivity improvements. After-tax earnings of our utilities and energy business increased 8.8% as compared to 2019. The increase reflected increased tax benefits from renewable energy and increased earnings from the real estate brokerage business. Earnings in 2020 from our manufacturing, service and retailing businesses declined 11.4% versus 2019. The effects of the COVID-19 pandemic varied among our manufacturing businesses relative to significance and duration. Other earnings included after-tax goodwill and indefinite-lived intangible asset impairment charges of $11.0 billion in 2020, $435 million in 2019 and $3.0 billion in 2018. Such amounts included our share of impairment charges recorded by Kraft Heinz. Approximately $9.8 billion of the charges in 2020 were attributable to impairments of goodwill and identifiable intangible assets recorded in connection with Berkshire’s acquisition of Precision Castparts in 2016. Other earnings in 2020 also included after-tax foreign exchange rate losses of $764 million related to non-U.S. Dollar denominated debt issued by Berkshire and its U.S.-based finance subsidiary, Berkshire Hathaway Finance Corporation (“BHFC”). After-tax earnings of our railroad business increased 5.0% in 2019 compared to 2018. Earnings in 2019 benefitted from higher rates per car/unit, a curtailment gain related to an amendment to defined benefit retirement plans and ongoing operating cost control initiatives, partly offset by lower freight volumes and incremental costs associated with the persistent flooding conditions and severe winter weather in the first half of 2019. After-tax earnings of our utilities and energy business increased 8.4% in 2019 compared to 2018. Earnings from our manufacturing, service and retailing businesses in 2019 were relatively unchanged from 2018, reflecting mixed operating results with several of these businesses experiencing lower earnings in 2019 from a variety of factors. Revenues and pre-tax earnings in 2019 of certain of these businesses were negatively affected by the unfavorable effects of foreign currency translation attributable to a stronger U.S. Dollar, international trade tensions and U.S. trade tariffs. Investment and derivative gains/losses in each of the three years presented included significant gains and losses on our investments in equity securities, including unrealized gains and losses from market price changes on securities we continue to hold. We believe that investment and derivative gains/losses, whether realized from dispositions or unrealized from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating the economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings. Insurance—Underwriting Our management views our insurance businesses as possessing two distinct activities – underwriting and investing. Underwriting decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett and Berkshire’s corporate investment managers. Accordingly, we evaluate performance of underwriting operations without any allocation of investment income or investment gains/losses. We consider investment income as an integral component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized as non-operating, based on our long-held strategy of acquiring securities and holding those securities for long periods. We believe that such gains and losses are not meaningful in understanding the operating results of our insurance businesses. The timing and amount of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly with respect to our reinsurance businesses. Generally, we consider pre-tax losses in excess of $100 million from a current year catastrophic event to be significant. Changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years, can also significantly affect our periodic underwriting results. Unpaid loss estimates, including estimates under retroactive reinsurance contracts, were approximately $120.8 billion as of December 31, 2020. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation of non-U.S. Dollar denominated liabilities of our U.S. based insurance subsidiaries due to foreign currency exchange rate fluctuations. K-34   Management’s Discussion and Analysis (Continued) Insurance—Underwriting (Continued) Underwriting results in 2020 of certain of our commercial insurance and reinsurance businesses were negatively affected by estimated losses and costs associated with the COVID-19 pandemic, including estimated provisions for claims and uncollectible premiums and incremental operating costs to maintain customer service levels. The effects of the pandemic in the future may be further affected by judicial rulings and regulatory and legislative actions pertaining to insurance coverage and claims and by its effects on general economic activity, which we cannot reasonably estimate at this time. We provide primary insurance and reinsurance products covering property and casualty risks, as well as life and health risks. Our insurance and reinsurance businesses are GEICO, Berkshire Hathaway Primary Group and Berkshire Hathaway Reinsurance Group (“BHRG”). Underwriting results of our insurance businesses are summarized below (dollars in millions).     2020     2019     2018   Pre-tax underwriting earnings (loss):                       GEICO $ 3,428     $ 1,506     $ 2,449   Berkshire Hathaway Primary Group   110       383       670   Berkshire Hathaway Reinsurance Group   (2,700 )     (1,472 )     (1,109 ) Pre-tax underwriting earnings   838       417       2,010   Income taxes and noncontrolling interests   181       92       444   Net underwriting earnings $ 657     $ 325     $ 1,566   Effective income tax rate   21.5 %     24.2 %     21.4 %   GEICO GEICO writes private passenger automobile insurance, offering coverages to insureds in all 50 states and the District of Columbia. GEICO markets its policies mainly by direct response methods where most customers apply for coverage directly to the company via the Internet or over the telephone. A summary of GEICO’s underwriting results follows (dollars in millions).     2020     2019     2018     Amount     %     Amount     %     Amount     %   Premiums written $ 34,928             $ 36,016             $ 34,123           Premiums earned $ 35,093       100.0     $ 35,572       100.0     $ 33,363       100.0   Losses and loss adjustment expenses   26,018       74.1       28,937       81.3       26,278       78.8   Underwriting expenses   5,647       16.1       5,129       14.5       4,636       13.9   Total losses and expenses   31,665       90.2       34,066       95.8       30,914       92.7   Pre-tax underwriting earnings $ 3,428             $ 1,506             $ 2,449             2020 versus 2019 GEICO’s pre-tax underwriting earnings for 2020 reflected significant declines in losses and loss adjustment expenses attributable to lower claims frequencies from the effects of less driving by policyholders during the COVID-19 pandemic offset by the effects of the GEICO Giveback program (see following paragraph) on earned premiums. Premiums written decreased 3.0% compared to 2019. The GEICO Giveback program provided for a 15% premium credit to all voluntary auto and motorcycle policies renewing between April 8, 2020 and October 7, 2020, as well as to any new policies written during the same period. The GEICO Giveback program reduced premiums written in 2020 by approximately $2.9 billion. Premiums earned decreased 1.3% in 2020 compared to 2019, which included reductions of approximately $2.5 billion attributable to the GEICO Giveback program. K-35   Management’s Discussion and Analysis (Continued) Insurance—Underwriting (Continued) GEICO (Continued) Voluntary auto policies-in-force at the end of 2020 increased approximately 820,000 (4.6%) compared to the end of 2019. The increase reflected a 7.3% decrease in new business sales and a 2.5% decrease in non-renewals and policy cancellations. Losses and loss adjustment expenses decreased $2.9 billion (10.1%) in 2020 compared to 2019. GEICO’s ratio of losses and loss adjustment expenses to premiums earned (the “loss ratio”) was 74.1%, a decrease of 7.2 percentage points compared to 2019. The decrease in the loss ratio reflected declines in claims frequencies, partly offset by increases in claims severities and the impact of lower premiums earned attributable to the GEICO Giveback program. Claims frequencies in 2020 were lower for property damage, bodily injury and personal injury protection coverages (twenty-eight to thirty percent range) and collision coverage (twenty-three to twenty-four percent range) compared to 2019. Average claims severities in 2020 were higher for property damage and collision coverages (eight to ten percent range) and bodily injury coverage (twelve to thirteen percent range). Losses and loss adjustment expenses included net reductions of $253 million in 2020 for decreases in the ultimate loss estimates for prior years’ loss events compared to net increases of $42 million in 2019. Losses incurred included $81 million in 2020 from Hurricanes Laura and Sally and U.S. wildfires. There were no losses from significant catastrophe events in 2019. Underwriting expenses in 2020 increased $518 million (10.1%) compared to 2019, reflecting higher employee-related, advertising and technology costs partly offset by lower premium taxes. GEICO’s expense ratio in 2020 (underwriting expenses to premiums earned) was 16.1%, an increase of 1.6 percentage points compared to 2019. The expense ratio increase was primarily attributable to the decline in earned premiums from the GEICO Giveback program. 2019 versus 2018 Premiums written and earned in 2019 increased 5.5% and 6.6%, respectively, compared to 2018. These increases were primarily attributable to voluntary auto policies-in-force growth of 6.4%, partially offset by a decrease in average premiums per auto policy. The increase in voluntary auto policies-in-force primarily resulted from an increase in new business sales and a decrease in policies cancelled or not renewed. Voluntary auto policies-in-force increased approximately 1,068,000 during 2019. Losses and loss adjustment expenses in 2019 increased 10.1% compared to 2018. The loss ratio in 2019 was 81.3%, an increase of 2.5 percentage points over 2018, primarily due to increases in average claims severities. Average claims severities in 2019 were higher versus 2018 for property damage and collision coverages (four to six percent range) and bodily injury coverage (seven to nine percent range). Claims frequencies in 2019 declined compared to 2018 for property damage and collision coverages (two to four percent range) and personal injury protection coverage (one to two percent range) and were relatively unchanged for bodily injury coverage. Losses and loss adjustment expenses included net increases of $42 million in 2019 and net of decreases $222 million in 2018 for changes in the ultimate loss estimates for prior years’ loss events. Underwriting expenses in 2019 increased $493 million (10.6%) over 2018. GEICO’s underwriting expense ratio in 2019 was 14.5%, an increase of 0.6 percentage points compared to 2018. The underwriting expense increase was primarily attributable to increases in advertising expenses and employee-related costs, which reflected wage and staffing increases. K-36   Management’s Discussion and Analysis (Continued) Insurance—Underwriting (Continued) Berkshire Hathaway Primary Group The Berkshire Hathaway Primary Group (“BH Primary”) provides a variety of commercial insurance solutions, including healthcare malpractice, workers’ compensation, automobile, general liability, property and various specialty coverages for small, medium and large clients. The largest of these insurers are Berkshire Hathaway Specialty Insurance (“BH Specialty”), Berkshire Hathaway Homestate Companies (“BHHC”), MedPro Group, Berkshire Hathaway GUARD Insurance Companies (“GUARD”) and National Indemnity Company (“NICO Primary”). Other BH Primary insurers include U.S. Liability Insurance Company, Central States Indemnity Company and MLMIC Insurance Company (“MLMIC”), acquired October 1, 2018. A summary of BH Primary underwriting results follows (dollars in millions).     2020     2019     2018     Amount     %     Amount     %     Amount     %   Premiums written $ 10,212             $ 9,843             $ 8,561           Premiums earned $ 9,615       100.0     $ 9,165       100.0     $ 8,111       100.0   Losses and loss adjustment expenses   7,129       74.1       6,336       69.1       5,261       64.9   Underwriting expenses   2,376       24.7       2,446       26.7       2,180       26.9   Total losses and expenses   9,505       98.8       8,782       95.8       7,441       91.8   Pre-tax underwriting earnings $ 110             $ 383             $ 670             Premiums written increased $369 million (3.7%) in 2020 compared to 2019, reflecting increased premiums written from BH Specialty (34%) and MedPro Group (9%), partially offset by a 13% decrease in premiums written by our other primary insurers. The increase at BH Specialty was driven by increased casualty business globally and the increase at MedPro Group reflected increases across several product categories. The decline in volume by our other primary insurers was primarily due to lower workers’ compensation and commercial automobile volumes and the effect of the divestiture of Applied Underwriters in October 2019. The declines in workers’ compensation and commercial auto business written reflected the effects of reduced exposures and premium refunds related to the COVID-19 pandemic and volume reductions attributable to increased price competition in the market. Premiums written increased $1.3 billion (15.0%) in 2019 compared to 2018. The increase was attributable to higher volumes from BH Specialty, MedPro Group and GUARD, as well as from the effects of the MLMIC acquisition. These increases were partly offset by lower volume at BHHC and the effect of the Applied Underwriters divestiture. BH Primary’s combined loss ratios were 74.1% in 2020, 69.1% in 2019 and 64.9% in 2018, which reflected the effects of significant catastrophe events during the year and changes in estimated losses for prior years’ loss events. Losses and loss adjustment expenses attributable to significant catastrophe events were $207 million in 2020 (Hurricanes Laura and Sally and U.S. wildfires) and $190 million in 2018 (Hurricanes Florence and Michael and the wildfires in California). We incurred no losses from significant catastrophe events in 2019. Losses in 2020 also included $167 million attributable to the pandemic. Finally, losses and loss adjustment expenses were reduced $265 million in 2020, $499 million in 2019 and $715 million in 2018 for net reductions in estimated ultimate liabilities for prior years’ loss events. BH Primary insurers write significant levels of commercial and professional liability and workers’ compensation insurance and the related claim costs may be subject to high severity and long claim-tails. Accordingly, we could experience significant increases in claims liabilities in the future attributable to higher-than-expected claim settlements, adverse litigation outcomes or judicial rulings and other factors not currently anticipated. Berkshire Hathaway Reinsurance Group We offer excess-of-loss and quota-share reinsurance coverages on property and casualty risks and life and health reinsurance to insurers and reinsurers worldwide through several subsidiaries, led by National Indemnity Company (“NICO”), Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”) and General Reinsurance Corporation, General Reinsurance AG and General Re Life Corporation (collectively, “General Re”). We also periodically assume property and casualty risks under retroactive reinsurance contracts written through NICO. In addition, we write periodic payment annuity contracts predominantly through BHLN. K-37   Management’s Discussion and Analysis (Continued) Insurance—Underwriting (Continued) Berkshire Hathaway Reinsurance Group (Continued) Generally, we strive to generate underwriting profits. However, time-value-of-money concepts are important elements in establishing prices for retroactive reinsurance and periodic payment annuity businesses due to the expected long durations of the liabilities. We expect to incur pre-tax underwriting losses from such businesses, primarily through deferred charge amortization and discount accretion charges. We receive premiums at the inception of these contracts, which are then available for investment. A summary of BHRG’s premiums and pre-tax underwriting results follows (dollars in millions).     Premiums written   Premiums earned   Pre-tax underwriting earnings (loss)     2020   2019   2018   2020   2019   2018   2020     2019     2018   Property/casualty $ 13,295   $ 10,428   $ 9,413   $ 12,214   $ 9,911   $ 8,928   $ (799 )   $ 16     $ (207 ) Life/health   5,848     4,963     5,430     5,861     4,869     5,327     (18 )     159       182   Retroactive reinsurance   38     684     517     38     684     517     (1,248 )     (1,265 )     (778 ) Periodic payment annuity   566     863     1,156     566     863     1,156     (617 )     (549 )     (340 ) Variable annuity   14     14     16     14     14     16     (18 )     167       34     $ 19,761   $ 16,952   $ 16,532   $ 18,693   $ 16,341   $ 15,944   $ (2,700 )   $ (1,472 )   $ (1,109 ) Property/casualty A summary of property/casualty reinsurance underwriting results follows (dollars in millions).     2020     2019     2018     Amount     %     Amount     %     Amount     %   Premiums written $ 13,295             $ 10,428             $ 9,413           Premiums earned $ 12,214       100.0     $ 9,911       100.0     $ 8,928       100.0   Losses and loss adjustment expenses   9,898       81.0       7,313       73.8       6,929       77.6   Underwriting expenses   3,115       25.5       2,582       26.0       2,206       24.7   Total losses and expenses   13,013       106.5       9,895       99.8       9,135       102.3   Pre-tax underwriting earnings (loss) $ (799 )           $ 16             $ (207 )           Premiums written in 2020 increased $2.9 billion (27.5%) compared to 2019. The increase was primarily attributable to new business, including a small number of contracts with very large premiums, and increased participations on renewals. Premiums written in 2019 increased $1.0 billion (10.8%) compared to 2018. The increase was primarily attributable to new business, net of non-renewals, and increased participations on renewal business, partly offset by the unfavorable foreign currency translation effects of a stronger U.S. Dollar. Underwriting earnings in 2020 were negatively affected by an increase in losses and loss adjustment expenses of $2.6 billion (35.3%). The loss ratio in 2020 was 81.0%, an increase of 7.2 percentage points over 2019. Losses and loss adjustment expenses in 2020 included estimated losses of $964 million attributable to the COVID-19 pandemic and estimated losses from significant catastrophe events of $667 million from Hurricanes Laura and Sally and U.S. wildfires. Losses and loss adjustment expenses also reflected net increases in estimated ultimate liabilities for prior years’ loss events of $162 million in 2020 primarily attributable to legacy environmental, asbestos and other latent injury claims. Such amount as a percentage of the related net unpaid claim liabilities as of the beginning of 2020 was 0.5%. BHRG’s loss ratio was 73.8% in 2019 and 77.6% in 2018. Losses in 2019 included approximately $1.0 billion from Typhoons Faxia and Hagibis and various U.S. and non-U.S. wildfires, while losses in 2018 included approximately $1.3 billion from Hurricanes Florence and Michael, Typhoon Jebi and wildfires in California. Losses and loss adjustment expenses also included net decreases of $295 million in 2019 and $469 million in 2018 for prior years’ loss events. Such amounts as percentages of the related net unpaid claim liabilities as of the beginning of the applicable year were 1.0% in 2019 and 1.7% in 2018. Underwriting expenses are primarily commissions and brokerage costs. Underwriting expenses in 2020 increased $533 million (20.6%) over 2019, and underwriting expenses in 2019 increased $376 million (17.0%) over 2018. The increases reflected the increases in premium volumes and changes in business mix. K-38   Management’s Discussion and Analysis (Continued) Insurance—Underwriting (Continued) Life/health A summary of our life/health reinsurance underwriting results follows (dollars in millions).     2020     2019     2018     Amount     %     Amount     %     Amount     %   Premiums written $ 5,848             $ 4,963             $ 5,430           Premiums earned $ 5,861       100.0     $ 4,869       100.0     $ 5,327       100.0   Life and health insurance benefits   4,883       83.3       3,800       78.0       4,240       79.6   Underwriting expenses   996       17.0       910       18.7       905       17.0   Total benefits and expenses   5,879       100.3       4,710       96.7       5,145       96.6   Pre-tax underwriting earnings (loss) $ (18 )           $ 159             $ 182           Life/health premiums written increased $885 million (17.8%) in 2020 compared to 2019. Approximately $480 million of the increase was attributable to a reinsurance contract covering U.S. health insurance risks that incepted in the fourth quarter of 2019, which was not renewed for 2021. The remainder of the increase was primarily from volume growth in the Asian and European life reinsurance markets. Underwriting earnings in 2020 were negatively affected by increased life benefits from COVID-19-related claims (approximately $275 million) and continuing losses from increased liabilities from changes in underlying assumptions with respect to disability benefit liabilities in Australia, which were mostly offset by lower other life claims and reduced losses from U.S. long-term care business that is in run-off. The ratio of life and health insurance benefits to premiums earned was 83.3% in 2020 and 81.5% in 2019, which is before the effects of the BHLN contract amendment referred to below. Life/health premiums written in 2019 decreased $467 million (8.6%) compared to 2018. In the first quarter of 2019, BHLN amended a yearly-renewable-term life reinsurance contract with a major reinsurer. BHLN recorded a reduction in earned premiums on this contract in 2019 of $49 million, while premiums earned in 2018 related to this contract were $954 million. In 2019, premiums earned also included $228 million from a new health reinsurance contract and reflected volume growth in life markets, partially offset by the unfavorable effects of foreign currency translation attributable to a stronger U.S. Dollar. Underwriting earnings in 2019 included a one-time gain of $163 million attributable to the BHLN yearly-renewable-term life reinsurance contract amendment. Pre-tax underwriting earnings in 2019 also included losses from increased disability benefit liabilities in Australia, attributable to higher claims experience and changes to various underlying assumptions increased U.S. long-term care liabilities due to discount rate reductions and changes in other actuarial assumptions, and an increase in life claims in North America, partially offset by increased earnings from other international life business. Retroactive reinsurance There were no significant retroactive reinsurance contracts written in 2020. Premiums written were $684 million in 2019 and $517 million in 2018, attributable to a limited number of contracts in each year. Pre-tax underwriting losses in each year derived from deferred charge amortization and changes in the estimated timing and amounts of future claim payments. Underwriting results also include foreign currency exchange gains and losses from the effects of changes in foreign currency exchange rates on non-U.S. Dollar denominated liabilities of our U.S. subsidiaries. Underwriting results included pre-tax foreign currency losses of $139 million in 2020 and $76 million in 2019 and pre-tax gains of $169 million in 2018. Pre-tax underwriting losses before foreign currency gains/losses were $1.1 billion in 2020, $1.2 billion in 2019 and $947 million in 2018. Overall, we decreased estimated ultimate liabilities $399 million in 2020 for prior years’ contracts compared to an increase of $378 million in 2019. After adjustments to the related unamortized deferred charges from changes in the estimated timing and amount of the future claim payments, such changes produced pre-tax underwriting earnings of approximately $230 million in 2020 and pre-tax losses of $125 million in 2019.   Gross unpaid losses assumed under retroactive reinsurance contracts were $41.0 billion at December 31, 2020 and $42.4 billion at December 31, 2019. Unamortized deferred charge assets related to such reinsurance contracts were $12.4 billion at December 31, 2020 and $13.7 billion at December 31, 2019. Deferred charge assets will be charged to earnings over the expected remaining claims settlement periods through periodic amortization. K-39   Management’s Discussion and Analysis (Continued) Insurance—Underwriting (Continued) Periodic payment annuity Periodic payment annuity premiums earned in 2020 decreased $297 million (34.4%) compared to 2019, which decreased $293 million (25.3%) from 2018. Periodic payment annuity business is price sensitive. The volumes written can change rapidly due to changes in prices, which are affected by prevailing interest rates, the perceived risks and durations associated with the expected annuity payments, as well as the level of competition. Periodic payment annuity contracts normally produce pre-tax underwriting losses deriving from the recurring discount accretion of annuity liabilities. Underwriting results also include gains or losses from the effects of changes in mortality and interest rates and from foreign currency exchange rate changes on non-U.S. Dollar denominated liabilities of our U.S. subsidiaries. Pre-tax underwriting results included foreign currency losses of $67 million in 2020 and $40 million in 2019 compared to pre-tax gains of $93 million in 2018. Excluding foreign currency gains/losses, pre-tax underwriting losses from periodic payment annuity contracts were $550 million in 2020, $509 million in 2019 and $433 million in 2018. These losses primarily derived from the recurring discount accretion of annuity liabilities, as well as from the impact of mortality and interest rate changes. Discounted annuity liabilities were $14.3 billion at December 31, 2020 and $13.5 billion at December 31, 2019. The weighted average discount rate was approximately 4.0%. Variable annuity Variable annuity guarantee reinsurance contracts produced pre-tax losses of $18 million in 2020 compared to pre-tax earnings of $167 million in 2019 and $34 million in 2018. The results of this business reflect changes in remaining liabilities for underlying guaranteed benefits reinsured, which are affected by changes in securities markets and interest rates and from the periodic amortization of expected profit margins. Underwriting results from these contracts can be volatile, reflecting the volatility of securities markets, interest rates and foreign currency exchange rates. Insurance—Investment Income A summary of net investment income attributable to our insurance operations follows (dollars in millions).                           Percentage change     2020     2019     2018   2020 vs 2019   2019 vs 2018   Interest and other investment income $ 1,059     $ 2,075     $ 1,851     (49.0 )%   12.1 % Dividend income   4,890       4,525       3,652     8.1     23.9   Pre-tax net investment income   5,949       6,600       5,503     (9.9 )   19.9   Income taxes and noncontrolling interests   910       1,070       949               Net investment income $ 5,039     $ 5,530     $ 4,554               Effective income tax rate   15.3 %     16.1 %     17.2 %               Interest and other investment income declined $1.0 billion (49.0%) in 2020 compared to 2019, primarily due to lower income from short-term investments. We continue to hold substantial balances of cash, cash equivalents and short-term U.S. Treasury Bills. Short-term interest rates declined over the second half of 2019 and the decline continued throughout 2020, which resulted in significantly lower interest income. We expect such rates, which are historically low, to remain low, negatively affecting our earnings from such investments in 2021. Nevertheless, we believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to short-term investments. K-40   Management’s Discussion and Analysis (Continued) Insurance—Investment Income (Continued) Dividend income increased $365 million (8.1%) in 2020 compared to 2019. The increase was primarily attributable to dividends from the investment in $10 billion liquidation value of 8% cumulative preferred stock of Occidental Petroleum Corporation (“Occidental”) on August 8, 2019, partly offset by lower dividends from common stock investments. Interest and other investment income increased $224 million (12.1%) in 2019 compared to 2018, primarily due to higher interest rates on short-term investments and interest from a term loan with Seritage Growth Properties, partially offset by lower income earned from fixed maturity securities and limited partnership investments. Dividend income increased $873 million (23.9%) in 2019 compared to 2018. The increase in dividend income was attributable to an overall increase in investment levels, including the investment in Occidental and increased dividends from common stock investments. Invested assets of our insurance businesses derive from shareholder capital, including reinvested earnings, and from net liabilities under insurance and reinsurance contracts or “float.” The major components of float are unpaid losses and loss adjustment expenses, including liabilities under retroactive reinsurance contracts, life, annuity and health insurance benefit liabilities, unearned premiums and other liabilities due to policyholders, which are reduced by insurance premiums and reinsurance receivables, deferred charges assumed under retroactive reinsurance contracts and deferred policy acquisition costs. Float approximated $138 billion at December 31, 2020, $129 billion at December 31, 2019 and $123 billion at December 31, 2018. Our combined insurance operations generated pre-tax underwriting earnings of approximately $838 million in 2020, $417 million in 2019 and $2.0 billion in 2018, and consequently, the average cost of float for each of those periods was negative. A summary of cash and investments held in our insurance businesses as of December 31, 2020 and 2019 follows (in millions).       December 31,       2020     2019   Cash, cash equivalents and U.S. Treasury Bills   $ 67,082     $ 64,908   Equity securities     269,498       240,126   Fixed maturity securities     20,317       18,537   Other     6,220       2,481       $ 363,117     $ 326,052     Fixed maturity investments as of December 31, 2020 were as follows (in millions).       Amortized cost     Unrealized gains/losses     Carrying value   U.S. Treasury, U.S. government corporations and agencies   $ 3,339     $ 55     $ 3,394   Foreign governments     11,232       105       11,337   Corporate bonds     4,678       462       5,140   Other     382       64       446       $ 19,631     $ 686     $ 20,317     U.S. government obligations are rated AA+ or Aaa by the major rating agencies. Approximately 88% of all foreign government obligations were rated AA or higher by at least one of the major rating agencies. Foreign government securities include obligations issued or unconditionally guaranteed by national or provincial government entities. K-41   Management’s Discussion and Analysis (Continued) Railroad (“Burlington Northern Santa Fe”) Burlington Northern Santa Fe, LLC (“BNSF”) operates one of the largest railroad systems in North America, with approximately 32,500 route miles of track in 28 states. BNSF also operates in three Canadian provinces. BNSF classifies its major railroad business groups by type of product shipped which includes consumer products, industrial products, agricultural products and coal. A summary of BNSF’s earnings follows (dollars in millions).                         Percentage change       2020   2019   2018   2020 vs 2019   2019 vs 2018   Railroad operating revenues   $ 20,181   $ 22,745   $ 22,999     (11.3 )%   (1.1 )% Railroad operating expenses:                                 Compensation and benefits     4,542     5,270     5,322     (13.8 )   (1.0 ) Fuel     1,789     2,944     3,346     (39.2 )   (12.0 ) Purchased services     1,954     2,049     2,131     (4.6 )   (3.8 ) Depreciation and amortization     2,460     2,389     2,306     3.0     3.6   Equipment rents, materials and other     1,684     2,028     2,110     (17.0 )   (3.9 ) Total     12,429     14,680     15,215     (15.3 )   (3.5 ) Railroad operating earnings     7,752     8,065     7,784     (3.9 )   3.6   Other revenues (expenses):                                 Other revenues     688     770     856     (10.6 )   (10.0 ) Other expenses, net     (611 )   (515 )   (736 )   18.6     (30.0 ) Interest expense     (1,037 )   (1,070 )   (1,041 )   (3.1 )   2.8   Pre-tax earnings     6,792     7,250     6,863     (6.3 )   5.6   Income taxes     1,631     1,769     1,644     (7.8 )   7.6   Net earnings   $ 5,161   $ 5,481   $ 5,219     (5.8 )   5.0   Effective income tax rate     24.0 %   24.4 %   24.0 %               The following table summarizes BNSF’s railroad freight volumes by business group (cars/units in thousands).     Cars/Units   Percentage change       2020   2019   2018   2020 vs 2019   2019 vs 2018   Consumer products     5,266     5,342     5,597     (1.4 )%   (4.6 )% Industrial products     1,622     1,931     1,991     (16.0 )   (3.0 ) Agricultural products     1,189     1,146     1,208     3.8     (5.1 ) Coal     1,404     1,802     1,902     (22.1 )   (5.3 ) Total cars/units     9,481     10,221     10,698     (7.2 )   (4.5 )   2020 versus 2019 Railroad operating revenues declined 11.3% in 2020 versus 2019, reflecting a 7.2% decrease in volume and a 4.5% decrease in average revenue per car/unit. The decrease in revenue per car/unit was attributable to lower fuel surcharge revenue driven by lower fuel prices and business mix changes. The overall volume decrease was primarily due to the COVID-19 pandemic, which severely impacted volumes through the first half of the year. Volumes sequentially improved from earlier periods and recovered overall to pre-pandemic levels by the end of the year.   BNSF is an important component of the national and global supply chain and, as an essential business, has continued to operate throughout the duration of the COVID-19 pandemic. However, the pandemic caused significant economic disruptions that adversely affected the demand for transportation services. The pandemic continues to evolve, and the full extent to which it may impact BNSF's business, operating results, financial condition, or liquidity will depend on future developments. We believe BNSF's fundamental business remains strong and it has ample liquidity to continue business operations during this volatile period. K-42   Management’s Discussion and Analysis (Continued) Railroad (“Burlington Northern Santa Fe”) (Continued) Pre-tax earnings were $6.8 billion in 2020, a decrease of 6.3% from 2019, principally due to the negative impacts of the pandemic on volumes. In addition, pre-tax earnings in 2019 included an operating revenue increase related to the favorable outcome of an arbitration hearing and a retirement plan curtailment gain that is included in other expenses, net in the preceding table. These effects were partially offset by significant improvements in 2020 in service, system velocity and cost performance compared to 2019, along with lower costs related to severe winter weather and flooding on parts of the network, which negatively affected expenses and service levels in 2019. Operating revenues from consumer products of $7.3 billion in 2020 declined 7.6% compared to 2019, primarily due to a 6.3% decrease in average revenue per car/unit along with lower volumes. The volume decrease was primarily due to the impact of the pandemic. Lower international and automotive volumes were offset by higher domestic intermodal volumes. Increased retail sales, inventory replenishments by retailers and e-commerce activity produced recovery of intermodal volumes in the second half of 2020. Operating revenues from industrial products were $5.0 billion in 2020, a decrease of 17.0% from 2019. The decrease was primarily attributable to the decline in volume and to a lesser extent lower average revenue per car/unit. Volumes decreased primarily due to lower U.S. industrial production driven by the pandemic, including reduced production and demand in the energy sector, which drove lower sand and petroleum products volume, along with reduced steel demand, which drove lower taconite volume. Operating revenues from agricultural products increased 2.9% to $4.8 billion in 2020 compared to 2019. The increase was due to higher volumes, partially offset by slightly lower average revenue per car/unit. The volume increase was primarily due to higher grain and meal exports, partially offsetting adverse impacts of the pandemic, primarily for ethanol and sweeteners shipments. Operating revenues from coal decreased 28.5% to $2.7 billion in 2020 compared to 2019. This decrease was primarily due to lower volumes, as well as lower revenues per car/unit. Volumes decreased primarily due to lower natural gas prices, lower electricity demand driven by the pandemic, utility coal plant retirements and mild temperatures. Railroad operating expenses declined 15.3% to $12.4 billion in 2020 as compared to 2019. The ratio of railroad operating expenses to railroad operating revenues declined 2.9 percentage points to 61.6% in 2020 versus 2019. Railroad operating expenses in 2020 reflected lower volume-related costs, productivity improvements, the effects of cost control initiatives and improved weather conditions compared to 2019. Compensation and benefits expenses decreased $728 million (13.8%) in 2020 compared to 2019, primarily due to lower employee counts associated with lower volume and due to improved workforce productivity. Fuel expenses decreased $1.2 billion (39.2%) compared to 2019, primarily due to lower average fuel prices, lower volumes and improved fuel efficiency. Purchased services expense declined $95 million (4.6%) compared to 2019. The decrease was primarily due to lower volume, improved productivity and higher insurance recoveries in 2020 related to network flooding in 2019. Equipment rents, materials and other expense decreased $344 million (17.0%) compared to 2019, primarily due to lower volume-related costs, the effects of cost controls and lower personal injury and derailment expenses. 2019 versus 2018 Railroad operating revenues were $22.7 billion in 2019, a decline of 1.1% versus 2018. During 2019, BNSF’s revenues reflected a 3.6% comparative increase in average revenue per car/unit and a 4.5% decrease in volume. The increase in average revenue per car/unit was attributable to increased rates per car/unit and a favorable outcome of an arbitration hearing. Pre-tax earnings were approximately $7.3 billion in 2019, an increase of 5.6% over 2018. BNSF experienced severe winter weather and flooding on parts of the network, which negatively affected revenues, expenses and service levels. In addition to the impact of an increase in average revenue per car/unit, earnings in 2019 benefited from a reduction in total operating expenses. K-43   Management’s Discussion and Analysis (Continued) Railroad (“Burlington Northern Santa Fe”) (Continued) Operating revenues from consumer products were $7.9 billion in 2019, a decrease of 0.5% compared to 2018, reflecting volume decreases and higher average revenue per car/unit. The volume decreases were driven by moderated demand and the availability of truck capacity, as well as lower west coast imports. Operating revenues from industrial products were $6.1 billion in 2019, an increase of 1.7% from 2018. The increase was attributable to higher average revenue per car/unit, partially offset by a decrease in volume. Volumes decreased primarily due to overall softness in the industrial sector, lower sand volumes and reduced car loadings, due to the challenging weather conditions in 2019. Increased demand for petroleum products and liquefied petroleum gas, partially offset the other decreases in volumes. Operating revenues from agricultural products decreased 0.3% in 2019 to $4.7 billion compared to 2018. The decrease was due to lower volumes and higher average revenue per car/unit. The volume decreases were attributable to export competition from non-U.S. sources, the impacts of international trade policies and the challenging weather conditions in 2019. Operating revenues from coal decreased 7.4% in 2019 to $3.7 billion compared to 2018, reflecting lower average revenue per car/unit and lower volumes. Volumes were negatively impacted by adverse weather conditions, as well as from the effects of lower natural gas prices. Railroad operating expenses were $14.7 billion in 2019, a decrease of $535 million compared to 2018. Our ratio of operating expenses to railroad operating revenues in 2019 of 64.5% decreased 1.7 percentage points versus 2018. Operating expenses in 2019 reflected lower volume-related costs, lower fuel prices and the effects of cost control initiatives, partially offset by the costs associated with the adverse weather conditions. Fuel expenses decreased $402 million in 2019 compared to 2018, primarily due to lower average fuel prices, lower volumes and improved fuel efficiency. Purchased services expense decreased $82 million compared to 2018. The decrease was due to lower purchased transportation costs of our logistics services business, lower drayage, lower services expense and higher insurance recoveries. Equipment rents, materials and other expense decreased $82 million compared to 2018, due to lower locomotive and various other costs associated with lower volumes and cost controls. Other expenses, net decreased $221 million compared to 2018. In 2019, other expenses were net of a $120 million curtailment gain from an amendment to the company-sponsored defined benefit retirement plans. Utilities and Energy (“Berkshire Hathaway Energy Company”) We currently own 91.1% of the outstanding common stock of Berkshire Hathaway Energy Company (“BHE”), which operates a global energy business. BHE’s domestic regulated utility interests are comprised of PacifiCorp, MidAmerican Energy Company (“MEC”) and NV Energy. In Great Britain, BHE subsidiaries operate two regulated electricity distribution businesses referred to as Northern Powergrid. BHE’s natural gas pipelines consist of five domestic regulated interstate natural gas pipeline systems and a 25% interest in a liquefied natural gas export, import and storage facility in which BHE operates and consolidates for financial reporting purposes. Three of these systems were acquired on November 1, 2020 from Dominion Energy, Inc. (“BHE GT&S acquisition”). See Note 2 to accompanying Consolidated Financial Statements. Other energy businesses include a regulated electricity transmission-only business in Alberta, Canada (“AltaLink, L.P.”) and a diversified portfolio of mostly renewable independent power projects. BHE also operates the largest residential real estate brokerage firm and one of the largest residential real estate brokerage franchise networks in the United States. K-44   Management’s Discussion and Analysis (Continued) Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued) The rates our regulated businesses charge customers for energy and services are based in large part on the costs of business operations, including income taxes and a return on capital, and are subject to regulatory approval. To the extent such costs are not allowed in the approved rates, operating results will be adversely affected. A summary of BHE’s net earnings follows (dollars in millions).                               2020     2019     2018   Revenues:                       Energy operating revenue $ 15,556     $ 15,371     $ 15,573   Real estate operating revenue   5,396       4,473       4,214   Other income (loss)   79       270       200   Total revenue   21,031       20,114       19,987   Costs and expense:                       Energy cost of sales   4,187       4,586       4,769   Energy operating expense   7,539       6,824       6,969   Real estate operating costs and expense   4,885       4,251       4,000   Interest expense   1,941       1,835       1,777   Total costs and expense   18,552       17,496       17,515   Pre-tax earnings   2,479       2,618       2,472   Income tax expense (benefit)*   (1,010 )     (526 )     (452 ) Net earnings after income taxes   3,489       3,144       2,924   Noncontrolling interests   71       18       23   Net earnings attributable to BHE   3,418       3,126       2,901   Noncontrolling interests and preferred stock dividends   327       286       280   Net earnings attributable to Berkshire Hathaway shareholders $ 3,091     $ 2,840     $ 2,621   Effective income tax rate   (40.7 )%     (20.1 )%     (18.3 )%   *Includes significant production tax credits from wind-powered electricity generation. The discussion of BHE’s operating results that follows is based on after-tax earnings, reflecting how the energy businesses are managed and evaluated. A summary of net earnings attributable to BHE follows (dollars in millions).                             Percentage change     2020     2019     2018   2020 vs 2019   2019 vs 2018   PacifiCorp $ 741     $ 773     $ 739     (4.1 )%   4.6 % MidAmerican Energy Company   818       781       669     4.7     16.7   NV Energy   410       365       317     12.3     15.1   Northern Powergrid   201       256       239     (21.5 )   7.1   Natural gas pipelines   528       422       387     25.1     9.0   Other energy businesses   697       608       489     14.6     24.3   Real estate brokerage   375       160       145     134.4     10.3   Corporate interest and other   (352 )     (239 )     (84 )   47.3     184.5     $ 3,418     $ 3,126     $ 2,901     9.3     7.8   K-45     Management’s Discussion and Analysis (Continued) Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued) 2020 versus 2019 PacifiCorp operates a regulated electric utility in portions of several Western states, including Utah, Oregon and Wyoming. PacifiCorp after-tax earnings decreased $32 million in 2020 compared to 2019. The decrease reflected higher operating expenses and net interest expense, partially offset by increased production tax credit benefits driven by repowered wind projects placed in-service, higher utility margin (operating revenue less cost of sales) and higher other income. The increase in operating expenses was largely due to costs associated with wildfires, a settlement agreement and pension benefits. PacifiCorp utility margin was $3.3 billion in 2020, an increase of $47 million compared to 2019. The increase reflected higher operating revenue from favorable average retail prices and lower generation and purchased power costs, partially offset by lower operating revenue from a 1.4% decline in retail customer volumes. The decline in retail customer volumes was due to the impacts of the pandemic, partly offset by an increase in the average number of customers and the favorable impacts of weather. MEC operates a regulated electric and natural gas utility primarily in Iowa and Illinois. After-tax earnings increased $37 million in 2020 compared to 2019. The increase reflected increased income tax benefits, primarily from production tax credits, driven by repowered and new wind projects placed in-service, and the effects of ratemaking. These effects were partially offset by higher depreciation expense from additional assets placed in-service, higher net interest expense, lower other income and lower electric and natural gas utility margins. MEC electric utility margin decreased $10 million to $1.8 billion in 2020 compared to 2019. The electric utility margin decrease was attributable to lower operating revenue from unfavorable wholesale prices and price impacts from changes in retail sales mix. These effects were mostly offset by lower generation and purchased power costs and higher operating revenue from a 1.2% increase in retail customer volumes. The increase in electric retail customer volumes was primarily due to increased usage by certain industrial customers, partially offset by the impacts of the pandemic. Natural gas utility margin decreased $9 million in 2020 compared to 2019, due to the unfavorable impacts of weather. NV Energy operates regulated electric and natural gas utilities in Nevada. After-tax earnings increased $45 million in 2020 compared to 2019. The increase reflected higher electric utility margin and lower income tax expense from the favorable impacts of ratemaking, partially offset by higher operating expenses. The increase in operating expenses was mainly due to higher earnings sharing accruals for customers at Nevada Power Company and higher depreciation expense from additional assets placed in-service. NV Energy electric utility margin increased $100 million to $1.7 billion in 2020 compared to 2019. The increase was primarily due to higher operating revenue from a 1.5% increase in electric retail customer volumes, including distribution-only service customers and price impacts from changes in retail sales mix. The increase in electric retail customer volumes was primarily due to the favorable impacts of weather, partially offset by the impacts of the pandemic. Northern Powergrid after-tax earnings decreased $55 million in 2020 as compared to 2019. The earnings decrease reflected write-offs of gas exploration costs and higher income tax expense, in large part from a change in the United Kingdom corporate income tax rate, partially offset by lower pension costs and interest expense. Natural gas pipelines after-tax earnings increased $106 million in 2020 compared to 2019. The increase was primarily due to $73 million of earnings from the BHE GT&S acquisition, the favorable impact of a rate case settlement at Northern Natural Gas and higher transportation volume and rates, partially offset by higher depreciation, operating expenses and interest expenses. Other energy business after-tax earnings in 2020 increased $89 million compared to 2019. The increase was primarily due to increased income tax benefits from renewable wind tax equity investments, largely from projects reaching commercial operation, partially offset by lower operating revenue and higher operating expenses from geothermal and natural gas units. K-46   Management’s Discussion and Analysis (Continued) Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued) Real estate brokerage after-tax earnings increased $215 million in 2020 compared to 2019. The increase reflected higher earnings from mortgage and brokerage services. The increase in earnings from mortgage services was attributable to higher refinance activity from the favorable interest rate environment and the earnings increase from brokerage services was due to an increase of 13.1% in closed transaction dollar volume. Corporate interest and other after-tax earnings decreased $113 million in 2020 compared to 2019. The decline was primarily due to higher interest expense and lower state income tax benefits. 2019 versus 2018 PacifiCorp after-tax earnings were $773 million in 2019, an increase of $34 million compared to 2018, reflecting slightly higher utility margin and higher other income, partly offset by higher depreciation expense from additional assets placed in-service. PacifiCorp utility margin was $3.3 billion in 2019, an increase of $4 million compared to 2018, as a 0.4% increase in retail customer volumes was largely offset by lower wholesale revenue mainly due to lower volumes. MEC after-tax earnings of $781 million in 2019 increased $112 million as compared to 2018, primarily attributable to increases in electric utility margin, income tax benefits from higher production tax credits and the effects of ratemaking and other income. Electric utility margin in 2019 increased 2% to $1.8 billion, primarily due to higher wind generation and higher retail customer volumes of 1.4%, as a 4.0% increase in industrial volumes was largely offset by lower residential volumes from the unfavorable impacts of weather. These earnings increases were partially offset by increased depreciation expense from additional assets placed in-service (net of lower Iowa revenue sharing) and higher net interest expense. NV Energy after-tax earnings were $365 million in 2019, an increase of $48 million compared to 2018, as lower operating expenses were partly offset by lower electric utility margin. Electric utility margin in 2019 was $1.6 billion, representing a decrease of $58 million (3%) versus 2018. The decrease was primarily due to a 1.4% decline in retail customer volumes, largely attributable to the impacts of weather, and rate reductions from the impact of the changes in U.S. income tax laws, partially offset by retail customer growth. Northern Powergrid after-tax earnings increased in 2019 compared to 2018, reflecting higher distribution revenues and lower operating expenses, which were largely from lower pension settlement losses in 2019, partially offset by the unfavorable foreign currency translation effects of a strong average U.S. Dollar. Distribution revenues increased $18 million, attributable to higher tariff rates, partly offset by lower distributed units. Natural gas pipelines after-tax earnings increased $35 million in 2019 compared to 2018, primarily due to higher transportation revenues from generally higher volumes and rates, favorable margins from system balancing activities and a decrease in operating expenses, partly offset by higher depreciation expense from increased spending on capital projects. Other energy businesses after-tax earnings in 2019 increased $119 million compared to 2018. The increase was primarily due to improved earnings from renewable wind energy projects ($49 million from tax equity investments and $25 million from new and existing projects and activities), higher income from geothermal and natural gas units, largely due to higher generation and favorable margins and lower operating expenses, partly offset by lower earnings at a hydroelectric facility in the Philippines due to lower rainfall. The increase in earnings also reflected the effects of favorable regulatory decisions received in 2019 and the unfavorable impacts of a regulatory rate order received in 2018 at AltaLink L.P. Real estate brokerage after-tax earnings increased in 2019 compared to 2018. The increase was primarily due to higher earnings at mortgage businesses due to increased refinance activity and earnings attributable to recent business acquisitions, partially offset by lower earnings at brokerage businesses, primarily from a decrease in closed units and lower margins. Corporate interest and other after-tax earnings decreased $155 million in 2019 compared to 2018. The earnings decline was primarily due to income tax benefits recognized in 2018 related to the reduction of accrued repatriation taxes on undistributed foreign earnings in connection with the changes in U.S. income tax laws, higher interest expense and lower earnings from non-regulated energy services. K-47   Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing A summary of revenues and earnings of our manufacturing, service and retailing businesses follows (dollars in millions).                               Percentage change         2020     2019     2018     2020 vs 2019     2019 vs 2018     Revenues                                           Manufacturing   $ 59,079     $ 62,730     $ 61,883       (5.8 )%     1.4 %   Service and retailing     75,018       79,945       78,926       (6.2 )     1.3         $ 134,097     $ 142,675     $ 140,809       (6.0 )     1.3     Pre-tax earnings *                                           Manufacturing   $ 8,010     $ 9,522     $ 9,366       (15.9 )%     1.7 %   Service and retailing     2,879       2,843       2,942       1.3       (3.4 )         10,889       12,365       12,308       (11.9 )     0.5     Income taxes and noncontrolling interests     2,589       2,993       2,944                         $ 8,300     $ 9,372     $ 9,364                     Effective income tax rate     23.3 %     23.7 %     23.4 %                   Pretax earnings as a percentage of revenues     8.1 %     8.7 %     8.7 %                     * Excludes certain acquisition accounting expenses, which primarily related to the amortization of identified intangible assets recorded in connection with our business acquisitions. The after-tax acquisition accounting expenses excluded from earnings above were $783 million in 2020, $788 million in 2019 and $932 million in 2018. In 2020, such expenses also exclude after-tax goodwill and indefinite-lived intangible asset impairment charges of $10.4 billion. These expenses are included in “Other” in the summary of earnings on page K-33 and in the “Other” earnings section on page K-56. Manufacturing Our manufacturing group includes a variety of industrial, building and consumer products businesses. A summary of revenues and pre-tax earnings of our manufacturing operations follows (dollars in millions).                               Percentage change         2020     2019     2018     2020 vs 2019     2019 vs 2018     Revenues                                           Industrial products   $ 25,667     $ 30,594     $ 30,679       (16.1 )%     (0.3 )%   Building products     21,244       20,327       18,677       4.5       8.8     Consumer products     12,168       11,809       12,527       3.0       (5.7 )       $ 59,079     $ 62,730     $ 61,883                     Pretax earnings                                           Industrial products   $ 3,755     $ 5,635     $ 5,822       (33.4 )%     (3.2 )%   Building products     2,858       2,636       2,336       8.4       12.8     Consumer products     1,397       1,251       1,208       11.7       3.6         $ 8,010     $ 9,522     $ 9,366                     Pre-tax earnings as a percentage of revenues                                           Industrial products     14.6 %     18.4 %     19.0 %                   Building products     13.5 %     13.0 %     12.5 %                   Consumer products     11.5 %     10.6 %     9.6 %                     K-48     Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing (Continued) Industrial products The industrial products group includes specialty chemicals (The Lubrizol Corporation (“Lubrizol”)), complex metal products for aerospace, power and general industrial markets (Precision Castparts Corp. (“PCC”)), metal cutting tools/systems (IMC International Metalworking Companies (“IMC”)), equipment and systems for the livestock and agricultural industries (CTB International (“CTB”)), and a variety of industrial products for diverse markets (Marmon, Scott Fetzer and LiquidPower Specialty Products (“LSPI”)). Marmon consists of more than 100 autonomous manufacturing and service businesses, including equipment leasing for the rail, intermodal tank container and mobile crane industries. 2020 versus 2019 Revenues of the industrial products group in 2020 declined $4.9 billion (16.1%) from 2019, while pre-tax earnings declined $1.9 billion (33.4%). Pre-tax earnings as a percentage of revenues for the group were 14.6% in 2020 compared to 18.4% in 2019. PCC’s revenues were $7.3 billion in 2020, a decrease of $3.0 billion (28.9%) compared to 2019. Historically, a significant portion of PCC’s earnings have been dependent on sales related to the aerospace industry. The COVID-19 pandemic contributed to material declines in commercial air travel and aircraft production. Airlines responded to the pandemic by delaying delivery of aircraft orders or, in some cases, cancelling aircraft orders, resulting in significant reductions in build rates by aircraft manufacturers and significant inventory reduction initiatives by PCC’s customers. Further, Boeing’s 737 MAX aircraft production issues contributed to the declines in aerospace product sales across the industry in 2020. These factors resulted in significant declines in demand for PCC’s aerospace products in 2020. In 2020, PCC’s sales of products for power markets increased 2.2%, primarily driven by increases in industrial gas turbine products, offset by reductions in oil and gas products. PCC’s pre-tax earnings in 2020 were $650 million, a decrease of 64.5% compared to 2019, which reflected the decline in aerospace product sales as well as increased manufacturing inefficiencies attributable to lower volumes. In response to the effects of the pandemic, PCC has taken aggressive restructuring actions to resize operations in response to reduced expected volumes in aerospace markets. PCC’s worldwide workforce was reduced by about 40% since the end of 2019. PCC recorded charges for restructuring and inventory and fixed asset charges of approximately $295 million in 2020. Although earnings as a percentage of revenues were negatively impacted in 2020 due to inefficiencies associated with aligning operations to reduced aircraft build rates, the restructuring actions taken contributed to improved margins in the fourth quarter compared to earlier in the year and further margin improvements are expected in the future. The level of aircraft production is currently expected to slowly increase beginning in the latter half of 2021. However, this is dependent of the timing and extent that COVID-19 infections are lowered on a sustained basis and the return to historical levels of air travel and subsequent demand for aerospace products. Lubrizol’s revenues were $5.95 billion in 2020, a decrease of 8.0% compared to 2019. The decline was primarily attributable to lower volumes from economic effects of the pandemic and a fire at an Additives manufacturing, blending and storage facility in Rouen, France at the end of the third quarter of 2019, which resulted in the temporary suspension of operations. Revenues in 2020 also reflected lower selling prices, partly offset by favorable changes in sales mix. Lubrizol’s consolidated volume for the year declined 9% in 2020 compared to 2019, due to declines in the Additives and Engineered Materials product lines, partly offset by higher volumes in Life Science products. Overall, the effects of the pandemic on Lubrizol were more pronounced in the first half of the year, as volumes rebounded significantly in the second half. Lubrizol’s pre-tax earnings in 2020 were approximately $1.0 billion, essentially unchanged compared to 2019. The effects of lower sales volumes, including the effects from the Rouen fire and lower average selling prices were offset by lower average raw material costs, lower operating expenses and insurance recoveries in 2020 associated with the Rouen fire. Marmon’s revenues were $7.6 billion in 2020, a decrease of $681 million (8.2%) compared to 2019. Excluding the effects of business acquisitions, revenues decreased in essentially all sectors, primarily attributable to lower demand from the effects of the pandemic. The largest effects were experienced in the Transportation Products and Foodservice Technologies sectors. Additionally, revenues decreased due to lower metal prices in the Metal Services sector and the effect of business divestitures in 2019. Declines in oil prices in 2020 also adversely affected demand and revenues in the Rail & Leasing and Crane Services sectors. Marmon’s pre-tax earnings in 2020 decreased $312 million (24.3%) as compared to 2019. The decrease reflected the declines in revenues, increased restructuring charges and lower interest income. Restructuring initiatives were initiated in response to the lower product demand, particularly in the sectors most impacted by the pandemic. K-49   Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing (Continued) Industrial products (Continued) IMC’s revenues declined 13.2% in 2020 compared to 2019, reflecting negative economic effects from the pandemic on demand for cutting tools in most geographic regions, partly offset by the effects of business acquisitions over the past year. IMC’s pre-tax earnings declined 26.6% in 2020 versus 2019, attributable to declines in sales and margins due to lower volumes and to changes in sales mix. 2019 versus 2018 Revenues of the industrial products group were slightly lower in 2019 than in 2018 and pre-tax earnings declined 3.2% compared to 2018. Pre-tax earnings as a percentage of revenues for the group were 18.4% in 2019 compared to 19.0% in 2018. PCC’s revenues were $10.3 billion in 2019, an increase of $74 million (0.7%) compared to 2018. In 2019, PCC generated increased sales in aerospace markets, which was partially offset by lower sales in the power markets. The increase in aerospace sales was tempered due to significant efforts focused on the ramp-up requirements for certain new aerospace programs, such as LEAP, that created manufacturing inefficiencies and slowed production cycles contributing to delays in product deliveries and sales. PCC’s pre-tax earnings increased 5.1% in 2019 compared to 2018, reflecting increased sales of aerospace products and higher earnings from various non-recurring items in 2019, which were partially offset by lower earnings from the power markets due to the decrease in sales. Temporary unplanned shutdowns of certain metals facilities and metal press outages also negatively impacted earnings in 2018. PCC incurred incremental costs in 2019 to meet required deliveries to customers associated with the increased aerospace demand, which negatively affected margins and earnings. The production headwinds experienced were primarily attributable to shortages of qualified skilled labor and the rapid increase in requirements for newer, complex aerospace products. Lubrizol’s revenues were $6.5 billion in 2019, a decrease of 5.2% compared to 2018. The decline reflected lower volumes, including the effects from the Rouen fire, and unfavorable foreign currency translation effects, partly offset by higher average selling prices which were necessitated by raw material cost increases. Lubrizol’s consolidated volume in 2019 declined 4% from 2018, primarily due to volume decline of 6% in the Additives product lines. Lubrizol’s pre-tax earnings in 2019 for the fourth quarter and year decreased 50.5% and 14.6%, respectively, compared to the same periods in 2018. Earnings in 2019 were significantly impacted by costs and lost business associated with the Rouen fire. Lubrizol’s operating results in 2019 were also negatively affected by lower sales volumes, higher manufacturing expenses and unfavorable foreign currency translation effects, partly offset by improved material margins. Marmon’s revenues were $8.3 billion in 2019, an increase of $146 million (1.8%) compared to 2018. The revenue increase reflected the effects of business acquisitions, higher volumes in several business sectors, which were largely offset by lower distribution volumes in the Metals Services sector, unfavorable foreign currency translation and the impact of lower metal prices in the Electrical and Plumbing & Refrigeration sectors. Marmon’s business acquisitions included the acquisition of the Colson Medical companies on October 31, 2019, resulting in a new Medical sector. Marmon’s Rail & Leasing and Crane Services sectors benefitted from higher railcar equipment sales, railcar fleet utilization, railcar repair services, intermodal container leasing revenue and improved crane rental demand in the U.S. and Australia. Marmon’s pre-tax earnings increased $12 million in 2019 (1.0%) as compared to 2018. The earnings increase reflected the effects of business acquisitions, partly offset by lower gains from business divestitures. Earnings in 2019 also reflected increased earnings in sectors that experienced sales volume increases, which were substantially offset by lower earnings in the Metal Services and certain other sectors, the unfavorable impacts of foreign currency translation and increased interest and other expenses. IMC’s revenues declined 1.3% in 2019 as compared to 2018, reflecting unfavorable foreign currency translation effects of a stronger U.S. Dollar and lower sales in several regions, including Asia and Europe, mostly offset by increased revenues from recent business acquisitions. IMC’s pre-tax earnings declined 12.8% in 2019 versus 2018, attributable to unfavorable foreign currency translation effects, changes in business mix to lower margin items and the effects of the U.S./China trade disputes. K-50   Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing (Continued) Building products The building products group includes manufactured and site-built home construction and related lending and financial services (Clayton Homes), flooring (Shaw), insulation, roofing and engineered products (Johns Manville), bricks and masonry products (Acme Building Brands), paint and coatings (Benjamin Moore), and residential and commercial construction and engineering products and systems (MiTek). 2020 versus 2019 Revenues of the building products group increased $917 million (4.5%) in 2020 compared to 2019 and pre-tax earnings increased $222 million (8.4%) over 2019. Pre-tax earnings as percentages of revenues were 13.5% in 2020 and 13.0% in 2019. Clayton Homes’ revenues were approximately $8.6 billion in 2020, an increase of $1.3 billion (17.1%) over 2019. The increase was primarily due to increases in home sales of $1.0 billion (18.4%), driven by increases in units sold and revenue per home sold and by changes in sales mix. Unit sales of site-built homes increased 28.6% in 2020 over 2019, while revenue per home increased slightly. Manufactured home unit sales increased 2.8% in 2020. Financial services revenues, which include mortgage services, insurance and interest income from lending activities increased 13.7% in 2020 compared to 2019, attributable to increased loan originations and average outstanding loan balances. Loan balances, net of allowances for credit losses, were approximately $17.1 billion at December 31, 2020 compared to $15.9 billion as of December 31, 2019. Pre-tax earnings of Clayton Homes were approximately $1.25 billion in 2020, an increase of $152 million (13.9%) compared to 2019. The earnings increase reflected higher earnings from home sales, partly offset by higher materials costs, which lowered manufactured housing gross margin rates. Earnings in 2020 also benefitted from increased interest income, lower interest expense and higher earnings from mortgage services, partly offset by increased provisions for credit and insurance losses. Aggregate revenues of our other building products businesses were approximately $12.6 billion in 2020, a decrease of 2.6% versus 2019. The revenue decrease reflected lower flooring volumes, partly attributable to the negative effects of the COVID-19 pandemic, partly offset by increased paint and coatings volumes, including volumes from a new agreement with Ace Hardware Stores, and increased volumes in residential markets. Pre-tax earnings of the other building products businesses were approximately $1.6 billion in 2020, an increase of 4.6% over 2019. The earnings increase reflected the effects of lower average input costs, operating cost containment efforts and lower facilities closure costs. 2019 versus 2018 Revenues of the building products group in 2019 increased $1.65 billion (8.8%) compared to 2018, while pre-tax earnings increased 12.8% over 2018. Pre-tax earnings as percentages of revenues were 13.0% in 2019 and 12.5% in 2018. Clayton Homes’ revenues were approximately $7.3 billion in 2019, an increase of $1.3 billion (21.5%) over 2018. The comparative increase was primarily due to a 26% increase in home sales, reflecting a net increase in units sold and changes in sales mix. Unit sales of site-built homes increased 84% in 2019 over 2018, primarily due to business acquisitions, while average prices declined 5%. Manufactured home unit retail sales increased 5% and wholesale sales were 9% lower in 2019. Interest income from lending activities increased 6.7% in 2019 compared to 2018, attributable to increased originations and average outstanding loan balances. Aggregate loan balances outstanding were approximately $15.9 billion at December 31, 2019 compared to $14.7 billion as of December 31, 2018. Clayton Homes’ pre-tax earnings were $1.1 billion in 2019, an increase of $182 million (20.0%) compared to 2018. The increase was attributable to home building activities, which benefitted from the increases in home sales, and to financial services activities. Pre-tax earnings from lending and finance activities increased 12%, primarily due to an increase in interest income attributable to higher average loan balances, increased earnings from other financial services and lower credit losses, partially offset by higher interest expense, attributable to higher average borrowings and interest rates, and by higher other operating costs. Aggregate revenues of our other building products businesses were $13.0 billion in 2019, an increase of 2.8% versus 2018. Revenues increased for paint and coatings, hard surface flooring and roofing products, attributable to a combination of increased volumes, product mix changes and increased average selling prices, while sales of brick products declined. K-51   Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing (Continued) Building products (Continued) Pre-tax earnings of the other building products businesses were $1.5 billion in 2019, an increase of 8.2% over 2018. Earnings in 2019 benefitted from a combination of increases in selling prices in certain product categories, declining raw material costs for certain commodities and operating cost control initiatives, which were partly offset by the effects of increased facilities closure costs. Consumer products The consumer products group includes leisure vehicles (Forest River), several apparel and footwear operations (including Fruit of the Loom, Garan, H.H. Brown Shoe Group and Brooks Sports) and a manufacturer of high-performance alkaline batteries (Duracell). This group also includes custom picture framing products (Larson Juhl) and jewelry products (Richline). 2020 versus 2019 Consumer products revenues increased of $359 million (3.0%) in 2020 versus 2019, while pre-tax earnings increased $146 million (11.7%). Pre-tax earnings as a percentage of revenues in 2020 increased 0.9 percentage points to 11.5%. The comparative increase in revenues reflected revenue increases from Forest River and Duracell, partially offset by lower apparel and footwear revenues. Forest River revenues increased 11.7% in 2020 compared to 2019, primarily attributable to a significant increase in recreational vehicle unit sales over the last half of the year and changes in sales mix. Unit sales in the second half of 2020 increased 31% over the second half of 2019. Revenues from Duracell increased 10.0% in 2020 compared to 2019, reflecting the effects of changes in sales mix and increased volume. Apparel and footwear revenues declined 6.1% in 2020 compared to 2019. Apparel and footwear sales volumes in the first half of 2020, particularly in the second quarter, reflected the negative effects of the pandemic, which included retail store closures, reduced or cancelled orders and pandemic-related disruptions at certain manufacturing facilities. Sales recovered somewhat in the second half of 2020, attributable to higher consumer demand and inventory restocking by retailers. Brooks Sports revenues were higher, partly attributable to the effect of the reduced sales in 2019 that were caused by shipping delays at a new distribution facility. The comparative increase in pre-tax earnings was primarily attributable to Forest River and Duracell, partially offset by lower earnings from apparel and footwear. The increase reflected the effects of sales volumes changes and ongoing expense management efforts. 2019 versus 2018 Consumer products revenues declined $718 million (5.7%) in 2019 versus 2018, driven by a 12.9% revenue decline from Forest River, primarily due to lower unit sales. Revenues of Duracell increased 1.3% and apparel and footwear revenues declined 1.1% compared to 2018. Although revenues from Brooks Sports increased 3.5% in 2019, its operating results were negatively affected by lost sales associated with problems encountered at a distribution center that opened in the second quarter. In addition, our other apparel and other footwear businesses continue to experience lower sales volumes for certain products, reflecting the shift by major retailers towards private label products. Consumer products pre-tax earnings increased $43 million (3.6%) in 2019 compared to 2018. The increase was primarily attributable to continuing cost containment efforts across several of the businesses and the effects of a new Duracell product launch, partially offset by the impact of lower recreational vehicle sales at Forest River. K-52   Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing (Continued) Service and retailing A summary of revenues and pre-tax earnings of our service and retailing businesses follows (dollars in millions).                               Percentage change         2020     2019     2018     2020 vs 2019     2019 vs 2018     Revenues                                           Service   $ 12,346     $ 13,496     $ 13,333       (8.5 )%     1.2 %   Retailing     15,832       15,991       15,606       (1.0 )     2.5     McLane Company     46,840       50,458       49,987       (7.2 )     0.9         $ 75,018     $ 79,945     $ 78,926                     Pre-tax earnings                                           Service   $ 1,600     $ 1,681     $ 1,836       (4.8 )%     (8.4 )%   Retailing     1,028       874       860       17.6       1.6     McLane Company     251       288       246       (12.8 )     17.1         $ 2,879     $ 2,843     $ 2,942                     Pre-tax earnings as a percentage of revenues                                           Service     13.0 %     12.5 %     13.8 %                   Retailing     6.5 %     5.5 %     5.5 %                   McLane Company     0.5 %     0.6 %     0.5 %                   Service Our service business group offers shared ownership programs for general aviation aircraft (NetJets) and high technology training products and services to operators of aircraft (FlightSafety). We also distribute electronic components (TTI), franchise and service a network of quick service restaurants (Dairy Queen) and offer third party logistics services that primarily serve the petroleum and chemical industries (Charter Brokerage). Other service businesses include transportation equipment leasing (XTRA) and furniture leasing (CORT), electronic news distribution, multimedia and regulatory filings (Business Wire) and the operation of a television station in Miami, Florida (WPLG). 2020 versus 2019 Service group revenues declined $1.15 billion (8.5%) in 2020 compared to 2019 and pre-tax earnings decreased $81 million (4.8%). Pre-tax earnings of the group as a percentage of revenues were 13.0% in 2020 compared to 12.5% in 2019. The aggregate revenues of NetJets and FlightSafety in 2020 declined $816 million (13.5%) compared to 2019, reflecting lower demand for air travel and aviation services attributable to the COVID-19 pandemic. NetJets experienced a decline in flight hours of 27% and FlightSafety’s commercial and corporate simulator training hours declined 30% from 2019. The comparative service group revenue decline was also attributable to the effects of the disposition of the newspaper operations in March of 2020 and lower revenues from CORT, which was driven by lower demand attributable to the effects of the pandemic. Partially offsetting these declines were revenue increases at TTI and at WPLG. The decline in earnings reflected lower earnings from NetJets, TTI and CORT and from the effects of the divestiture of the newspaper operations, partly offset by higher earnings from XTRA, Business Wire, WPLG and FlightSafety. TTI’s earnings decline reflected lower average gross margin rates, attributable to product mix changes and sales price pressures deriving from ample inventory availability. The decline at NetJets was primarily attributable to increased asset impairment charges and restructuring costs, partly offset by lower general and administrative expenses and a slight net increase in margins. The decline at CORT was driven by lower revenues, partly offset by the effects of cost control initiatives. The increase at FlightSafety was attributable to the effects of contract losses recorded in 2019 with respect to an existing government contract and cost control efforts in 2020, which more than offset significantly lower earnings from commercial and corporate training services. K-53   Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing (Continued) Service (Continued) 2019 versus 2018 Service group revenues increased $163 million (1.2%) in 2019 compared to 2018, primarily attributable to increased sales at TTI and higher aviation-related services revenues (NetJets and FlightSafety), partially offset by decreases from the media businesses and Charter Brokerage. TTI’s sales increased 2% in 2019 compared to the exceptionally high sales levels in 2018. TTI’s sales slowed throughout 2019, attributable to softening customer demand, lower average selling prices and the effects of U.S. trade tariffs. The increase in NetJets’ revenues in 2019 reflected increased lease revenue, primarily attributable to an increase in aircraft on lease, and increased flight hours, partly offset by lower revenue from prepaid flight cards. The revenue decline at Charter Brokerage was attributable to the divesture of a high revenue, low margin business in mid-2019. Pre-tax earnings of the service group decreased $155 million (8.4%) compared to 2018. The comparative earnings decline was primarily due to lower earnings from TTI and FlightSafety, partly offset by higher earnings from NetJets. TTI’s earnings decline was primarily attributable to lower gross margins, unfavorable foreign currency translation effects and higher operating expenses. The earnings decline at FlightSafety was attributable to pre-tax losses of approximately $165 million recorded in the fourth quarter of 2019 in connection with an existing government contract, partly offset by lower training equipment impairment charges. Earnings from NetJets increased in 2019, primarily attributable to increased revenues and improved fleet and operating efficiencies, which improved operating margins. Retailing Our largest retailing business is Berkshire Hathaway Automotive (“BHA”), which consists of over 80 auto dealerships that sell new and pre-owned automobiles and offer repair services and related products and represented 62.6% of our combined retailing revenue in 2020. BHA also operates two insurance businesses, two auto auctions and an automotive fluid maintenance products distributor. Our retailing businesses also include four home furnishings retailing businesses (Nebraska Furniture Mart, R.C. Willey, Star Furniture and Jordan’s), which sell furniture, appliances, flooring and electronics and represented 20.6% of the combined retailing revenues in 2020. Other retailing businesses include three jewelry retailing businesses (Borsheims, Helzberg and Ben Bridge), See’s Candies (confectionary products), Pampered Chef (high quality kitchen tools), Oriental Trading Company (party supplies, school supplies and toys and novelties) and Detlev Louis Motorrad (“Louis”), a retailer of motorcycle accessories based in Germany. 2020 versus 2019 Retailing group revenues in 2020 declined $159 million (1.0%) compared to 2019. The spread of COVID-19 throughout the U.S. resulted in the temporary closures or restricted operations at several of our retailing businesses and effected consumer spending patterns during 2020. The severity and duration of the effects from the pandemic varied widely at our retail operations. BHA’s revenues decreased 2.9% in 2020 compared to 2019. BHA’s revenues in 2020 reflected decreases in new and pre-owned vehicle sales of 2.6% as well as lower vehicle service and repair revenues. Home furnishings revenues were essentially unchanged in 2020 compared to 2019. The group experienced lower revenues in the first half of 2020, attributable to restricted store hours, which were substantially offset by increased revenues over the second half of the year. However, supply chain disruptions had a negative effect on obtaining product at certain times, which negatively affected sales levels. The effects of the pandemic contributed to significantly lower sales in 2020 for our jewelry stores, See’s Candy and Oriental Trading Company, which were more than offset by significant revenue increases from Pampered Chef and Louis. Sales volumes generally increased and operating results improved beginning in the latter part of the second quarter as our operations slowly reopened. K-54   Management’s Discussion and Analysis (Continued) Manufacturing, Service and Retailing (Continued) Retailing (Continued) Retail group pre-tax earnings increased $154 million (17.6%) in 2020 from 2019. BHA’s pre-tax earnings increased 37.7%, primarily due to lower selling, general and administrative expenses, lower floorplan interest expense and higher average gross sales margin rates. Aggregate pre-tax earnings for the remainder of our retailing group increased 1.1% in 2020 compared to 2019, reflecting higher earnings from the home furnishings businesses and from Pampered Chef, which were substantially offset by lower earnings from our other retailing operations. Home furnishings group pre-tax earnings increased $79 million (36%) in 2020 versus 2019, reflecting generally higher average gross margin rates, sales mix changes and fewer sales promotions, and from lower advertising and other operating expenses. Certain of our other operations, including Pampered Chef and Louis experienced significant earnings increases in 2020, while others, including See’s Candy and Oriental Trading Company, experienced significant declines driven by the negative effects of the pandemic. 2019 versus 2018 Retailing group revenues increased $385 million (2.5%) in 2019 compared to 2018. BHA’s revenues increased 4.1% in 2019 over 2018, primarily attributable to an 11.5% increase in pre-owned vehicle sales, vehicle pricing increases, improvement in vehicle finance and service contract activities and vehicle repair work as compared to 2018. New vehicle sales in 2019 were relatively unchanged from 2018. Home furnishings group revenues declined 1.3% in 2019 compared to 2018, as sales were relatively unchanged or lower in each of our home furnishings operations. Retail group pre-tax earnings increased $14 million (1.6%) in 2019 over 2018. BHA’s pre-tax earnings increased 22.7%, primarily due to the increases in earnings from finance and service contract activities, partly offset by higher floorplan interest expense. Home furnishings group pre-tax earnings declined 14.7% versus 2018, reflecting the decline in revenues and generally higher operating expenses. McLane Company McLane operates a wholesale distribution business that provides grocery and non-food consumer products to retailers and convenience stores (“grocery”) and to restaurants (“foodservice”). McLane also operates businesses that are wholesale distributors of distilled spirits, wine and beer (“beverage”). The grocery and foodservice businesses generate high sales and very low profit margins. These businesses have several significant customers, including Walmart, 7-Eleven, Yum! Brands and others. Grocery sales comprised about two-thirds of McLane’s consolidated sales in 2020 with food service comprising most of the remainder. A curtailment of purchasing by any of its significant customers could have an adverse impact on periodic revenues and earnings. 2020 versus 2019 Revenues declined $3.6 billion (7.2%) in 2020 compared to 2019. The decline was attributable to COVID-19 related restaurant closures (particularly in the casual dining category) in the foodservice business and lower sales in certain product categories within the grocery business. McLane operates on a 52/53-week fiscal year and 2020 included 52 weeks compared to 53 weeks in 2019. Otherwise, revenues declined 5.2% in the grocery business and 7.7% in the foodservice business in 2020 as compared to 2019. Pre-tax earnings decreased $37 million (12.8%) in 2020 as compared to 2019. The earnings decrease included the effects of increased LIFO inventory reserves of $22 million, credit and inventory losses of $12 million in the foodservice operations and the impact of lower sales. McLane continues to operate in an intensely competitive business environment, which is negatively affecting its current operating results. We expect that these operating conditions will continue. 2019 versus 2018 Revenues increased $471 million (0.9%) in 2019 compared to 2018. McLane’s results in 2019 included 53 weeks compared to 52 weeks in 2018. Otherwise, revenues decreased roughly 3% in the grocery business and increased 3% in the foodservice business in 2019 as compared to 2018. Pre-tax earnings increased $42 million (17.1%) as compared to 2018. The earnings increase in 2019 reflected an increase in average gross margin rates and changes in business mix, partly offset by increased operating expenses, the largest portion of which was employee costs. K-55   Management’s Discussion and Analysis (Continued) Investment and Derivative Gains (Losses) A summary of investment and derivative gains and losses follows (dollars in millions).       2020     2019     2018   Investment gains (losses)   $ 40,905     $ 71,123     $ (22,155 ) Derivative gains (losses)     (159 )     1,484       (300 ) Gains (losses) before income taxes and noncontrolling interests     40,746       72,607       (22,455 ) Income taxes and noncontrolling interests     9,155       15,162       (4,718 ) Net gains (losses)   $ 31,591     $ 57,445     $ (17,737 ) Effective income tax rate     21.7 %     20.9 %     20.8 %   Investment gains (losses) We are required to include the unrealized gains and losses arising from changes in market prices of investments in equity securities in earnings, which significantly increases the volatility of our periodic net earnings due to the magnitude of our equity securities portfolio and the inherent volatility of equity securities prices. Pre-tax investment gains included net unrealized gains of approximately $55.0 billion in 2020 attributable to changes in market prices of equity securities we held at December 31, 2020 and net losses of approximately $14.0 billion from changes in market prices during 2020 on securities sold during 2020. We recorded pre-tax unrealized investment gains of approximately $69.6 billion in 2019 attributable to changes in market prices in 2019 on equity securities we held at December 31, 2019. Pre-tax unrealized investment losses of approximately $22.7 billion were recorded in 2018 attributable to market price changes in 2018 on equity securities we held at December 31, 2018. Taxable investment gains on equity securities sold, which is the difference between sales proceeds and the original cost basis of the securities sold, were $6.2 billion in 2020, $3.2 billion in 2019 and $3.3 billion in 2018. We believe that investment gains/losses, whether realized from sales or unrealized from changes in market prices, are often meaningless in terms of understanding our reported consolidated earnings or evaluating our periodic economic performance. We continue to believe the investment gains/losses recorded in earnings, including the changes in market prices for equity securities, in any given period has little analytical or predictive value. Derivative gains (losses) Derivative contract gains/losses include the changes in fair value of our equity index put option contract liabilities, which relate to contracts that were originated prior to March 2008. Substantially all remaining contracts will expire by February 2023. The periodic changes in the fair values of these liabilities are recorded in earnings and can be significant, primarily due to the volatility of underlying equity markets. As of December 31, 2020, the intrinsic value of our equity index put option contracts was $727 million and our recorded liability at fair value was approximately $1.1 billion. Our ultimate payment obligations, if any, under our contracts will be determined as of the contract expiration dates based on the intrinsic value as defined under the contracts. Equity index put option contracts produced pre-tax losses of $159 million in 2020, pre-tax gains of $1.5 billion in 2019 and pre-tax losses of $300 million in 2018. These gains and losses reflected changes in the equity index values and shorter remaining contract durations. Settlement payments to counterparties were relatively insignificant in each of the three years. Other A summary of after-tax other earnings/losses follows (in millions).       2020     2019     2018   Equity method earnings (losses)   $ 665     $ 1,023     $ (1,419 ) Acquisition accounting expenses     (783 )     (788 )     (831 ) Goodwill and intangible asset impairments     (10,381 )     (96 )     (280 ) Corporate interest expense, before foreign currency effects     (334 )     (280 )     (311 ) Foreign currency exchange rate gains (losses) on Berkshire    and BHFC non-U.S. Dollar senior notes     (764 )     58       289   Income tax expense adjustments     (60 )     (377 )     —   Other, principally corporate investment income     339       884       986       $ (11,318 )   $ 424     $ (1,566 )   K-56     Management’s Discussion and Analysis (Continued) Other (Continued) After-tax equity method earnings (losses) include our proportionate share of earnings attributable to our investments in Kraft Heinz, Pilot, Berkadia and Electric Transmission of Texas. Our after-tax earnings from Kraft Heinz were $170 million in 2020 and $488 million in 2019 and our after-tax losses were $1,859 million in 2018. Our earnings from Kraft Heinz included our after-tax share of goodwill and other intangible asset impairment charges recorded by Kraft Heinz in each year. Our after-tax share of such charges was $611 million in 2020, $339 million in 2019 and approximately $2.7 billion in 2018. After-tax acquisition accounting expenses include charges arising from the application of the acquisition method in connection with certain of Berkshire’s past business acquisitions. Such charges arise primarily from the amortization or impairment of intangible assets recorded in connection with those business acquisitions. Goodwill and intangible asset impairments in 2020 included after-tax charges of $9.8 billion attributable to impairments of goodwill and certain identifiable intangible assets that were recorded in connection with our acquisition of PCC in 2016. See Critical Accounting Policies on page K-63 for additional details. Foreign currency exchange rate gains and losses pertain to Berkshire’s outstanding Euro denominated debt (€6.85 billion par) and Japanese Yen denominated debt (¥625.5 billion par), and BHFC’s Great Britain Pound denominated debt (£1.75 billion par). Changes in foreign currency exchange rates produced gains and losses from the periodic revaluation of these liabilities into U.S. Dollars. The gains and losses recorded in any given period can be significant due to the magnitude of the borrowings and the inherent volatility in foreign currency exchange rates. The income tax expense adjustments relate to investments that were made between 2015 and 2018 in certain tax equity investment funds. Our investments in these funds aggregated approximately $340 million. In December 2018, we first learned of allegations by federal authorities of fraudulent conduct by the sponsor of these funds. In January 2020, the principals involved in creating the investment funds plead guilty to criminal charges related to the sale of the investments. In the first quarter of 2019, we concluded that it is more likely than not that the previously recognized income tax benefits were not valid. Financial Condition Our consolidated balance sheet continues to reflect very significant liquidity and a very strong capital base. Consolidated shareholders’ equity at December 31, 2020 was $443.2 billion, an increase of $18.4 billion since December 31, 2019, which was net of common stock repurchases of $24.7 billion. Net earnings attributable to Berkshire shareholders was $42.5 billion and included after-tax gains on our investments of approximately $31.7 billion. During each of the last three years, changes in the market prices of our investments in equity securities produced exceptional volatility in our earnings. Our results in 2020 also included after-tax goodwill and other intangible asset impairments charges of $11.0 billion. At December 31, 2020, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of $135.0 billion, which included $112.8 billion in U.S. Treasury Bills. Investments in equity and fixed maturity securities (excluding our investment in Kraft Heinz) were $301.6 billion. Berkshire parent company debt outstanding at December 31, 2020 was $22.7 billion, an increase of $2.8 billion since December 31, 2019. In 2020, Berkshire repaid maturing senior notes of €1.0 billion and issued €1.0 billion of 0.0% senior notes due in 2025. Berkshire also issued ¥195.5 billion of senior notes (approximately $1.8 billion) with a weighted average interest rate of 1.07% and maturity dates ranging from 2023 to 2060. In the first quarter of 2021, senior notes of $1.7 billion will mature, including $665 million (€550 million) that matured in January. In January 2021, Berkshire issued €600 million of 0.5% senior notes due in 2041. Berkshire’s insurance and other subsidiary outstanding borrowings were approximately $18.9 billion at December 31, 2020, which included senior note borrowings of BHFC, a wholly-owned financing subsidiary, of approximately $13.1 billion. BHFC’s borrowings are used to fund a portion of loans originated and acquired by Clayton Homes and equipment held for lease by our railcar leasing business. In 2020, BHFC repaid $900 million of maturing senior notes and issued $3.0 billion of senior notes with maturity dates ranging from 2030 to 2050 and a weighted average interest rate of 2.3%. Berkshire guarantees the full and timely payment of principal and interest with respect to BHFC’s senior notes. In January 2021, $750 million of BHFC debt matured and BHFC issued $750 million of 2.5% senior notes due in 2051. Our railroad, utilities and energy businesses (conducted by BNSF and BHE) maintain very large investments in capital assets (property, plant and equipment) and will regularly make significant capital expenditures in the normal course of business. Capital expenditures of these two operations were $9.8 billion in 2020 and we forecast a similar amount of capital expenditures in 2021. K-57   Management’s Discussion and Analysis (Continued) Financial Condition (Continued) BNSF’s outstanding debt was $23.2 billion as of December 31, 2020. In 2020, BNSF issued $575 million of 3.05% senior unsecured debentures due in 2051. Outstanding borrowings of BHE and its subsidiaries were $52.2 billion at December 31, 2020, an increase of $9.6 billion since December 31, 2019. In 2020, BHE and its subsidiaries issued new term debt of approximately $7.6 billion with maturity dates ranging from 2025 to 2062 and repaid approximately $3.2 billion of debt. BHE also assumed $5.6 billion in debt in connection with the business acquired from Dominion Energy in November 2020. Berkshire does not guarantee the repayment of debt issued by BNSF, BHE or any of their subsidiaries and is not committed to provide capital to support BNSF, BHE or any of their subsidiaries. Berkshire’s common stock repurchase program as amended permits Berkshire to repurchase its Class A and Class B shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, Vice Chairman of the Board. The program allows share repurchases in the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased. The program is expected to continue indefinitely. We will not repurchase our stock if it reduces the total amount of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bill holdings below $20 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire. In 2020, Berkshire paid $24.7 billion to repurchase shares of its Class A and B common stock. 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 are included in our Consolidated Balance Sheets, such as notes payable, which require future payments on contractually specified dates and in fixed and determinable amounts. Other obligations pertaining to the acquisition of goods or services in the future, such as certain purchase obligations, are not currently reflected in the financial statements and will be recognized in future periods as the goods are delivered or services are provided. The timing and amount of the payments under insurance and reinsurance contracts are contingent upon the outcome of future events. Actual payments will likely vary, perhaps materially, from the estimated liabilities currently recorded in our Consolidated Balance Sheet. A summary of our contractual obligations as of December 31, 2020 follows (in millions). Actual payments will likely vary, perhaps significantly, from estimates reflected in the table.       Estimated payments due by period       Total     2021     2022-2023     2024-2025     After 2025   Notes payable and other borrowings, including interest   $ 182,004     $ 13,456     $ 23,393     $ 19,596     $ 125,559   Operating leases     6,318       1,342       2,016       1,269       1,691   Purchase obligations (1)     48,413       14,552       7,947       5,939       19,975   Unpaid losses and loss adjustment expenses (2)     120,820       27,617       28,623       16,144       48,436   Life, annuity and health insurance benefits (3)     36,920       2,623       269       540       33,488   Other     26,524       3,136       7,762       1,684       13,942   Total   $ 420,999     $ 62,726     $ 70,010     $ 45,172     $ 243,091     (1) Primarily related to fuel, capacity, transmission and maintenance contracts and capital expenditure commitments of BHE and BNSF and aircraft purchase commitments of NetJets. (2) Includes unpaid losses and loss adjustment expenses under retroactive reinsurance contracts. (3) Amounts represent estimated undiscounted benefits, net of estimated future premiums, as applicable. K-58     Management’s Discussion and Analysis (Continued) Critical Accounting Policies Certain accounting policies require us to make estimates and judgments in determining the amounts reflected in the Consolidated Financial Statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances. A discussion of our principal accounting policies that required the application of significant judgments as of December 31, 2020 follows. Property and casualty insurance unpaid losses We record liabilities for unpaid losses and loss adjustment expenses (also referred to as “gross unpaid losses” or “claim liabilities”) based upon estimates of the ultimate amounts payable for losses occurring on or before the balance sheet date. The timing and amount of ultimate loss payments are contingent upon, among other things, the timing of claim reporting from insureds and ceding companies and the final determination of the loss amount through the loss adjustment process. We use a variety of techniques in establishing claim liabilities and all techniques require significant judgments and assumptions. As of the balance sheet date, recorded claim liabilities include liabilities for reported claims and for claims not yet reported. The period between the loss occurrence date and loss settlement date is the “claim-tail.” Property claims usually have relatively short claim-tails, absent litigation. Casualty claims usually have longer claim-tails, occasionally extending for decades. Casualty claims may be more susceptible to litigation and the impact of changing contract interpretations. The legal environment and judicial process further contribute to extending claim-tails. Our consolidated claim liabilities as of December 31, 2020 were approximately $120.8 billion (including liabilities from retroactive reinsurance), of which 83% related to GEICO and the Berkshire Hathaway Reinsurance Group. Additional information regarding significant uncertainties inherent in the processes and techniques for estimating unpaid losses of these businesses follows. GEICO GEICO predominantly writes private passenger auto insurance. As of December 31, 2020, GEICO’s gross unpaid losses were $22.9 billion and claim liabilities, net of reinsurance recoverable, were $21.8 billion. GEICO’s claim reserving methodologies produce liability estimates based upon the individual claims. The key assumptions affecting our liability estimates include projections of ultimate claim counts (“frequency”) and average loss per claim (“severity”). We utilize a combination of several actuarial estimation methods, including Bornhuetter-Ferguson and chain-ladder methodologies. Claim liability estimates for automobile liability coverages (such as bodily injury (“BI”), uninsured motorists, and personal injury protection) are more uncertain due to the longer claim-tails, so we establish additional case development estimates. As of December 31, 2020, case development liabilities averaged approximately 33% of the case reserves. We select case development factors through analysis of the overall adequacy of historical case liabilities. Incurred-but-not-reported (“IBNR”) claim liabilities are based on projections of the ultimate number of claims expected (reported and unreported) for each significant coverage. We use historical claim count data to develop age-to-age projections of the ultimate counts by quarterly accident period, from which we deduct reported claims to produce the number of unreported claims. We estimate the average costs per unreported claim and apply such estimates to the unreported claim counts, producing an IBNR liability estimate. We may record additional IBNR estimates when actuarial techniques are difficult to apply. We test the adequacy of the aggregate claim liabilities using one or more actuarial projections based on claim closure models and paid and incurred loss triangles. Each type of projection analyzes loss occurrence data for claims occurring in a given period and projects the ultimate cost. Our claim liability estimates recorded at the end of 2019 were reduced by $253 million during 2020, which produced a corresponding increase to pre-tax earnings. The assumptions used to estimate liabilities at December 31, 2020 reflect the most recent frequency and severity results. Future development of recorded liabilities will depend on whether actual frequency and severity of claims are more or less than anticipated. K-59   Management’s Discussion and Analysis (Continued) Property and casualty losses (Continued) GEICO (Continued) With respect to liabilities for BI claims, we believe it is reasonably possible that average severities will change by at least one percentage point from the severities used in establishing the recorded liabilities at December 31, 2020. We estimate that a one percentage point increase or decrease in BI severities would produce a $300 million increase or decrease in recorded liabilities, with a corresponding decrease or increase in pre-tax earnings. Many of the economic forces that would likely cause BI severity to differ from expectations would likely also cause severities for other injury coverages to differ in the same direction. Berkshire Hathaway Reinsurance Group BHRG’s liabilities for unpaid losses and loss adjustment expenses derive primarily from reinsurance contracts issued through NICO and General Re. A summary of BHRG’s property and casualty unpaid losses and loss adjustment expenses, other than retroactive reinsurance losses and loss adjustment expenses, as of December 31, 2020 follows (in millions).       Property     Casualty     Total   Reported case liabilities   $ 5,714     $ 9,497     $ 15,211   IBNR liabilities     5,821       14,615       20,436   Gross unpaid losses and loss adjustment expenses     11,535       24,112       35,647   Reinsurance recoverable     181       864       1,045   Net unpaid losses and loss adjustment expenses   $ 11,354     $ 23,248     $ 34,602     Gross unpaid losses and loss adjustment expenses consist primarily of traditional property and casualty coverages written primarily under excess-of-loss and quota-share treaties. Under certain contracts, coverage can apply to multiple lines of business written and the ceding company may not report loss data by such lines consistently, if at all. In those instances, we allocate losses to property and casualty coverages based on internal estimates. In connection with reinsurance contracts, the nature, extent, timing and perceived reliability of loss information received from ceding companies varies widely depending on the type of coverage and the contractual reporting terms. Contract terms, conditions and coverages also tend to lack standardization and may evolve more rapidly than primary insurance policies. The nature and extent of loss information provided under many facultative (individual risk) or per occurrence excess contracts may be comparable to the information received under a primary insurance contract. However, loss information is often less detailed with respect to aggregate excess-of-loss and quota-share contracts and is often in a summary format rather than on an individual claim basis. Loss data includes recoverable paid losses, as well as case loss estimates. Ceding companies infrequently provide reliable IBNR estimates to reinsurers. Loss reporting to reinsurers is typically slower in comparison to primary insurers. In the U.S., such reporting is generally required at quarterly intervals ranging from 30 to 90 days after the end of the quarterly period, while outside of the U.S., reinsurance reporting practices may vary further. In certain countries, clients report annually from 90 to 180 days after the end of the annual period. Reinsurers may assume and cede underlying risks from other reinsurers, which may further delay the reporting of claims. The relative impact of reporting delays on the reinsurer may vary depending on the type of coverage, contractual reporting terms, the magnitude of the claim relative to the attachment point of the reinsurance coverage, and for other reasons. As reinsurers, the premium and loss data we receive is at least one level removed from the underlying claimant, so there is a risk that the loss data reported is incomplete, inaccurate or the claim is outside the coverage terms. We maintain certain internal procedures in order to determine that the information is complete and in compliance with the contract terms. Generally, our reinsurance contracts permit us to access the ceding company’s records with respect to the subject business, thus providing the ability to audit the reported information. In the normal course of business, disputes occasionally arise concerning whether claims are covered by our reinsurance policies. We resolve most coverage disputes through negotiation with the client. If disputes cannot be resolved, our contracts generally provide arbitration or alternative dispute resolution processes. There are no coverage disputes at this time for which an adverse resolution would likely have a material impact on our consolidated results of operations or financial condition. K-60   Management’s Discussion and Analysis (Continued) Property and casualty losses (Continued) Berkshire Hathaway Reinsurance Group (Continued) Establishing claim liability estimates for reinsurance requires evaluation of loss information received from our clients. We generally rely on the ceding companies reported case loss estimates. We independently evaluate certain reported case losses and if appropriate, we use our own case liability estimate. For instance, as of December 31, 2020, our case loss estimates exceeded ceding company estimates by approximately $800 million for certain legacy workers’ compensation claims occurring over 10 years ago. We also periodically conduct detailed reviews of individual client claims, which may cause us to adjust our case estimates. Although liabilities for losses are initially determined based on pricing and underwriting analysis, BHRG uses a variety of actuarial methodologies that place reliance on the extrapolation of actual historical data, loss development patterns, industry data and other benchmarks, as appropriate. The estimate of the required IBNR liabilities also requires judgment by actuaries and management to reflect the impact of additional factors like change in business mix, volume, claim reporting and handling practices, inflation, social and legal environment and the terms and conditions of the contracts. The methodologies generally fall into one of the following categories or are hybrids of one or more of the following categories: Paid and incurred loss development methods – these methods consider expected case loss emergence and development patterns, together with expected loss ratios by year. Factors affecting our loss development analysis include, but are not limited to, changes in the following: client claims reporting and settlement practices; the frequency of client company claim reviews; policy terms and coverage (such as loss retention levels and occurrence and aggregate policy limits); loss trends; and legal trends that result in unanticipated losses. Collectively, these factors influence our selections of expected case loss emergence patterns. Incurred and paid loss Bornhuetter-Ferguson methods – these methods consider actual paid and incurred losses and expected patterns of paid and incurred losses, taking the initial expected ultimate losses into account to determine an estimate of the expected unpaid or unreported losses. Frequency and severity methods – these methods commonly focus on a review of the number of anticipated claims and the anticipated claims severity and may also rely on development patterns to derive such estimates. However, our processes and techniques for estimating liabilities in such analyses generally rely more on a per-policy assessment of the ultimate cost associated with the individual loss rather than with an analysis of historical development patterns of past losses. Additional Analysis – in some cases we have established reinsurance claim liabilities on a contract-by-contract basis, determined from case loss estimates reported by the ceding company and IBNR liabilities that are primarily a function of an anticipated loss ratio for the contract and the reported case loss estimate. Liabilities are adjusted upward or downward over time to reflect case losses reported versus expected case losses, which we use to form revised judgement on the adequacy of the expected loss ratio and the level of IBNR liabilities required for unreported claims. Anticipated loss ratios are also revised to include estimates of known major catastrophe events. Our claim liability estimation process for short-tail lines, primarily property exposures, utilizes a combination of the paid and incurred loss development methods and the incurred and paid loss Bornhuetter-Ferguson methods. Certain catastrophe, individual risk and aviation excess-of-loss contracts tend to generate low frequency/high severity losses. Our processes and techniques for estimating liabilities under such contracts generally rely more on a per contract assessment of the ultimate cost associated with the individual loss event rather than with an analysis of the historical development patterns of past losses. For our long-tail lines, primarily casualty exposures, we may rely on different methods depending on the maturity of the business, with estimates for the most recent years being based on priced loss expectations and more mature years reflecting the paid or incurred development pattern indications. In 2020, certain workers’ compensation claims reported losses were less than expected. As a result, we reduced estimated ultimate losses for prior years’ loss events by $160 million. We estimate that increases of ten percent in the tail of the expected loss emergence pattern and in the expected loss ratios would produce a net increase of approximately $1.1 billion in IBNR liabilities, producing a corresponding decrease in pre-tax earnings. We believe it is reasonably possible for these assumptions to increase at these rates. K-61   Management’s Discussion and Analysis (Continued) Property and casualty losses (Continued) Berkshire Hathaway Reinsurance Group (Continued) For other casualty losses, excluding asbestos, environmental, and other latent injury claims, the overall change in estimates for prior years’ events was not significant in 2020. However, the potential for significant changes in future periods remains. For certain significant casualty and general liability portfolios, we estimate that increases of five percent in the claim-tails of the expected loss emergence patterns and in the expected loss ratios would produce a net increase in our nominal IBNR liabilities and a corresponding reduction in pre-tax earnings of approximately $900 million, although outcomes of greater than or less than $900 million are possible given the diversification in worldwide business. Estimated ultimate liabilities for asbestos, environmental and other latent injury claims, excluding amounts assumed under retroactive reinsurance contracts increased $468 million in 2020, which produced a corresponding reduction in pre-tax earnings. Net liabilities for such claims were approximately $2.1 billion at December 31, 2020. Loss estimations for these exposures are difficult to determine due to the changing legal environment and increases may be required in the future if new exposures or claimants are identified, new claims are reported or new theories of liability emerge. Retroactive reinsurance Our retroactive reinsurance contracts cover loss events occurring before the contract inception dates. Claim liabilities relating to our retroactive reinsurance contracts are predominately related to casualty or liability exposures. We expect the claim-tails to be very long. As of December 31, 2020, gross unpaid losses were $41.0 billion and deferred charge assets were $12.4 billion. Our contracts are generally subject to maximum limits of indemnifications and, as such, we currently expect that maximum remaining gross losses payable under our retroactive policies will not exceed $56 billion. Absent significant judicial or legislative changes affecting asbestos, environmental or latent injury exposures, we also currently believe it unlikely that losses will develop upward to the maximum losses payable or downward by more than 15% of our estimated gross liability. We establish liability estimates by individual contract, considering exposure and development trends. In establishing our liability estimates, we often analyze historical aggregate loss payment patterns and project expected ultimate losses under various scenarios. We assign judgmental probability factors to these scenarios and an expected outcome is determined. We then monitor subsequent loss payment activity and review ceding company reports and other available information concerning the underlying losses. We re-estimate the expected ultimate losses when significant events or significant deviations from expected results are revealed. Certain of our retroactive reinsurance contracts include asbestos, environmental and other latent injury claims. Our estimated liabilities for such claims were approximately $12.5 billion at December 31, 2020. We do not consistently receive reliable detailed data regarding asbestos, environmental and latent injury claims from all ceding companies, particularly with respect to multi-line or aggregate excess-of-loss policies. When possible, we conduct a detailed analysis of the underlying loss data to make an estimate of ultimate reinsured losses. When detailed loss information is unavailable, we develop estimates by applying recent industry trends and projections to aggregate client data. Judgments in these areas necessarily consider the stability of the legal and regulatory environment under which we expect claims will be adjudicated. Legal reform and legislation could also have a significant impact on our ultimate liabilities. We reduced estimated ultimate liabilities for prior years’ retroactive reinsurance contracts by $399 million in 2020, which after the changes in related deferred charge assets, resulted in pre-tax earnings of $230 million. In 2020, we paid losses and loss adjustment expenses of $1.1 billion with respect to these contracts. K-62   Management’s Discussion and Analysis (Continued) Property and casualty losses (Continued) Retroactive reinsurance (Continued) In connection with our retroactive reinsurance contracts, we also record deferred charge assets, which at contract inception represents the excess, if any, of the estimated ultimate liability for unpaid losses over premiums received. We amortize deferred charge assets, which produces charges to pre-tax earnings in future periods based on the expected timing and amount of loss payments. We also adjust deferred charge balances due to changes in the expected timing and ultimate amount of claim payments. Significant changes in such estimates may have a significant effect on unamortized deferred charge balances and the amount of periodic amortization. Based on the contracts in effect as of December 31, 2020, we currently estimate that amortization expense in 2021 will approximate $1.1 billion. Other Critical Accounting Policies Our Consolidated Balance Sheet at December 31, 2020 includes goodwill of acquired businesses of $73.7 billion and other indefinite-lived intangible assets of $18.3 billion. We evaluate these assets for impairment annually in the fourth quarter and on an interim basis if the facts and circumstances lead us to believe that more-likely-not there has been an impairment. Goodwill and indefinite-lived intangible asset impairment reviews include determining the estimated fair values of our reporting units and intangible assets. The key assumptions and inputs used in such determinations may include forecasting revenues and expenses, cash flows and capital expenditures, as well as an appropriate discount rate and other inputs. Significant judgment by management is required in estimating the fair value of a reporting unit and in performing impairment reviews. Due to the inherent subjectivity and uncertainty in forecasting future cash flows and earnings over long periods of time, actual results may vary materially from the forecasts. If the carrying value of the indefinite-lived intangible asset exceeds fair value, the excess is charged to earnings as an impairment loss. If the carrying value of a reporting unit exceeds the estimated fair value of the reporting unit, then the excess, limited to the carrying amount of goodwill, will be charged to earnings as an impairment loss. In response to the adverse effects of the COVID-19 pandemic, we considered whether goodwill needed to be reevaluated for impairment during the second quarter of 2020. We determined it was necessary to quantitively reevaluate goodwill for impairment for certain reporting units, and most significantly for PCC. As a result of our reviews, we recorded pre-tax goodwill impairment charges of $10.0 billion and indefinite-lived intangible asset impairment charges of $638 million of which approximately $10 billion related to PCC. Prior to the reevaluation, the carrying value of goodwill related to PCC was approximately $17 billion. Additionally, the carrying value of PCC’s indefinite-lived intangible assets was approximately $14 billion. Substantially all of these amounts were recorded in connection with Berkshire’s acquisition of PCC in 2016. The effects of the COVID-19 pandemic on commercial airlines and aircraft manufacturers is particularly severe. We considered a number of factors in our reevaluation, including but not limited to the announcements by airlines concerning potential future demand, employment levels and aircraft orders, announcements by manufacturers on reduced aircraft production, and the actions we are taking or may take to restructure our operations to fit lower expected demand. In our judgment, the timing and extent of the recovery in the commercial airline and aerospace industries may be dependent on the development and wide-scale distribution of medicines and vaccines that effectively treat the virus. Consequently, we deemed it prudent under the prevailing circumstances to increase discount rates and reduce prior long-term forecasts of future cash flows for purposes of reviewing for impairments. As of December 31, 2020, we concluded it is more likely than not that goodwill recorded in our Consolidated Balance Sheet was not impaired. Making estimates of the fair value of reporting units at this time is and will likely be significantly affected by assumptions on the severity, duration or long-term effects of the pandemic on the reporting unit’s business, which we cannot reliably predict. Consequently, any fair value estimates in such instances can be subject to wide variations. The effects of the COVID-19 pandemic could prove to be worse than we currently estimate and could lead us to record additional goodwill or indefinite-lived intangible asset impairment charges in 2021. We primarily use discounted projected future earnings or cash flow methods in determining fair values. The key assumptions and inputs used in such methods may include forecasting revenues and expenses, cash flows and capital expenditures, as well as an appropriate discount rate and other inputs. A significant amount of judgment is required in estimating the fair value of a reporting unit and in performing goodwill impairment tests.   K-63     Management’s Discussion and Analysis (Continued) Market Risk Disclosures Our Consolidated Balance Sheets include substantial amounts of assets and liabilities whose fair values are subject to market risks. Our significant market risks are primarily associated with equity prices, interest rates, foreign currency exchange rates and commodity prices. The fair values of our investment portfolios and equity index put option contracts remain subject to considerable volatility. The following sections address the significant market risks associated with our business activities. Equity Price Risk Equity securities represent a significant portion of our investment portfolio. Strategically, we strive to invest in businesses that possess excellent economics and able and honest management, and we prefer to invest a meaningful amount in each investee. Historically, equity investments have been concentrated in relatively few issuers. At December 31, 2020, approximately 68% of the total fair value of equity securities was concentrated in four issuers. We often hold our equity investments for long periods and short-term price volatility has occurred in the past and will occur in the future. We also strive to maintain significant levels of shareholder capital and ample liquidity to provide a margin of safety against short-term price volatility. We are also subject to equity price risk with respect to our equity index put option contracts. Our ultimate liability with respect to these contracts is determined from the movement of the underlying stock index between the contract inception date and expiration date. The fair values of our liabilities arising from these contracts are also affected by changes in other factors such as interest rates and the remaining duration of the contracts. The following table summarizes our equity securities and derivative contract liabilities with significant equity price risk as of December 31, 2020 and 2019 and the estimated effects of a hypothetical 30% increase and a 30% decrease in market prices as of those dates. The selected 30% hypothetical increase and decrease does not reflect the best or worst case scenario. Indeed, results from declines could be far worse due both to the nature of equity markets and the aforementioned concentrations existing in our equity investment portfolio. Dollar amounts are in millions.       Fair Value     Hypothetical Price Change   Estimated Fair Value after Hypothetical Change in Prices     Estimated Increase (Decrease) in Net Earnings (1)   December 31, 2020                             Investments in equity securities   $ 281,170     30% increase   $ 362,830     $ 63,321               30% decrease     199,547       (63,293 ) Equity index put option contract liabilities     1,065     30% increase     257     638               30% decrease     2,702       (1,293 ) December 31, 2019                             Investments in equity securities   $ 248,027     30% increase   $ 319,445     $ 56,493               30% decrease     176,749       (56,382 ) Equity index put option contract liabilities     968     30% increase     267       554               30% decrease     2,776       (1,428 )   (1) The estimated increase (decrease) is after income taxes at the statutory rate in effect as of the balance sheet date. K-64     Management’s Discussion and Analysis (Continued) Market Risk Disclosures (Continued) Interest Rate Risk We may also invest in bonds, loans or other interest rate sensitive instruments. Our strategy is to acquire or originate such instruments at prices considered appropriate relative to the perceived credit risk. We also issue debt in the ordinary course of business to fund business operations, business acquisitions and for other general purposes. We attempt to maintain high credit ratings, in order to minimize the cost of our debt. We infrequently utilize derivative products, such as interest rate swaps, to manage interest rate risks. The fair values of our fixed maturity investments, loans and finance receivables, and notes payable and other borrowings will fluctuate in response to changes in market interest rates. In addition, changes in interest rate assumptions used in our equity index put option contract models cause changes in the reported liabilities. Increases and decreases in interest rates generally translate into decreases and increases in fair values of these instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions. The following table summarizes the estimated effects of hypothetical changes in interest rates on our significant assets and liabilities that are subject to significant interest rate risk at December 31, 2020 and 2019. We assumed that the interest rate changes occur immediately and uniformly to each category of instrument and that there were no significant changes to other factors used to determine the value of the instrument. The hypothetical changes in interest rates do not reflect the best or worst case scenarios. Actual results may differ from those reflected in the table. Dollars are in millions.               Estimated Fair Value after Hypothetical Change in Interest Rates               (bp=basis points)       Fair Value     100 bp decrease     100 bp increase     200 bp increase     300 bp increase   December 31, 2020                                         Assets:                                         Investments in fixed maturity securities   $ 20,410     $ 20,622     $ 20,139     $ 19,879     $ 19,628   Investments in equity securities*     8,891       9,408       8,413       7,970       7,559   Loans and finance receivables     20,554       21,472       19,916       19,219       18,570                                             Liabilities:                                         Notes payable and other borrowings:                                         Insurance and other     46,677       50,754       42,785       39,514       36,739   Railroad, utilities and energy     92,593       102,926       83,070       75,484       69,093   Equity index put option contracts     1,065       1,125       1,008       953       900                                             December 31, 2019                                         Assets:                                         Investments in fixed maturity securities   $ 18,685     $ 19,008     $ 18,375     $ 18,075     $ 17,787   Investments in equity securities*     10,314       11,016       9,671       9,081       8,539   Loans and finance receivables     17,861       18,527       17,240       16,660       16,116   Liabilities:                                         Notes payable and other borrowings:                                         Insurance and other     40,589       44,334       37,454       34,799       32,534   Railroad, utilities and energy     76,237       84,758       69,160       63,218       58,193   Equity index put option contracts     968       1,065       877       792       713     *Occidental Petroleum Cumulative Perpetual Preferred Stock K-65     Management’s Discussion and Analysis (Continued) Foreign Currency Risk Certain of our subsidiaries operate in foreign jurisdictions and we transact business in foreign currencies. In addition, we hold investments in common stocks of major multinational companies, who have significant foreign business and foreign currency risk of their own. We generally do not attempt to match assets and liabilities by currency and do not use derivative contracts to manage foreign currency risks in a meaningful way. Our net assets subject to financial statement translation into U.S. Dollars are primarily in our insurance, utilities and energy and certain manufacturing and service subsidiaries. A portion of our financial statement translation-related impact from changes in foreign currency rates is recorded in other comprehensive income. In addition, we include gains or losses in net earnings related to certain liabilities of Berkshire and U.S. insurance subsidiaries that are denominated in foreign currencies, due to changes in exchange rates. A summary of these gains (losses), after-tax, for each of the years ending December 31, 2020 and 2019 follows (in millions).       2020     2019   Non-U.S. denominated debt included in net earnings   $ (764 )   $ 58   Net liabilities under certain reinsurance contracts included in net earnings     (163 )     (92 ) Foreign currency translation included in other comprehensive income     1,264       257   Commodity Price Risk Our subsidiaries use commodities in various ways in manufacturing and providing services. As such, we are subject to price risks related to various commodities. In most instances, we attempt to manage these risks through the pricing of our products and services to customers. To the extent that we are unable to sustain price increases in response to commodity price increases, our operating results will likely be adversely affected. We do not utilize derivative contracts to manage commodity price risks to any significant degree. Item 7A. Quantitative and Qualitative Disclosures About Market Risk See “Market Risk Disclosures” contained in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Management’s Report on Internal Control Over Financial Reporting Management of Berkshire Hathaway Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2020. The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears on page K-67. Berkshire Hathaway Inc. February 27, 2021 K-66   Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Berkshire Hathaway Inc. Omaha, Nebraska Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.   K-67     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued) Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Unpaid Losses and Loss Adjustment Expenses— Refer to Notes 1 and 15 to the financial statements Critical Audit Matter Description The Company’s unpaid losses and loss adjustment expenses (“claim liabilities”) under short duration property and casualty insurance and reinsurance contracts are $79,854 million as of December 31, 2020. The key assumptions affecting certain claim liabilities include expected loss and expense (“loss”) ratios, expected claim count emergence patterns, expected loss payment emergence patterns and expected loss reporting emergence patterns. Given the subjectivity of estimating these key assumptions, performing audit procedures to evaluate whether claim liabilities were appropriately recorded as of December 31, 2020, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the key assumptions affecting certain claim liabilities included the following, among others: • We tested the operating effectiveness of controls over claim liabilities, including those over the key assumptions. • We evaluated the methods and assumptions used by management to estimate the claim liabilities by:   • Testing the underlying data that served as the basis for the actuarial analysis, such as historical claims and earned premium, to test that the inputs to the actuarial estimate were reasonable.   • Comparing management’s prior-year claim liabilities to actual development during the current year to identify potential bias in the determination of the claim liabilities. • With the assistance of our actuarial specialists:   • We developed independent estimates of the claim liabilities, including loss data and industry claim development factors as needed, and compared our estimates to management’s estimates.   • We compared management’s change in ultimate loss and loss adjustment expense to prior year estimates to test the reasonableness of the prior year estimates and assessed unexpected development. Unpaid Losses and Loss Adjustment Expenses Under Retroactive Reinsurance Contracts — Refer to Notes 1 and 16 to the financial statements Critical Audit Matter Description The Company’s unpaid losses and loss adjustment expenses (“claim liabilities”) for property and casualty retroactive reinsurance contracts are $40,966 million as of December 31, 2020. The key assumptions affecting certain claim liabilities and related deferred charge reinsurance assumed assets (“related assets”) include expected loss and expense (“loss”) ratios, expected loss payment emergence patterns and expected loss reporting emergence. Given the subjectivity of estimating these key assumptions, performing audit procedures to evaluate whether claim liabilities were appropriately recorded as of December 31, 2020, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the key assumptions affecting claim liabilities and related assets included the following, among others: • We tested the operating effectiveness of controls over claim liabilities and related assets, including those over the key assumptions. K-68   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued) • We evaluated the methods and assumptions used by management to estimate the claim liabilities and related assets by:   • Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.   • Comparing management’s prior-year claim liabilities to actual development during the current year to identify potential bias in the determination of the claim liabilities and related assets. • With the assistance of our actuarial specialists:   • We developed independent claim liability estimates for certain retroactive reinsurance contracts and compared our estimates to management’s estimates. For other retroactive reinsurance contracts and related assets, we evaluated the process used by management to develop the estimated claim liabilities and related assets.   • We compared management’s change in ultimate loss and loss adjustment expense to prior year estimates, assessed unexpected development and assessed internal rates of return. Goodwill and Indefinite-Lived Intangible Assets — Refer to Notes 1 and 13 to the financial statements Critical Audit Matter Description The Company’s evaluation of goodwill and indefinite-lived intangible assets for impairment involves the comparison of the fair value of each reporting unit or asset to its carrying value. The Company evaluates goodwill and indefinite-lived intangible assets for impairment at least annually. When evaluating goodwill and indefinite-lived intangible assets for impairment, the fair value of each reporting unit or asset is estimated. Significant judgment is required in estimating fair values and performing impairment tests. The Company primarily uses discounted projected future net earnings or net cash flows and multiples of earnings to estimate fair value, which requires management to make significant estimates and assumptions related to forecasts of future revenue, earnings before interest and taxes (“EBIT”), and discount rates. Changes in these assumptions could have a significant impact on the fair value of reporting units and indefinite-lived intangible assets. The Precision Castparts Corp. (“PCC”) reporting unit reported approximately $31 billion of goodwill and indefinite-lived intangible assets as of December 31, 2019. During the second quarter of 2020, the Company performed an interim reevaluation of the goodwill and indefinite-lived intangible assets at the PCC reporting unit. This determination was made due to disruptions arising from the COVID-19 pandemic that had an adverse impact on the industries in which PCC operates. As a result of the reevaluation, the Company recognized goodwill and indefinite-lived intangible asset impairment charges in the amount of approximately $10 billion, as the fair values of the PCC reporting unit and indefinite-lived intangible assets were less than their respective carrying values. As a result, PCC reported goodwill and indefinite-lived intangible assets of approximately $21 billion as of December 31, 2020. Given the significant judgments made by management to estimate the fair value of the PCC reporting unit and certain customer relationships with indefinite lives along with the difference between their fair values and carrying values, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenue and EBIT and the selection of the discount rate required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to forecasts of future revenue and EBIT and the selection of the discount rate for the PCC reporting unit and certain customer relationships included the following, among others:   • We tested the effectiveness of controls over goodwill and indefinite-lived intangible assets, including those over the forecasts of future revenue and EBIT and the selection of the discount rate.   • We evaluated management’s ability to accurately forecast future revenue and EBIT by comparing prior year forecasts to actual results in the respective years.   • We evaluated the reasonableness of management’s current revenue and EBIT forecasts by comparing the forecasts to historical results and forecasted information included in analyst and industry reports and certain peer companies’ disclosures.   • With the assistance of our fair value specialists, we evaluated the valuation methodologies, the long-term growth rates and discount rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developed a range of independent estimates and compared those to the long-term growth rates and discount rate selected by management. /s/ Deloitte & Touche LLP Omaha, Nebraska February 27, 2021 We have served as the Company’s auditor since 1985. K-69   BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (dollars in millions)       December 31,       2020     2019   ASSETS                 Insurance and Other:                 Cash and cash equivalents*   $ 44,714     $ 61,151   Short-term investments in U.S. Treasury Bills     90,300       63,822   Investments in fixed maturity securities     20,410       18,685   Investments in equity securities     281,170       248,027   Equity method investments     17,303       17,505   Loans and finance receivables     19,201       17,527   Other receivables     32,310       32,418   Inventories     19,208       19,852   Property, plant and equipment     21,200       21,438   Equipment held for lease     14,601       15,065   Goodwill     47,121       57,052   Other intangible assets     29,462       31,051   Deferred charges under retroactive reinsurance contracts     12,441       13,747   Other     14,580       13,232         664,021       630,572   Railroad, Utilities and Energy:                 Cash and cash equivalents*     3,276       3,024   Receivables     3,542       3,417   Property, plant and equipment     151,216       137,838   Goodwill     26,613       24,830   Regulatory assets     3,440       2,881   Other     21,621       15,167         209,708       187,157       $ 873,729     $ 817,729     * Includes U.S. Treasury Bills with maturities of three months or less when purchased of $23.2 billion at December 31, 2020 and $37.1 billion at December 31, 2019. See accompanying Notes to Consolidated Financial Statements K-70   BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (dollars in millions)       December 31,       2020     2019   LIABILITIES AND SHAREHOLDERS’ EQUITY                 Insurance and Other:                 Unpaid losses and loss adjustment expenses   $ 79,854     $ 73,019   Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts     40,966       42,441   Unearned premiums     21,395       19,782   Life, annuity and health insurance benefits     21,616       20,155   Other policyholder liabilities     8,670       7,723   Accounts payable, accruals and other liabilities     29,279       27,611   Derivative contract liabilities     1,065       968   Aircraft repurchase liabilities and unearned lease revenues     5,856       5,281   Notes payable and other borrowings     41,522       37,590         250,223       234,570   Railroad, Utilities and Energy:                 Accounts payable, accruals and other liabilities     15,224       14,708   Regulatory liabilities     7,475       7,311   Notes payable and other borrowings     75,373       65,778         98,072       87,797   Income taxes, principally deferred     74,098       66,799   Total liabilities     422,393       389,166   Shareholders’ equity:                 Common stock     8       8   Capital in excess of par value     35,626       35,658   Accumulated other comprehensive income     (4,243 )     (5,243 ) Retained earnings     444,626       402,493   Treasury stock, at cost     (32,853 )     (8,125 ) Berkshire Hathaway shareholders’ equity     443,164       424,791   Noncontrolling interests     8,172       3,772   Total shareholders’ equity     451,336       428,563       $ 873,729     $ 817,729     See accompanying Notes to Consolidated Financial Statements K-71   BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (dollars in millions except per share amounts)       Year Ended December 31,       2020     2019     2018   Revenues:                         Insurance and Other:                         Insurance premiums earned   $ 63,401     $ 61,078     $ 57,418   Sales and service revenues     127,044       134,989       133,336   Leasing revenues     5,209       5,856       5,732   Interest, dividend and other investment income     8,092       9,240       7,678         203,746       211,163       204,164   Railroad, Utilities and Energy:                         Freight rail transportation revenues     20,750       23,357       23,703   Energy operating revenues     15,540       15,353       15,555   Service revenues and other income     5,474       4,743       4,415         41,764       43,453       43,673   Total revenues     245,510       254,616       247,837                             Investment and derivative contract gains/losses:     40,746       72,607       (22,455 )                           Costs and expenses:                         Insurance and Other:                         Insurance losses and loss adjustment expenses     43,951       44,456       39,906   Life, annuity and health insurance benefits     5,812       4,986       5,699   Insurance underwriting expenses     12,798       11,200       9,793   Cost of sales and services     101,091       107,041       106,083   Cost of leasing     3,520       4,003       4,061   Selling, general and administrative expenses     19,809       19,226       17,856   Goodwill and intangible asset impairments     10,671       96       382   Interest expense     1,105       1,056       1,035         198,757       192,064       184,815   Railroad, Utilities and Energy:                         Freight rail transportation expenses     13,120       15,436       16,045   Utilities and energy cost of sales and other expenses     11,638       11,296       11,641   Other expenses     4,796       4,002       3,895   Interest expense     2,978       2,905       2,818         32,532       33,639       34,399   Total costs and expenses     231,289       225,703       219,214   Earnings before income taxes and equity method earnings (losses)     54,967       101,520       6,168   Equity method earnings (losses)     726       1,176       (2,167 ) Earnings before income taxes     55,693       102,696       4,001   Income tax expense (benefit)     12,440       20,904       (321 ) Net earnings     43,253       81,792       4,322   Earnings attributable to noncontrolling interests     732       375       301   Net earnings attributable to Berkshire Hathaway shareholders   $ 42,521     $ 81,417     $ 4,021   Net earnings per average equivalent Class A share   $ 26,668     $ 49,828     $ 2,446   Net earnings per average equivalent Class B share*   $ 17.78     $ 33.22     $ 1.63   Average equivalent Class A shares outstanding     1,594,469       1,633,946       1,643,795   Average equivalent Class B shares outstanding     2,391,703,454       2,450,919,020       2,465,692,368     * Class B shares are economically equivalent to one-fifteen-hundredth of a Class A share. Accordingly, net earnings per average equivalent Class B share outstanding is equal to one-fifteen-hundredth of the equivalent Class A amount. See Note 22. See accompanying Notes to Consolidated Financial Statements K-72   BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (dollars in millions)       Year Ended December 31,       2020     2019     2018   Net earnings   $ 43,253     $ 81,792     $ 4,322   Other comprehensive income:                         Unrealized appreciation of investments     74       142       (438 ) Applicable income taxes     (19 )     (31 )     84   Foreign currency translation     1,284       323       (1,531 ) Applicable income taxes     3       (28 )     62   Defined benefit pension plans     (355 )     (711 )     (571 ) Applicable income taxes     74       155       143   Other, net     (42 )     (48 )     (12 ) Other comprehensive income, net     1,019       (198 )     (2,263 ) Comprehensive income     44,272       81,594       2,059   Comprehensive income attributable to noncontrolling interests     751       405       249   Comprehensive income attributable to Berkshire Hathaway shareholders   $ 43,521     $ 81,189     $ 1,810       BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (dollars in millions)       Berkshire Hathaway shareholders’ equity                       Common stock and capital in excess of par value     Accumulated other comprehensive income     Retained earnings     Treasury stock     Non- controlling interests     Total   Balance December 31, 2017   $ 35,702     $ 58,571     $ 255,786     $ (1,763 )   $ 3,658     $ 351,954   Adoption of new accounting pronouncements     —       (61,375 )     61,305       —       —       (70 ) Net earnings     —       —       4,021       —       301       4,322   Other comprehensive income, net     —       (2,211 )     —       —       (52 )     (2,263 ) Issuance (acquisition) of common stock     59       —       —       (1,346 )     —       (1,287 ) Transactions with noncontrolling interests     (46 )     —       —       —       (110 )     (156 ) Balance December 31, 2018     35,715       (5,015 )     321,112       (3,109 )     3,797       352,500   Net earnings     —       —       81,417       —       375       81,792   Other comprehensive income, net     —       (228 )     —       —       30       (198 ) Issuance (acquisition) of common stock     21       —       —       (5,016 )     —       (4,995 ) Transactions with noncontrolling interests     (70 )     —       (36 )     —       (430 )     (536 ) Balance December 31, 2019     35,666       (5,243 )     402,493       (8,125 )     3,772       428,563   Net earnings     —       —       42,521       —       732       43,253   Adoption of new accounting pronouncement     —       —       (388 )     —       —       (388 ) Other comprehensive income, net     —       1,000       —       —       19       1,019   Issuance (acquisition) of common stock     —       —       —       (24,728 )     —       (24,728 ) Transactions with noncontrolling interests     (32 )     —       —       —       3,649       3,617   Balance December 31, 2020   $ 35,634     $ (4,243 )   $ 444,626     $ (32,853 )   $ 8,172     $ 451,336       See accompanying Notes to Consolidated Financial Statements K-73   BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in millions)       Year Ended December 31,       2020     2019     2018   Cash flows from operating activities:                         Net earnings   $ 43,253     $ 81,792     $ 4,322   Adjustments to reconcile net earnings to operating cash flows:                         Investment (gains) losses     (40,905 )     (71,123 )     22,155   Depreciation and amortization     10,596       10,064       9,779   Other, including asset impairment charges     11,263       (1,254 )     2,957   Changes in operating assets and liabilities:                         Losses and loss adjustment expenses     4,819       6,087       3,449   Deferred charges reinsurance assumed     1,307       357       1,174   Unearned premiums     1,587       1,707       1,794   Receivables and originated loans     (1,609 )     (2,303 )     (3,443 ) Other assets     (1,109 )     (2,011 )     (1,832 ) Other liabilities     3,376       190       2,002   Income taxes     7,195       15,181       (4,957 ) Net cash flows from operating activities     39,773       38,687       37,400   Cash flows from investing activities:                         Purchases of equity securities     (30,161 )     (18,642 )     (43,210 ) Sales of equity securities     38,756       14,336       18,783   Purchases of U.S. Treasury Bills and fixed maturity securities     (208,429 )     (136,123 )     (141,844 ) Sales of U.S. Treasury Bills and fixed maturity securities     31,873       15,929       39,693   Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities     149,709       137,767       113,045   Purchases of loans and finance receivables     (772 )     (75 )     (1,771 ) Collections of loans and finance receivables     393       345       342   Acquisitions of businesses, net of cash acquired     (2,532 )     (1,683 )     (3,279 ) Purchases of property, plant and equipment and equipment held for lease     (13,012 )     (15,979 )     (14,537 ) Other     (3,582 )     (1,496 )     (71 ) Net cash flows from investing activities     (37,757 )     (5,621 )     (32,849 ) Cash flows from financing activities:                         Proceeds from borrowings of insurance and other businesses     5,925       8,144       2,409   Repayments of borrowings of insurance and other businesses     (2,700 )     (5,095 )     (7,395 ) Proceeds from borrowings of railroad, utilities and energy businesses     8,445       5,400       7,019   Repayments of borrowings of railroad, utilities and energy businesses     (3,761 )     (2,638 )     (4,213 ) Changes in short term borrowings, net     (1,118 )     266       (1,943 ) Acquisition of treasury stock     (24,706 )     (4,850 )     (1,346 ) Other     (429 )     (497 )     (343 ) Net cash flows from financing activities     (18,344 )     730       (5,812 ) Effects of foreign currency exchange rate changes     92       25       (140 ) Increase (decrease) in cash and cash equivalents and restricted cash     (16,236 )     33,821       (1,401 ) Cash and cash equivalents and restricted cash at beginning of year     64,632       30,811       32,212   Cash and cash equivalents and restricted cash at end of year *   $ 48,396     $ 64,632     $ 30,811   * Cash and cash equivalents and restricted cash at end of year are comprised of    the following:                         Insurance and Other   $ 44,714     $ 61,151     $ 27,749   Railroad, Utilities and Energy     3,276       3,024       2,612   Restricted cash, included in other assets     406       457       450       $ 48,396     $ 64,632     $ 30,811     See accompanying Notes to Consolidated Financial Statements K-74   BERKSHIRE HATHAWAY INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020 (1) Significant accounting policies and practices   (a) Nature of operations and basis of consolidation Berkshire Hathaway Inc. (“Berkshire”) is a holding company owning subsidiaries engaged in a number of diverse business activities, including insurance and reinsurance, freight rail transportation, utilities and energy, manufacturing, service and retailing. In these notes the terms “us,” “we,” or “our” refer to Berkshire and its consolidated subsidiaries. Further information regarding our reportable business segments is contained in Note 27. Information concerning business acquisitions completed over the past three years appears in Note 2. We believe that reporting the Railroad, Utilities and Energy subsidiaries separately is appropriate given the relative significance of their long-lived assets, capital expenditures and debt, which is not guaranteed by Berkshire. The accompanying Consolidated Financial Statements include the accounts of Berkshire consolidated with the accounts of all subsidiaries and affiliates in which we hold a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. We consolidate variable interest entities (“VIE”) when we possess both the power to direct the activities of the VIE that most significantly affect its economic performance, and we (a) are obligated to absorb the losses that could be significant to the VIE or (b) hold the right to receive benefits from the VIE that could be significant to the VIE. Intercompany accounts and transactions have been eliminated.   (b) Use of estimates in preparation of financial statements We prepare our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States (“GAAP”) which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the period. Our estimates of unpaid losses and loss adjustment expenses are subject to considerable estimation error due to the inherent uncertainty in projecting ultimate claim costs. In addition, estimates and assumptions associated with the amortization of deferred charges on retroactive reinsurance contracts, determinations of fair values of certain financial instruments and evaluations of goodwill and identifiable intangible assets for impairment require considerable judgment. Actual results may differ from the estimates used in preparing our Consolidated Financial Statements. The novel coronavirus (“COVID-19”) spread rapidly across the world in 2020 and was declared a pandemic by the World Health Organization. The government and private sector responses to contain its spread began to significantly affect our operating businesses in March. COVID-19 has since adversely affected nearly all of our operations, although the effects are varying significantly. The duration and extent of the effects over longer terms cannot be reasonably estimated at this time. The risks and uncertainties resulting from the pandemic that may affect our future earnings, cash flows and financial condition include the time necessary to distribute safe and effective vaccines and to vaccinate a significant number of people in the U.S. and throughout the world as well as the long-term effect from the pandemic on the demand for certain of our products and services. Accordingly, significant estimates used in the preparation of our financial statements including those associated with evaluations of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to us and the estimations of certain losses assumed under insurance and reinsurance contracts may be subject to significant adjustments in future periods.     (c) Cash and cash equivalents and short-term investments in U.S. Treasury Bills Cash equivalents consist of demand deposit and money market accounts and investments (including U.S. Treasury Bills) with maturities of three months or less when purchased. Short-term investments in U.S. Treasury Bills consist of U.S. Treasury Bills with maturities exceeding three months at the time of purchase and are stated at amortized cost, which approximates fair value.   K-75     Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)   (d) Investments in fixed maturity securities We classify investments in fixed maturity securities on the acquisition date and at each balance sheet date. Securities classified as held-to-maturity are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Securities classified as trading are acquired with the intent to sell in the near term and are carried at fair value with changes in fair value reported in earnings. All other securities are classified as available-for-sale and are carried at fair value. Substantially all of these investments are classified as available-for-sale. We amortize the difference between the original cost and maturity value of a fixed maturity security to earnings using the interest method. We record investment gains and losses on available-for-sale fixed maturity securities when the securities are sold, as determined on a specific identification basis. For securities in an unrealized loss position, we recognize a loss in earnings for the excess of amortized cost over fair value if we intend to sell before the price recovers. Otherwise, we evaluate as of the balance sheet date whether the unrealized losses are attributable to credit losses or other factors. We consider the severity of the decline in value, creditworthiness of the issuer and other relevant factors. We record an allowance for credit losses, limited to the excess of amortized cost over fair value, along with a corresponding charge to earnings if the present value of estimated cash flows is less than the present value of contractual cash flows. The allowance may be subsequently increased or decreased based on the prevailing facts and circumstances. The portion of the unrealized loss that we believe is not related to a credit loss is recognized in other comprehensive income.   (e) Investments in equity securities We carry substantially all investments in equity securities at fair value and record the subsequent changes in fair values in the Consolidated Statements of Earnings as a component of investment gains/losses.   (f) Investments under the equity method We utilize the equity method to account for investments when we possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. We apply the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock. In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee. We record dividends or other equity distributions as reductions in the carrying value of the investment. In the event that net losses of the investee reduce the carrying amount to zero, additional net losses may be recorded if other investments in the investee are at-risk, even if we have not committed to provide financial support to the investee. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value.   (g) Receivables Receivables primarily consist of balances due from customers, insurance premiums receivable and reinsurance losses recoverable. Trade receivables, insurance premium receivables and other receivables are primarily short-term in nature with stated collection terms of less than one year from the date of origination. Reinsurance recoverables are comprised of amounts ceded under reinsurance contracts or pursuant to mandatory government-sponsored insurance programs. Reinsurance recoverables relate to claims for unpaid losses and loss adjustment expenses arising from property and casualty contracts and claim benefits under life and health insurance contracts. Receivables are stated net of estimated allowances for uncollectible balances. Prior to 2020, we recorded provisions for uncollectible balances when it was probable counterparties or customers would be unable to pay all amounts due based on the contractual terms and historical loss history. As of January 1, 2020, we adopted a new accounting pronouncement that affects the measurement of allowances for credit losses. See Note 1(w). In measuring credit loss allowances, we primarily utilize credit loss history, with adjustments to reflect current or expected future economic conditions when reasonable and supportable forecasts of losses deviate from historical experience. In evaluating expected credit losses of reinsurance recoverable on unpaid losses, we review the credit quality of the counterparty and consider right-of-offset provisions within reinsurance contracts and other forms of credit enhancement including, collateral, guarantees and other available information. We charge-off receivables against the allowances after all reasonable collection efforts are exhausted. K-76   Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)   (h) Loans and finance receivables Loans and finance receivables are primarily manufactured home loans, and to lesser extent, commercial loans and site-built home loans. We carry substantially all of these loans at amortized cost, net of allowances for expected credit losses, based on our ability and intent to hold such loans to maturity. Acquisition costs and loan origination and commitment costs paid or fees received along with acquisition premiums or discounts are amortized as yield adjustments over the lives of the loans. Prior to 2020, credit losses were measured when non-collection was considered probable based on the prevailing facts and circumstances. Beginning in 2020, measurements of expected credit losses include provisions for non-collection, whether the risk is probable or remote. Expected credit losses on manufactured housing installment loans are based on the net present value of future principal payments less estimated expenses related to the charge-off and foreclosure of expected uncollectible loans and include provisions for loans that are not in foreclosure. Our principal credit quality indicator is whether the loans are performing. Expected credit loss estimates consider historical default rates, collateral recovery rates, historical runoff rates, interest rates, reductions of future cash flows for modified loans and the historical time elapsed from last payment until foreclosure, among other factors. In addition, our estimates consider current conditions and reasonable and supportable forecasts. Loans are considered delinquent when payments are more than 30 days past due. We place loans over 90 days past due on nonaccrual status and accrued but uncollected interest is reversed. Subsequent collections on the loans are first applied to the principal and interest owed for the most delinquent amount. We resume interest income accrual once a loan is less than 90 days delinquent. Loans are considered non-performing when the foreclosure process has started. Once a loan is in the process of foreclosure, interest income is not recognized unless the foreclosure is cured or the loan is modified. Once a modification is complete, interest income is recognized based on the terms of the new loan. Foreclosed loans are charged off when the collateral is sold. Loans not in foreclosure are evaluated for charge-off based on individual circumstances concerning the future collectability of the loan and the condition of the collateral securing the loan.   (i) Derivatives We carry derivative contracts in our Consolidated Balance Sheets at fair value, net of reductions permitted under master netting agreements with counterparties. We record the changes in fair value of derivative contracts that do not qualify as hedging instruments for financial reporting purposes in earnings or, if such contracts involve our regulated utilities subsidiaries, as regulatory assets or liabilities when inclusion in regulated rates is probable.   (j) Fair value measurements As defined under GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or in the most advantageous market when no principal market exists. Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in estimating fair value. Alternative valuation techniques may be appropriate under the circumstances to determine the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction. Market participants are assumed to be independent, knowledgeable, and able and willing to transact an exchange and not acting under duress. Our nonperformance or credit risk is considered in determining the fair value of liabilities. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange.   (k) Inventories Inventories consist of manufactured goods, goods or products acquired for resale and homes constructed for sale. Manufactured inventory costs include materials, direct and indirect labor and factory overhead. At December 31, 2020, we used the last-in-first-out (“LIFO”) method to value approximately 35% of consolidated inventories with the remainder primarily determined under first-in-first-out and average cost methods. Non-LIFO inventories are stated at the lower of cost or net realizable value. The excess of current or replacement costs over costs determined under LIFO was approximately $1.1 billion as of December 31, 2020 and $950 million as of December 31, 2019. K-77   Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)   (l) Property, plant and equipment We record additions to property, plant and equipment used in operations at cost, which includes asset additions, improvements and betterments. With respect to constructed assets, all materials, direct labor and contract services as well as certain indirect costs are capitalized. Indirect costs include interest over the construction period. With respect to constructed assets of our utility and energy subsidiaries that are subject to authoritative guidance for regulated operations, capitalized costs also include an allowance for funds used during construction, which represents the cost of equity funds used to finance the construction of the regulated facilities. Normal repairs and maintenance and other costs that do not improve the property, extend useful lives or otherwise do not meet capitalization criteria are charged to expense as incurred. Depreciation of assets of our regulated utilities and railroad is generally determined using group depreciation methods where rates are based on periodic depreciation studies approved by the applicable regulator. Under group depreciation, a composite rate is applied to the gross investment in a particular class of property, despite differences in the service life or salvage value of individual property units within the same class. When such assets are retired or sold, no gain or loss is recognized. Gains or losses on disposals of all other assets are recorded through earnings. We depreciate property, plant and equipment used by our other businesses to estimated salvage value primarily using the straight-line method over estimated useful lives. Ranges of estimated useful lives of depreciable assets used in our other businesses are as follows: buildings and improvements – 5 to 50 years, machinery and equipment – 3 to 25 years and furniture, fixtures and other – 3 to 15 years. Ranges of estimated useful lives of depreciable assets unique to our railroad business are as follows: track structure and other roadway – 10 to 100 years and locomotives, freight cars and other equipment – 6 to 43 years. Ranges of estimated useful lives of assets unique to our regulated utilities and energy businesses are as follows: utility generation, transmission and distribution systems – 5 to 80 years, interstate natural gas pipeline assets – 3 to 80 years and independent power plants and other assets – 3 to 40 years. We evaluate property, plant and equipment for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable or when the assets are held for sale. Upon the occurrence of a triggering event, we assess whether the estimated undiscounted cash flows expected from the use of the asset and the residual value from the ultimate disposal of the asset exceeds the carrying value. If the carrying value exceeds the estimated recoverable amounts, we reduce the carrying value to fair value and record an impairment loss in earnings, except with respect to impairment of assets of our regulated utility and energy subsidiaries where the impacts of regulation are considered in evaluating the carrying value.   (m) Leases We are party to contracts where we lease property to others (“lessor” contracts) and where we lease property from others (“lessee” contracts). We record acquisitions of and additions to equipment that we lease to others at cost. We depreciate equipment held for lease to estimated salvage value primarily using the straight-line method over estimated useful lives ranging from 3 to 35 years. We use declining balance deprecation methods for assets when the revenue-earning power of the asset is relatively greater during the earlier years of its life and maintenance and repair costs increase during the later years. We also evaluate equipment held for lease for impairment consistent with policies for property, plant and equipment. When we lease assets from others, we record right-of-use assets and lease liabilities. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. In this regard, lease payments include fixed payments and variable payments that depend on an index or rate. The lease term is generally the non-cancellable lease period. Certain lease contracts contain renewal options or other terms that provide for variable payments based on performance or usage. Options are not included in determining right-of-use assets or lease liabilities unless it is reasonably certain that options will be exercised. Generally, incremental borrowing rates are used in measuring lease liabilities. Right-of-use assets are subject to review for impairment. K-78   Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)   (n) Goodwill and other intangible assets Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of that business. We evaluate goodwill for impairment at least annually. When evaluating goodwill for impairment, we estimate the fair value of the reporting unit. Several methods may be used to estimate a reporting unit’s fair value, including market quotations, asset and liability fair values and other valuation techniques, including, but not limited to, discounted projected future net earnings or net cash flows and multiples of earnings. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, then the excess is charged to earnings as an impairment loss. Intangible assets with indefinite lives are also tested for impairment at least annually and when events or changes in circumstances indicate that, more-likely-than-not, the asset is impaired. Significant judgment is required in estimating fair values and performing goodwill and indefinite-life intangible asset impairment tests. We amortize intangible assets with finite lives in a pattern that reflects the expected consumption of related economic benefits or on a straight-line basis over the estimated economic useful lives. Intangible assets with finite lives are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.   (o) Revenue recognition We earn insurance premiums on prospective property/casualty insurance and reinsurance contracts over the loss exposure or coverage period in proportion to the level of protection provided. In most cases, such premiums are earned ratably over the term of the contract with unearned premiums computed on a monthly or daily pro-rata basis. Premiums on retroactive property/casualty reinsurance contracts are earned at the inception of the contracts, as all underlying loss events covered by the policies occurred prior to contract inception. Premiums for life reinsurance and annuity contracts are earned when due. Premiums earned are stated net of amounts ceded to reinsurers. Premiums earned on contracts with experience-rating provisions reflect estimated loss experience under such contracts. Sales and service revenues are recognized when goods or services are transferred to a customer. A good or service is transferred when (or as) the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers. We manufacture and/or distribute a wide variety of industrial, building and consumer products. Our sales contracts provide customers with these products through wholesale and retail channels in exchange for consideration specified under the contracts. Contracts generally represent customer orders for individual products at stated prices. Sales contracts may contain either single or multiple performance obligations. In instances where contracts contain multiple performance obligations, we allocate the revenue to each obligation based on the relative stand-alone selling prices of each product or service. Sales revenue reflects reductions for returns, allowances, volume discounts and other incentives, some of which may be contingent on future events. In certain customer contracts, sales revenue includes certain state and local excise taxes billed to customers on specified products when those taxes are levied directly upon us by the taxing authorities. Sales revenue excludes sales taxes and value-added taxes collected on behalf of taxing authorities. Sales revenue includes consideration for shipping and other fulfillment activities performed prior to the customer obtaining control of the goods. We also elect to treat consideration for such services performed after control has passed to the customer as sales revenue. Our product sales revenues are generally recognized at a point in time when control of the product transfers to the customer, which coincides with customer pickup or product delivery or acceptance, depending on terms of the arrangement. We recognize sales revenues and related costs with respect to certain contracts over time, primarily from certain castings, forgings and aerostructures contracts. Control of the product units under these contracts transfers continuously to the customer as the product is manufactured. These products generally have no alternative use and the contract requires the customer to provide reasonable compensation if terminated for reasons other than breach of contract. K-79   Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)   (o) Revenue recognition (Continued) Our energy revenue derives primarily from tariff-based sales arrangements approved by various regulatory commissions. These tariff-based revenues are mainly comprised of energy, transmission, distribution and natural gas and have performance obligations to deliver energy products and services to customers which are satisfied over time as energy is delivered or services are provided. Our nonregulated energy revenue primarily relates to our renewable energy business. Energy revenues are equivalent to the amounts we have the right to invoice and correspond directly with the value to the customer of the performance to date and include billed and unbilled amounts. Payments from customers are generally due within 30 days of billing. Rates charged for energy products and services are established by regulators or contractual arrangements that establish the transaction price, as well as the allocation of price among the separate performance obligations. When preliminary regulated rates are permitted to be billed prior to final approval by the applicable regulator, certain revenue collected may be subject to refund and a liability for estimated refunds is accrued. The primary performance obligation under our freight rail transportation service contracts is to move freight from a point of origin to a point of destination. The performance obligations are represented by bills of lading which create a series of distinct services that have a similar pattern of transfer to the customer. The revenues for each performance obligation are based on various factors including the product being shipped, the origin and destination pair and contract incentives, which are outlined in various private rate agreements, common carrier public tariffs, interline foreign road agreements and pricing quotes. The transaction price is generally a per car/unit amount to transport railcars from a specified origin to a specified destination. Freight revenues are recognized over time as the service is performed because the customer simultaneously receives and consumes the benefits of the service. Revenues recognized represent the proportion of the service completed as of the balance sheet date. Invoices for freight transportation services are generally issued to customers and paid within 30 days or less. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specific locations, are recorded as a reduction to revenue on a pro-rata basis based on actual or projected future customer shipments. Other service revenues derive from contracts with customers in which performance obligations are satisfied over time, where customers receive and consume benefits as we perform the services, or at a point in time when the services are provided. Other service revenues primarily derive from real estate brokerage, automotive repair, aircraft management, aviation training and franchising and news distribution services. Leasing revenue is generally recognized ratably over the term of the lease or based on usage, if applicable under the terms of the contract. A substantial portion of our leases are classified as operating leases.   (p) Losses and loss adjustment expenses We record liabilities for unpaid losses and loss adjustment expenses under property/casualty insurance and reinsurance contracts for loss events that have occurred on or before the balance sheet date. Such liabilities represent the estimated ultimate payment amounts without discounting for time value. We base liability estimates on (1) loss reports from policyholders and cedents, (2) individual case estimates and (3) estimates of incurred but not reported losses. Losses and loss adjustment expenses in the Consolidated Statements of Earnings include paid claims, claim settlement costs and changes in estimated claim liabilities. Losses and loss adjustment expenses charged to earnings are net of amounts recovered and estimates of amounts recoverable under ceded reinsurance contracts. Reinsurance contracts do not relieve the ceding company of its obligations to indemnify policyholders with respect to the underlying insurance and reinsurance contracts.   (q) Retroactive reinsurance contracts We record liabilities for unpaid losses and loss adjustment expenses under short duration retroactive reinsurance contracts consistent with other short duration property/casualty insurance and reinsurance contracts described in Note 1(p). With respect to retroactive reinsurance contracts, we also record deferred charge assets at the inception of the contracts, representing the excess, if any, of the estimated ultimate claim liabilities over the premiums earned. We subsequently amortize the deferred charge assets over the expected claim settlement periods using the interest method. Changes to the estimated timing or amount of future loss payments also produce changes in deferred charge balances. We apply changes in such estimates retrospectively and the resulting changes in deferred charge balances, together with periodic amortization, are included in insurance losses and loss adjustment expenses in the Consolidated Statements of Earnings. K-80   Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)   (r) Insurance policy acquisition costs We capitalize the incremental costs that directly relate to the successful sale of insurance contracts, subject to ultimate recoverability, and we subsequently amortize such costs to underwriting expenses as the related premiums are earned. Direct incremental acquisition costs include commissions, premium taxes and certain other costs associated with successful efforts. We expense all other underwriting costs as incurred. The recoverability of capitalized insurance policy acquisition costs generally reflects anticipation of investment income. The unamortized balances are included in other assets and were approximately $3.25 billion and $2.95 billion at December 31, 2020 and 2019, respectively.   (s) Life and annuity insurance benefits We compute liabilities for insurance benefits under life contracts based upon estimated future investment yields, expected mortality, morbidity and lapse or withdrawal rates, as well as estimates of premiums we expect to receive and expenses we expect to incur in the future. These assumptions, as applicable, also include a margin for adverse deviation and may vary with the characteristics of the contract’s date of issuance, policy duration and country of risk. The interest rate assumptions used may vary by contract or jurisdiction. We discount periodic payment annuity liabilities based on the implicit rate as of the inception of the contracts such that the present value of the liabilities equals the premiums. Discount rates for most contracts range from 3% to 7%.   (t) Regulated utilities and energy businesses Certain energy subsidiaries prepare their financial statements in accordance with authoritative guidance for regulated operations, reflecting the economic effects of regulation from the ability to recover certain costs from customers and the requirement to return revenues to customers in the future through the regulated rate-setting process. Accordingly, certain costs are deferred as regulatory assets and certain income is accrued as regulatory liabilities. Regulatory assets and liabilities will be amortized into operating expenses and revenues over various future periods. Regulatory assets and liabilities are continually assessed for probable future inclusion in regulatory rates by considering factors such as applicable regulatory or legislative changes and recent rate orders received by other regulated entities. If future inclusion in regulatory rates ceases to be probable, the amount no longer probable of inclusion in regulatory rates is charged or credited to earnings (or other comprehensive income, if applicable) or returned to customers.   (u) Foreign currency The accounts of our non-U.S. based subsidiaries are measured, in most instances, using functional currencies other than the U.S. Dollar. Revenues and expenses in the financial statements of these subsidiaries are translated into U.S. Dollars at the average exchange rate for the period and assets and liabilities are translated at the exchange rate as of the end of the reporting period. The net effects of translating the financial statements of these subsidiaries are included in shareholders’ equity as a component of accumulated other comprehensive income. Gains and losses arising from transactions denominated in a currency other than the functional currency of the reporting entity, including gains and losses from the remeasurement of assets and liabilities due to changes in currency exchange rates, are included in earnings.   (v) Income taxes Berkshire files a consolidated federal income tax return in the United States, which includes eligible subsidiaries. In addition, we file income tax returns in state, local and foreign jurisdictions as applicable. Provisions for current income tax liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings also include deferred income tax provisions. Deferred income tax assets and liabilities are computed on differences between the financial statement bases and tax bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets when realization is not likely. K-81   Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)   (v) Income taxes (Continued) Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in our judgment, do not meet a more-likely-than-not threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of income tax expense.   (w) New accounting pronouncements adopted in 2020 We adopted Accounting Standards Codification (“ASC”) 326 “Financial Instruments-Credit Losses” on January 1, 2020. ASC 326 provides for the measurement of expected credit losses on financial assets that are carried at amortized cost based on the net amounts expected to be collected. Measurements of expected credit losses therefore include provisions for non-collection, whether the risk is probable or remote. Prior to the adoption of ASC 326, credit losses were measured when non-collection was considered probable based on the prevailing facts and circumstances. We do not measure an allowance for expected credit losses on accrued interest and instead, as permitted, we elected to reverse uncollectible accrued interest through interest income on a timely basis. Upon adoption of ASC 326, we recorded a charge to retained earnings of $388 million representing the cumulative after-tax increase in our allowances for credit losses, which was primarily related to our manufactured housing loans.   (x) New accounting pronouncements adopted in 2019 Berkshire adopted ASC 842 “Leases” on January 1, 2019. Most significantly, ASC 842 requires a lessee to recognize a liability to make operating lease payments and an asset with respect to its right to use the underlying asset for the lease term. In adopting and applying ASC 842, we elected to use practical expedients, including but not limited to, not reassessing past lease and easement accounting, not separating lease components from non-lease components by class of asset and not recording assets or liabilities for leases with terms of one year or less. We adopted ASC 842 as of January 1, 2019 with respect to contracts in effect as of that date and elected to not restate prior period financial statements. Upon the adoption of ASC 842, we recognized operating lease right-of-use assets of approximately $6.2 billion and lease liabilities of $5.9 billion. We also reduced other assets by approximately $300 million. Consequently, our consolidated assets and liabilities increased by approximately $5.9 billion. ASC 842 did not have a material effect on our accounting for our lessor contracts or for lessee contracts classified as financing leases.   (y) New accounting pronouncements adopted in 2018 On January 1, 2018, we adopted Accounting Standards Update (“ASU”) 2016-01 “Financial Instruments—Recognition and Measurement of Financial Assets and Financial Liabilities,” ASU 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” and ASC 606 “Revenues from Contracts with Customers.” Prior year financial statements were not restated. A summary of the effects of the initial adoption of ASU 2016-01, ASU 2018-02 and ASC 606 on our shareholders’ equity follows (in millions).       ASU 2016-01     ASU 2018-02     ASC 606     Total   Increase (decrease):                                 Accumulated other comprehensive income   $ (61,459 )   $ 84     $ —     $ (61,375 ) Retained earnings     61,459       (84 )     (70 )     61,305   Shareholders’ equity     —       —       (70 )     (70 )   In adopting ASU 2016-01, as of January 1, 2018, we reclassified the net after-tax unrealized gains on equity securities from accumulated other comprehensive income to retained earnings. Thereafter, the unrealized gains and losses from the changes during the period in the fair values of our equity securities are included within investment gains/losses in the Consolidated Statements of Earnings. In adopting ASU 2018-02, we reclassified certain deferred income tax effects as of January 1, 2018 attributable to the reduction in the U.S. statutory income tax rate under the Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive income to retained earnings. In adopting ASC 606, we recorded increases to certain assets and other liabilities, with the cumulative net effect recorded to retained earnings. K-82   Notes to Consolidated Financial Statements (Continued) (1) Significant accounting policies and practices (Continued)     (z) New accounting pronouncements to be adopted subsequent to December 31, 2020 In August 2018, the FASB issued ASU 2018-12 “Targeted Improvements to the Accounting for Long-Duration Contracts.” ASU 2018-12 requires periodic reassessment of actuarial and discount rate assumptions used to value policyholder liabilities and deferred acquisition costs of long-duration insurance and reinsurance contracts, with the effects of changes in cash flow assumptions reflected in earnings and the effects of changes in discount rate assumptions reflected in other comprehensive income. Under current GAAP, the actuarial and discount rate assumptions are set at the contract inception date and not subsequently changed, except under limited circumstances. ASU 2018-12 requires new disclosures and is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We are evaluating the effect this standard will have on our Consolidated Financial Statements. (2) Business acquisitions Our long-held acquisition strategy is to acquire businesses that have consistent earning power, good returns on equity and able and honest management. Financial results attributable to business acquisitions are included in our Consolidated Financial Statements beginning on their respective acquisition dates.   In July 2020, Berkshire Hathaway Energy (“BHE”) reached a definitive agreement with Dominion Energy, Inc. (“Dominion”) to acquire substantially all of Dominion’s natural gas transmission and storage business. On October 5, 2020, BHE and Dominion also agreed, as permitted under the acquisition agreement, to provide for the acquisition of all originally agreed upon businesses, except for certain pipeline assets (the “Excluded Assets”) and entered into a second acquisition agreement with respect to the Excluded Assets. The acquisition of the Dominion businesses, other than the Excluded Assets, was completed on November 1, 2020 and included more than 5,400 miles of natural gas transmission, gathering and storage pipelines, about 420 billion cubic feet of operated natural gas storage capacity and partial ownership of a liquefied natural gas export, import and storage facility (“Cove Point”). Under the terms of the second acquisition agreement, BHE agreed to acquire the Excluded Assets for approximately $1.3 billion in cash. The closing of this second acquisition is subject to receiving necessary regulatory approvals and other customary closing conditions and is expected to occur during the first half of 2021. The cost of the acquisition completed on November 1, 2020, was approximately $2.5 billion after post-closing adjustments as provided in the agreement. The preliminary fair values of identified assets acquired and liabilities assumed and residual goodwill are summarized as follows (in millions).   Property, plant and equipment $ 9,254   Goodwill   1,732   Other   2,376   Assets acquired $ 13,362           Notes payable and other borrowings $ 5,615   Other   1,317   Liabilities assumed   6,932   Noncontrolling interests   3,916   Net assets $ 2,514     As part of this acquisition, BHE acquired an indirect 25% economic interest in Cove Point, consisting of 100% of the general partnership interest and 25% of the limited partnership interests. We concluded that Cove Point is a VIE and that we have the power to direct the activities that most significantly impact its economic performance as well as the obligation to absorb losses and receive benefits which could be significant to Cove Point. Therefore, we treat Cove Point as a consolidated subsidiary. The noncontrolling interests in the preceding table is attributable to the limited partner interests held by third parties. On October 1, 2018, we acquired MLMIC Insurance Company (“MLMIC”), a writer of medical professional liability insurance domiciled in New York. The acquisition price was approximately $2.5 billion. As of the acquisition date, the fair value of MLMIC’s assets was approximately $6.1 billion, primarily investments ($5.2 billion), and the fair value of its liabilities was approximately $3.6 billion, primarily unpaid losses and loss adjustment expenses ($3.2 billion). K-83   Notes to Consolidated Financial Statements (Continued) (2) Business acquisitions (Continued)   In each of the past three years, we also completed several smaller-sized business acquisitions, which we consider as “bolt-ons” to several of our existing business operations. Aggregate consideration paid for bolt-on acquisitions, net of cash acquired was approximately $130 million in 2020, $1.7 billion in 2019 and $1.0 billion in 2018. We do not believe that these acquisitions are material, individually or in the aggregate to our Consolidated Financial Statements. (3) Investments in fixed maturity securities Investments in fixed maturity securities as of December 31, 2020 and 2019 are summarized by type below (in millions).       Amortized Cost     Unrealized Gains     Unrealized Losses     Fair Value   December 31, 2020                                 U.S. Treasury, U.S. government corporations and agencies   $ 3,348     $ 55     $ —     $ 3,403   Foreign governments     11,233       110       (5 )     11,338   Corporate bonds     4,729       464       (2 )     5,191   Other     414       66       (2 )     478       $ 19,724     $ 695     $ (9 )   $ 20,410   December 31, 2019                                 U.S. Treasury, U.S. government corporations and agencies   $ 3,054     $ 37     $ (1 )   $ 3,090   Foreign governments     8,584       63       (9 )     8,638   Corporate bonds     5,896       459       (3 )     6,352   Other     539       67       (1 )     605       $ 18,073     $ 626     $ (14 )   $ 18,685     Investments in foreign governments include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of December 31, 2020, approximately 88% of our foreign government holdings were rated AA or higher by at least one of the major rating agencies. The amortized cost and estimated fair value of fixed maturity securities at December 31, 2020 are summarized below by contractual maturity dates. Amounts are in millions. Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers.       Due in one year or less     Due after one year through five years     Due after five years through ten years     Due after ten years     Mortgage-backed securities     Total   Amortized cost   $ 10,379     $ 8,323     $ 373     $ 337     $ 312     $ 19,724   Fair value     10,448       8,456       496       640       370       20,410       K-84   Notes to Consolidated Financial Statements (Continued) (4) Investments in equity securities Investments in equity securities as of December 31, 2020 and 2019 are summarized based on the primary industry of the investee in the table below (in millions).       Cost Basis     Net Unrealized Gains     Fair Value   December 31, 2020 *                         Banks, insurance and finance   $ 26,312     $ 40,167     $ 66,479   Consumer products     34,747       111,583       146,330   Commercial, industrial and other     47,561       20,800       68,361       $ 108,620     $ 172,550     $ 281,170     * Approximately 68% of the aggregate fair value was concentrated in four companies (American Express Company – $18.3 billion; Apple Inc. – $120.4 billion; Bank of America Corporation – $31.3 billion and The Coca-Cola Company – $21.9 billion).       Cost Basis     Net Unrealized Gains     Fair Value   December 31, 2019 *                         Banks, insurance and finance   $ 40,419     $ 61,976     $ 102,395   Consumer products     38,887       60,747       99,634   Commercial, industrial and other     31,034       14,964       45,998       $ 110,340     $ 137,687     $ 248,027     * Approximately 60% of the aggregate fair value was concentrated in four companies (American Express Company – $18.9 billion; Apple Inc. – $73.7 billion; Bank of America Corporation – $33.4 billion and The Coca-Cola Company – $22.1 billion). On August 8, 2019, Berkshire invested a total of $10 billion in Occidental Corporation (“Occidental”) newly issued Occidental Cumulative Perpetual Preferred Stock with an aggregate liquidation value of $10 billion and warrants to purchase up to 80 million shares of Occidental common stock at an exercise price of $62.50 per share. In accordance with the terms of the warrants, on August 3, 2020, the number of shares of common stock that can be purchased was increased to 83.86 million shares and the exercise price was reduced to $59.62 per share. The preferred stock accrues dividends at 8% per annum and is redeemable at the option of Occidental commencing in 2029 at a redemption price equal to 105% of the liquidation preference plus any accumulated and unpaid dividends, or is mandatorily redeemable under certain specified capital return events. Dividends on the preferred stock may be paid in cash or, at Occidental’s option, in shares of Occidental common stock. The warrants are exercisable in whole or in part until one year after the redemption of the preferred stock. Our investments in Occidental are included in the commercial, industrial and other category in the preceding tables. (5) Equity method investments Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.6% of the outstanding shares. K-85   Notes to Consolidated Financial Statements (Continued) (5) Equity method investments (Continued) We recorded equity method earnings from our investment in Kraft Heinz of $95 million in 2020, $493 million in 2019 and losses of approximately $2.7 billion in 2018. Equity method earnings (losses) included the effects of goodwill and identifiable intangible asset impairment charges recorded by Kraft Heinz. Our share of such charges was approximately $850 million in 2020, $450 million in 2019 and $3.7 billion in 2018. We received dividends from Kraft Heinz of $521 million in each of 2020 and 2019 and $814 million in 2018, which we recorded as reductions in our carrying value. Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $11.3 billion at December 31, 2020 and $10.5 billion at December 31, 2019. The carrying value of our investment was approximately $13.3 billion at December 31, 2020 and $13.8 billion at December 31, 2019. As of December 31, 2020, the carrying value of our investment exceeded the fair value based on the quoted market price by $2.0 billion (15% of carrying value). In light of this fact, we evaluated our investment in Kraft Heinz for impairment. We utilize no bright-line tests in such evaluations. Based on the available facts and information regarding the operating results of Kraft Heinz, our ability and intent to hold the investment until recovery, the relative amount of the decline and the length of time that fair value was less than carrying value, we concluded that recognition of an impairment loss in earnings was not required. However, we will continue to monitor this investment and it is possible that an impairment loss will be recorded in earnings in a future period based on changes in facts and circumstances or intentions. Summarized financial information of Kraft Heinz follows (in millions).       December 26, 2020     December 28, 2019   Assets   $ 99,830     $ 101,450   Liabilities     49,587       49,701           Year ending December 26, 2020     Year ending December 28, 2019     Year ending December 29, 2018   Sales   $ 26,185     $ 24,977     $ 26,268   Net earnings (losses) attributable to Kraft Heinz common shareholders   $ 356     $ 1,935     $ (10,192 )   Other investments accounted for pursuant to the equity method include our investments in Berkadia Commercial Mortgage LLC (“Berkadia”), Pilot Travel Centers LLC (“Pilot”) and Electric Transmission Texas, LLC (“ETT”). The carrying value of our investments in these entities was approximately $4.0 billion as of December 31, 2020 and $3.7 billion as of December 31, 2019. Our equity method earnings in these entities were $631 million in 2020, $683 million in 2019 and $563 million in 2018. Additional information concerning these investments follows. We own a 50% interest in Berkadia, with Jefferies Financial Group Inc. (“Jefferies”) owning the other 50% interest. Berkadia is a servicer of commercial real estate loans in the U.S., performing primary, master and special servicing functions for U.S. government agency programs, commercial mortgage-backed securities transactions, banks, insurance companies and other financial institutions. A source of funding for Berkadia’s operations is through its issuance of commercial paper, which is currently limited to $1.5 billion. On December 31, 2020, Berkadia’s commercial paper outstanding was $1.47 billion. The commercial paper is supported by a surety policy issued by a Berkshire insurance subsidiary. Jefferies is obligated to indemnify us for one-half of any losses incurred under the policy. A Berkshire Hathaway Energy Company subsidiary owns a 50% interest in ETT, an owner and operator of electric transmission assets in the Electric Reliability Council of Texas footprint. American Electric Power owns the other 50% interest. On October 3, 2017, we entered into an investment agreement and an equity purchase agreement whereby we acquired a 38.6% interest in Pilot, headquartered in Knoxville, Tennessee. Pilot is the largest operator of travel centers in North America, supplying more than 11 billion gallons of fuel per year via more than 950 retail locations across 44 U.S. states and six Canadian provinces and through wholesale distribution. The Haslam family currently owns a 50.1% interest in Pilot and a third party owns the remaining 11.3% interest. We also entered into an agreement to acquire in 2023 an additional 41.4% interest in Pilot with the Haslam family retaining a 20% interest. As a result, Berkshire will become the majority owner of Pilot in 2023. K-86   Notes to Consolidated Financial Statements (Continued) (6) Investment gains/losses Investment gains/losses for each of the three years ending December 31, 2020 are summarized below (in millions).       2020     2019     2018   Equity securities:                         Change in unrealized investment gains/losses during the year on    securities held at the end of the period   $ 54,951     $ 69,581     $ (22,729 ) Investment gains/losses during the year on securities sold     (14,036 )     1,585       291         40,915       71,166       (22,438 ) Fixed maturity securities:                         Gross realized gains     56       87       480   Gross realized losses     (27 )     (25 )     (227 ) Other     (39 )     (105 )     30       $ 40,905     $ 71,123     $ (22,155 )   Equity securities gains and losses include unrealized gains and losses from changes in fair values during the period on equity securities we still own, as well as gains and losses on securities we sold during the period. As reflected in the Consolidated Statements of Cash Flows, we received proceeds of approximately $38.8 billion in 2020, $14.3 billion in 2019 and $18.8 billion in 2018 from sales of equity securities. In the preceding table, investment gains/losses on equity securities sold reflect the difference between proceeds from sales and the fair value of the equity security sold at the beginning of the period or the purchase date, if later. Our taxable gains on equity securities sold during the year, which are generally the difference between the proceeds from sales and our original cost, were $6.2 billion in 2020, $3.2 billion in 2019 and $3.3 billion in 2018. (7) Loans and finance receivables Loans and finance receivables are summarized as follows (in millions).       December 31,       2020     2019   Loans and finance receivables before allowances and discounts   $ 20,436     $ 18,199   Allowances for uncollectible loans     (712 )     (167 ) Unamortized acquisition discounts and points     (523 )     (505 )     $ 19,201     $ 17,527     Loans and finance receivables are principally manufactured home loans, and to a lesser extent, commercial loans and site-built home loans. Reconciliations of the allowance for credit losses on loans and finance receivables for 2020 and 2019 follow (in millions).       2020     2019   Balance at beginning of year   $ 167     $ 177   Adoption of ASC 326     486       —   Provision for credit losses     177       125   Charge-offs, net of recoveries     (118 )     (135 ) Balance at December 31   $ 712     $ 167     At December 31, 2020, approximately 99% of home loan balances were evaluated collectively for impairment. At December 31, 2020, we considered approximately 97% of the loan balances to be current as to payment status. A summary of performing and non-performing home loans before discounts and allowances by year of loan origination as of December 31, 2020 follows (in millions).     Loans and Financing Receivables by Origination Year               2020     2019     2018     2017     2016     Prior     Total   Performing   $ 4,430     $ 2,537     $ 1,928     $ 1,424     $ 1,276     $ 6,645     $ 18,240   Non-performing     3       5       7       7       7       43       72   Total   $ 4,433     $ 2,542     $ 1,935     $ 1,431     $ 1,283     $ 6,688     $ 18,312     K-87     Notes to Consolidated Financial Statements (Continued) (7) Loans and finance receivables (Continued) We are party to an agreement with Seritage Growth Properties to provide a $2.0 billion term loan facility, which expires on July 31, 2023. The outstanding loan under the facility was approximately $1.6 billion at December 31, 2020 and 2019, and is secured by mortgages on real estate properties. In 2020, we provided a loan to Lee Enterprises, Inc. in connection with its acquisition of our newspaper operations and the repayment by Lee of its then outstanding credit facilities. The loan balance as of December 31, 2020 was $524 million. We are the sole lender to each of these entities and each of these loans is current as to payment status. (8) Other receivables Other receivables of insurance and other businesses are comprised of the following (in millions).       December 31,       2020     2019   Insurance premiums receivable   $ 14,025     $ 13,379   Reinsurance recoverables     4,805       4,470   Trade receivables     11,521       12,275   Other     2,637       2,712   Allowances for uncollectible accounts     (678 )     (418 )     $ 32,310     $ 32,418       Receivables of our railroad and utilities and energy businesses are comprised of the following (in millions).       December 31,       2020     2019   Trade receivables   $ 3,235     $ 3,120   Other     438       388   Allowances for uncollectible accounts     (131 )     (91 )     $ 3,542     $ 3,417     Provisions for credit losses on receivables in the preceding tables were $564 million in 2020 and $363 million in 2019. Net charge-offs were $401 million in 2020 and $350 million in 2019. (9) Inventories Inventories are comprised of the following (in millions).       December 31,       2020     2019   Raw materials   $ 4,821     $ 4,492   Work in process and other     2,541       2,700   Finished manufactured goods     4,412       4,821   Goods acquired for resale     7,434       7,839       $ 19,208     $ 19,852         (10) Property, plant and equipment A summary of property, plant and equipment of our insurance and other businesses follows (in millions).       December 31,       2020     2019   Land, buildings and improvements   $ 13,799     $ 13,259   Machinery and equipment     25,488       24,285   Furniture, fixtures and other     4,530       4,666         43,817       42,210   Accumulated depreciation     (22,617 )     (20,772 )     $ 21,200     $ 21,438     K-88     Notes to Consolidated Financial Statements (Continued) (10) Property, plant and equipment (Continued) A summary of property, plant and equipment of railroad and utilities and energy businesses follows (in millions). The utility generation, transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries.       December 31,       2020     2019   Railroad:                 Land, track structure and other roadway   $ 63,824     $ 62,404   Locomotives, freight cars and other equipment     13,523       13,482   Construction in progress     916       748         78,263       76,634   Accumulated depreciation     (13,175 )     (12,101 )       65,088       64,533   Utilities and energy:                 Utility generation, transmission and distribution systems     86,730       81,127   Interstate natural gas pipeline assets     16,667       8,165   Independent power plants and other assets     12,671       8,817   Construction in progress     3,308       3,732         119,376       101,841   Accumulated depreciation     (33,248 )     (28,536 )       86,128       73,305       $ 151,216     $ 137,838     Depreciation expense for each of the three years ending December 31, 2020 is summarized below (in millions).       2020     2019     2018   Insurance and other   $ 2,320     $ 2,269     $ 2,186   Railroad, utilities and energy     5,799       5,297       5,098       $ 8,119     $ 7,566     $ 7,284       (11) Equipment held for lease Equipment held for lease includes railcars, aircraft, over-the-road trailers, intermodal tank containers, cranes, storage units and furniture. Equipment held for lease is summarized below (in millions).       December 31,       2020     2019   Railcars   $ 9,402     $ 9,260   Aircraft     8,204       8,093   Other     4,868       4,862         22,474       22,215   Accumulated depreciation     (7,873 )     (7,150 )     $ 14,601     $ 15,065     Depreciation expense for equipment held for lease was $1,200 million in 2020, $1,181 million in 2019 and $1,102 million in 2018. Fixed and variable operating lease revenues for each of the two years ending December 31, 2020 are summarized below (in millions).         2020     2019   Fixed lease revenue   $ 4,262     $ 4,415   Variable lease revenue     947       1,441       $ 5,209     $ 5,856     K-89     Notes to Consolidated Financial Statements (Continued) (11) Equipment held for lease (Continued) A summary of future operating lease receipts as of December 31, 2020 follows (in millions).   2021     2022     2023     2024     2025     Thereafter     Total   $ 2,618     $ 1,962     $ 1,429     $ 905     $ 443     $ 387     $ 7,744     (12) Leases We are party to contracts where we lease property from others. As a lessee, we primarily lease office and operating facilities, locomotives, freight cars, energy generation facilities and transmission assets. Operating lease right-of-use assets were $5,579 million and lease liabilities were $5,469 million at December 31, 2020. Operating lease right-of-use assets were $5,941 million and lease liabilities were $5,882 million at December 31, 2019. Such amounts were included in other assets and accounts payable, accruals and other liabilities in our Consolidated Balance Sheet. The weighted average term of these leases was approximately 7.3 years at December 31, 2020 and 7.7 years at December 31, 2019. The weighted average discount rate used to measure lease liabilities was approximately 3.6% at December 31, 2020 and 3.8% at December 31, 2019. A summary of our remaining operating lease payments as of December 31, 2020 and December 31, 2019 follows (in millions).       Year 1     Year 2     Year 3     Year 4     Year 5     Thereafter     Total lease payments     Amount representing interest     Lease liabilities   December 31:                                                                         2020   $ 1,342     $ 1,111     $ 905     $ 725     $ 544     $ 1,691     $ 6,318     $ (849 )   $ 5,469   2019     1,374       1,183       950       764       620       1,988       6,879       (997 )     5,882     Components of operating lease costs for the years ending December 31, 2020 and 2019, by type, are summarized in the following table (in millions). Operating lease expense was $1,649 million in 2018.       2020     2019     Operating lease cost   $ 1,413     $ 1,459     Short-term lease cost     145       178     Variable lease cost     228       276     Sublease income     (10 )     (24 )   Total lease cost   $ 1,776     $ 1,889       (13) Goodwill and other intangible assets Reconciliations of the changes in the carrying value of goodwill during 2020 and 2019 follows (in millions).       December 31,       2020     2019   Balance at beginning of year   $ 81,882     $ 81,025   Acquisitions of businesses     1,758       890   Impairment charges     (10,033 )     (90 ) Other, including foreign currency translation     127       57   Balance at end of year*   $ 73,734     $ 81,882     * Net of accumulated goodwill impairments of $11.0 billion as of December 31, 2020 and $1.1 billion as of December 31, 2019.   K-90     Notes to Consolidated Financial Statements (Continued) (13) Goodwill and other intangible assets (Continued) The gross carrying amounts and related accumulated amortization of other intangible assets are summarized as follows (in millions).       December 31, 2020     December 31, 2019       Gross carrying amount     Accumulated amortization     Gross carrying amount     Accumulated amortization   Insurance and other:                                 Customer relationships   $ 27,374     $ 5,756     $ 27,943     $ 5,025   Trademarks and trade names     5,206       779       5,286       759   Patents and technology     4,766       3,313       4,560       3,032   Other     3,339       1,375       3,364       1,286       $ 40,685     $ 11,223     $ 41,153     $ 10,102   Railroad, utilities and energy:                                 Customer relationships   $ 678     $ 361     $ 678     $ 324   Trademarks, trade names and other     1,003       98       325       84       $ 1,681     $ 459     $ 1,003     $ 408     Intangible asset amortization expense was $1,277 million in 2020, $1,317 million in 2019 and $1,393 million in 2018. Estimated amortization expense over the next five years is as follows (in millions): 2021 – $1,262; 2022 – $1,190; 2023 – $1,108; 2024 – $986 and 2025 – $906. Intangible assets with indefinite lives were $18.3 billion as of December 31, 2020 and $19.0 billion as of December 31, 2019 and primarily related to certain customer relationships and trademarks and trade names. During 2020, we concluded it was necessary to reevaluate goodwill and indefinite-lived intangible assets of certain of our reporting units for impairment due to the disruptions arising from the COVID-19 pandemic. We believed that the most significant of these disruptions related to the air travel and commercial aerospace and supporting industries. We recorded pre-tax goodwill impairment charges of approximately $10 billion and pre-tax indefinite-lived intangible asset impairment charges of $638 million in the second quarter of 2020. Approximately $10 billion of these charges related to Precision Castparts Corp. (“PCC”), the largest business within Berkshire's manufacturing segment. The carrying value of PCC-related goodwill and indefinite-lived intangible assets prior to the impairment charges was approximately $31 billion. The impairment charges were determined based on discounted cash flow methods and reflected our assessments of the risks and uncertainties associated with the aerospace industry. Significant judgment is required in estimating the fair value of a reporting unit and in performing impairment tests. Due to the inherent uncertainty in forecasting cash flows and earnings, actual results in the future may vary significantly from the forecasts. (14) Derivative contracts We are party to derivative contracts through certain of our subsidiaries. The most significant derivative contracts consist of equity index put option contracts. Information related to these contracts follows (dollars in millions).       December 31,       2020     2019   Balance sheet liabilities - at fair value   $ 1,065     $ 968   Notional value     10,991       14,385   Intrinsic value     727       397   Weighted average remaining life (in years)     1.2       1.8     The equity index put option contracts are European style options written prior to March 2008 on four major equity indexes. Notional value in the preceding table represents the aggregate undiscounted amounts payable assuming that the value of each index is zero at each contract’s expiration date. Intrinsic value is the undiscounted liability assuming the contracts are settled based on the index values and foreign currency exchange rates as of the balance sheet date. Substantially all open contracts as of December 31, 2020 will expire by February 2023. K-91   Notes to Consolidated Financial Statements (Continued) (14) Derivative contracts (Continued) Future payments, if any, under any given contract will be required if the prevailing index value is below the contract strike price at the expiration date. We received aggregate premiums of $1.9 billion on the contract inception dates with respect to unexpired contracts as of December 31, 2020 and we have no counterparty credit risk.   We recorded derivative contract losses of $159 million in 2020, gains of $1,484 million in 2019 and losses of $300 million in 2018, with respect to our equity index put option contracts. These gains and losses were primarily due to changes in the equity index values. These contracts may not be unilaterally terminated or fully settled before the expiration dates and the ultimate amount of cash basis gains or losses on these contracts will not be determined until the contract expiration dates. Our regulated utility subsidiaries may use forward purchases and sales, futures, swaps and options to manage a portion of their commodity price risks. Most of these net derivative contract assets or liabilities of our regulated utilities are probable of recovery through rates and are offset by regulatory liabilities or assets.   (15) Unpaid losses and loss adjustment expenses Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 16), for each of the three years ending December 31, 2020 is as follows (in millions).       2020     2019     2018   Balances at beginning of year:                         Gross liabilities   $ 73,019     $ 68,458     $ 61,122   Reinsurance recoverable on unpaid losses     (2,855 )     (3,060 )     (3,201 ) Net liabilities     70,164       65,398       57,921   Incurred losses and loss adjustment expenses:                         Current accident year events     43,400       43,335       39,876   Prior accident years’ events     (356 )     (752 )     (1,406 ) Total     43,044       42,583       38,470   Paid losses and loss adjustment expenses:                         Current accident year events     (17,884 )     (19,482 )     (18,391 ) Prior accident years’ events     (18,862 )     (17,642 )     (15,452 ) Total     (36,746 )     (37,124 )     (33,843 ) Foreign currency translation adjustment     480       (23 )     (331 ) Business acquisition (disposition)     —       (670 )     3,181   Balances at December 31:                         Net liabilities     76,942       70,164       65,398   Reinsurance recoverable on unpaid losses     2,912       2,855       3,060   Gross liabilities   $ 79,854     $ 73,019     $ 68,458     Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). Current accident year losses included approximately $950 million in 2020, $1.0 billion in 2019 and $1.6 billion in 2018 from significant catastrophe events occurring in each year. Current accident year losses in 2020 also reflected the effects of low private passenger automobile claims frequencies and increased loss estimates for certain commercial insurance and reinsurance business attributable to the COVID-19 pandemic. We recorded net reductions of estimated ultimate liabilities for prior accident years of $356 million in 2020, $752 million in 2019 and $1,406 million in 2018, which produced corresponding reductions in incurred losses and loss adjustment expenses. These reductions, as percentages of the net liabilities at the beginning of each year, were 0.5% in 2020, 1.1% in 2019 and 2.4% in 2018. K-92   Notes to Consolidated Financial Statements (Continued) (15) Unpaid losses and loss adjustment expenses (Continued) Estimated ultimate liabilities for prior years’ loss events related to primary insurance were reduced by $518 million in 2020, $457 million in 2019 and $937 million in 2018. The decrease in 2020 was primarily attributable to reductions for private passenger automobile, medical professional liability and workers’ compensation claims, partly offset by increases for other casualty claims. The decrease in 2019 reflected reductions in medical professional liability and workers’ compensation claims, partially offset by higher commercial auto and other liability claims. The decrease in 2018 was primarily due to reductions for workers’ compensation, medical professional liability and private passenger automobile claims. Estimated ultimate liabilities for prior years’ loss events related to property and casualty reinsurance increased $162 million in 2020 and were reduced $295 million in 2019 and $469 million in 2018. The increase in 2020 included increased claims estimates for legacy casualty exposures. Estimated claim liabilities included amounts for environmental, asbestos and other latent injury exposures, net of reinsurance recoverable, of approximately $2.1 billion at December 31, 2020 and $1.7 billion at December 31, 2019. These liabilities are subject to change due to changes in the legal and regulatory environment. We are unable to reliably estimate additional losses or a range of losses that are reasonably possible for these claims. Disaggregated information concerning our claims liabilities is provided below and in the pages that follow. The effects of businesses acquired or disposed during the period are reflected in the data presented on a retrospective basis. A reconciliation of the disaggregated net unpaid losses and allocated loss adjustment expenses (the latter referred to as “ALAE”) of GEICO, Berkshire Hathaway Primary Group (“BH Primary”) and Berkshire Hathaway Reinsurance Group (“BHRG”) to our consolidated unpaid losses and loss adjustment expenses as of December 31, 2020 follows (in millions).       GEICO Physical Damage     GEICO Auto Liability     BH Primary Medical Professional Liability     BH Primary Workers’ Compensation and Other Casualty   BHRG Property     BHRG Casualty     Total   Unpaid losses and ALAE, net   $ 524     $ 18,755     $ 7,897     $ 11,294   $ 11,280     $ 22,890     $ 72,640   Reinsurance recoverable     —       1,109       49       621     181       864       2,824   Unpaid unallocated loss    adjustment expenses                                                   2,671   Other unpaid losses and loss    adjustment expenses                                                   1,719   Unpaid losses and loss adjustment    expenses                                                 $ 79,854       GEICO GEICO’s claim liabilities predominantly relate to various types of private passenger auto liability and physical damage claims. For such claims, we establish and evaluate unpaid claim liabilities using standard actuarial loss development methods and techniques. The actuarial methods utilize historical claims data, adjusted when deemed appropriate to reflect perceived changes in loss patterns. Claim liabilities include average, case, case development and IBNR estimates. We establish average liabilities based on expected severities for newly reported physical damage and liability claims prior to establishing individual case reserves when insufficient time or information is available for specific claim estimates and for large volumes of minor physical damage claims that once reported are quickly settled. We establish case loss estimates for liability claims, including estimates for loss adjustment expenses, as the facts and merits of the claim are evaluated. Estimates for liability coverages are more uncertain than for physical damage coverages, primarily due to the longer claim-tails, the greater chance of protracted litigation and the incompleteness of facts at the time the case estimate is first established. The “claim-tail” is the time period between the claim occurrence date and settlement date. Consequently, we establish additional case development liabilities, which are usually percentages of the case liabilities. For unreported claims, IBNR liabilities are estimated by projecting the ultimate number of claims expected (reported and unreported) for each significant coverage and deducting reported claims to produce estimated unreported claims. The product of the average cost per unreported claim and the number of unreported claims produces the IBNR liability estimate. We may record supplemental IBNR liabilities in certain situations when actuarial techniques are difficult to apply. K-93   Notes to Consolidated Financial Statements (Continued) (15) Unpaid losses and loss adjustment expenses (Continued) GEICO’s incurred and paid losses and ALAE, net of reinsurance, are summarized by accident year below for physical damage and auto liability claims. IBNR and case development liabilities are as of December 31, 2020. Claim counts are established when accidents that may result in a liability are reported and are based on policy coverage. Each claim event may generate claims under multiple coverages, and thus may result in multiple counts. The “Cumulative Number of Reported Claims” includes the combined number of reported claims for all policy coverages and excludes projected IBNR claims. Dollars are in millions. Physical Damage       Incurred Losses and ALAE through December 31,             Cumulative Number of   Accident Year       2019*     2020     IBNR and Case Development Liabilities     Reported Claims (in thousands)   2019       $ 9,020     $ 8,920     $ 69       8,929   2020                 8,603       296       7,794       Incurred losses and ALAE     $ 17,523                                                             Cumulative Paid Losses and ALAE through December 31,                   Accident Year       2019*     2020                   2019       $ 8,678     $ 8,905                   2020                 8,118                       Paid losses and ALAE       17,023                       Net unpaid losses and ALAE for 2019 – 2020 accident years       500                       Net unpaid losses and ALAE for accident years before 2019       24                       Net unpaid losses and ALAE     $ 524                     Auto Liability       Incurred Losses and ALAE through December 31,             Cumulative Number of   Accident Year   2016*     2017*     2018*     2019*     2020     IBNR and Case Development Liabilities     Reported Claims (in thousands)   2016   $ 11,800     $ 12,184     $ 12,149     $ 12,178     $ 12,198     $ 222       2,451   2017             14,095       13,864       13,888       13,824       502       2,639   2018                     15,383       15,226       14,985       1,163       2,702   2019                             16,901       16,678       2,905       2,749   2020                                     14,637       4,482       1,945       Incurred losses and ALAE     $ 72,322                                                                                 Cumulative Paid Losses and ALAE through December 31,                   Accident Year   2016*     2017*     2018*     2019*     2020                   2016   $ 5,069     $ 8,716     $ 10,330     $ 11,294     $ 11,718                   2017             5,806       9,944       11,799       12,729                   2018                     6,218       10,772       12,658                   2019                             6,742       11,671                   2020                                     5,395                       Paid losses and ALAE       54,171                       Net unpaid losses and ALAE for 2016 – 2020 accident years       18,151                       Net unpaid losses and ALAE for accident years before 2016       604                       Net unpaid losses and ALAE     $ 18,755                     * Unaudited required supplemental information K-94     Notes to Consolidated Financial Statements (Continued) (15) Unpaid losses and loss adjustment expenses (Continued) BH Primary BH Primary’s liabilities for unpaid losses and loss adjustment expenses primarily derive from medical professional liability and workers’ compensation and other casualty insurance, including commercial auto and general liability insurance. Incurred and paid losses and ALAE are summarized by accident year in the following tables, disaggregated by medical professional liability coverages and workers’ compensation and other casualty coverages. IBNR and case development liabilities are as of December 31, 2020. The cumulative number of reported claims reflects the number of individual claimants and includes claims that ultimately resulted in no liability or payment. Dollars are in millions. BH Primary Medical Professional Liability We estimate the ultimate expected incurred losses and loss adjustment expenses for medical professional claim liabilities using a variety of commonly accepted actuarial methodologies, such as the paid and incurred development method and Bornhuetter-Ferguson based methods, as well as other techniques that consider insured loss exposures and historical and expected loss trends, among other factors. These methodologies produce loss estimates from which we determine our best estimate. In addition, we study developments in older accident years and adjust initial loss estimates to reflect recent development based upon claim age, coverage and litigation experience.       Incurred Losses and ALAE through December 31,             Cumulative Number of   Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020     IBNR and Case Development Liabilities     Reported Claims (in thousands)   2011   $ 1,346     $ 1,334     $ 1,321     $ 1,262     $ 1,173     $ 1,115     $ 1,050     $ 1,004     $ 968     $ 972     $ 39       11   2012             1,336       1,306       1,277       1,223       1,168       1,078       1,035       998       988       53       11   2013                     1,328       1,296       1,261       1,195       1,127       1,086       1,019       985       65       11   2014                             1,370       1,375       1,305       1,246       1,218       1,127       1,061       129       11   2015                                     1,374       1,342       1,269       1,290       1,218       1,157       202       12   2016                                             1,392       1,416       1,414       1,394       1,341       286       14   2017                                                     1,466       1,499       1,495       1,474       494       20   2018                                                             1,602       1,650       1,659       780       22   2019                                                                     1,670       1,691       1,204       17   2020                                                                             1,704       1,529       13       Incurred losses and ALAE     $ 13,032                                                                                                                         Cumulative Paid Losses and ALAE through December 31,                   Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020                   2011   $ 16     $ 82     $ 200     $ 356     $ 517     $ 632     $ 711     $ 767     $ 822     $ 842                   2012             15       93       218       377       522       642       725       789       830                   2013                     15       90       219       368       518       635       743       793                   2014                             21       106       238       396       540       671       752                   2015                                     23       108       218       382       543       663                   2016                                             22       115       274       461       620                   2017                                                     27       128       300       457                   2018                                                             35       166       367                   2019                                                                     39       160                   2020                                                                             34                       Paid losses and ALAE       5,518                       Net unpaid losses and ALAE for 2011– 2020 accident years       7,514                       Net unpaid losses and ALAE for accident years before 2011       383                       Net unpaid losses and ALAE     $ 7,897                     * Unaudited required supplemental information K-95     Notes to Consolidated Financial Statements (Continued) (15) Unpaid losses and loss adjustment expenses (Continued) BH Primary Workers’ Compensation and Other Casualty We periodically evaluate ultimate loss and loss adjustment expense estimates for the workers’ compensation and other casualty claims using a combination of commonly accepted actuarial methodologies such as the Bornhuetter-Ferguson and chain-ladder approaches using paid and incurred loss data. Paid and incurred loss data is segregated and analyzed by state due to the different state regulatory frameworks that may impact certain factors, including the duration and amount of loss payments. We also separately study the various components of liabilities, such as employee lost wages, medical expenses and the costs of claims investigations and administration. We establish case liabilities for reported claims based upon the facts and circumstances of the claim. The excess of the ultimate projected losses, including the expected development of case estimates, and the case-basis liabilities is included in IBNR liabilities.       Incurred Losses and ALAE through December 31,             Cumulative Number of   Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020     IBNR and Case Development Liabilities     Reported Claims (in thousands)   2011   $ 738     $ 675     $ 675     $ 624     $ 621     $ 618     $ 607     $ 596     $ 591     $ 576     $ 39       46   2012             873       850       837       791       780       762       750       736       718       53       53   2013                     1,258       1,228       1,178       1,127       1,096       1,072       1,050       1,028       120       67   2014                             1,743       1,638       1,614       1,548       1,482       1,497       1,477       190       90   2015                                     2,169       2,127       2,042       2,014       2,025       1,997       267       111   2016                                             2,511       2,422       2,359       2,325       2,365       470       115   2017                                                     3,044       2,907       2,842       2,843       691       138   2018                                                             3,544       3,412       3,480       1,152       160   2019                                                                     4,074       4,102       1,788       170   2020                                                                             4,421       2,987       120       Incurred losses and ALAE     $ 23,007                                                                                                                         Cumulative Paid Losses and ALAE through December 31,                   Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020                   2011   $ 109     $ 220     $ 333     $ 403     $ 453     $ 481     $ 496     $ 505     $ 512     $ 519                   2012             116       299       414       501       560       592       611       626       634                   2013                     177       422       609       725       793       835       858       874                   2014                             239       557       800       1,007       1,111       1,176       1,214                   2015                                     289       700       1,017       1,289       1,488       1,570                   2016                                             329       775       1,148       1,461       1,661                   2017                                                     441       1,003       1,434       1,771                   2018                                                             538       1,198       1,683                   2019                                                                     682       1,478                   2020                                                                             695                       Paid losses and ALAE       12,099                       Net unpaid losses and ALAE for 2011 – 2020 accident years       10,908                       Net unpaid losses and ALAE for accident years before 2011       386                       Net unpaid losses and ALAE     $ 11,294                     * Unaudited required supplemental information BHRG We use a variety of methodologies to establish BHRG’s estimates for property and casualty claims liabilities. We use certain methodologies, such as paid and incurred loss development techniques, incurred and paid loss Bornhuetter-Ferguson techniques and frequency and severity techniques, as well as ground-up techniques when appropriate. Our claims liabilities are principally a function of reported losses from ceding companies, case development and IBNR liability estimates. Case loss estimates are reported under our contracts either individually or in bulk as provided under the terms of the contracts. We may independently evaluate case losses reported by the ceding company, and if deemed appropriate, we may establish case liabilities based on our estimates. K-96   Notes to Consolidated Financial Statements (Continued) (15) Unpaid losses and loss adjustment expenses (Continued) Estimated IBNR liabilities are affected by expected case loss emergence patterns and expected loss ratios, which are evaluated as groups of contracts with similar exposures or on a contract-by-contract basis. Estimated case and IBNR liabilities for major catastrophe events are generally based on a per-contract assessment of the ultimate cost associated with the individual loss event. Claim count data is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable. Incurred and paid losses and ALAE of BHRG are disaggregated based on losses that are expected to have shorter claim-tails (property) and losses expected to have longer claim-tails (casualty). Under certain contracts, the coverage can apply to multiple lines of business written by the ceding company, whether property, casualty or combined, and the ceding company may not report loss data by such lines consistently, if at all. In those instances, we allocated losses to property and casualty coverages based on internal estimates. BHRG’s disaggregated incurred and paid losses and ALAE are summarized by accident year, net of reinsurance. IBNR and case development liabilities are as of December 31, 2020. Dollars are in millions. BHRG Property       Incurred Losses and ALAE through December 31,           Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020     IBNR and Case Development Liabilities   2011   $ 4,111     $ 4,095     $ 3,804     $ 3,711     $ 3,707     $ 3,672     $ 3,654     $ 3,638     $ 3,627     $ 3,616     $ 30   2012             3,153       2,846       2,644       2,403       2,351       2,348       2,329       2,315       2,305       35   2013                     3,255       3,093       2,745       2,653       2,631       2,570       2,518       2,504       45   2014                             2,648       2,436       2,322       2,178       2,123       2,050       2,021       48   2015                                     3,287       3,135       2,577       2,979       2,976       3,000       143   2016                                             3,293       3,923       3,646       3,614       3,616       218   2017                                                     5,291       4,986       4,837       4,727       187   2018                                                             4,426       4,524       4,397       678   2019                                                                     4,146       4,299       952   2020                                                                             5,858       3,129   Incurred losses and ALAE     $ 36,343                                                                                                         Cumulative Paid Losses and ALAE through December 31,           Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020           2011   $ 609     $ 2,259     $ 2,917     $ 3,188     $ 3,304     $ 3,387     $ 3,429     $ 3,474     $ 3,493     $ 3,507           2012             262       1,232       1,813       1,950       2,040       2,117       2,135       2,181       2,199           2013                     526       1,459       1,906       2,105       2,226       2,307       2,347       2,376           2014                             467       1,249       1,574       1,713       1,779       1,829       1,858           2015                                     581       1,614       1,969       2,166       2,271       2,453           2016                                             709       1,811       2,208       2,670       2,923           2017                                                     1,028       2,734       3,660       3,972           2018                                                             915       2,341       2,868           2019                                                                     751       2,282           2020                                                                             960           Paid losses and ALAE       25,398           Net unpaid losses and ALAE for 2011 – 2020 accident years       10,945           Net unpaid losses and ALAE for accident years before 2011     335           Net unpaid losses and ALAE     $ 11,280             * Unaudited required supplemental information K-97     Notes to Consolidated Financial Statements (Continued) (15) Unpaid losses and loss adjustment expenses (Continued) BHRG Casualty       Incurred Losses and ALAE through December 31,           Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020     IBNR and Case Development Liabilities   2011   $ 2,635     $ 2,726     $ 2,595     $ 2,536     $ 2,447     $ 2,354     $ 2,346     $ 2,307     $ 2,272     $ 2,255     $ 279   2012             2,820       3,002       2,837       2,899       2,827       2,712       2,645       2,588       2,581       317   2013                     2,160       2,298       2,328       2,170       2,114       2,060       1,964       1,892       387   2014                             1,900       2,099       2,068       2,030       1,944       1,980       1,970       537   2015                                     1,902       2,109       2,137       2,035       1,908       1,870       455   2016                                             1,928       2,138       2,047       2,003       1,922       555   2017                                                     2,216       2,711       2,588       2,494       762   2018                                                             2,948       3,585       3,509       1,183   2019                                                                     3,455       3,931       1,924   2020                                                                             3,883       2,754       Incurred losses and ALAE     $ 26,307                                                                                                         Cumulative Paid Losses and ALAE through December 31,           Accident Year   2011*     2012*     2013*     2014*     2015*     2016*     2017*     2018*     2019*     2020           2011   $ 294     $ 824     $ 1,169     $ 1,412     $ 1,501     $ 1,595     $ 1,673     $ 1,713     $ 1,748     $ 1,776           2012             312       757       1,150       1,381       1,539       1,664       1,764       1,825       1,883           2013                     294       530       818       947       1,052       1,155       1,215       1,273           2014                             153       488       655       765       889       974       1,119           2015                                     199       500       725       846       938       1,029           2016                                             255       563       742       874       972           2017                                                     233       574       830       1,282           2018                                                             267       875       1,649           2019                                                                     356       906           2020                                                                             406               Paid losses and ALAE       12,295               Net unpaid losses and ALAE for 2011 – 2020 accident years       14,012               Net unpaid losses and ALAE for accident years before 2011       8,878               Net unpaid losses and ALAE     $ 22,890             * Unaudited required supplemental information K-98     Notes to Consolidated Financial Statements (Continued) (15) Unpaid losses and loss adjustment expenses (Continued) Required supplemental unaudited average historical claims duration information based on the net losses and ALAE incurred and paid accident year data in the preceding tables follows. The percentages show the average portions of net losses and ALAE paid by each succeeding year, with year 1 representing the current accident year.   Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance   In Year   1     2     3     4     5     6     7     8     9     10   GEICO Physical Damage     97 %     2 %                                                                 GEICO Auto Liability     42 %     29 %     13 %     7 %     4 %                                         BH Primary Medical Professional Liability     2 %     7 %     12 %     14 %     14 %     12 %     9 %     6 %     5 %     2 % BH Primary Workers’ Compensation and Other Casualty     16 %     21 %     16 %     13 %     8 %     4 %     3 %     2 %     1 %     1 % BHRG Property     19 %     37 %     17 %     8 %     4 %     4 %     1 %     2 %     1 %     0 % BHRG Casualty     11 %     16 %     14 %     9 %     5 %     5 %     5 %     2 %     2 %     1 %     (16) Retroactive reinsurance contracts Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date. Claims payments may commence immediately after the contract date or, when applicable, once a contractual retention amount has been reached. Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses (“claim liabilities”) and related deferred charge reinsurance assumed assets for each of the three years ended December 31, 2020 follow (in millions).       2020     2019     2018       Unpaid losses and loss adjustment expenses     Deferred charges reinsurance assumed     Unpaid losses and loss adjustment expenses     Deferred charges reinsurance assumed     Unpaid losses and loss adjustment expenses     Deferred charges reinsurance assumed   Balances at beginning of year   $ 42,441     $ (13,747 )   $ 41,834     $ (14,104 )   $ 42,937     $ (15,278 ) Incurred losses and loss adjustment expenses:                                                 Current year contracts     —       —       1,138       (453 )     603       (86 ) Prior years’ contracts     (399 )     1,306       378       810       (341 )     1,260   Total     (399 )     1,306       1,516       357       262       1,174   Paid losses and loss adjustment expenses     (1,076 )     —       (909 )     —       (1,365 )     —   Balances at December 31   $ 40,966     $ (12,441 )   $ 42,441     $ (13,747 )   $ 41,834     $ (14,104 ) Incurred losses and loss adjustment expenses, net of deferred charges   $ 907             $ 1,873             $ 1,436             In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts. We do not believe that analysis of losses incurred and paid by accident year of the underlying event is relevant or meaningful given that our exposure to losses incepts when the contract incepts. Further, we believe the classifications of reported claims and case development liabilities have little or no practical analytical value. Estimated ultimate claim liabilities included $17.7 billion at December 31, 2020 and $18.2 billion at December 31, 2019, with respect to an agreement with various subsidiaries of American International Group, Inc. (collectively, “AIG”) to indemnify AIG for 80% of up to $25 billion of losses and allocated loss adjustment expenses in excess of $25 billion retained by AIG for certain commercial insurance loss events occurring prior to 2016. The related deferred charge assets were $5.4 billion at December 31, 2020 and $6.3 billion at December 31, 2019.   K-99     Notes to Consolidated Financial Statements (Continued) (16) Retroactive reinsurance contracts (Continued) Incurred losses and loss adjustment expenses related to contracts written in prior years were $907 million in 2020, $1,188 million in 2019 and $919 million in 2018, which included recurring amortization of deferred charges and the effect of changes in the timing and amount of expected future loss payments. In establishing retroactive reinsurance claim liabilities, we analyze historical aggregate loss payment patterns and project losses into the future under various probability-weighted scenarios. We expect the claim-tail to be very long for many contracts, with some lasting several decades. We monitor claim payment activity and review ceding company reports and other information concerning the underlying losses. We reassess and revise the expected timing and amounts of ultimate losses periodically or when significant events are revealed through our monitoring and review processes. Our retroactive reinsurance claim liabilities include estimated liabilities for environmental, asbestos and other latent injury exposures of approximately $12.5 billion at December 31, 2020 and $12.9 billion at December 31, 2019. Retroactive reinsurance contracts are generally subject to aggregate policy limits and thus, our exposure to such claims under these contracts is likewise limited. We monitor evolving case law and its effect on environmental and other latent injury claims. Changing laws or government regulations, newly identified toxins, newly reported claims, new theories of liability, new contract interpretations and other factors could result in increases in these liabilities, which could be material to our results of operations. We are unable to reliably estimate the amount of additional net loss or the range of net loss that is reasonably possible. (17) Notes payable and other borrowings Notes payable and other borrowings are summarized below (in millions). The weighted average interest rates and maturity date ranges shown in the following tables are based on borrowings as of December 31, 2020.       Weighted Average     December 31,       Interest Rate     2020     2019   Insurance and other:                         Berkshire Hathaway Inc. (“Berkshire”):                         U.S. Dollar denominated due 2021-2047     3.2 %   $ 8,308     $ 8,324   Euro denominated due 2021-2035     1.0 %     8,326       7,641   Japanese Yen denominated due 2023-2060     0.7 %     6,031       3,938   Berkshire Hathaway Finance Corporation (“BHFC”):                         U.S. Dollar denominated due 2021-2050     3.7 %     10,766       8,679   Great Britain Pound denominated due 2039-2059     2.5 %     2,347       2,274   Other subsidiary borrowings due 2021-2045     4.2 %     4,682       5,262   Short-term subsidiary borrowings     2.5 %     1,062       1,472               $ 41,522     $ 37,590     In March 2020, Berkshire repaid €1.0 billion of maturing senior notes and issued €1.0 billion of 0.0% senior notes due in 2025. In April 2020, Berkshire issued ¥195.5 billion (approximately $1.8 billion) of senior notes with maturity dates ranging from 2023 to 2060 and a weighted average interest rate of 1.07%. Borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, consist of senior unsecured notes used to fund manufactured housing loans originated or acquired and equipment held for lease of certain subsidiaries. BHFC borrowings are fully and unconditionally guaranteed by Berkshire. During 2020, BHFC repaid $900 million of maturing senior notes and issued $3.0 billion of senior notes consisting of $500 million of 1.85% notes due in 2030, $750 million of 1.45% notes due in 2030 and $1.75 billion of 2.85% notes due in 2050. The carrying values of Berkshire and BHFC non-U.S. Dollar denominated senior notes (€6.85 billion, £1.75 billion and ¥625.5 billion par) reflect the applicable exchange rates as of the balance sheet dates. The effects of changes in foreign currency exchange rates during the period are recorded in earnings as a component of selling, general and administrative expenses. Changes in the exchange rates resulted in pre-tax losses of approximately $1.0 billion in 2020 and pre-tax gains of $192 million in 2019 and $366 million in 2018. K-100   Notes to Consolidated Financial Statements (Continued) (17) Notes payable and other borrowings (Continued) In addition to BHFC borrowings, Berkshire guaranteed approximately $1.2 billion of other subsidiary borrowings at December 31, 2020. 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 payment obligations.     Weighted Average     December 31,     Interest Rate     2020   2019   Railroad, utilities and energy:                     Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:                     BHE senior unsecured debt due 2021-2051   4.2 %   $ 13,447   $ 8,581   Subsidiary and other debt due 2021-2064   4.1 %     36,420     30,772   Short-term borrowings   1.8 %     2,286     3,214   Burlington Northern Santa Fe ("BNSF") and subsidiaries due 2021-2097   4.6 %     23,220     23,211             $ 75,373   $ 65,778     BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure debt. These borrowing arrangements generally contain various covenants, including covenants which pertain to leverage ratios, interest coverage ratios and/or debt service coverage ratios. In November 2020, BHE’s subsidiary debt increased $5.6 billion for the debt assumed in connection with the Dominion pipeline business acquisition. See Note 2 to the Consolidated Financial Statements. During 2020, BHE and its subsidiaries also issued new term debt of approximately $7.6 billion with maturity dates ranging from 2025 to 2062 and a weighted average interest rate of 3.2% and repaid $3.2 billion of term debt and reduced short-term borrowings. BNSF’s borrowings are primarily senior unsecured debentures. During 2020, BNSF issued $575 million of 3.05% senior unsecured debentures due in 2051 and repaid debt of $570 million. As of December 31, 2020, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries. As of December 31, 2020, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $9.3 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit included approximately $8.2 billion related to BHE and its subsidiaries. Debt principal repayments expected during each of the next five years are as follows (in millions). Amounts in 2021 include short-term borrowings.       2021     2022     2023     2024     2025   Insurance and other   $ 4,354     $ 1,593     $ 6,021     $ 2,343     $ 2,817   Railroad, utilities and energy     5,044       3,405       4,792       3,965       3,777       $ 9,398     $ 4,998     $ 10,813     $ 6,308     $ 6,594       (18) Income taxes The liabilities for income taxes reflected in our Consolidated Balance Sheets are as follows (in millions).       December 31,       2020     2019   Currently payable (receivable)   $ (276 )   $ 24   Deferred     73,261       65,823   Other     1,113       952       $ 74,098     $ 66,799     K-101     Notes to Consolidated Financial Statements (Continued) (18) Income taxes (Continued) The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are shown below (in millions).       December 31,       2020     2019   Deferred tax liabilities:                 Investments – unrealized appreciation and cost basis differences   $ 40,181     $ 32,134   Deferred charges reinsurance assumed     2,613       2,890   Property, plant and equipment and equipment held for lease     30,203       29,388   Goodwill and other intangible assets     6,753       7,293   Other     3,736       3,144         83,486       74,849   Deferred tax assets:                 Unpaid losses and loss adjustment expenses     (1,135 )     (1,086 ) Unearned premiums     (900 )     (853 ) Accrued liabilities     (2,193 )     (1,981 ) Regulatory liabilities     (1,421 )     (1,610 ) Other     (4,576 )     (3,496 )       (10,225 )     (9,026 ) Net deferred tax liability   $ 73,261     $ 65,823     We have not established deferred income taxes on accumulated undistributed earnings of certain foreign subsidiaries, which are expected to be reinvested indefinitely. Repatriation of all accumulated earnings of foreign subsidiaries would be impracticable to the extent that such earnings represent capital to support normal business operations. Generally, no U.S. federal income taxes will be imposed on future distributions of foreign earnings under current law. However, distributions to the U.S. or other foreign jurisdictions could be subject to withholding and other local taxes. On December 22, 2017, legislation known as the Tax Cuts and Jobs Act of 2017 (“TCJA”) was enacted. Among its provisions, the TCJA reduced the statutory U.S. Corporate income tax rate from 35% to 21% effective January 1, 2018 and provided for a one-time tax on certain accumulated undistributed post-1986 earnings of foreign subsidiaries. These effects were largely recorded in 2017 upon the enactment. In 2018, we reduced our estimate of the income taxes on the deemed repatriation of earnings of foreign subsidiaries and recognized additional deferred income tax rate change effects. Income tax expense reflected in our Consolidated Statements of Earnings for each of the three years ending December 31, 2020 is as follows (in millions).       2020     2019     2018   Federal   $ 10,596     $ 19,069     $ (1,613 ) State     1,086       625       175   Foreign     758       1,210       1,117       $ 12,440     $ 20,904     $ (321 )                           Current   $ 5,052     $ 5,818     $ 5,176   Deferred     7,388       15,086       (5,497 )     $ 12,440     $ 20,904     $ (321 ) K-102     Notes to Consolidated Financial Statements (Continued) (18) Income taxes (Continued) Income tax expense is reconciled to hypothetical amounts computed at the U.S. federal statutory rate for each of the three years ending December 31, 2020 in the table below (in millions).       2020     2019     2018   Earnings before income taxes   $ 55,693     $ 102,696     $ 4,001                             Hypothetical income tax expense computed at the U.S. federal statutory rate   $ 11,696     $ 21,566     $ 840   Dividends received deduction and tax-exempt interest     (448 )     (433 )     (393 ) State income taxes, less U.S. federal income tax benefit     858       494       138   Foreign tax rate differences     13       (6 )     271   U.S. income tax credits     (1,519 )     (942 )     (711 ) Net benefit from the enactment of the TCJA     —       —       (302 ) Goodwill impairments     1,977       20       21   Other differences, net     (137 )     205       (185 )     $ 12,440     $ 20,904     $ (321 ) Effective income tax rate     22.3 %     20.4 %     (8.0 )%   We file income tax returns in the United States and in state, local and foreign jurisdictions. We have settled income tax liabilities with the U.S. federal taxing authority (“IRS”) for tax years through 2011 and the tax years 2012 and 2013 remain open. The IRS is auditing Berkshire’s consolidated U.S. federal income tax returns for the 2014 through 2016 tax years. We are also under audit or subject to audit with respect to income taxes in many state and foreign jurisdictions. It is reasonably possible that certain of these income tax examinations will be settled in 2021. We currently do not believe that the outcome of unresolved issues or claims will be material to our Consolidated Financial Statements. At December 31, 2020 and 2019, net unrecognized tax benefits were $1,113 million and $952 million, respectively. Included in the balance at December 31, 2020, were $920 million of tax positions that, if recognized, would impact the effective tax rate. The remaining balance in net unrecognized tax benefits principally relates to tax positions where the ultimate recognition is highly certain but there is uncertainty about the timing of recognition. Because of the impact of deferred income tax accounting, these positions, when recognized, would not affect the annual effective income tax rate. We recorded income tax expense of $60 million in 2020 and $377 million in 2019 for uncertain tax positions related to investments by a subsidiary in certain tax equity investment funds that generated income tax benefits from 2015 through 2018. We now believe that it is more likely than not those income tax benefits are not valid. We do not expect any material increases to the estimated amount of unrecognized tax benefits during 2021. (19) Dividend restrictions – Insurance subsidiaries Payments of dividends by our insurance subsidiaries are restricted by insurance statutes and regulations. Without prior regulatory approval, our principal insurance subsidiaries may declare up to approximately $23 billion as ordinary dividends during 2021. Investments in fixed maturity and equity securities and short-term investments on deposit with U.S. state insurance authorities in accordance with state insurance regulations were approximately $5.5 billion at December 31, 2020 and $6.3 billion at December 31, 2019. Combined shareholders’ equity of U.S. based insurance subsidiaries determined pursuant to statutory accounting rules (Surplus as Regards Policyholders) was approximately $237 billion at December 31, 2020 and $216 billion at December 31, 2019. Statutory surplus differs from the corresponding amount based on GAAP, due to differences in accounting for certain assets and liabilities. For instance, deferred charges reinsurance assumed, deferred policy acquisition costs, unrealized gains on certain investments and related deferred income taxes are recognized for GAAP but not for statutory reporting purposes. In addition, the carrying values of certain assets, such as goodwill and non-insurance entities owned by our insurance subsidiaries, are not fully recognized for statutory reporting purposes. K-103   Notes to Consolidated Financial Statements (Continued) (20) Fair value measurements Our financial assets and liabilities are summarized below as of December 31, 2020 and December 31, 2019, with fair values shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills, receivables and accounts payable, accruals and other liabilities are considered to be reasonable estimates of their fair values.       Carrying Value     Fair Value     Quoted Prices (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)   December 31, 2020                                         Investments in fixed maturity securities:                                         U.S. Treasury, U.S. government corporations and    agencies   $ 3,403     $ 3,403     $ 3,358     $ 45     $ —   Foreign governments     11,338       11,338       9,259       2,079       —   Corporate bonds     5,191       5,191       —       5,191       —   Other     478       478       —       478       —   Investments in equity securities     281,170       281,170       271,848       38       9,284   Investment in Kraft Heinz common stock     13,336       11,280       11,280       —       —   Loans and finance receivables     19,201       20,554       —       2,692       17,862   Derivative contract assets (1)     270       270       1       72       197   Derivative contract liabilities:                                         Railroad, utilities and energy (1)     121       121       6       96       19   Equity index put options     1,065       1,065       —       —       1,065   Notes payable and other borrowings:                                         Insurance and other     41,522       46,676       —       46,665       11   Railroad, utilities and energy     75,373       92,593       —       92,593       —                                             December 31, 2019                                         Investments in fixed maturity securities:                                         U.S. Treasury, U.S. government corporations and    agencies   $ 3,090     $ 3,090     $ 3,046     $ 44     $ —   Foreign governments     8,638       8,638       5,437       3,201       —   Corporate bonds     6,352       6,352       —       6,350       2   Other     605       605       —       605       —   Investments in equity securities     248,027       248,027       237,271       46       10,710   Investment in Kraft Heinz common stock     13,757       10,456       10,456       —       —   Loans and finance receivables     17,527       17,861       —       1,809       16,052   Derivative contract assets (1)     145       145       —       23       122   Derivative contract liabilities:                                         Railroad, utilities and energy (1)     76       76       6       59       11   Equity index put options     968       968       —       —       968   Notes payable and other borrowings:                                         Insurance and other     37,590       40,589       —       40,569       20   Railroad, utilities and energy     65,778       76,237       —       76,237       —     (1) Assets are included in other assets and liabilities are included in accounts payable, accruals and other liabilities. K-104     Notes to Consolidated Financial Statements (Continued) (20) Fair value measurements (Continued) The fair values of substantially all of our financial instruments were measured using market or income approaches. The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below. Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets. Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector. Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities. Reconciliations of assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for each of the three years ending December 31, 2020 follow (in millions).       Investments in equity and fixed maturity securities     Net derivative contract liabilities   Balance December 31, 2017   $ 6     $ (2,069 ) Gains (losses) included in:                 Earnings     —       (118 ) Other comprehensive income     —       2   Regulatory assets and liabilities     —       3   Acquisitions     2       3   Dispositions and settlements     (1 )     (164 ) Balance December 31, 2018     7       (2,343 ) Gains (losses) included in:                 Earnings     404       1,972   Other comprehensive income     —       (1 ) Regulatory assets and liabilities     —       (26 ) Acquisitions     10,000       6   Dispositions and settlements     (4 )     (465 ) Balance December 31, 2019     10,407       (857 ) Gains (losses) included in:                 Earnings     (1,426 )     603   Other comprehensive income     —       —   Regulatory assets and liabilities     —       (17 ) Acquisitions     —       5   Dispositions and settlements     (2 )     (621 ) Balance December 31, 2020   $ 8,979     $ (887 )   K-105     Notes to Consolidated Financial Statements (Continued) (20) Fair value measurements (Continued) We acquired investments in Occidental Cumulative Perpetual Preferred Stock (“Occidental Preferred”) and Occidental common stock warrants in August 2019 at an aggregate cost of $10 billion. We currently consider the related fair value measurements to contain Level 3 inputs. See Note 4 for information regarding these investments. Quantitative information as of December 31, 2020, with respect to assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) follows (in millions).       Fair Value     Principal Valuation Techniques   Unobservable Inputs   Weighted Average   Investments in equity securities:                         Preferred stock   $ 8,891     Discounted cash flow   Expected duration   9 years                   Discount for transferability restrictions and subordination   375 bps                             Common stock warrants     86     Warrant pricing model   Expected duration   9 years                   Volatility   32%                             Derivative contract liabilities     1,065     Option pricing model   Volatility   19%     Investments in equity securities in the preceding table include our investments in the Occidental Preferred and Occidental common stock warrants. These investments are subject to contractual restrictions on transferability and contain provisions that currently prevent us from economically hedging our investments. In applying discounted cash flow techniques in valuing the Occidental Preferred, we made assumptions regarding the expected duration of the investment. The Occidental Preferred is redeemable at Occidental’s option beginning in 2029. We also made estimates regarding the impact of subordination, as the Occidental Preferred has a lower priority in liquidation than debt instruments. In valuing the Occidental common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we made assumptions regarding the expected duration and volatility of the warrants. The Occidental common stock warrants contractually expire on the one-year anniversary on which no Occidental Preferred remains outstanding. Our equity index put option contracts are illiquid and contain contract terms that are not standard in derivatives markets. For example, we are not required to post collateral under most of our contracts. We determine the fair value of the equity index put option contract liabilities based on the Black-Scholes option valuation model. (21) Accumulated other comprehensive income A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders for each of the three years ending December 31, 2020 follows (in millions).       Unrealized appreciation of investments, net     Foreign currency translation     Defined benefit pension plans     Other     Accumulated other comprehensive income   Balance December 31, 2017   $ 62,093     $ (3,114 )   $ (420 )   $ 12     $ 58,571   Reclassifications to retained earnings upon    adoption of new accounting standards     (61,340 )     (65 )     36       (6 )     (61,375 ) Other comprehensive income, net     (383 )     (1,424 )     (432 )     28       (2,211 ) Balance December 31, 2018     370       (4,603 )     (816 )     34       (5,015 ) Other comprehensive income, net     111       257       (553 )     (43 )     (228 ) Balance December 31, 2019     481       (4,346 )     (1,369 )     (9 )     (5,243 ) Other comprehensive income, net     55       1,264       (276 )     (43 )     1,000   Balance December 31, 2020   $ 536     $ (3,082 )   $ (1,645 )   $ (52 )   $ (4,243 )       K-106   Notes to Consolidated Financial Statements (Continued) (22) Common stock Changes in Berkshire’s issued, treasury and outstanding common stock during the three years ending December 31, 2020 are shown in the table below. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but none are issued.       Class A, $5 Par Value (1,650,000 shares authorized)     Class B, $0.0033 Par Value (3,225,000,000 shares authorized)       Issued     Treasury     Outstanding     Issued     Treasury     Outstanding   Balance December 31, 2017     762,755       (11,680 )     751,075       1,342,066,749       (1,409,762 )     1,340,656,987   Conversions of Class A common stock to    Class B common stock and exercises of    replacement stock options     (20,542 )     —       (20,542 )     31,492,234       —       31,492,234   Treasury stock acquired     —       (1,217 )     (1,217 )     —       (4,729,147 )     (4,729,147 ) Balance December 31, 2018     742,213       (12,897 )     729,316       1,373,558,983       (6,138,909 )     1,367,420,074   Conversions of Class A common stock to    Class B common stock and exercises of    replacement stock options     (22,906 )     —       (22,906 )     34,624,869       —       34,624,869   Treasury stock acquired     —       (4,440 )     (4,440 )     —       (17,563,410 )     (17,563,410 ) Balance December 31, 2019     719,307       (17,337 )     701,970       1,408,183,852       (23,702,319 )     1,384,481,533   Conversions of Class A common stock to    Class B common stock and exercises of    replacement stock options     (40,784 )     —       (40,784 )     61,176,000       —       61,176,000   Treasury stock acquired     —       (17,255 )     (17,255 )     —       (95,614,062 )     (95,614,062 ) Balance December 31, 2020     678,523       (34,592 )     643,931       1,469,359,852       (119,316,381 )     1,350,043,471     Each Class A common share is entitled to one vote per share. Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth (1/1,500) of such rights of Class A common stock. Each Class B common share possesses voting rights equivalent to one-ten-thousandth (1/10,000) of the voting rights of a Class A share. Unless otherwise required under Delaware General Corporation Law, Class A and Class B common shares vote as a single class. Each share of Class A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock. On an equivalent Class A common stock basis, there were 1,543,960 shares outstanding as of December 31, 2020 and 1,624,958 shares outstanding as of December 31, 2019. Since we have two classes of common stock, we provide earnings per share data on the Consolidated Statements of Earnings for average equivalent Class A shares outstanding and average equivalent Class B shares outstanding. Class B shares are economically equivalent to one-fifteen-hundredth (1/1,500) of a Class A share. Average equivalent Class A shares outstanding represents average Class A shares outstanding plus one-fifteen-hundredth (1/1,500) of the average Class B shares outstanding. Average equivalent Class B shares outstanding represents average Class B shares outstanding plus 1,500 times average Class A shares outstanding. Berkshire’s common stock repurchase program, as amended, permits Berkshire to repurchase shares any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. The program continues to allow share repurchases in the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased. However, repurchases will not be made if they would reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bill holdings below $20 billion. The repurchase program does not obligate Berkshire to repurchase any specific dollar amount or number of Class A or Class B shares and there is no expiration date to the program. (23) Revenues from contracts with customers We recognize revenue when a good or service is transferred to a customer. A good or service is transferred when or as the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers. K-107   Notes to Consolidated Financial Statements (Continued) (23) Revenues from contracts with customers (Continued) The following tables summarize customer contract revenues disaggregated by reportable segment and the source of the revenue for each of the three years ended December 31, 2020 (in millions). Other revenues included in consolidated revenues were primarily insurance premiums earned, interest, dividend and other investment income and leasing revenues, which are not considered to be revenues from contracts with customers under GAAP.   2020   Manufacturing     McLane Company     Service and retailing     BNSF     Berkshire Hathaway Energy     Insurance, Corporate and other     Total   Manufactured products:                                                         Industrial and commercial products   $ 20,772     $ —     $ 192     $ —     $ —     $ —     $ 20,964   Building products     15,943       —       —       —       —       —       15,943   Consumer products     14,757       —       —       —       —       —       14,757   Grocery and convenience store distribution     —       30,795       —       —       —       —       30,795   Food and beverage distribution     —       15,368       —       —       —       —       15,368   Auto sales     —       —       8,258       —       —       —       8,258   Other retail and wholesale distribution     2,452       —       12,470       —       —       —       14,922   Service     1,456       584       3,332       20,693       4,595       —       30,660   Electricity and natural gas     —       —       —       —       15,066       —       15,066   Total     55,380       46,747       24,252       20,693       19,661       —       166,733   Other revenues     3,598       93       3,859       57       1,353       69,817       78,777       $ 58,978     $ 46,840     $ 28,111     $ 20,750     $ 21,014     $ 69,817     $ 245,510       2019                                                         Manufactured products:                                                         Industrial and commercial products   $ 25,311     $ —     $ 184     $ —     $ —     $ —     $ 25,495   Building products     15,620       —       —       —       —       —       15,620   Consumer products     14,120       —       —       —       —       —       14,120   Grocery and convenience store distribution     —       33,057       —       —       —       —       33,057   Food and beverage distribution     —       16,767       —       —       —       —       16,767   Auto sales     —       —       8,481       —       —       —       8,481   Other retail and wholesale distribution     2,299       —       12,213       —       —       —       14,512   Service     1,642       539       4,062       23,302       4,096       —       33,641   Electricity and natural gas     —       —       —       —       14,819       —       14,819   Total     58,992       50,363       24,940       23,302       18,915       —       176,512   Other revenues     3,632       95       4,459       55       1,181       68,682       78,104       $ 62,624     $ 50,458     $ 29,399     $ 23,357     $ 20,096     $ 68,682     $ 254,616       2018                                                         Manufactured products:                                                         Industrial and commercial products   $ 25,707     $ —     $ 204     $ —     $ —     $ —     $ 25,911   Building products     14,323       —       —       —       —       —       14,323   Consumer products     14,790       —       —       —       —       —       14,790   Grocery and convenience store distribution     —       33,518       —       —       —       —       33,518   Food and beverage distribution     —       16,309       —       —       —       —       16,309   Auto sales     —       —       8,181       —       —       —       8,181   Other retail and wholesale distribution     2,091       —       12,067       —       —       —       14,158   Service     1,519       84       4,100       23,652       3,949       —       33,304   Electricity and natural gas     —       —       —       —       14,951       —       14,951   Total     58,430       49,911       24,552       23,652       18,900       —       175,445   Other revenues     3,340       76       4,297       51       1,070       63,558       72,392       $ 61,770     $ 49,987     $ 28,849     $ 23,703     $ 19,970     $ 63,558     $ 247,837   K-108     Notes to Consolidated Financial Statements (Continued) (23) Revenues from contracts with customers (Continued) A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in excess of one year as of December 31, 2020 and the timing of when the performance obligations are expected to be satisfied follows (in millions).       Less than 12 months     Greater than 12 months     Total   Electricity and natural gas   $ 3,210     $ 22,088     $ 25,298   Other sales and service contracts     1,228       2,382       3,610       (24) Pension plans Certain of our subsidiaries sponsor defined benefit pension plans. Benefits under the plans are generally based on years of service and compensation or fixed benefit rates. Plan sponsors may make contributions to the plans to meet regulatory requirements and may also make discretionary contributions. The components of our net periodic pension expense for each of the three years ending December 31, 2020 follow (in millions).       2020     2019     2018   Service cost   $ 235     $ 224     $ 271   Interest cost     510       618       593   Expected return on plan assets     (955 )     (936 )     (988 ) Amortization of actuarial losses and other     171       26       188   Net periodic pension expense   $ (39 )   $ (68 )   $ 64     The projected benefit obligation (“PBO”) is the actuarial present value of benefits earned based upon service and compensation prior to the valuation date and, if applicable, includes assumptions regarding future compensation levels. Benefit obligations under qualified U.S. defined benefit pension plans are funded through assets held in trusts. Pension obligations under certain non-U.S. plans and non-qualified U.S. plans are unfunded and the aggregate PBOs of such plans were approximately $1.6 billion and $1.3 billion as of December 31, 2020 and 2019, respectively. The cost of pension plans covering employees of certain regulated subsidiaries of BHE are generally recoverable through the regulated rate making process. The funded status at year end 2020 and 2019 and reconciliations of the changes in PBOs and plan assets related to BHE’s pension plans and all other pension plans for each of the two years ending December 31, 2020 follow (in millions).       2020     2019       BHE     Other     Total     BHE     Other     Total   Benefit obligations                                                 PBO beginning of year   $ 4,898     $ 13,808     $ 18,706     $ 4,551     $ 12,371     $ 16,922   Service cost     33       202       235       32       192       224   Interest cost     133       377       510       161       457       618   Benefits paid     (285 )     (709 )     (994 )     (257 )     (776 )     (1,033 ) Settlements     (63 )     (12 )     (75 )     (121 )     (46 )     (167 ) Actuarial (gains) or losses and other     566       1,481       2,047       532       1,610       2,142   PBO end of year   $ 5,282     $ 15,147     $ 20,429     $ 4,898     $ 13,808     $ 18,706   Plan assets                                                 Plan assets beginning of year   $ 4,808     $ 11,688     $ 16,496     $ 4,385     $ 10,574     $ 14,959   Employer contributions     69       127       196       68       131       199   Benefits paid     (285 )     (709 )     (994 )     (257 )     (776 )     (1,033 ) Actual return on plan assets     554       1,820       2,374       650       1,764       2,414   Settlements     (63 )     (12 )     (75 )     (121 )     (46 )     (167 ) Other     75       (134 )     (59 )     83       41       124   Plan assets end of year   $ 5,158     $ 12,780     $ 17,938     $ 4,808     $ 11,688     $ 16,496   Funded status – net liability   $ 124     $ 2,367     $ 2,491     $ 90     $ 2,120     $ 2,210     K-109     Notes to Consolidated Financial Statements (Continued) (24) Pension plans (Continued) The funded status reflected in assets was $1,351 million and in liabilities was $3,842 million at December 31, 2020. The funded status included in assets was $857 million and in liabilities was $3,067 million at December 31, 2019.   The accumulated benefit obligation (“ABO”) is the actuarial present value of benefits earned based on service and compensation prior to the valuation date. The ABO was $19.4 billion at December 31, 2020 and $17.5 billion at December 31, 2019. Information for plans with PBOs and ABOs in excess of plan assets as of December 31, 2020 and 2019 follows (in millions)       2020   2019   PBOs $ 12,775   $ 12,625   Plan assets   9,018     9,627                 ABOs   10,875     10,617   Plan assets   7,820     8,367     Weighted average assumptions used in determining PBOs and net periodic pension expense follow.       2020     2019     2018   Discount rate applicable to pension benefit obligations     2.3 %     3.1 %     3.9 % Expected long-term rate of return on plan assets   6.2     6.4       6.4   Rate of compensation increase   2.6     2.5       2.6   Discount rate applicable to net periodic pension expense     3.1       4.0       3.4       Pension benefit payments expected over the next ten years are as follows (in millions): 2021 – $1,105; 2022 – $1,031; 2023 – $1,034; 2024 – $1,037; 2025 – $1,040; and 2026 to 2030 – $5,119. Sponsoring subsidiaries expect to contribute $202 million to the plans in 2021. Fair value measurements of plan assets as of December 31, 2020 and 2019 follow (in millions).       Fair Value     Investment funds and partnerships       Total     Level 1     Level 2     Level 3     at net asset value   December 31, 2020                                         Cash and cash equivalents   $ 383     $ 243     $ 140     $ —     $ —   Equity securities     11,383       10,123       851       409       —   Fixed maturity securities     3,173       2,214       926       33       —   Investment funds and other     2,999       198       398       56       2,347       $ 17,938     $ 12,778     $ 2,315     $ 498     $ 2,347   December 31, 2019                                         Cash and cash equivalents   $ 412     $ 309     $ 103     $ —     $ —   Equity securities     11,105       9,860       836       409       —   Fixed maturity securities     2,328       1,593       704       31       —   Investment funds and other     2,651       143       358       40       2,110       $ 16,496     $ 11,905     $ 2,001     $ 480     $ 2,110     See Note 20 for a discussion of the three levels of fair value measurements. Plan assets are generally invested with the long-term objective of producing earnings to adequately cover expected benefit obligations, while assuming a prudent level of risk. Allocations may change due to changing market conditions and investment opportunities. The expected rates of return on plan assets reflect subjective assessments of expected long-term investment returns. Generally, past investment returns are not given significant consideration when establishing assumptions for expected long-term rates of return on plan assets. Actual experience will differ from the assumed rates of return. K-110   Notes to Consolidated Financial Statements (Continued) (24) Pension plans (Continued) A reconciliation of the pre-tax accumulated other comprehensive income (loss) related to defined benefit pension plans for each of the two years ending December 31, 2020 follows (in millions).       2020     2019   Balance beginning of year   $ (1,896 )   $ (1,184 ) Amount included in net periodic pension expense     141       94   Actuarial gains (losses) and other     (496 )     (806 ) Balance end of year   $ (2,251 )   $ (1,896 )   Several of our subsidiaries also sponsor defined contribution retirement plans, such as 401(k) or profit-sharing plans. Employee contributions are subject to regulatory limitations and the specific plan provisions. Several plans provide for employer matching contributions up to levels specified in the plans and provide for additional discretionary contributions as determined by management. Our defined contribution plan expense was approximately $1.4 billion in 2020, $1.2 billion in 2019 and $1.0 billion in 2018. (25) Contingencies and Commitments We are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. We do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations. Our subsidiaries regularly make commitments in the ordinary course of business to purchase goods and services used in their businesses. As of December 31, 2020, estimated future payments under such arrangements were as follows: $14.6 billion in 2021, $4.5 billion in 2022, $3.4 billion in 2023, $2.8 billion in 2024, $3.1 billion in 2025 and $20.0 billion after 2025. The most significant of these relate to our railroad, utilities and energy businesses and our shared aircraft ownership and leasing business. Pursuant to the terms of agreements with noncontrolling shareholders in our less than wholly-owned subsidiaries, we may be obligated to acquire their equity interests. If we had acquired all outstanding noncontrolling interests as of December 31, 2020, we estimate the cost would have been approximately $6.3 billion. However, the timing and the amount of any such future payments that might be required are contingent on future actions of the noncontrolling owners. (26) Supplemental cash flow information A summary of supplemental cash flow information for each of the three years ending December 31, 2020 is presented in the following table (in millions).       2020     2019     2018   Cash paid during the period for:                         Income taxes   $ 5,001     $ 5,415     $ 4,354   Interest:                         Insurance and other     1,001       1,011       1,111   Railroad, utilities and energy     3,006       2,879       2,867   Non-cash investing and financing activities:                         Liabilities assumed in connection with business acquisitions     6,981       766       3,735   Operating lease liabilities arising from obtaining right-of-use assets     729       782       —       K-111   Notes to Consolidated Financial Statements (Continued) (27) Business segment data Our operating businesses include a large and diverse group of insurance, manufacturing, service and retailing businesses. We organize our reportable business segments in a manner that reflects how management views those business activities. Certain businesses are grouped together for segment reporting based upon similar products or product lines, marketing, selling and distribution characteristics, even though those business units are operated under separate local management. The tabular information that follows shows data of reportable segments reconciled to amounts reflected in our Consolidated Financial Statements. Intersegment transactions are not eliminated from segment results when management considers those transactions in assessing the results of the respective segments. Furthermore, our management does not consider investment and derivative gains/losses, impairments or amortization of certain business acquisition accounting adjustments related to Berkshire’s business acquisitions or certain other corporate income and expense items in assessing the financial performance of operating units. Collectively, these items are included in reconciliations of segment amounts to consolidated amounts. Berkshire’s operating segments are as follows.   Business Identity    Business Activity  Insurance:     GEICO   Underwriting private passenger automobile insurance mainly by direct response methods       Berkshire Hathaway Primary Group   Underwriting multiple lines of property and casualty insurance policies for primarily commercial accounts       Berkshire Hathaway Reinsurance Group   Underwriting excess-of-loss, quota-share and facultative reinsurance worldwide       BNSF   Operation of one of the largest railroad systems in North America       Berkshire Hathaway Energy   Regulated electric and gas utility, including power generation and distribution activities and real estate brokerage activities       Manufacturing   Manufacturers of numerous products including industrial, consumer and building products, including home building and related financial services       McLane Company   Wholesale distribution of groceries and non-food items       Service and retailing   Providers of numerous services including shared aircraft ownership programs, aviation pilot training, electronic components distribution, various retailing businesses, including automobile dealerships and trailer and furniture leasing   K-112     Notes to Consolidated Financial Statements (Continued) (27) Business segment data (Continued) A disaggregation of our consolidated data for each of the three most recent years is presented as follows (in millions).       Revenues     Earnings before income taxes       2020     2019     2018     2020     2019     2018   Operating Businesses                                                 Insurance:                                                 Underwriting:                                                 GEICO   $ 35,093     $ 35,572     $ 33,363     $ 3,428     $ 1,506     $ 2,449   Berkshire Hathaway Primary Group     9,615       9,165       8,111       110       383       670   Berkshire Hathaway Reinsurance Group     18,693       16,341       15,944       (2,700 )     (1,472 )     (1,109 ) Insurance underwriting     63,401       61,078       57,418       838       417       2,010   Investment income     5,960       6,615       5,518       5,949       6,600       5,503   Total insurance     69,361       67,693       62,936       6,787       7,017       7,513                                                     BNSF     20,869       23,515       23,855       6,792       7,250       6,863   Berkshire Hathaway Energy     21,031       20,114       19,987       2,479       2,618       2,472   Manufacturing     59,079       62,730       61,883       8,010       9,522       9,366   McLane Company     46,840       50,458       49,987       251       288       246   Service and retailing     28,178       29,487       28,939       2,628       2,555       2,696         245,358       253,997       247,587       26,947       29,250       29,156   Reconciliation to consolidated amount                                                 Investment and derivative gains/losses     —       —       —       40,746       72,607       (22,455 ) Interest expense, not allocated to segments     —       —       —       (483 )     (416 )     (458 ) Equity method investments     —       —       —       726       1,176       (2,167 ) Goodwill and intangible asset impairments     —       —       —       (10,671 )     (96 )     (382 ) Corporate, eliminations and other     152       619       250       (1,572 )     175       307       $ 245,510     $ 254,616     $ 247,837     $ 55,693     $ 102,696     $ 4,001           Interest expense     Income tax expense       2020     2019     2018     2020     2019     2018   Operating Businesses                                                 Insurance   $ —     $ —     $ —     $ 1,089     $ 1,166     $ 1,374   BNSF     1,037       1,070       1,041       1,631       1,769       1,644   Berkshire Hathaway Energy     1,941       1,835       1,777       (1,010 )     (526 )     (452 ) Manufacturing     737       752       690       1,795       2,253       2,188   McLane Company     —       —       15       71       71       59   Service and retailing     61       86       91       669       603       634         3,776       3,743       3,614       4,245       5,336       5,447   Reconciliation to consolidated amount                                                 Investment and derivative gains/losses     —       —       —       8,855       15,159       (4,673 ) Interest expense, not allocated to segments     483       416       458       (102 )     (88 )     (96 ) Equity method investments     —       —       —       57       148       (753 ) Corporate, eliminations and other     (176 )     (198 )     (219 )     (615 )     349       (246 )     $ 4,083     $ 3,961     $ 3,853     $ 12,440     $ 20,904     $ (321 ) K-113     Notes to Consolidated Financial Statements (Continued) (27) Business segment data (Continued)       Capital expenditures     Depreciation of tangible assets       2020     2019     2018     2020     2019     2018   Operating Businesses                                                 Insurance   $ 50     $ 108     $ 130     $ 74     $ 82     $ 79   BNSF     3,063       3,608       3,187       2,423       2,350       2,268   Berkshire Hathaway Energy     6,765       7,364       6,241       3,376       2,947       2,830   Manufacturing     2,133       2,981       3,116       2,026       1,951       1,890   McLane Company     98       158       276       204       225       204   Service and retailing     903       1,760       1,587       1,216       1,192       1,115       $ 13,012     $ 15,979     $ 14,537     $ 9,319     $ 8,747     $ 8,386           Goodwill at year-end     Identifiable assets at year-end       2020     2019     2018     2020     2019     2018   Operating Businesses                                                 Insurance   $ 15,224     $ 15,289     $ 15,289     $ 399,169     $ 364,550     $ 289,746   BNSF     14,851       14,851       14,851       73,809       73,699       70,242   Berkshire Hathaway Energy     11,763       9,979       9,851       109,286       88,651       80,543   Manufacturing     25,512       34,800       34,019       104,318       104,437       99,912   McLane Company     232       734       734       6,771       6,872       6,243   Service and retailing     6,152       6,229       6,281       26,173       26,494       24,724       $ 73,734     $ 81,882     $ 81,025       719,526       664,703       571,410   Reconciliation to consolidated amount                                                 Corporate and other                             80,469       71,144       55,359   Goodwill                             73,734       81,882       81,025                               $ 873,729     $ 817,729     $ 707,794     Property/casualty and life/health insurance premiums written and earned are summarized below (in millions).       Property/Casualty     Life/Health       2020     2019     2018     2020     2019     2018   Premiums Written:                                                 Direct   $ 47,838     $ 47,578     $ 44,513     $ 510     $ 839     $ 1,111   Assumed     11,533       10,214       8,970       5,960       5,046       5,540   Ceded     (898 )     (821 )     (869 )     (42 )     (45 )     (49 )     $ 58,473     $ 56,971     $ 52,614     $ 6,428     $ 5,840     $ 6,602   Premiums Earned:                                                 Direct   $ 46,418     $ 46,540     $ 43,095     $ 510     $ 839     $ 1,111   Assumed     11,449       9,643       8,649       5,973       4,952       5,438   Ceded     (907 )     (851 )     (825 )     (42 )     (45 )     (50 )     $ 56,960     $ 55,332     $ 50,919     $ 6,441     $ 5,746     $ 6,499     K-114     Notes to Consolidated Financial Statements (Continued) (27) Business segment data (Continued) Insurance premiums written by geographic region (based upon the domicile of the insured or reinsured) are summarized below (in millions).     Property/Casualty     Life/Health     2020   2019   2018     2020   2019   2018   United States $ 50,250   $ 50,529   $ 46,146     $ 2,820   $ 2,553   $ 3,598   Western Europe   3,751     2,535     2,157       1,120     908     939   Asia Pacific   3,410     3,114     3,726       1,652     1,582     1,361   All other   1,062     793     585       836     797     704     $ 58,473   $ 56,971   $ 52,614     $ 6,428   $ 5,840   $ 6,602     Consolidated sales, service and leasing revenues were $132.3 billion in 2020, $140.8 billion in 2019 and $139.1 billion in 2018. Sales, service and leasing revenues attributable to the United States were 86% in 2020, 85% in 2019 and 84% in 2018 of such amounts. The remainder of sales, service and leasing revenues were primarily in Europe, Canada and the Asia Pacific.  Railroad, utilities and energy revenues were $41.8 billion in 2020, $43.5 billion in 2019 and $43.7 billion in 2018. In each of the three years, approximately 96% of such revenues were attributable to the United States. At December 31, 2020, approximately 89% of our consolidated net property, plant and equipment and equipment held for lease was located in the United States with the remainder primarily in Canada and the United Kingdom. (28) Quarterly data A summary of revenues and net earnings by quarter for each of the last two years follows. This information is unaudited. Amounts are in millions, except per share amounts.       1st Quarter     2nd Quarter     3rd Quarter     4th Quarter   2020                                 Revenues   $ 61,265     $ 56,840     $ 63,024     $ 64,381   Net earnings (loss) attributable to Berkshire shareholders *     (49,746 )     26,295       30,137       35,835   Net earnings (loss) attributable to Berkshire shareholders per    equivalent Class A common share     (30,653 )     16,314       18,994       23,015                                     2019                                 Revenues   $ 60,678     $ 63,598     $ 64,972     $ 65,368   Net earnings attributable to Berkshire shareholders *     21,661       14,073       16,524       29,159   Net earnings attributable to Berkshire shareholders per    equivalent Class A common share     13,209       8,608       10,119       17,909     * Includes after-tax investment and derivative gains/losses as follows:       1st Quarter     2nd Quarter     3rd Quarter     4th Quarter   2020   $ (55,617 )   $ 31,645     $ 24,737     $ 30,826   2019     16,106       7,934       8,666       24,739     K-115     Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Item 9A. Controls and Procedures At the end of the period covered by this Annual Report on Form 10-K, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer) concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s periodic SEC filings. The report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to Management’s Report on Internal Control Over Financial Reporting, included on page K-66 of this report. The attestation report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to Report of Independent Registered Public Accounting Firm, included on page K-67 of this report. There has been no change in the Corporation’s internal control over financial reporting during the quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting. Item 9B. Other Information None Part III Except for the information set forth under the caption “Executive Officers of the Registrant” in Part I hereof, information required by this Part (Items 10, 11, 12, 13 and 14) is incorporated by reference from the Registrant’s definitive proxy statement, filed pursuant to Regulation 14A, for the Annual Meeting of Shareholders of the Registrant to be held on May 1, 2021, which meeting will involve the election of directors. Part IV Item 15. Exhibits and Financial Statement Schedules (a)1. Financial Statements The following Consolidated Financial Statements, as well as the Report of Independent Registered Public Accounting Firm, are included in Part II Item 8 of this report:     PAGE Report of Independent Registered Public Accounting Firm   K-67 Consolidated Balance Sheets— December 31, 2020 and December 31, 2019   K-70 Consolidated Statements of Earnings— Years Ended December 31, 2020, December 31, 2019, and December 31, 2018   K-72 Consolidated Statements of Comprehensive Income— Years Ended December 31, 2020, December 31, 2019, and December 31, 2018   K-73 Consolidated Statements of Changes in Shareholders’ Equity— Years Ended December 31, 2020, December 31, 2019, and December 31, 2018   K-73 Consolidated Statements of Cash Flows— Years Ended December 31, 2020, December 31, 2019, and December 31, 2018   K-74 Notes to Consolidated Financial Statements   K-75       2. Financial Statement Schedule     Report of Independent Registered Public Accounting Firm   K-117 Schedule I—Parent Company Condensed Financial Information Balance Sheets as of December 31, 2020 and 2019, Statements of Earnings and Comprehensive Income and Cash Flows for the years ended December 31, 2020, December 31, 2019 and December 31, 2018 and Note to Condensed Financial Information   K-118       Other schedules are omitted because they are not required, information therein is not applicable, or is reflected in the Consolidated Financial Statements or notes thereto.       (b) Exhibits See the “Exhibit Index” at page K-120. K-116   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Berkshire Hathaway Inc. Omaha, Nebraska Opinion on the Financial Statement Schedule We have audited the consolidated financial statements of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, and for each of the three years in the period ended December 31, 2020, and the Company’s internal control over financial reporting as of December 31, 2020, and have issued our report thereon dated February 27, 2021; such consolidated financial statements and report are included elsewhere in this Form 10-K. Our audits also included the financial statement schedule of the Company listed in the Index at Item 15. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ Deloitte & Touche LLP Omaha, Nebraska February 27, 2021 K-117   BERKSHIRE HATHAWAY INC. (Parent Company) Condensed Financial Information (Dollars in millions) Schedule I Balance Sheets       December 31,       2020     2019   Assets:                 Cash and cash equivalents   $ 12,329     $ 15,004   Short-term investments in U.S. Treasury Bills     29,773       25,514   Investments in and advances to/from consolidated subsidiaries     411,826       392,162   Investment in The Kraft Heinz Company     13,336       13,757   Other assets     108       131       $ 467,372     $ 446,568   Liabilities and Shareholders’ Equity:                 Accounts payable, accrued interest and other liabilities   $ 369     $ 320   Income taxes, principally deferred     1,174       1,554   Notes payable and other borrowings     22,665       19,903         24,208       21,777   Berkshire Hathaway shareholders’ equity     443,164       424,791       $ 467,372     $ 446,568     Statements of Earnings and Comprehensive Income       Year ended December 31,       2020     2019     2018   Income items:                         From consolidated subsidiaries:                         Dividends and distributions   $ 26,110     $ 15,603     $ 9,658   Undistributed earnings (losses)     17,402       65,237       (3,952 )       43,512       80,840       5,706   Investment gains (losses)     (24 )     (125 )     (4 ) Equity in net earnings (losses) of The Kraft Heinz Company     95       493       (2,730 ) Other income     328       780       649         43,911       81,988       3,621   Cost and expense items:                         General and administrative     194       122       216   Interest expense     489       591       601   Foreign exchange (gains) losses on non-U.S. Dollar denominated debt     970       (193 )     (366 ) Income tax expense (benefit)     (263 )     51       (851 )       1,390       571       (400 ) Net earnings attributable to Berkshire Hathaway shareholders     42,521       81,417       4,021   Other comprehensive income attributable to Berkshire Hathaway shareholders     1,000       (228 )     (2,211 ) Comprehensive income attributable to Berkshire Hathaway shareholders   $ 43,521     $ 81,189     $ 1,810     See Note to Condensed Financial Information K-118   BERKSHIRE HATHAWAY INC. (Parent Company) Condensed Financial Information (Dollars in millions) Schedule I (continued) Statements of Cash Flows     Year ended December 31,       2020     2019     2018   Cash flows from operating activities:                         Net earnings attributable to Berkshire Hathaway shareholders   $ 42,521     $ 81,417     $ 4,021   Adjustments to reconcile net earnings to cash flows from operating activities:                         Investment gains/losses     24       125       4   Undistributed earnings of consolidated subsidiaries     (17,402 )     (65,237 )     3,952   Non-cash dividends from subsidiaries     (8,296 )     —       —   Income taxes payable     (72 )     (56 )     (972 ) Other     1,100       (693 )     3,062   Net cash flows from operating activities     17,875       15,556       10,067   Cash flows from investing activities:                         Investments in and advances to/from consolidated subsidiaries, net     (1,947 )     60       460   Purchases of U.S. Treasury Bills     (54,715 )     (40,107 )     (29,740 ) Sales and maturities of U.S. Treasury Bills     59,035       36,943       21,442   Other     11       737       —   Net cash flows from investing activities     2,384       (2,367 )     (7,838 ) Cash flows from financing activities:                         Proceeds from borrowings     2,923       3,967       17   Repayments of borrowings     (1,151 )     (758 )     (1,563 ) Acquisition of treasury stock     (24,706 )     (4,850 )     (1,346 ) Other     —       19       61   Net cash flows from financing activities     (22,934 )     (1,622 )     (2,831 ) Increase (decrease) in cash and cash equivalents     (2,675 )     11,567       (602 ) Cash and cash equivalents at beginning of year     15,004       3,437       4,039   Cash and cash equivalents at end of year   $ 12,329     $ 15,004     $ 3,437   Other cash flow information:                         Income taxes paid   $ 3,391     $ 3,531     $ 2,790   Interest paid   359     364       388     Note to Condensed Financial Information Berkshire currently owns 26.6% of the outstanding shares of The Kraft Heinz Company (“Kraft Heinz”) common stock, which is accounted for pursuant to the equity method. See Note 5 to the accompanying Consolidated Financial Statements for additional information regarding this investment. In 2020, the Parent Company repaid €1.0 billion of maturing senior notes and issued €1.0 billion of 0.0% senior notes due in 2025 and ¥195.5 billion (approximately $1.8 billion) of senior notes with maturity dates ranging from 2023 to 2060 with a weighted average interest rate of 1.07%. As of December 31, 2020, the Parent Company’s non-U.S. Dollar denominated borrowings included €6.85 billion and ¥625.5 billion par value senior notes. The gains and losses from the periodic remeasurement of these non-U.S. Dollar denominated notes due to changes in foreign currency exchange rates are included in earnings. See Note 17 to the accompanying Consolidated Financial Statements for additional information. Parent Company debt maturities over the next five years are as follows: 2021—$2,172 million; 2022—$600 million; 2023—$4,633 million; 2024—$2,272 million and 2025—$1,801 million. The Parent Company guarantees certain debt of subsidiaries, which in the aggregate, approximated $14.4 billion at December 31, 2020 and included $13.1 billion of debt issued by Berkshire Hathaway Finance Corporation. Such guarantees are an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all present and future payment obligations. The Parent Company has also provided guarantees in connection with equity index put option contracts and certain retroactive reinsurance contracts issued by subsidiaries. The amounts of subsidiary payments under these contracts, if any, is contingent upon the outcome of future events.   K-119     EXHIBIT INDEX   Exhibit No.     2(i)   Agreement and Plan of Merger dated as of June 19, 1998 between Berkshire and General Re Corporation. Incorporated by reference to Annex I to Registration Statement No. 333-61129 filed on Form S-4.       2(ii)   Agreement and Plan of Merger dated as of November 2, 2009 by and among Berkshire, R Acquisition Company, LLC and BNSF. Incorporated by reference to Annex A to Registration Statement No. 333-163343 on Form S-4.       2(iii)   Agreement and Plan of Merger dated August 8, 2015, by and among Berkshire, NW Merger Sub Inc. and Precision Castparts Corporation (“PCC”) Incorporated by reference to Exhibit 2.1 to PCC’s Current Report on Form 8-K filed on August 10, 2015 (SEC File No. 001-10348)           3(i)   Restated Certificate of Incorporation Incorporated by reference to Exhibit 3(i) to Form 10-K filed on March 2, 2015.       3(ii)   By-Laws Incorporated by reference to Exhibit 3(ii) to Form 8-K filed on May 4, 2016.       4.1   Indenture, dated as of December 22, 2003, between Berkshire Hathaway Finance Corporation, Berkshire Hathaway Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association), as trustee. Incorporated by reference to Exhibit 4.1 on Form S-4 of Berkshire Hathaway Finance Corporation and Berkshire Hathaway Inc. filed on February 4, 2004. SEC File No. 333-112486           4.2   Indenture, dated as of February 1, 2010, among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee. Incorporated by reference to Exhibit 4.1 to Berkshire’s Registration Statement on Form S-3 filed on February 1, 2010. SEC File No. 333-164611           4.3   Indenture, dated as of January 26, 2016, by and among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee. Incorporated by reference to Exhibit 4.1 to Berkshire’s Registration Statement on Form S-3 filed on January 26, 2016. SEC File No. 333-209122           4.4   Indenture, dated as of December 1, 1995, between BNSF and The First National Bank of Chicago, as trustee. Incorporated by reference to Exhibit 4 on Form S-3 of BNSF filed on February 8, 1999.       4.5   Indenture, dated as of October 4, 2002, by and between MidAmerican Energy Holdings Company and The Bank of New York, Trustee. Incorporated by reference to Exhibit 4.1 to the Berkshire Hathaway Energy Company Registration Statement No. 333-101699 dated December 6, 2002.               Other instruments defining the rights of holders of long-term debt of Registrant and its subsidiaries are not being filed since the total amount of securities authorized by all other such instruments does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis as of December 31, 2020. The Registrant hereby agrees to furnish to the Commission upon request a copy of any such debt instrument to which it is a party.       10.1   Equity Commitment Letter of Berkshire Hathaway Inc. with Hawk Acquisition Holding Corporation dated February 13, 2013. Incorporated by reference to Exhibit 10.1 on Form 8-K of Berkshire Hathaway Inc. filed on February 14, 2013.       14   Code of Ethics     Berkshire’s Code of Business Conduct and Ethics is posted on its Internet website at www.berkshirehathaway.com       21   Subsidiaries of Registrant       23   Consent of Independent Registered Public Accounting Firm       31.1   Rule 13a—14(a)/15d-14(a) Certification       31.2   Rule 13a—14(a)/15d-14(a) Certification       32.1   Section 1350 Certification       32.2   Section 1350 Certification       K-120   Exhibit No.     95   Mine Safety Disclosures       101   The following financial information from Berkshire Hathaway Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) the Cover Page (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Earnings, (iv) the Consolidated Statements of Comprehensive Income, (v) the Consolidated Statements of Changes in Shareholders’ Equity, (vi) the Consolidated Statements of Cash Flows, and (vii) the Notes to Consolidated Financial Statements and Schedule I, tagged in summary and detail.       104   Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)   K-121     SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.     BERKSHIRE HATHAWAY INC.     Date: February 27, 2021 /S/     MARC D. HAMBURG    Marc D. Hamburg Senior Vice President and Principal Financial Officer   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.               /S/  WARREN E. BUFFETT                           Warren E. Buffett Chairman of the Board of Directors—Chief Executive Officer February 27, 2021 Date                   /S/  GREGORY E. ABEL                           Gregory E. Abel Director—Vice Chairman—Non Insurance Operations February 27, 2021 Date                   /S/  HOWARD G. BUFFETT                           Howard G. Buffett Director February 27, 2021 Date                   /S/  STEPHEN B. BURKE                           Stephen B. Burke Director February 27, 2021 Date                   /S/  KENNETH I. CHENAULT                           Kenneth I. Chenault Director February 27, 2021 Date                   /S/  SUSAN L. DECKER                           Susan L. Decker Director February 27, 2021 Date                   /S/  DAVID S. GOTTESMAN                           David S. Gottesman Director February 27, 2021 Date                   /S/  CHARLOTTE GUYMAN                           Charlotte Guyman Director February 27, 2021 Date                   /S/  AJIT JAIN                           Ajit Jain Director—Vice Chairman—Insurance Operations February 27, 2021 Date                   /S/  CHARLES T. MUNGER                           Charles T. Munger Director—Vice Chairman February 27, 2021 Date                   /S/  THOMAS S. MURPHY                           Thomas S. Murphy Director February 27, 2021 Date                   /S/  RONALD L. OLSON                           Ronald L. Olson Director February 27, 2021 Date                   /S/  WALTER SCOTT, JR.                           Walter Scott, Jr. Director February 27, 2021 Date                   /S/  MERYL B. WITMER                           Meryl B. Witmer Director February 27, 2021 Date                   /S/  MARC D. HAMBURG                           Marc D. Hamburg Senior Vice President—Principal Financial Officer February 27, 2021 Date                   /S/  DANIEL J. JAKSICH                           Daniel J. Jaksich Vice President—Principal Accounting Officer February 27, 2021 Date   K-122
8-K_59478_0000059478-24-000146.htm
lly-202406020000059478false00000594782024-06-022024-06-020000059478us-gaap:CommonClassAMember2024-06-022024-06-020000059478lly:A718NotesDueJune12025Member2024-06-022024-06-020000059478lly:A1.625NotesDueJune22026Member2024-06-022024-06-020000059478lly:A2.125NotesDueJune32030Member2024-06-022024-06-020000059478lly:A625Notesdue2031Member2024-06-022024-06-020000059478lly:A500NotesDue2033Member2024-06-022024-06-020000059478lly:A6.77NotesDueJanuary12036Member2024-06-022024-06-020000059478lly:A1625NotesDue2043Member2024-06-022024-06-020000059478lly:A1.700Notesdue2049Member2024-06-022024-06-020000059478lly:A1125NotesDue2051Member2024-06-022024-06-020000059478lly:A1375NotesDue2061Member2024-06-022024-06-02 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-K CURRENT REPORTPursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934Date of Report (Date of Earliest Event Reported): June 2, 2024ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in its Charter) Indiana 001-06351 35-0470950(State or Other Jurisdictionof Incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)  Lilly Corporate CenterIndianapolis,Indiana46285(Address of Principal Executive Offices)(Zip Code) Registrant’s Telephone Number, Including Area Code: (317) 276-2000 Not Applicable (Former Name or Former Address, if Changed Since Last Report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act: Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock (no par value)LLYNew York Stock Exchange7 1/8% Notes due 2025LLY25New York Stock Exchange1.625% Notes due 2026LLY26New York Stock Exchange2.125% Notes due 2030LLY30New York Stock Exchange0.625% Notes due 2031LLY31New York Stock Exchange0.500% Notes due 2033LLY33New York Stock Exchange6.77% Notes due 2036LLY36New York Stock Exchange1.625% Notes due 2043LLY43New York Stock Exchange1.700% Notes due 2049LLY49ANew York Stock Exchange1.125% Notes due 2051LLY51New York Stock Exchange1.375% Notes due 2061LLY61New York Stock ExchangeIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.On June 5, 2024, Eli Lilly and Company (the “Company”) announced that Anat Ashkenazi resigned as Executive Vice President and Chief Financial Officer of the Company to pursue another career opportunity outside of the pharmaceutical industry. Ms. Ashkenazi will continue to serve at full capacity in her role and as a member of the Company’s Executive Committee through July 2024. An internal and external search for Ms. Ashkenazi’s successor is underway. A copy of the press release announcing the foregoing is attached as Exhibit 99.1 to this Current Report on Form 8-K.Item 9.01. Financial Statements and Exhibits.(d) ExhibitsExhibit No.Description99.1Press Release of Eli Lilly and Company, dated June 5, 2024.104Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ELI LILLY AND COMPANY(Registrant)By:/s/ Anat HakimName:Anat HakimTitle:Executive Vice President, General Counsel andSecretaryDate: June 5, 2024
8-K_1326801_0001326801-24-000003.htm
meta-202401160001326801false00013268012024-01-162024-01-16UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): January 16, 2024 Meta Platforms, Inc.(Exact name of registrant as specified in its charter)Delaware001-3555120-1665019(State or Other Jurisdiction of Incorporation)(Commission File Number)(IRS Employer Identification No.)1 Meta Way, Menlo Park, California 94025 (Address of principal executive offices and Zip Code)(650) 543-4800 (Registrant’s telephone number, including area code)N/A(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredClass A Common Stock, $0.000006 par valueMETAThe Nasdaq Stock Market LLCIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.(b) On January 16, 2024, Sheryl Sandberg notified Meta Platforms, Inc. (the “Company”) that she has decided not to stand for re-election to the Company’s Board of Directors at the Company’s 2024 Annual Meeting of Shareholders (the “Annual Meeting”). Ms. Sandberg will continue to serve as a director until the date of the Annual Meeting.SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.META PLATFORMS, INC.Date: January 17, 2024By:/s/ Katherine R. KellyName:Katherine R. KellyTitle:Vice President and Corporate Secretary
8-K_1018724_0001018724-20-000028.htm
amzn-202010290001018724false00010187242020-10-292020-10-29Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 _________________________ FORM 8-K _________________________ CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934October 29, 2020 Date of Report(Date of earliest event reported) _________________________AMAZON.COM, INC. (Exact name of registrant as specified in its charter)_________________________ Delaware000-2251391-1646860(State or other jurisdiction ofincorporation)(Commission File Number)(IRS Employer Identification No.)410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code)(206) 266-1000 (Registrant’s telephone number, including area code)_________________________ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per shareAMZNNasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨Table of ContentsTABLE OF CONTENTS ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.3ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.3SIGNATURES4EXHIBIT 99.1EXHIBIT 99.2Table of ContentsITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.On October 29, 2020, Amazon.com, Inc. announced its third quarter 2020 financial results. A copy of the press release containing the announcement is included as Exhibit 99.1 and additional information regarding the inclusion of non-GAAP financial measures in certain of Amazon.com, Inc.’s public disclosures, including its third quarter 2020 financial results announcement, is included as Exhibit 99.2. Both of these exhibits are incorporated herein by reference.ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.(d) Exhibits. ExhibitNumberDescription99.1Press Release dated October 29, 2020 announcing Amazon.com, Inc.’s Third Quarter 2020 Financial Results.99.2Information Regarding Non-GAAP Financial Measures.104The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101).3Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AMAZON.COM, INC. (REGISTRANT)By:/s/ Brian T. OlsavskyBrian T. OlsavskySenior Vice President andChief Financial OfficerDated: October 29, 2020 4
8-K_320193_0000320193-22-000058.htm
aapl-20220428false000032019300003201932022-04-282022-04-280000320193us-gaap:CommonStockMember2022-04-282022-04-280000320193aapl:A1.000NotesDue2022Member2022-04-282022-04-280000320193aapl:A1.375NotesDue2024Member2022-04-282022-04-280000320193aapl:A0.000Notesdue2025Member2022-04-282022-04-280000320193aapl:A0.875NotesDue2025Member2022-04-282022-04-280000320193aapl:A1.625NotesDue2026Member2022-04-282022-04-280000320193aapl:A2.000NotesDue2027Member2022-04-282022-04-280000320193aapl:A1.375NotesDue2029Member2022-04-282022-04-280000320193aapl:A3.050NotesDue2029Member2022-04-282022-04-280000320193aapl:A0.500Notesdue2031Member2022-04-282022-04-280000320193aapl:A3.600NotesDue2042Member2022-04-282022-04-28UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-KCURRENT REPORTPursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934April 28, 2022Date of Report (Date of earliest event reported)Apple Inc.(Exact name of Registrant as specified in its charter)California 001-36743 94-2404110(State or other jurisdictionof incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)One Apple Park Way Cupertino, California 95014 (Address of principal executive offices) (Zip Code)(408) 996-1010 (Registrant’s telephone number, including area code)Not applicable(Former name or former address, if changed since last report.)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredCommon Stock, $0.00001 par value per shareAAPLThe Nasdaq Stock Market LLC1.000% Notes due 2022—The Nasdaq Stock Market LLC1.375% Notes due 2024—The Nasdaq Stock Market LLC0.000% Notes due 2025—The Nasdaq Stock Market LLC0.875% Notes due 2025—The Nasdaq Stock Market LLC1.625% Notes due 2026—The Nasdaq Stock Market LLC2.000% Notes due 2027—The Nasdaq Stock Market LLC1.375% Notes due 2029—The Nasdaq Stock Market LLC3.050% Notes due 2029—The Nasdaq Stock Market LLC0.500% Notes due 2031—The Nasdaq Stock Market LLC3.600% Notes due 2042—The Nasdaq Stock Market LLCIndicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02    Results of Operations and Financial Condition.On April 28, 2022, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its second fiscal quarter ended March 26, 2022. A copy of Apple’s press release is attached hereto as Exhibit 99.1.The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01    Financial Statements and Exhibits.(d)Exhibits.ExhibitNumberExhibit Description99.1Press release issued by Apple Inc. on April 28, 2022.104Inline XBRL for the cover page of this Current Report on Form 8-K.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date:April 28, 2022Apple Inc.By:/s/ Luca MaestriLuca MaestriSenior Vice President,Chief Financial Officer
8-K_1045810_0001045810-17-000006.htm
8-K 1 form8-ktimteter.htm FORM 8-K Document UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K______________CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): January 18, 2017NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdictionof incorporation)(CommissionFile Number)(IRS EmployerIdentification No.)2701 San Tomas Expressway, Santa Clara, CA(Address of principal executive offices)95050(Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))     Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.On January 18, 2017, the Board of Directors of NVIDIA Corporation (“NVIDIA” or the “Company”) appointed Tim Teter as senior vice president, general counsel and secretary of NVIDIA, contingent upon the commencement of his employment which is expected on January 23, 2017. Mr. Teter, age 50, most recently served as a partner at the law firm of Cooley LLP, where for more than two decades he focused on litigating patent and technology related matters. Previous to attending law school, he worked as an engineer at Lockheed Missiles and Space Company. Mr. Teter holds a B.S. in Mechanical Engineering from the University of California at Davis and a J.D. from Stanford Law School. Mr. Teter will assume leadership of the legal department from David M. Shannon, who in June 2016 announced his intention to retire as the Company’s chief administrative officer, responsible for legal and human resources functions. Mr. Shannon will continue to lead human resources at this time and he intends to assist on legal matters until his retirement.Mr. Teter’s offer letter provides that Mr. Teter will be employed by NVIDIA “at will” and contains the following additional terms:(1)He will receive an annual base salary of $850,000;(2)Beginning with the Company’s fiscal year 2018, he will be eligible to receive annual incentive compensation targeted at $250,000 pursuant to a variable compensation plan adopted by the Company’s Compensation Committee; (3)He will receive an anniversary bonus of $450,000 on the one year anniversary of his employment start date, subject to his continued employment, which must be repaid to NVIDIA if he resigns or is terminated prior to his second anniversary of his employment;(4)He will receive a grant of Restricted Stock Units (RSUs) at a target value of $5,800,000. The number of RSUs granted will be determined by dividing $5,800,000 by the closing price of NVIDIA’s Common Stock on the day before grant (which will be the 6th business day of the month immediately following Mr. Teter’s employment start date), rounded to the nearest 100 RSUs. The RSUs will vest and be issued approximately over a four (4) year period, with 25% of the shares subject to the RSU being issued on March 21, 2018 and 6.25% of the shares subject to the RSU being issued every three months thereafter, on the third Wednesdays in March, June and September, and on the second Wednesday in December; provided in each case he remains employed with NVIDIA on each vesting/issuance date. The terms of the RSUs will be governed by the Amended and Restated NVIDIA Corporation 2007 Equity Incentive Plan, filed as Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on May 23, 2016, and the form of RSU grant notice and RSU  agreement filed as Exhibit 10.23 to the Quarterly Report on Form 10-Q for the quarterly period ended April 26, 2015, filed with the SEC on May 20, 2015;(5)He will be eligible to participate in the Amended and Restated NVIDIA Corporation 2012 Employee Stock Purchase Plan, which is filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended April 26, 2015 filed with the SEC on May 20, 2015; and (6)He will be eligible to participate in our comprehensive benefits programs.A copy of the offer letter is filed hereto as Exhibit 10.1 and is incorporated herein by reference. The foregoing description of the offer letter is subject to, and qualified in its entirety by, the offer letter.Mr. Teter is also expected to enter into NVIDIA’s standard indemnity agreement, filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on March 7, 2006, which would require NVIDIA to indemnify Mr. Teter, under the circumstances and to the extent provided for therein, against certain expenses and other amounts incurred by Mr. Teter as a result of being made a party to certain actions, suits, proceedings and the like by reason of his position as an officer of NVIDIA.Item 9.01. Financial Statements and Exhibits.(d) Exhibits Exhibit No. Description  10.1 Offer Letter, dated December 16, 2016, between NVIDIA Corporation and Tim TeterSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  NVIDIA CorporationDate: January 19, 2017By: /s/ David M. Shannon  David M. Shannon EVP, Chief Administrative Officer and SecretaryEXHIBIT INDEXExhibit No. Description  10.1 Offer Letter, dated December 16, 2016, between NVIDIA Corporation and Tim Teter 
8-K_1045810_0001045810-17-000012.htm
8-K 1 form8-ksyntheticleaseamend.htm FORM 8-K Document UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K______________CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): January 27, 2017NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdictionof incorporation)(CommissionFile Number)(IRS EmployerIdentification No.)2701 San Tomas Expressway, Santa Clara, California(Address of principal executive offices)95050(Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))     Item 1.01. Entry into a Material Definitive Agreement.Amendment to Participation Agreement    On January 27, 2017, NVIDIA Land Development, LLC, a wholly-owned subsidiary of NVIDIA Corporation (the “Company”), entered into an amendment (the “Amendment”) to its Participation Agreement with Wachovia Service Corporation, Wells Fargo Bank, N.A. and a syndicate of other institutions, dated June 19, 2015, in connection with the construction and lease of the Company’s new headquarters building in Santa Clara, California (the “Participation Agreement”). The Amendment was executed primarily to conform certain representations, warranties and covenants in the Participation Agreement to the terms of the Company’s Credit Agreement with Wells Fargo Bank, National Association, Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners, LLC and certain other lenders, dated October 7, 2016 (the “Credit Agreement”), including an increase in the maximum total leverage ratio to not exceed 3.5:1.0 (previously a maximum of 3.0:1.0) and the deletion of the required minimum interest coverage ratio (previously a minimum of 3.5:1.0).The Participation Agreement is filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 26, 2015 (File No. 000-23985) as filed with the Securities and Exchange Commission (the “SEC”) on August 19, 2015.The Credit Agreement is filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K (File No. 000-23985) as filed with the SEC on October 13, 2016.The above description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment, which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for fiscal year 2017.SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  NVIDIA CorporationDate: February 2, 2017By: /s/ Colette M. Kress  Colette M. Kress Executive Vice President and Chief Financial Officer 
8-K_1730168_0001730168-24-000055.htm
avgo-202404220001730168FALSE00017301682023-03-072023-03-07UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): April 22, 2024 Broadcom Inc. (Exact Name of Registrant as Specified in Charter)  Delaware001-3844935-2617337(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer Identification No.)3421 Hillview AvenuePalo Alto,California94304(Address of principal executive offices including zip code)(650)427-6000(Registrant’s telephone number, including area code)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par valueAVGOThe NASDAQ Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Item 5.07     Submission of Matters to a Vote of Security Holders.Broadcom Inc. (“Broadcom”) held its 2024 Annual Meeting of Stockholders on April 22, 2024 (the “2024 Annual Meeting”). At the 2024 Annual Meeting, Broadcom stockholders voted on the following matters and cast their votes as set forth below:(1)The nine nominees were elected to serve as directors of Broadcom until the next annual meeting of stockholders or until their successors have been elected:NameForAgainstAbstainBroker Non-VotesDiane M. Bryant342,815,16330,824,708391,30739,301,578Gayla J. Delly366,931,6746,743,168356,33639,301,578Kenneth Y. Hao373,177,617477,990375,57139,301,578Eddy W. Hartenstein307,000,98166,603,442426,75539,301,578Check Kian Low 339,350,78833,479,8441,200,54639,301,578Justine F. Page372,038,4651,633,141359,57239,301,578Henry Samueli, Ph.D.366,501,9037,212,280316,99539,301,578Hock E. Tan 372,571,4931,166,112293,57339,301,578Harry L. You 297,387,81976,252,051391,30839,301,578(2)A proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Broadcom for the fiscal year ending November 3, 2024 was approved:ForAgainstAbstainBroker Non-Votes407,021,8326,040,713270,2110(3)An advisory vote to approve the named executive officer compensation was approved:ForAgainstAbstainBroker Non-Votes229,311,363142,648,2272,071,58839,301,578SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date: April 23, 2024  Broadcom Inc.By:/s/ Kirsten M. SpearsName:Kirsten M. SpearsTitle:Chief Financial Officer and Chief Accounting Officer
8-K_1045810_0001045810-18-000113.htm
8-K 1 form8-kq2fy19.htm FORM 8-K Document UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-KCURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): August 16, 2018 NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)    2788 San Tomas Expressway, Santa Clara, CA95051 (Address of principal executive offices)(Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company oIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oItem 2.02 Results of Operations and Financial Condition.On August 16, 2018, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter ended July 29, 2018. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter ended July 29, 2018, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.Item 9.01 Financial Statements and Exhibits.(d) Exhibits Exhibit Description99.1 Press Release, dated August 16, 2018, entitled "NVIDIA Announces Financial Results for Second Quarter Fiscal 2019"99.2 CFO Commentary on Second Quarter Fiscal 2019 ResultsSIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.   NVIDIA CorporationDate: August 16, 2018 By: /s/ Colette M. Kress  Colette M. Kress  Executive Vice President and Chief Financial Officer
8-K_320193_0000320193-18-000067.htm
8-K 1 a8-kq220183312018.htm 8-K Document  UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 8-KCURRENT REPORTPursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934May 1, 2018Date of Report (Date of earliest event reported) Apple Inc.(Exact name of Registrant as specified in its charter)California 001-36743 94-2404110(State or other jurisdictionof incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)One Apple Park WayCupertino, California 95014(Address of principal executive offices) (Zip Code)(408) 996-1010(Registrant’s telephone number, including area code)1 Infinite LoopCupertino, California 95014(Former name or former address, if changed since last report.)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Item 2.02    Results of Operations and Financial Condition.On May 1, 2018, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its second fiscal quarter ended March 31, 2018 and a related data sheet. A copy of Apple’s press release is attached hereto as Exhibit 99.1 and a copy of the related data sheet is attached hereto as Exhibit 99.2.The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01    Financial Statements and Exhibits.(d)Exhibits.ExhibitNumber Exhibit Description  99.1 Press release issued by Apple Inc. on May 1, 2018.  99.2 Data sheet issued by Apple Inc. on May 1, 2018.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date:May 1, 2018 Apple Inc.         By: /s/ Luca Maestri     Luca Maestri     Senior Vice President,Chief Financial Officer
8-K_320193_0000320193-18-000098.htm
8-K 1 a8-kq320186302018.htm 8-K Document  UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 8-KCURRENT REPORTPursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934July 31, 2018Date of Report (Date of earliest event reported) Apple Inc.(Exact name of Registrant as specified in its charter)California 001-36743 94-2404110(State or other jurisdictionof incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)One Apple Park WayCupertino, California 95014(Address of principal executive offices) (Zip Code)(408) 996-1010(Registrant’s telephone number, including area code)Not applicable(Former name or former address, if changed since last report.)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Item 2.02    Results of Operations and Financial Condition.On July 31, 2018, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its third fiscal quarter ended June 30, 2018 and a related data sheet. A copy of Apple’s press release is attached hereto as Exhibit 99.1 and a copy of the related data sheet is attached hereto as Exhibit 99.2.The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01    Financial Statements and Exhibits.(d)Exhibits.ExhibitNumber Exhibit Description  99.1 Press release issued by Apple Inc. on July 31, 2018.  99.2 Data sheet issued by Apple Inc. on July 31, 2018.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.Date:July 31, 2018 Apple Inc.         By: /s/ Luca Maestri     Luca Maestri     Senior Vice President,Chief Financial Officer
10-K_1652044_0001652044-22-000019.htm
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STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549___________________________________________FORM 10-K ___________________________________________(Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2021 OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from              to             .Commission file number: 001-37580 ___________________________________________Alphabet Inc. (Exact name of registrant as specified in its charter)___________________________________________Delaware61-1767919(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)1600 Amphitheatre Parkway Mountain View, CA 94043 (Address of principal executive offices, including zip code)(650) 253-0000 (Registrant's telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredClass A Common Stock, $0.001 par valueGOOGLNasdaq Stock Market LLC(Nasdaq Global Select Market)Class C Capital Stock, $0.001 par valueGOOGNasdaq Stock Market LLC(Nasdaq Global Select Market)Securities registered pursuant to Section 12(g) of the Act:Title of each classNone___________________________________________Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐   No  ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer☒  Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒As of June 30, 2021, the aggregate market value of shares held by non-affiliates of the registrant (based upon the closing sale prices of such shares on the Nasdaq Global Select Market on June 30, 2021) was approximately $1,451.1 billion. For purposes of calculating the aggregate market value of shares held by non-affiliates, we have assumed that all outstanding shares are held by non-affiliates, except for shares held by each of our executive officers, directors and 5% or greater stockholders. In the case of 5% or greater stockholders, we have not deemed such stockholders to be affiliates unless there are facts and circumstances which would indicate that such stockholders exercise any control over our company, or unless they hold 10% or more of our outstanding common stock. These assumptions should not be deemed to constitute an admission that all executive officers, directors and 5% or greater stockholders are, in fact, affiliates of our company, or that there are not other persons who may be deemed to be affiliates of our company. Further information concerning shareholdings of our officers, directors and principal stockholders is included or incorporated by reference in Part III, Item 12 of this Annual Report on Form 10-K.As of January 25, 2022, there were 300,754,904 shares of the registrant’s Class A common stock outstanding, 44,576,938 shares of the registrant’s Class B common stock outstanding, and 315,639,479 shares of the registrant’s Class C capital stock outstanding.___________________________________________DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s Proxy Statement for the 2022 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2021. Table of ContentsAlphabet Inc.Alphabet Inc.Form 10-KFor the Fiscal Year Ended December 31, 2021 TABLE OF CONTENTS  PageNote About Forward-Looking Statements3PART IItem 1.Business4Item 1A.Risk Factors10Item 1B.Unresolved Staff Comments24Item 2.Properties24Item 3.Legal Proceedings24Item 4.Mine Safety Disclosures24PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities25Item 6.[Reserved]27Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations28Item 7A.Quantitative and Qualitative Disclosures About Market Risk42Item 8.Financial Statements and Supplementary Data45Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure86Item 9A.Controls and Procedures86Item 9B.Other Information86Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections87PART IIIItem 10.Directors, Executive Officers and Corporate Governance88Item 11.Executive Compensation88Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters88Item 13.Certain Relationships and Related Transactions, and Director Independence88Item 14.Principal Accountant Fees and Services88PART IVItem 15.Exhibits, Financial Statement Schedules89Item 16.Form 10-K Summary92Signatures2Table of ContentsAlphabet Inc.NOTE ABOUT FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, among other things, statements regarding:•the ongoing effect of the novel coronavirus pandemic ("COVID-19"), including its macroeconomic effects on our business, operations, and financial results;•the growth of our business and revenues and our expectations about the factors that influence our success and trends in our business;•fluctuations in our revenue growth rate and operating margin and various factors contributing to such fluctuations;•our expectation that the continuing shift from an offline to online world will continue to benefit our business;•our expectation that the portion of our revenues that we derive from non-advertising revenues will continue to increase and may affect our margins;•our expectation that our traffic acquisition costs (TAC) and the associated TAC rate will fluctuate, which could affect our overall margins;•our expectation that our monetization trends will fluctuate, which could affect our revenues and margins;•fluctuations in our revenue growth, as well as the change in paid clicks and cost-per-click and the change in impressions and cost-per-impression, and various factors contributing to such fluctuations;•our expectation that we will continue to periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and impressions;•our expectation that our results will be affected by our performance in international markets as users in developing economies increasingly come online;•our expectation that our foreign exchange risk management program will not fully offset our net exposure to fluctuations in foreign currency exchange rates;•the expected variability of gains and losses related to hedging activities under our foreign exchange risk management program;•the amount and timing of revenue recognition from customer contracts with commitments for performance obligations, including our estimate of the remaining amount of commitments and when we expect to recognize revenue;•fluctuations in our capital expenditures;•our plans to continue to invest in new businesses, products, services and technologies, systems, land and buildings for data centers and offices, and infrastructure, as well as to continue to invest in acquisitions and strategic investments;•our pace of hiring and our plans to provide competitive compensation programs;•our expectation that our cost of revenues, research and development (R&D) expenses, sales and marketing expenses, and general and administrative expenses may increase in amount and/or may increase as a percentage of revenues and may be affected by a number of factors;•estimates of our future compensation expenses;•our expectation that our other income (expense), net (OI&E), will fluctuate in the future, as it is largely driven by market dynamics;•fluctuations in our effective tax rate;•seasonal fluctuations in internet usage and advertiser expenditures, underlying business trends such as traditional retail seasonality, which are likely to cause fluctuations in our quarterly results;•the sufficiency of our sources of funding;•our potential exposure in connection with new and pending investigations, proceedings, and other contingencies;3Table of ContentsAlphabet Inc.•the sufficiency and timing of our proposed remedies in response to decisions from the European Commission (EC) and other regulators and governmental entities;•our expectations regarding the timing, design, and ongoing phased implementation of our new global enterprise resource planning (ERP) system;•the expected timing, amount, and effect of Alphabet Inc.'s share repurchases;•our long-term sustainability and diversity goals;as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may appear throughout this report and other documents we file with the Securities and Exchange Commission (SEC), including without limitation, the following sections: Part I, Item 1 "Business;" Part I, Item 1A "Risk Factors;" and Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will be," "will continue," "may," "could," "will likely result," and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed in Part I, Item 1A, "Risk Factors" of this report and those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.As used herein, "Alphabet," "the company," "we," "us," "our," and similar terms include Alphabet Inc. and its subsidiaries, unless the context indicates otherwise."Alphabet," "Google," and other trademarks of ours appearing in this report are our property. This report contains additional trade names and trademarks of other companies. We do not intend our use or display of other companies' trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.PART IITEM 1.BUSINESSOverviewAs our founders Larry and Sergey wrote in the original founders' letter, "Google is not a conventional company. We do not intend to become one." That unconventional spirit has been a driving force throughout our history, inspiring us to tackle big problems and invest in moonshots like artificial intelligence (AI) research and quantum computing. We continue this work under the leadership of Sundar Pichai, who has served as CEO of Google since 2015 and as CEO of Alphabet since 2019. Alphabet is a collection of businesses — the largest of which is Google. We report Google in two segments, Google Services and Google Cloud; we also report all non-Google businesses collectively as Other Bets. Other Bets include earlier stage technologies that are further afield from our core Google business. We take a long-term view and manage the portfolio of Other Bets with the discipline and rigor needed to deliver long-term returns. Alphabet's structure is about helping each of our businesses prosper through strong leaders and independence. Access and technology for everyoneThe Internet is one of the world’s most powerful equalizers; it propels ideas, people and businesses large and small. Our mission to organize the world’s information and make it universally accessible and useful is as relevant today as it was when we were founded in 1998. Since then, we have evolved from a company that helps people find answers to a company that also helps people get things done. We are focused on building an even more helpful Google for everyone, and we aspire to give everyone the tools they need to increase their knowledge, health, happiness, and success. Every year, there are trillions of searches on Google, and 15% of the searches we see every day are new. We continue to invest deeply in AI and other technologies to ensure the most helpful search experience possible. YouTube provides people with entertainment, information, and opportunities to learn something new. And Google Assistant offers the best way to get things done seamlessly across different devices, providing intelligent help throughout a person's day, no matter where they are.We are continually innovating and building new product features that will help our users, partners, customers, and communities. We have invested more than $100 billion in R&D over the last five years. In addition, with the onset of 4Table of ContentsAlphabet Inc.the pandemic, we have focused in particular on features that help people in their daily lives and that support businesses working to serve their customers. For example, we have added live busyness trends in Google Maps that help users instantly spot when a neighborhood or part of town is near or at its busiest. We have also helped businesses navigate uncertainty during an uneven economic recovery, and we have worked to address the complex challenge of distributing critical information about COVID-19 vaccines to billions of people around the world. Importantly, we have made authoritative content a key focus area across both Google Search and YouTube to help users find trusted public health information.Other Bets also remain focused on innovation through technology that can positively affect people's lives. For instance, Waymo is working toward our goal of making transportation safer and easier for everyone and Verily is developing tools and platforms to improve health outcomes.MoonshotsMany companies get comfortable doing what they have always done, making only incremental changes. This incrementalism leads to irrelevance over time, especially in technology, where change tends to be revolutionary, not evolutionary. People thought we were crazy when we acquired YouTube and Android and when we launched Chrome, but those efforts have matured into major platforms for digital video and mobile devices and a safer, popular browser. We continue to look toward the future and to invest for the long term within each of our segments. As we said in the original founders' letter, we will not shy away from high-risk, high-reward projects that we believe in, as they are the key to our long-term success.The power of AIAcross the company, investments in AI and machine learning are increasingly driving many of our latest innovations and have enabled us to build products that are smarter and more helpful. For example, in May of 2021, we introduced Multitask Unified Model — or MUM — which has the potential to transform how Google helps with complex tasks. MUM is trained across 75 different languages, which means that it can learn from sources written in one language and help bring that information to people in another. It is also multimodal, so it understands information across text and images and, in the future, can expand to more modalities like video and audio. We are currently experimenting with MUM’s capabilities to make searching more natural and intuitive and even enable entirely new ways to search.DeepMind also made a significant AI-powered breakthrough, solving a 50-year-old protein folding challenge, which will help the world better understand one of life’s fundamental building blocks, and will enable researchers to tackle new and difficult problems, from fighting diseases to environmental sustainability. DeepMind has since shared its new AlphaFold protein structure database, which doubled the number of high-accuracy human protein structures available to researchers.GoogleFor reporting purposes, Google comprises two segments: Google Services and Google Cloud.Google ServicesServing our usersWe have always been a company committed to building helpful products that can improve the lives of millions of people. Our product innovations have made our services widely used, and our brand one of the most recognized in the world. Google Services' core products and platforms include ads, Android, Chrome, hardware, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube, each with broad and growing adoption by users around the world.Our products and services have come a long way since the company was founded more than two decades ago. Rather than the ten blue links in our early search results, users can now get direct answers to their questions using their computer, mobile device, or their own voice, making it quicker, easier and more natural to find what they are looking for. This drive to make information more accessible and helpful has led us over the years to improve the discovery and creation of digital content both on the web and through platforms like Google Play and YouTube. With the continued adoption of mobile, people are consuming more digital content by watching more videos, playing more games, listening to more music, reading more books, and using more apps than ever before. Working with content creators and partners, we continue to build new ways for people around the world to find great digital content.Fueling all of these great digital experiences are extraordinary platforms and hardware. That is why we continue to invest in platforms like our Android mobile operating system, Chrome browser, and Chrome operating system, as 5Table of ContentsAlphabet Inc.well as growing our family of hardware devices. We see tremendous potential for devices to be helpful and make people's lives easier by combining the best of our AI, software and hardware. This potential is reflected in our latest generation of hardware products such as Pixel 5a 5G and Pixel 6 phones, the Fitbit Charge 5, Chromecast with Google TV, and the new Google Nest Cams and Nest Doorbell. Creating products that people rely on every day is a journey that we are investing in for the long run.The key to building helpful products for users is our commitment to privacy, security, and user choice. We protect user privacy and security with products that are secure by default and private by design, and that keep users in control of their data. Our privacy-preserving technologies safeguard individual privacy and enhance data protection. As the Internet evolves, so does our approach to privacy and security. We continue to enhance our anti-malware features in Chrome and drive improvements such as auto-delete controls that automatically delete web and app searches after 18 months. And we continue to keep users and their passwords safe through advances like our built-in password manager. How we make moneyWe have built world-class advertising technologies for advertisers, agencies, and publishers to power their digital marketing businesses. Our advertising solutions help millions of companies grow their businesses through our wide range of products across devices and formats, and we aim to ensure positive user experiences by serving the right ads at the right time and by building deep partnerships with brands and agencies. Google Services generates revenues primarily by delivering both performance and brand advertising that appears on Google Search & other properties, YouTube and Google Network partners' properties ("Google Network properties"). We continue to invest in both performance and brand advertising and seek to improve the measurability of advertising so advertisers understand the effectiveness of their campaigns. •Performance advertising creates and delivers relevant ads that users will click on, leading to direct engagement with advertisers. Performance advertising lets our advertisers connect with users while driving measurable results. Our ads tools allow performance advertisers to create simple text-based ads.•Brand advertising helps enhance users' awareness of and affinity for advertisers' products and services, through videos, text, images, and other interactive ads that run across various devices. We help brand advertisers deliver digital videos and other types of ads to specific audiences for their brand-building marketing campaigns. We have allocated substantial resources to stopping bad advertising practices and protecting users on the web. We focus on creating the best advertising experiences for our users and advertisers in many ways, including filtering out invalid traffic, removing billions of bad ads from our systems every year, and closely monitoring the sites, apps, and videos where ads appear and blocklisting them when necessary to ensure that ads do not fund bad content.We continue to look to the future and are making long-term investments that we expect to grow revenues beyond advertising, including revenues from Google Play, hardware, and YouTube non-advertising. •Google Play generates revenues from sales of apps and in-app purchases and digital content sold in the Google Play store.•Hardware generates revenues from sales of Fitbit wearable devices, Google Nest home products, Pixel phones, and other devices.•YouTube non-advertising generates revenues from YouTube Premium and YouTube TV subscriptions and other services.Google CloudGoogle was a company built in the cloud. We continue to invest in infrastructure, security, data management, analytics, and AI. We see significant opportunity in helping businesses utilize these strengths with features like data migration, modern development environments, and machine learning tools to provide enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. Google Cloud Platform enables developers to build, test, and deploy applications on its highly scalable and reliable infrastructure. Google Workspace collaboration tools — which include apps like Gmail, Docs, Drive, Calendar, Meet and more — are designed with real-time collaboration and machine intelligence to help people work smarter. Because more and more of today’s digital experiences are being built in the cloud, Google Cloud products help businesses of all sizes take advantage of the latest technology advances to operate more efficiently.•Google Cloud Platform generates revenues from infrastructure, platform and other services.6Table of ContentsAlphabet Inc.•Google Workspace generates revenues from cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar and Meet.Our cloud services are generally provided on either a consumption or subscription basis and may have contract terms longer than a year. Other BetsAcross Alphabet, we are also using technology to try to solve big problems that affect a wide variety of industries. Alphabet’s investment in the portfolio of Other Bets includes emerging businesses at various stages of development, ranging from those in the R&D phase to those that are in the beginning stages of commercialization, and our goal is for them to become thriving, successful businesses in the medium to long term. While these early-stage businesses naturally come with considerable uncertainty, some of them are already generating revenue and making important strides in their industries. Revenues from Other Bets are generated primarily from the sale of health technology and internet services.Other Bets operate as independent companies and some of them have their own boards with independent members and outside investors. We are investing in the portfolio of Other Bets and being very deliberate about the focus, scale, and pace of investments.CompetitionOur business is characterized by rapid change as well as new and disruptive technologies. We face formidable competition in every aspect of our business, including from:•General purpose search engines and information services, such as Baidu, Microsoft's Bing, Naver, Seznam, Yahoo, and Yandex.•Vertical search engines and e-commerce providers, such as Amazon and eBay (e-commerce), Booking's Kayak (travel queries), Microsoft's LinkedIn (job queries), and WebMD (health queries). Some users will navigate directly to such content, websites, and apps rather than go through Google.•Social networks offered by ByteDance, Meta, Snap, and Twitter. Some users increasingly rely on social networks for product or service referrals, rather than seeking information through traditional search engines.•Other online advertising platforms and networks, such as Amazon, AppNexus, Criteo, and Meta, that compete for advertisers that use Google Ads, our primary auction-based advertising platform.•Other forms of advertising, such as billboards, magazines, newspapers, radio, and television. Our advertisers typically advertise in multiple media, both online and offline.•Companies that design, manufacture, and market consumer hardware products, including businesses that have developed proprietary platforms, such as Amazon, Apple, and Microsoft.•Digital assistant providers, such as Amazon and Apple.•Providers of enterprise cloud services, such as Alibaba, Amazon, Microsoft, and Salesforce.•Providers of digital video services, such as Amazon, Apple, AT&T, ByteDance, Disney, Hulu, Meta, and Netflix. •Other digital content and application platform providers, such as Amazon and Apple.•Providers of workspace connectivity and productivity products, such as Meta, Microsoft, Salesforce, and Zoom.Competing successfully depends heavily on our ability to develop and distribute innovative products and technologies to the marketplace across our businesses. Specifically, for advertising, competing successfully depends on attracting and retaining:•users, for whom other products and services are literally one click away, largely on the basis of the relevance of our advertising, as well as the general usefulness, security, and availability of our products and services;•advertisers, primarily based on our ability to generate sales leads, and ultimately customers, and to deliver their advertisements in an efficient and effective manner across a variety of distribution channels; and•content providers, primarily based on the quality of our advertiser base, our ability to help these partners generate revenues from advertising, and the terms of our agreements with them.For additional information about competition, see Risk Factors in Item 1A of this Annual Report on Form 10-K. 7Table of ContentsAlphabet Inc.Ongoing Commitment to SustainabilityWe believe that every business has the opportunity and obligation to protect our planet. Sustainability is one of our core values at Google, and we strive to build sustainability into everything we do. We have been a leader on sustainability and climate change since Google’s founding over 20 years ago. These are some of our key achievements over the past two decades:•In 2007, we became the first major company to be carbon neutral for our operations.•In 2017, we became the first major company to match 100% of our annual electricity use with renewable energy, which we have achieved for four consecutive years.•In 2020, we issued $5.75 billion in sustainability bonds—the largest sustainability or green bond issuance by any company in history at the time. The net proceeds from the issuance are used to fund environmentally and socially responsible projects in the following eight areas: energy efficiency, clean energy, green buildings, clean transportation, circular economy and design, affordable housing, commitment to racial equity, and support for small businesses and COVID-19 crisis response. As of December 31, 2020, we have allocated $3.47 billion of the net proceeds, as outlined in our Sustainability Bond Impact Report published in 2021. •Also in 2020, we compensated for our legacy carbon footprint, making Google the first major company to be carbon neutral for its entire operating history.Our sustainability strategy is focused on three key pillars: accelerating the transition to carbon-free energy and a circular economy, empowering everyone with technology, and benefiting the people and places where we operate.To accelerate the transition to a carbon-free economy, in 2020, we launched our third decade of climate action, and we are now working toward a new set of ambitious goals. By 2030, we aim to:•achieve net-zero emissions across all of our operations and value chain;•become the first major company to run on carbon-free energy 24 hours a day, seven days a week, 365 days a year;•enable 5 gigawatts of new carbon-free energy through investments in our key manufacturing regions; and•help more than 500 cities and local governments reduce an aggregate of 1 gigaton of carbon emissions annually.To accelerate the transition to a circular economy, we are working to maximize the reuse of finite resources across our operations, products, and supply chains and to enable others to do the same. We are also working to empower everyone with technology by committing to help 1 billion people make more sustainable choices by the end of 2022 through our core products.To benefit the people and places where we operate, we have set goals to replenish more water than we consume by 2030 and to support water security in communities where we operate. We will focus on three areas: enhancing our stewardship of water resources across Google office campuses and data centers; replenishing our water use and improving watershed health and ecosystems in water-stressed communities; and sharing technology and tools that help everyone predict, prevent, and recover from water stress.We remain steadfast in our commitment to sustainability, and we will continue to lead and encourage others to join us in improving the health of our planet. We are proud of what we have achieved so far, and we are energized to help move the world closer to a more sustainable and carbon-free future for all.More information on our approach to sustainability can be found in our annual sustainability reports, including Google’s Environmental Report and Alphabet’s 2021 Sustainability Bond Impact Report, which outlines the allocation of our net proceeds from our sustainability bonds. The contents of our sustainability reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. For additional information about risks and uncertainties applicable to our commitments to attain certain sustainability goals, see Risk Factors in Item 1A of this Annual Report on Form 10-K.Culture and WorkforceWe are a company of curious, talented, and passionate people. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex challenges in technology and society. Our people are critical for our continued success, so we work hard to create an environment where employees can have fulfilling careers, and be happy, healthy, and productive. We offer industry-leading benefits and programs to take care of the diverse needs of our employees and their families, including opportunities for career growth and 8Table of ContentsAlphabet Inc.development, resources to support their financial health, and access to excellent healthcare choices. Our competitive compensation programs help us to attract and retain top candidates, and we will continue to invest in recruiting talented people to technical and non-technical roles, and rewarding them well. We provide a variety of high quality training and support to our managers to build and strengthen their capabilities-–ranging from courses for new managers, to learning resources that help them provide feedback and manage performance, to coaching and individual support.At Alphabet, we are committed to making diversity, equity, and inclusion part of everything we do and to growing a workforce that is representative of the users we serve. More information on Google’s approach to diversity can be found in our annual diversity reports, available publicly at diversity.google. The contents of our diversity reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. As of December 31, 2021, Alphabet had 156,500 employees. We have work councils and statutory employee representation obligations in certain countries, and we are committed to supporting protected labor rights, maintaining an open culture and listening to all employees. Supporting healthy and open dialogue is central to how we work, and we communicate information about the company through multiple internal channels to our employees. When necessary, we contract with businesses around the world to provide specialized services where we do not have appropriate in-house expertise or resources, often in fields that require specialized training like cafe operations, content moderation, customer support, and physical security. We also contract with temporary staffing agencies when we need to cover short-term leaves, when we have spikes in business needs, or when we need to quickly incubate special projects. We choose our partners and staffing agencies carefully, and review their compliance with Google’s Supplier Code of Conduct. We continually make improvements to promote a respectful and positive working environment for everyone — employees, vendors, and temporary staff alike.Government RegulationWe are subject to numerous United States (U.S.) federal, state, and foreign laws and regulations covering a wide variety of subject matters. Like other companies in the technology industry, we face heightened scrutiny from both U.S. and foreign governments with respect to our compliance with laws and regulations. Many of these laws and regulations are evolving and their applicability and scope, as interpreted by the courts, remain uncertain.Our compliance with these laws and regulations may be onerous and could, individually or in the aggregate, increase our cost of doing business, make our products and services less useful, limit our ability to pursue certain business models, cause us to change our business practices, affect our competitive position relative to our peers, and/or otherwise have an adverse effect on our business, reputation, financial condition, and operating results. For additional information about government regulation applicable to our business, see Risk Factors in Item 1A, Trends in Our Business and Financial Effect in Part II, Item 7, and Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.Intellectual PropertyWe rely on various intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We have registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names and copyrights. We have also filed patent applications in the U.S. and foreign countries covering certain of our technology, and acquired patent assets to supplement our portfolio. We have licensed in the past, and expect that we may license in the future, certain of our rights to other parties. For additional information, see Risk Factors in Item 1A of this Annual Report on Form 10-K.Available InformationOur website is located at www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC. We also provide a link to the section of the SEC's website at www.sec.gov that has all of the reports that we file or furnish with the SEC.We webcast via our investor relations website our earnings calls and certain events we participate in or host with members of the investment community. Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items that may be material or of interest to our investors, including SEC filings, investor events, press and earnings releases, and blogs. We also share Google news and product updates on Google's Keyword blog at https://www.blog.google/, that may be material or of interest to our investors. Further, corporate governance information, including our certificate of incorporation, bylaws, governance 9Table of ContentsAlphabet Inc.guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading "Other." The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.ITEM 1A.RISK FACTORSOur operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm our business, reputation, financial condition, and operating results, and affect the trading price of our Class A and Class C stock.Risks Specific to our CompanyWe generate a significant portion of our revenues from advertising, and reduced spending by advertisers, a loss of partners, or new and existing technologies that block ads online and/or affect our ability to customize ads could harm our business. We generated more than 80% of total revenues from the display of ads online in 2021. Many of our advertisers, companies that distribute our products and services, digital publishers, and content providers can terminate their contracts with us at any time. These partners may not continue to do business with us if we do not create more value (such as increased numbers of users or customers, new sales leads, increased brand awareness, or more effective monetization) than their available alternatives. Changes to our advertising policies and data privacy practices, as well as changes to other companies’ advertising and/or data privacy practices have in the past, and may in the future, affect the advertising that we are able to provide, which could harm our business. In addition, technologies have been developed that make customized ads more difficult or that block the display of ads altogether and some providers of online services have integrated technologies that could potentially impair the availability and functionality of third-party digital advertising. Failing to provide superior value or deliver advertisements effectively and competitively could harm our reputation, financial condition, and operating results.In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions have affected, and may in the future affect, the demand for advertising, resulting in fluctuations in the amounts our advertisers spend on advertising, which could harm our financial condition and operating results.We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, customers, and other partners, we may not remain competitive, which could harm our business and operating results. Our business environment is rapidly evolving and intensely competitive. Our businesses face changing technologies, shifting user needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant and useful products, services, and technologies in a timely manner. As our businesses evolve, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in R&D, including through acquisitions, in order to enhance our technology and new and existing products and services.We have many competitors in different industries. Our current and potential domestic and international competitors range from large and established companies to emerging start-ups. Some competitors have longer operating histories and well established relationships in various sectors. They can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, continuing to invest heavily in R&D and in talent, aggressively initiating intellectual property claims (whether or not meritorious), and continuing to compete aggressively for users, advertisers, customers, and content providers. Further, discrepancies in enforcement of existing laws may enable our lesser known competitors to aggressively interpret those laws without commensurate scrutiny, thereby affording them competitive advantages. Our competitors may also be able to innovate and provide products and services faster than we can or may foresee the need for products and services before us.Our operating results may also suffer if our products and services are not responsive to the needs of our users, advertisers, publishers, customers, and content providers. As technologies continue to develop, our competitors may be able to offer experiences that are, or that are seen to be, substantially similar to or better than ours. This may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors are more successful than we are in providing compelling products and services or in attracting and retaining users, advertisers, publishers, customers, and content providers, our operating results could be harmed.Our ongoing investment in new businesses, products, services, and technologies is inherently risky, and could divert management attention and harm our financial condition and operating results. 10Table of ContentsAlphabet Inc.We have invested and expect to continue to invest in new businesses, products, services, and technologies. The investments that we are making across Google Services, Google Cloud, and Other Bets reflect our ongoing efforts to innovate and provide products and services that are useful to users, advertisers, publishers, customers, and content providers. Our investments in Google Services, Google Cloud, and Other Bets span a wide range of industries beyond online advertising. Such investments ultimately may not be commercially viable or may not result in an adequate return of capital and, in pursuing new strategies, we may incur unanticipated liabilities. These endeavors may involve significant risks and uncertainties, including diversion of resources and management attention from current operations and, with respect to Other Bets, the use of alternative investment, governance, or compensation structures that may fail to adequately align incentives across the company or otherwise accomplish their objectives.Within Google Services, we continue to invest heavily in hardware, including our smartphones, home devices, and wearables, which is a highly competitive market with frequent introduction of new products and services, rapid adoption of technological advancements by competitors, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, and price and feature sensitivity on the part of consumers and businesses. There can be no assurance we will be able to provide hardware that competes effectively.Within Google Cloud, we devote significant resources to develop and deploy our enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. We are incurring costs to build and maintain infrastructure to support cloud computing services and hire talent, particularly to support and scale our salesforce. At the same time, our competitors are rapidly developing and deploying cloud-based services. Pricing and delivery models are competitive and evolving, and we may not attain sufficient scale and profitability to achieve our business objectives.Within Other Bets, we are investing significantly in the areas of health, life sciences, and transportation, among others. These investment areas face intense competition from large, experienced, and well-funded competitors and our offerings may not be able to compete effectively or to operate at sufficient levels of profitability.In addition, new and evolving products and services, including those that use AI and machine learning, raise ethical, technological, legal, regulatory, and other challenges, which may negatively affect our brands and demand for our products and services. Because all of these new ventures are inherently risky, no assurance can be given that such strategies and offerings will be successful and will not harm our reputation, financial condition, and operating results.Our revenue growth rate could decline over time, and we anticipate downward pressure on our operating margin in the future. Our revenue growth rate could decline over time as a result of a number of factors, including increasing competition. Changes in device mix, geographic mix, ongoing product and policy changes, product mix, and property mix and an increasing competition for advertising may also affect our advertising revenue growth rate. We may also experience a decline in our revenue growth rate as our revenues increase to higher levels, if there is a decrease in the rate of adoption of our products, services, and technologies, or due to deceleration or decline in demand for devices used to access our services, among other factors.In addition, we may also experience downward pressure on our operating margin resulting from a variety of factors, such as the continued expansion of our business into new fields, including products and services such as hardware, Google Cloud, and subscription products, as well as significant investments in Other Bets, all of which may have margins lower than those we generate from advertising. We may also experience downward pressure on our operating margins from increasing regulations, increasing competition, and increased costs for many aspects of our business. Due to these factors and the evolving nature of our business, our historical revenue growth rate and historical operating margin may not be indicative of our future performance. For additional information, see Trends in Our Business and Financial Effect in Part II, Item 7 of this Annual Report on Form 10-K.Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brands as well as affect our ability to compete. Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets for us. Various events outside of our control pose a threat to our intellectual property rights, as well as to our products, services, and technologies. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed or made available through the Internet. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of these innovations. Moreover, we may not have adequate patent or copyright protection for certain innovations that later turn out to be important. There is always the possibility that the scope of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable.11Table of ContentsAlphabet Inc.We also seek to maintain certain intellectual property as trade secrets. The secrecy of such trade secrets and other sensitive information could be compromised, which could cause us to lose the competitive advantage resulting from these trade secrets. We also face risks associated with our trademarks. For example, there is a risk that the word “Google” could become so commonly used that it becomes synonymous with the word “search.” Some courts have ruled that "Google" is a protectable trademark, but it is possible that other courts, particularly those outside of the U.S., may reach a different determination. If this happens, we could lose protection for this trademark, which could result in other people using the word “Google” to refer to their own products, thus diminishing our brand.Any significant impairment of our intellectual property rights could harm our business and our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results.Our business depends on strong brands, and failing to maintain and enhance our brands would hurt our ability to expand our base of users, advertisers, customers, content providers, and other partners. Our strong brands have significantly contributed to the success of our business. Maintaining and enhancing the brands within Google Services, Google Cloud, and Other Bets increases our ability to enter new categories and launch new and innovative products and services that better serve the needs of our users, advertisers, customers, content providers, and other partners. Our brands have been, and may in the future be, negatively affected by a number of factors, including, among others, reputational issues, third-party content shared on our platforms, data privacy and security issues and developments, and product or technical performance failures. For example, if we fail to respond appropriately to the sharing of misinformation or objectionable content on our services and/or products or objectionable practices by advertisers, or otherwise to adequately address user concerns, our users may lose confidence in our brands.Furthermore, failure to maintain and enhance equity in our brands may harm our business, financial condition, and operating results. Our success will depend largely on our ability to remain a technology leader and continue to provide high-quality, trustworthy, innovative products and services that are truly useful and play a valuable role in a range of settings.We face a number of manufacturing and supply chain risks that could harm our financial condition, operating results, and prospects.We face a number of risks related to manufacturing and supply chain management, which could affect our ability to supply both our products and our internet-based services.We rely on other companies to manufacture many of our finished products; to design certain of our components and parts; to participate in the distribution of our products and services; and to design, manufacture, or assemble certain components and parts in our technical infrastructure. Our business could be negatively affected if we are not able to engage these companies with the necessary capabilities or capacity on reasonable terms, or if those we engage fail to meet their obligations (whether due to financial difficulties or other reasons), or make adverse changes in the pricing or other material terms of our arrangements with them.We have experienced and/or may in the future experience supply shortages and/or price increases that could negatively affect our operations, driven by raw material, component or part availability, manufacturing capacity, labor shortages, industry allocations, logistics capacity, tariffs, trade disputes and barriers, natural disasters or pandemics, the effects of climate change (such as sea level rise, drought, flooding, heat waves, wildfires and resultant air quality effects and power shutoffs associated with wildfire prevention, and increased storm severity), and significant changes in the financial or business condition of our suppliers. In addition, some of the components we use in our technical infrastructure and products are available from only one or limited sources, and we may not be able to find replacement vendors on favorable terms in the event of a supply chain disruption. In addition, a significant supply interruption that affects us or our vendors could delay critical data center upgrades or expansions and delay product availability.We may enter into long-term contracts for materials and products that commit us to significant terms and conditions. We may be liable for materials and products that are not consumed due to market acceptance, technological change, obsolescences, quality, product recalls, and warranty issues. For instance, because certain of our hardware supply contracts have volume-based pricing or minimum purchase requirements, if the volume of our hardware sales decreases or does not reach projected targets, we could face increased materials and manufacturing costs or other financial liabilities that could make our products more costly per unit to manufacture and negatively affect our financial results. Furthermore, certain of our competitors may negotiate more favorable contractual terms based on volume and other commitments that may provide them with competitive advantages and may affect our supply.12Table of ContentsAlphabet Inc.Our products and services have had, and in the future may have, quality issues resulting from design, manufacturing, or operations. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. If the quality of our products and services does not meet expectations or our products or services are defective, it could harm our reputation, financial condition, and operating results.We require our suppliers and business partners to comply with laws and, where applicable, our company policies, such as the Google Supplier Code of Conduct, regarding workplace and employment practices, data security, environmental compliance, and intellectual property licensing, but we do not control them or their practices. Violations of law or unethical business practices could result in supply chain disruptions, canceled orders, harm to key relationships, and damage to our reputation. Their failure to procure necessary license rights to intellectual property could affect our ability to sell our products or services and expose us to litigation or financial claims. Interruption to, interference with, or failure of our complex information technology and communications systems could hurt our ability to effectively provide our products and services, which could harm our reputation, financial condition, and operating results. In addition, problems with the design or implementation of our new global enterprise resource planning system could harm our business and operations.The availability of our products and services and fulfillment of our customer contracts depend on the continuing operation of our information technology and communications systems. Our systems are vulnerable to damage, interference, or interruption from modifications or upgrades, terrorist attacks, natural disasters or pandemics, the effects of climate change (such as sea level rise, drought, flooding, heat waves, wildfires and resultant air quality effects and power shutoffs associated with wildfire prevention, and increased storm severity), power loss, telecommunications failures, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access our systems. Some of our data centers are located in areas with a high risk of major earthquakes or other natural disasters. Our data centers are also subject to break-ins, sabotage, and intentional acts of vandalism, and, in some cases, to potential disruptions resulting from problems experienced by facility operators. Some of our systems are not fully redundant, and disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster or pandemic, closure of a facility, or other unanticipated problems affecting our data centers could result in lengthy interruptions in our service. In addition, our products and services are highly technical and complex and have contained in the past, and may contain in the future, errors or vulnerabilities, which could result in interruptions in or failure of our services or systems.In addition, we rely extensively on information systems and technology to manage our business and summarize operating results. We are in the process of a multi-year implementation of a new ERP system, which is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management, and provide timely information to our management team. As the phased implementation continues, we may experience delays, increased costs, and other difficulties. Failure to successfully design and implement the ERP system as planned could harm our business, financial condition, and operating results. Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively affected.Our international operations expose us to additional risks that could harm our business, our financial condition, and operating results.Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. International revenues accounted for approximately 54% of our consolidated revenues in 2021. In addition to risks described elsewhere in this section, our international operations expose us to other risks, including the following:•restrictions on foreign ownership and investments, and stringent foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.;•import and export requirements, tariffs and other market access barriers that may prevent or impede us from offering products or providing services to a particular market, or that could limit our ability to source assemblies and finished products from a particular market, and may increase our operating costs;•longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud;•an evolving foreign policy landscape that may adversely affect our revenues and could subject us to new regulatory costs and challenges (including the transfer of personal data between the EU and the United Kingdom and new customer requirements), in addition to other adverse effects that we are unable to effectively anticipate;13Table of ContentsAlphabet Inc.•anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and other local laws prohibiting certain payments to government officials, violations of which could result in civil and criminal penalties;•uncertainty regarding liability for services and content, including uncertainty as a result of local laws and lack of legal precedent; and•different employee/employer relationships, existence of works councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions.Because we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we have faced, and will continue to face, exposure to fluctuations in foreign currency exchange rates. Although we hedge a portion of our international currency exposure, significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings. Hedging programs are also inherently risky and could expose us to additional risks that could harm our financial condition and operating results.Risks Related to our IndustryPeople access the Internet through a variety of platforms and devices that continue to evolve with the advancement of technology and user preferences. If manufacturers and users do not widely adopt versions of our products and services developed for these interfaces, our business could be harmed.People access the Internet through a growing variety of devices such as desktop computers, mobile phones, smartphones, laptops and tablets, video game consoles, voice-activated speakers, wearables, automobiles, and television-streaming devices. Our products and services may be less popular on some interfaces. Each manufacturer or distributor may establish unique technical standards for its devices, and our products and services may not be available or may only be available with limited functionality for our users or our advertisers on these devices as a result. Some manufacturers may also elect not to include our products on their devices. In addition, search queries are increasingly being undertaken via voice-activated speakers, apps, social media or other platforms, which could harm our business. It is hard to predict the challenges we may encounter in adapting our products and services and developing competitive new products and services. We expect to continue to devote significant resources to creating and supporting products and services across multiple platforms and devices. Failing to attract and retain a substantial number of new device manufacturers, suppliers, distributors, developers, and users, or failing to develop products and technologies that work well on new devices and platforms, could harm our business, financial condition, and operating results and ability to capture future business opportunities.Data privacy and security concerns relating to our technology and our practices could damage our reputation, cause us to incur significant liability, and deter current and potential users or customers from using our products and services. Software bugs or defects, security breaches, and attacks on our systems could result in the improper disclosure and use of user data and interference with our users’ and customers’ ability to use our products and services, harming our business operations and reputation. Concerns about, including the adequacy of, our practices with regard to the collection, use, governance, disclosure, or security of personal information or other data-privacy-related matters, even if unfounded, could harm our reputation, financial condition, and operating results. Our policies and practices may change over time as expectations and regulations regarding privacy and data change.Our products and services involve the storage, handling, and transmission of proprietary and other sensitive information. Software bugs, theft, misuse, defects, vulnerabilities in our products and services, and security breaches expose us to a risk of loss or improper use and disclosure of such information, which could result in litigation and other potential liability, including regulatory fines and penalties, as well as reputational harm. Additionally, our products incorporate highly technical and complex technologies, and thus our technologies and software have contained, and are likely in the future to contain, undetected errors, bugs, or vulnerabilities. We have in the past discovered, and may in the future discover, some errors in our software code only after we have released the code. Systems and control failures, security breaches, failure to comply with our privacy policies, and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our reputation, brand, and business, and impair our ability to attract and retain users or customers. Such incidents have occurred in the past and may continue to occur due to the scale and nature of our products and services. While there is no guarantee that such incidents will not cause significant damage, we expect to continue to expend significant resources to maintain security protections that limit the effect of bugs, theft, misuse, and security vulnerabilities or breaches.We experience cyber attacks and other attempts to gain unauthorized access to our systems on a regular basis. Cyber attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. We have seen, and will continue to see, industry-wide vulnerabilities, such as the Log4j vulnerability reported in December 2021, which could affect our or other parties’ systems. We expect to continue to experience such 14Table of ContentsAlphabet Inc.incidents or vulnerabilities in the future. Our efforts to address undesirable activity on our platform may also increase the risk of retaliatory attack. We may experience future security issues, whether due to employee error or malfeasance or system errors or vulnerabilities in our or other parties’ systems. While we may not determine some of these issues to be material at the time they occur and may remedy them quickly, there is no guarantee that these issues will not ultimately result in significant legal, financial, and reputational harm, including government inquiries and enforcement actions, litigation, and negative publicity. Because the techniques used to obtain unauthorized access to, disable or degrade service provided by or otherwise sabotage systems change frequently and often are recognized only after being launched against a target, even taking all reasonable precautions, including those required by law, we have been unable in the past and may continue to be unable to anticipate or detect attacks or vulnerabilities or implement adequate preventative measures. Further, if any partners with whom we share user or other customer information fail to implement adequate data-security practices or fail to comply with our terms and policies or otherwise suffer a network or other security breach, our users’ information may be improperly accessed, used, or disclosed. If an actual or perceived breach of our or our business partners’ or service providers’ security occurs, the market perception of the effectiveness of our security measures would be harmed, we could lose users and customers, our trade secrets or those of our business partners may be compromised, and we may be exposed to significant legal and financial risks, including legal claims (which may include class-action litigation) and regulatory action, fines, and penalties. Any of the foregoing consequences could have a material and adverse effect on our business, reputation, and results of operations.While we have dedicated significant resources to privacy and security incident response capabilities, including dedicated worldwide incident response teams, our response process, particularly during times of a natural disaster or pandemic, may not be adequate, may fail to accurately assess the severity of an incident, may not be fast enough to prevent or limit harm, or may fail to sufficiently remediate an incident. As a result, we may suffer significant legal, reputational, or financial exposure, which could harm our business, financial condition, and operating results.For additional information, see also our risk factor on privacy and data protection regulations under ‘Risks Related to Laws and Regulations’ below. Our ongoing investments in safety, security, and content review will likely continue to identify abuse of our platforms and misuse of user data. In addition to our efforts to prevent and mitigate cyber attacks, we are making significant investments in safety, security, and review efforts to combat misuse of our services and unauthorized access to user data by third parties, including investigation and review of platform applications that could access the information of users of our services. As a result of these efforts, we have in the past discovered, and may in the future discover, incidents of unnecessary access to or misuse of user data or other undesirable activity by third parties. However, we may not have discovered, and may in the future not discover, all such incidents or activity, whether as a result of our data limitations, including our lack of visibility over our encrypted services, the scale of activity on our platform, or other factors, including factors outside of our control such as a natural disaster or pandemic, and we may learn of such incidents or activity via third parties. Such incidents and activities may include the use of user data or our systems in a manner inconsistent with our terms, contracts or policies, the existence of false or undesirable user accounts, election interference, improper ad purchases, activities that threaten people’s safety on- or off-line, or instances of spamming, scraping, or spreading disinformation. While we may not determine some of these incidents to be material at the time they occurred and we may remedy them quickly, there is no guarantee that these issues will not ultimately result in significant legal, financial, and reputational harm, including government inquiries and enforcement actions, litigation, and negative publicity.We may also be unsuccessful in our efforts to enforce our policies or otherwise prevent or remediate any such incidents. Any of the foregoing developments may negatively affect user trust and engagement, harm our reputation and brands, require us to change our business practices in ways that harm our business operations and adversely affect our business and financial results. Any such developments may also subject us to additional litigation and regulatory inquiries, which could result in monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight.Problematic content on our platforms, including low-quality user-generated content, web spam, content farms, and other violations of our guidelines could affect the quality of our services, which could damage our reputation and deter our current and potential users from using our products and services. We, like others in the industry, face violations of our content guidelines across our platforms, including sophisticated attempts by bad actors to manipulate our hosting and advertising systems to fraudulently generate revenues, or to otherwise generate traffic that does not represent genuine user interest or intent. While we invest significantly in efforts to promote high-quality and relevant results and to detect and prevent low-quality content and 15Table of ContentsAlphabet Inc.invalid traffic, we have been unable and may continue to be unable to adequately detect and prevent all such abuses or promote uniformly high-quality content.Many websites violate or attempt to violate our guidelines, including by seeking to inappropriately rank higher in search results than our search engine's assessment of their relevance and utility would rank them. Such efforts have affected, and may continue to affect, the quality of content on our platforms and lead them to display false, misleading, or undesirable content. Although English-language web spam in our search results has been reduced, and web spam in most other languages is limited, we expect web spammers will continue to seek inappropriate ways to improve their rankings. We continuously combat web spam in our search results, including through indexing technology that makes it harder for spam-like, less useful web content to rank highly. We also continue to invest in and deploy proprietary technology to detect and prevent web spam on our platforms. We also face other challenges from low-quality and irrelevant content websites, including content farms, which are websites that generate large quantities of low-quality content to help them improve their search rankings. We are continually launching algorithmic changes designed to detect and prevent abuse from low-quality websites. We also face other challenges on our platforms, including violations of our content guidelines involving incidents such as attempted election interference, activities that threaten the safety and/or well-being of our users on- or off-line, and the spreading of misinformation or disinformation.If we fail to either detect and prevent an increase in problematic content or effectively promote high-quality content, it could hurt our reputation for delivering relevant information or reduce use of our platforms, harming our financial condition or operating results. It may also subject us to litigation and regulatory action, which could result in monetary penalties and damages and divert management’s time and attention.Our business depends on continued and unimpeded access to the Internet by us and our users. Internet access providers may be able to restrict, block, degrade, or charge for access to certain of our products and services, which could lead to additional expenses and the loss of users and advertisers. Our products and services depend on the ability of our users to access the Internet, and certain of our products require significant bandwidth to work effectively. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, and government-owned service providers. Some of these providers have taken, or have stated that they may take measures that could degrade, disrupt, or increase the cost of user access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, by charging increased fees to us or our users to provide our offerings, or by providing our competitors preferential access. Some jurisdictions have adopted regulations prohibiting certain forms of discrimination by internet access providers; however, substantial uncertainty exists in the U.S. and elsewhere regarding such protections. For example, in 2018 the U.S. Federal Communications Commission repealed net neutrality rules, which could permit internet access providers to restrict, block, degrade, or charge for access to certain of our products and services. In addition, in some jurisdictions, our products and services have been subject to government-initiated restrictions or blockages. These could harm existing key relationships, including with our users, customers, advertisers, and/or content providers, and impair our ability to attract new ones; damage our reputation; and increase costs, thereby negatively affecting our business.Risks Related to Laws, Regulations, and PoliciesWe face increased regulatory scrutiny as well as changes in regulatory conditions, laws, and policies governing a wide range of topics that may negatively affect our business. We and other companies in the technology industry face increased regulatory scrutiny, enforcement action, and other proceedings. For instance, the U.S. Department of Justice, joined by a number of state Attorneys General, filed an antitrust complaint against Google on October 20, 2020, alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. Similarly, on December 16, 2020, a number of state Attorneys General filed an antitrust complaint against Google in the U.S. District Court for the Eastern District of Texas, alleging that Google violated U.S. antitrust laws as well as state deceptive trade laws relating to its advertising technology. Various other regulatory agencies in the U.S. and around the world, including competition enforcers, consumer protection agencies, data protection authorities, grand juries, inter-agency consultative groups, and a range of other governmental bodies have and continue to review and in some cases challenge our products and services and their compliance with laws and regulations around the world. We continue to cooperate with these investigations and defend litigation where appropriate. Various laws, regulations, investigations, enforcement lawsuits, and regulatory actions have in the past, and may in the future, result in substantial fines and penalties, injunctive relief, ongoing auditing and monitoring obligations, changes to our products and services, alterations to our business models and operations, and collateral litigation, all of which could harm our business, reputation, financial condition, and operating results.16Table of ContentsAlphabet Inc.Changes in international and local social, political, economic, tax, and regulatory conditions or in laws and policies have in the past, and may in the future, increase our cost of doing business and limit our ability to pursue certain business models, offer products or services in certain jurisdictions, or cause us to change our business practices. We have in the past had to alter or stop offering certain products and services as a result of laws or regulations that made them unfeasible, and new laws or regulations could result in our having to terminate, alter, or withdraw products and services in the future. Additional costs of doing business, new limitations, or changes to our business model or practices could harm our business, reputation, financial condition, and operating results.We are subject to regulations, laws, and policies that govern a wide range of topics, including those related to matters beyond our core products and services. For instance, new regulations, laws, policies, and international accords relating to environmental and social matters, including sustainability, climate change, human capital, and diversity, are being developed and formalized in Europe, the U.S., and elsewhere, which may entail specific, target-driven frameworks and/or disclosure requirements. We have implemented robust environmental and social programs, adopted reporting frameworks and principles, and announced a number of goals and initiatives, including those related to environmental sustainability and diversity. The implementation of these goals and initiatives may require considerable investments, and our goals, with all of their contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance, are complex and ambitious, and we cannot guarantee that we will achieve them. Additionally, there can be no assurance that our current programs, reporting frameworks, and principles will be in compliance with any new environmental and social laws and regulations that may be promulgated in the U.S. and elsewhere, and the costs of changing any of our current practices to comply with any new legal and regulatory requirements in the U.S. and elsewhere may be substantial. Furthermore, industry and market practices may further develop to become even more robust than what is required under any new laws and regulations, and we may have to expend significant efforts and resources to keep up with market trends and stay competitive among our peers.A variety of new and existing laws and/or interpretations could harm our business. We are subject to numerous U.S. and foreign laws and regulations covering a wide variety of subject matters. New laws and regulations, or new interpretations or applications of existing laws and regulations in a manner inconsistent with our practices, have made, and may continue to make, our products and services less useful, limit our ability to pursue certain business models or offer certain products and services in certain jurisdictions, require us to incur substantial costs, expose us to civil or criminal liability, or cause us to change our business practices. These laws and regulations are evolving and involve matters central to our business, including, among others:•Laws and regulations around the world focused on large technology platforms, including the Digital Markets Act in the European Union and proposed antitrust legislation on self-preferencing and mergers and acquisitions in the U.S., which may limit certain business practices, and in some cases, create the risk of significant penalties.•Privacy laws, such as the GDPR, CCPA, CPRA, Virginia CDPA, and ColoPA (as defined and discussed further below).•Data protection laws passed by many states within the U.S. and by certain countries regarding notification to data subjects and/or regulators when there is a security breach of personal data.•Consumer protection laws, including EU’s New Deal for Consumers, which could result in monetary penalties and create a range of new compliance obligations. •New laws further restricting the collection, processing and/or sharing of advertising-related data. Copyright or similar laws around the world, including the EU Directive on Copyright in the Digital Single Market (EUCD) and EU member state transpositions. These and similar laws that have been adopted or proposed introduce new licensing regimes that could affect our ability to operate. The EUCD and similar laws could also increase the liability of some content-sharing services with respect to content uploaded by their users. Some of these laws, as well as follow-on administrative or judicial actions, have also created or may create a new property right in news publications that limits the ability of some online services to link to, interact with, or present such content. They may also require individual or collective compensation negotiations with news agencies and publishers for the use of such content, which may result in payment obligations that significantly exceed the value that such content provides to Google and its users, potentially harming our services, commercial operations, and business results.•Data localization laws, which generally mandate that certain types of data collected in a particular country be stored and/or processed within that country.17Table of ContentsAlphabet Inc.•Various U.S. and international laws that govern the distribution of certain materials to children and regulate the ability of online services to collect information from minors, including the Children’s Online Privacy Protection Act of 1998 and the United Kingdom’s Age-Appropriate Design Code.•Various laws with regard to content moderation and removal, and related disclosure obligations, such as the Network Enforcement Act in Germany and the European Union's pending Digital Services Act, which may affect our businesses and operations and may subject us to significant fines if such laws are interpreted and applied in a manner inconsistent with our practices or when we may not proactively discover such content due to the scale of third-party content and the limitations of existing technologies. Other countries, including Singapore, Australia, and the United Kingdom, have implemented or are considering similar legislation imposing penalties for failure to remove certain types of content.•Various legislative, litigation, and regulatory activity regarding our Google Play billing policies and business model, which could result in monetary penalties, damages and/or prohibition.•Various legislative and regulatory activity requiring disclosure of information about the operation of our services and algorithms, which may make it easier for websites to artificially promote low-quality, deceptive, or harmful content on services like Google Search and YouTube, potentially harming the quality of our services.In addition, the applicability and scope of these laws, as interpreted by the courts, remain uncertain and could harm our business. For example:•We rely on statutory safe harbors, as set forth in the Digital Millennium Copyright Act and Section 230 of the Communications Decency Act in the U.S. and the E-Commerce Directive in Europe, against liability for various linking, caching, and hosting activities. Any legislation or court rulings affecting these safe harbors may adversely affect us. There are legislative proposals in both the U.S. and EU that could reduce our safe harbor protection.•Court decisions such as the judgment of the Court of Justice of the European Union (CJEU) on May 13, 2014 on the ‘right to be forgotten,’ which allows individuals to demand that Google remove search results about them in certain instances, may limit the content we can show to our users and impose significant operational burdens.The introduction of new businesses, products, services, and technologies, our activities in certain jurisdictions, or other actions we take have subjected us, and will likely continue to subject us, to additional laws and regulations. Our investment in a variety of new fields, such as healthcare and payment services, has expanded, and will continue to expand, the scope of regulations that apply to our business. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties.We are subject to claims, suits, government investigations, other proceedings, and consent decrees that may harm our business, financial condition, and operating results. We are subject to claims, suits, government investigations, other proceedings, and consent decrees involving competition, intellectual property, data privacy and security, consumer protection, tax, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, and other matters. Due to our manufacturing and sale of an expanded suite of products and services, including hardware as well as Google Cloud offerings, we also are subject to a variety of claims including product warranty, product liability, and consumer protection claims related to product defects, among other litigation. We may also be subject to claims involving health and safety, hazardous materials usage, other environmental effects, or service disruptions or failures.Any of these types of legal proceedings can have an adverse effect on us because of legal costs, diversion of management resources, negative publicity and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that requires significant judgment. The resolution of one or more such proceedings has resulted in, and may in the future result in, additional substantial fines, penalties, injunctions, and other sanctions that could harm our business, financial condition, and operating results.We may be subject to legal liability associated with providing online services or content. Our products and services let users exchange information, advertise products and services, conduct business, and engage in various online activities. We also place advertisements displayed on other companies’ websites, and we offer third-party products, services, and/or content. The law relating to the liability of online service providers for others’ activities on their services is still somewhat unsettled around the world. Claims have been brought against us, and we 18Table of ContentsAlphabet Inc.expect will continue to be brought against us, for defamation, negligence, breaches of contract, copyright and trademark infringement, unfair competition, unlawful activity, torts, fraud, or other legal theories based on the nature and content of information available on or via our services.We may be subject to claims by virtue of our involvement in hosting, transmitting, marketing, branding, or providing access to content created by third parties. Defense of such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, and may require us to change our business in an adverse manner.Privacy and data protection regulations are complex and rapidly evolving areas. Any failure or alleged failure to comply with these laws could harm our business, reputation, financial condition, and operating results. Authorities around the world have adopted and are considering a number of legislative and regulatory proposals concerning data protection and limits on encryption of user data. Adverse legal rulings, legislation, or regulation have resulted in, and may continue to result in, fines and orders requiring that we change our data practices, which could have an adverse effect on our ability to provide services, harming our business operations. Complying with these evolving laws could result in substantial costs and harm the quality of our products and services, negatively affecting our business, and may be particularly challenging during certain times, such as a natural disaster or pandemic. Amongst others, we are and will be subject to the following laws and regulations: •The General Data Protection Regulation (GDPR), which applies to all of our activities conducted from an establishment in the EU or related to products and services that we offer to EU users or customers, or the monitoring of their behavior in the EU. Ensuring compliance with the range of obligations created by the GDPR is an ongoing commitment that involves substantial costs. Despite our efforts, governmental authorities or others have asserted and may continue to assert that our business practices fail to comply with its requirements. If our operations are found to violate the GDPR requirements, we may incur substantial fines, have to change our business practices, and face reputational harm, any of which could have an adverse effect on our business. Serious breaches of the GDPR can result in administrative fines of up to 4% of annual worldwide revenues. Fines of up to 2% of annual worldwide revenues can be levied for other specified violations.•Various state privacy laws, such as the California Consumer Privacy Act of 2018 (CCPA), which came into effect in January of 2020; the California Privacy Rights Act (CPRA), which will go into effect in 2023; the Virginia Consumer Data Protection Act (Virginia CDPA), which will go into effect in 2023; and the Colorado Privacy Act (ColoPA), which will go into effect in 2023; all of which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data.•SB-327 in California, which regulates the security of data in connection with internet connected devices.Further, we are subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive personal data. The EU-U.S. and the Swiss-U.S. Privacy Shield frameworks that previously allowed U.S. companies that self-certify to the U.S. Department of Commerce and publicly commit to comply with specified requirements to import personal data from the EU and Switzerland have been invalidated by the CJEU. The CJEU upheld Standard Contractual Clauses (SCCs) as a valid transfer mechanism, provided they meet certain requirements. On June 4, 2021, the European Commission published new SCCs for this purpose, and we may have to adapt our existing contractual arrangements to meet these new requirements. The validity of data transfer mechanisms remains subject to legal, regulatory, and political developments in both Europe and the U.S., such as recent recommendations from the European Data Protection Board, decisions from supervisory authorities, recent proposals for reform of the data transfer mechanisms for transfers of personal data outside the United Kingdom, and potential invalidation of other data transfer mechanisms, which, together with increased enforcement action from supervisory authorities in relation to cross-border transfers of personal data, could have a significant adverse effect on our ability to process and transfer personal data outside of the European Economic Area and/or the United Kingdom.These laws and regulations are evolving and subject to interpretation, including developments which create some uncertainty, and compliance obligations could cause us to incur costs or harm the operations of our products and services in ways that harm our business. For example, in the EU, several supervisory authorities have issued new guidance concerning the ePrivacy Directive’s requirements regarding the use of cookies and similar technologies, including limitations on the use of data across messaging products and specific requirements for enabling users to accept or reject cookies, and have in some cases brought (and may seek to bring in the future) enforcement action in relation to those requirements. In the U.S., certain types of cookies may be deemed sales of personal information 19Table of ContentsAlphabet Inc.within the CCPA and other state laws, such that certain disclosure requirements and limitations apply to the use of such cookies. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data that could increase the cost and complexity of delivering our services and carries the potential of service interruptions in those countries.We face, and may continue to face, intellectual property and other claims that could be costly to defend, result in significant damage awards or other costs (including indemnification awards), and limit our ability to use certain technologies in the future. We, like other internet, technology and media companies, are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. In addition, patent-holding companies may frequently seek to generate income from patents they have obtained by bringing claims against us. As we have grown, the number of intellectual property claims against us has increased and may continue to increase as we develop new products, services, and technologies.We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe the intellectual property rights of others. Other parties have also sought broad injunctive relief against us by filing claims in U.S. and international courts and the U.S. International Trade Commission (ITC) for exclusion and cease-and-desist orders, which could limit our ability to sell our products or services in the U.S. or elsewhere if our products or services or those of our customers or suppliers are found to infringe the intellectual property subject to the claims. Adverse results in any of these lawsuits may include awards of monetary damages, costly royalty or licensing agreements (if licenses are available at all), or orders preventing us from offering certain features, functionalities, products, or services. They may also cause us to change our business practices and require development of non-infringing products, services, or technologies, which could result in a loss of revenues for us and otherwise harm our business.Many of our agreements with our customers and partners, including certain suppliers, require us to defend against certain intellectual property infringement claims and in some cases indemnify them for certain intellectual property infringement claims against them, which could result in increased costs for defending such claims or significant damages if there were an adverse ruling in any such claims. Such customers and partners may also discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. Moreover, intellectual property indemnities provided to us by our suppliers, when obtainable, may not cover all damages and losses suffered by us and our customers arising from intellectual property infringement claims. Furthermore, in connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, including those associated with intellectual property claims. Regardless of their merits, intellectual property claims are often time consuming and expensive to litigate or settle. To the extent such claims are successful, they may harm our business, including our product and service offerings, financial condition, or operating results.Risks Related to Ownership of our StockWe cannot guarantee that any share repurchase program will be fully consummated or will enhance long-term stockholder value, and share repurchases could increase the volatility of our stock prices and could diminish our cash reserves. We engage in share repurchases of our Class A and Class C stock from time to time in accordance with authorizations from the Board of Directors of Alphabet. Our repurchase program does not have an expiration date and does not obligate Alphabet to repurchase any specific dollar amount or to acquire any specific number of shares. Further, our share repurchases could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading prices of our stock.The concentration of our stock ownership limits our stockholders’ ability to influence corporate matters. Our Class B stock has 10 votes per share, our Class A stock has one vote per share, and our Class C stock has no voting rights. As of December 31, 2021, Larry Page and Sergey Brin beneficially owned approximately 85.9% of our outstanding Class B stock, which represented approximately 51.4% of the voting power of our outstanding common stock. Through their stock ownership, Larry and Sergey have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. In addition, because our Class C stock carries no voting rights (except as required by applicable law), the issuance of the Class C stock, including in future stock-based acquisition transactions and to fund employee equity incentive programs, could continue Larry and Sergey’s current relative voting power and their ability to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders. The share repurchases made pursuant to our repurchase program may also 20Table of ContentsAlphabet Inc.affect Larry and Sergey’s relative voting power. This concentrated control limits or severely restricts other stockholders’ ability to influence corporate matters and we may take actions that some of our stockholders do not view as beneficial, which could reduce the market price of our Class A stock and our Class C stock.Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.Provisions in Alphabet’s certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:•Our certificate of incorporation provides for a tri-class capital stock structure. As a result of this structure, Larry and Sergey have significant influence over all matters requiring stockholder approval. This concentrated control could discourage others from initiating any potential merger, takeover, or other change of control transaction that other stockholders may view as beneficial. •Our Board of Directors has the right to elect directors to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director.•Our stockholders may not act by written consent, which makes it difficult to take certain actions without holding a stockholders' meeting.•Our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates.•Stockholders must provide advance notice to nominate individuals for election to the Board of Directors or to propose matters that can be acted upon at a stockholders’ meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.•Our Board of Directors may issue, without stockholder approval, shares of undesignated preferred stock, which makes it possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its outstanding voting stock unless the holder has held the stock for three years or, among other things, the Board of Directors has approved the transaction. Our Board of Directors could rely on Delaware law to prevent or delay an acquisition of us.General RisksThe continuing effects of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on our business, operations and our future financial performance.Since COVID-19 was declared a global pandemic by the World Health Organization, our business, operations and financial performance have been, and may continue to be, affected by the macroeconomic impacts resulting from the efforts to control the spread of COVID-19. As a result of the scale of the ongoing pandemic, including the introduction of new variants of COVID-19 and vaccination and other efforts to control the spread, our revenue growth rate and expenses as a percentage of our revenues in future periods may differ significantly from our historical rates, and our future operating results may fall below expectations. Additionally, we may experience a significant and prolonged shift in user behavior such as a shift in interests to less commercial topics.As a result of the pandemic, our workforce shifted to operating in a primarily remote working environment, which continues to create inherent productivity, connectivity, and oversight challenges. The effects of the ongoing pandemic are dynamic and uneven. As we prepare to return our workforce in more locations back to the office, we may experience increased costs and/or disruption as we experiment with hybrid work models, in addition to potential effects on our ability to operate effectively and maintain our corporate culture.Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.Our operating results have fluctuated, and may in the future fluctuate, as a result of a number of factors, many outside of our control, including the cyclicality and seasonality in our business and geopolitical events. As a result, comparing our operating results (including our expenses as a percentage of our revenues) on a period-to-period basis may not be meaningful, and our past results should not be relied on as an indication of our future performance. Consequently, our operating results in future quarters may fall below expectations.21Table of ContentsAlphabet Inc.Acquisitions, joint ventures, investments, and divestitures could result in operating difficulties, dilution, and other consequences that may harm our business, financial condition, and operating results. Acquisitions, joint ventures, investments and divestitures are important elements of our overall corporate strategy and use of capital, and these transactions could be material to our financial condition and operating results. We expect to continue to evaluate and enter into discussions regarding a wide array of such potential strategic transactions, which could create unforeseen operating difficulties and expenditures. Some of the areas where we face risks include:•diversion of management time and focus from operating our business to challenges related to acquisitions and other strategic transactions;•failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of a transaction;•failure to successfully integrate and further develop the acquired business or technology;•implementation or remediation of controls, procedures, and policies at the acquired company;•integration of the acquired company’s accounting, human resource (including cultural integration and retention of employees), and other administrative systems, and coordination of product, engineering, and sales and marketing functions;•transition of operations, users, and customers onto our existing platforms;•in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries;•liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, data privacy and security issues, violations of laws, commercial disputes, tax liabilities, warranty claims, product liabilities, and other known and unknown liabilities; and•litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders, or other third parties.Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities, and harm our business generally.Our acquisitions and other strategic transactions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or operating results. Also, the anticipated benefits or value of our acquisitions and other strategic transactions may not materialize. In connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, which may harm our financial condition or operating results.If we were to lose the services of key personnel, we may not be able to execute our business strategy. Our future success depends in large part upon the continued service of key members of our senior management team. For instance, Sundar Pichai is critical to the overall management of Alphabet and its subsidiaries and plays an important role in the development of our technology, maintaining our culture, and setting our strategic direction. All of our executive officers and key employees are at-will employees, and we do not maintain any key-person life insurance policies. The loss of key personnel could seriously harm our business.We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel, hire qualified personnel, or maintain our corporate culture, we may not be able to grow effectively. Our performance largely depends on the talents and efforts of highly skilled individuals. Our ability to compete effectively and our future success depends on our continuing to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense, and certain of our competitors have directly targeted our employees. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Restrictive immigration policy and regulatory changes may also affect our ability to hire, mobilize, or retain some of our global talent.22Table of ContentsAlphabet Inc.In addition, we believe that our corporate culture fosters innovation, creativity, and teamwork. As our organization grows and evolves, we may need to implement more complex organizational management structures or adapt our corporate culture and work environments to ever-changing circumstances, such as during times of a natural disaster or pandemic, and these changes could affect our ability to compete effectively or have an adverse effect on our corporate culture.We are exposed to fluctuations in the fair values of our investments and, in some instances, our financial statements incorporate valuation methodologies that are subjective in nature resulting in fluctuations over time. The fair value of our investments may in the future be, and certain investments have been in the past, negatively affected by liquidity, credit deterioration or losses, performance and financial results of the underlying entities, foreign exchange rates, changes in interest rates, including changes that may result from the implementation of new benchmark rates, the effect of new or changing regulations, the stock market in general, or other factors. We measure certain of our non-marketable equity and debt securities, certain other instruments including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, at fair value on a nonrecurring basis. The determination of fair value involves use of appropriate valuation methods and certain unobservable inputs, requires management judgment and estimation, and may change over time. We adjust the carrying value of our non-marketable equity securities to fair value for observable transactions of identical or similar investments of the same issuer or for impairments. All gains and losses on non-marketable equity securities, are recognized in other income (expense), which increases the volatility of our other income (expense). The unrealized gains and losses we record from fair value remeasurements of our non-marketable equity securities in any particular period may differ significantly from the gains or losses we ultimately experience on such investments.As a result of these factors, the value or liquidity of our cash equivalents, as well as our marketable and non-marketable securities could decline and result in a material impairment, which could adversely affect our financial condition and operating results.We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. Our future income taxes could be negatively affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, the net gains and losses recognized by legal entities on certain hedges and related hedged intercompany and other transactions under our foreign exchange risk management program, decreases in our stock price for shares paid as employee compensation, changes in the valuation of our deferred tax assets or liabilities, the application of different provisions of tax laws or changes in tax laws, regulations, or accounting principles (including changes in the interpretation of existing laws), as well as certain discrete items.In addition, we are subject to regular review and audit by both domestic and foreign tax authorities. As a result, we have received, and may in the future receive, assessments in multiple jurisdictions, including in Europe, on various tax-related assertions, such as transfer-pricing adjustments or permanent-establishment claims. Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition and could require us to change our business practices in a manner adverse to our business. It may also subject us to additional litigation and regulatory inquiries, resulting in the diversion of management’s time and attention. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations for which the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may affect our financial results in the period or periods for which such determination is made.Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions may be subject to significant changes in ways that impair our financial results. Various jurisdictions around the world have enacted or are considering digital services taxes, which could lead to inconsistent and potentially overlapping international tax regimes. The Organization for Economic Cooperation and Development (OECD) continues to advance proposals relating to its initiative for modernizing international tax rules, with the goal of having different countries implement a modernized and aligned international tax framework, but there can be no guarantee that this will occur.In addition, in response to significant market volatility and disruptions to business operations resulting from the global spread of COVID-19, legislatures and taxing authorities in many jurisdictions in which we operate may propose changes to their tax rules. These changes could include modifications that have temporary effect, and more permanent 23Table of ContentsAlphabet Inc.changes. The effect of these potential new rules on us, our long-term tax planning, and our effective tax rate could be material.The trading price for our Class A stock and non-voting Class C stock may continue to be volatile.The trading price of our stock has at times experienced substantial price volatility and may continue to be volatile. In addition to the factors discussed in this report, the trading price of our Class A stock and Class C stock have fluctuated, and may continue to fluctuate widely, in response to various factors, many of which are beyond our control, including, among others, the activities of our peers and changes in broader economic and political conditions around the world. These broad market and industry factors may harm the market price of our Class A stock and our Class C stock, regardless of our actual operating performance.ITEM 1B.UNRESOLVED STAFF COMMENTSNot applicable.ITEM 2.PROPERTIESOur headquarters are located in Mountain View, California. We also own and lease office and building space in the surrounding areas near our headquarters. In addition, we own and lease office/building space and R&D sites around the world, primarily in North America, Europe, South America, and Asia. We own and operate data centers in the U.S., Europe, South America, and Asia. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.ITEM 3.LEGAL PROCEEDINGSFor a description of our material pending legal proceedings, see Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.24Table of ContentsAlphabet Inc.PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESAs of October 2, 2015, Alphabet Inc. became the successor issuer of Google Inc. pursuant to Rule 12g-3(a) under the Exchange Act. Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol “GOOG” since August 19, 2004 and under the symbol "GOOGL" since April 3, 2014. Prior to August 19, 2004, there was no public market for our stock. Our Class B common stock is neither listed nor traded. Our Class C capital stock has been listed on the Nasdaq Global Select Market under the symbol “GOOG” since April 3, 2014.Holders of RecordAs of December 31, 2021, there were approximately 4,907 and 1,733 stockholders of record of our Class A common stock and Class C capital stock, respectively. Because many of our shares of Class A common stock and Class C capital stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2021, there were approximately 64 stockholders of record of our Class B common stock.Dividend PolicyWe have never declared or paid any cash dividend on our common or capital stock. The primary use of capital continues to be to invest for the long-term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace, and form of capital return to stockholders.Issuer Purchases of Equity SecuritiesThe following table presents information with respect to Alphabet's repurchases of Class A common stock and Class C capital stock during the quarter ended December 31, 2021:PeriodTotal Number of Class A Shares Purchased (in thousands) (1)Total Number of Class C Shares Purchased (in thousands) (1)Average Price Paid per Class A Share (2)Average Price Paid per Class C Share (2)Total Number of Shares Purchased as Part of Publicly Announced Programs(in thousands) (1)Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)October 1 - 31126 1,445 $2,812.76 $2,794.72 1,571 $26,450 November 1 - 30289 1,393 $2,943.97 $2,956.73 1,682 $21,479 December 1 - 31250 1,169 $2,880.79 $2,898.56 1,419 $17,371 Total665 4,007 4,672 (1)    The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information related to share repurchases.(2)    Average price paid per share includes costs associated with the repurchases.25Table of ContentsAlphabet Inc.Stock Performance GraphsThe graph below matches Alphabet Inc. Class A's cumulative 5-year total stockholder return on common stock with the cumulative total returns of the S&P 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2016 to December 31, 2021. The returns shown are based on historical results and are not intended to suggest future performance.COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN*ALPHABET INC. CLASS A COMMON STOCKAmong Alphabet Inc., the S&P 500 Index, theNASDAQ Composite Index, and the RDG Internet Composite Index*$100 invested on December 31, 2016 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.Copyright© 2022 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.26Table of ContentsAlphabet Inc.The graph below matches Alphabet Inc. Class C's cumulative 5-year total stockholder return on capital stock with the cumulative total returns of the S&P 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our Class C capital stock and in each index (with the reinvestment of all dividends) from December 31, 2016 to December 31, 2021. The returns shown are based on historical results and are not intended to suggest future performance.COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN*ALPHABET INC. CLASS C CAPITAL STOCKAmong Alphabet Inc., the S&P 500 Index, theNASDAQ Composite Index, and the RDG Internet Composite Index*$100 invested on December 31, 2016 in stock or in index, including reinvestment of dividends. Fiscal year ending December 31.Copyright© 2022 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.ITEM 6.[Reserved]27Table of ContentsAlphabet Inc.ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSPlease read the following discussion and analysis of our financial condition and results of operations together with “Note about Forward-Looking Statements,” Part I, Item 1 "Business," Part I, Item 1A "Risk Factors," and our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K. We have omitted discussion of 2019 results where it would be redundant to the discussion previously included in Item 7 of our 2020 Annual Report on Form 10-K.Understanding Alphabet’s Financial ResultsAlphabet is a collection of businesses — the largest of which is Google. We report Google in two segments, Google Services and Google Cloud; we also report all non-Google businesses collectively as Other Bets. Other Bets include earlier stage technologies that are further afield from our core Google business. For further details on our segments, see Part I, Item 1 “Business” and Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.Trends in Our Business and Financial EffectThe following long-term trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results:•Users' behaviors and advertising continue to shift online as the digital economy evolves.The continuing shift from an offline to online world has contributed to the growth of our business since inception, contributing to revenue growth, and we expect that this online shift will continue to benefit our business. •Users are increasingly using diverse devices and modalities to access our products and services, and our advertising revenues are increasingly coming from new formats.Our users are accessing the Internet via diverse devices and modalities, such as smartphones, wearables and smart home devices, and want to be able to be connected no matter where they are or what they are doing. We are focused on expanding our products and services to stay in front of these trends in order to maintain and grow our business.We are increasingly generating advertising revenues from different channels, including mobile, and newer advertising formats. The margins on advertising revenues from these channels and newer products have generally been lower than those from traditional desktop search. Additionally, as the market for a particular device type or modality matures, our revenues may be affected. For example, growth in the global smartphone market has slowed due to various factors, including increased market saturation in developed countries, which can affect our mobile advertising revenue growth rates.We expect TAC paid to our distribution partners and Google Network partners to increase as our revenues grow and TAC as a percentage of our advertising revenues ("TAC rate") to be affected by changes in device mix; geographic mix; partner mix; partner agreement terms; the percentage of queries channeled through paid access points; product mix; the relative revenue growth rates of advertising revenues from different channels; and revenue share terms.We expect these trends to continue to affect our revenue growth rates and put pressure on our margins.•As online advertising evolves, we continue to expand our product offerings, which may affect our monetization.As interactions between users and advertisers change, and as online user behavior evolves, we continue to expand and evolve our product offerings to serve these changing needs. Over time, we expect our monetization trends to fluctuate. For example, we have seen an increase in revenues from ads on YouTube and Google Play, which monetize at a lower rate than our traditional search ads.•As users in developing economies increasingly come online, our revenues from international markets continue to increase and movements in foreign exchange rates affect such revenues.The shift to online, as well as the advent of the multi-device world, has brought opportunities outside of the U.S., including in emerging markets, such as India. We continue to invest heavily and develop localized versions of our products and advertising programs relevant to our users in these markets. This has led to a trend of increased revenues from emerging markets. We expect that our results will continue to be affected by our performance in these markets, particularly as low-cost mobile devices become more available. This trend could affect our revenues as developing markets initially monetize at a lower rate than more mature markets.28Table of ContentsAlphabet Inc.International revenues represent a significant portion of our revenues and are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. While we have a foreign exchange risk management program designed to reduce our exposure to these fluctuations, this program does not fully offset their effect on our revenues and earnings.•The portion of revenues that we derive from non-advertising revenues is increasing and may adversely affect margins.Non-advertising revenues have grown over time. We expect this trend to continue as we focus on expanding our offerings through products and services like Google Cloud, Google Play, hardware products, and YouTube subscriptions. We currently derive non-advertising revenues primarily from sales of apps and in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud services and subscription and other services. A number of Other Bets initiatives are in their initial development stages, and as such, revenues from these businesses could be volatile. In addition, the margins on these revenues vary significantly and may be lower than the margins on our advertising revenues.•As we continue to serve our users and expand our businesses, we will invest heavily in operating and capital expenditures.We continue to make significant R&D investments in areas of strategic focus across Google Services, Google Cloud and Other Bets. We also expect to continue to invest in land and buildings for data centers and offices, and information technology assets, which includes servers and network equipment, to support the long-term growth of our business. In addition, acquisitions and strategic investments contribute to the breadth and depth of our offerings, expand our expertise in engineering and other functional areas, and build strong partnerships around strategic initiatives. For example, in January 2021 we closed the acquisition of Fitbit, Inc. for $2.1 billion, which is expected to help spur innovation in wearable devices.•We face continuing changes in regulatory conditions, laws, and public policies, which could affect our business practices and financial results.Changes in social, political, economic, tax, and regulatory conditions or in laws and policies governing a wide range of topics and related legal matters have resulted in fines and caused us to change our business practices. As these global trends continue, our cost of doing business may increase, and our ability to pursue certain business models or offer certain products or services may be limited. Examples include the antitrust complaints filed by the U.S. Department of Justice and a number of state Attorneys General, the Digital Markets Act in Europe, and various legislative proposals in the U.S. focused on large technology platforms.•Our employees are critical to our success and we expect to continue investing in them.Our employees are among our best assets and are critical for our continued success. We expect to continue hiring talented employees around the globe and to provide competitive compensation programs. For additional information see Culture and Workforce in Part I, Item 1 “Business.”Seasonality and otherOur advertising revenues are affected by seasonal fluctuations in internet usage, advertising expenditures, and underlying business trends, such as traditional retail seasonality. Additionally, our non-advertising revenues, including those generated from Google Cloud, Google Play, hardware, and YouTube, may be affected by fluctuations driven by changes in pricing, digital content releases, fee structures, new product and service launches, other market dynamics, as well as seasonality. Revenues and Monetization Metrics Google ServicesGoogle Services revenues consist of revenues generated from advertising (“Google advertising”) as well as revenues from other sources (“Google other revenues”).Google AdvertisingGoogle advertising revenues are comprised of the following: •Google Search & other, which includes revenues generated on Google search properties (including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.), and other Google owned and operated properties like Gmail, Google Maps, and Google Play;•YouTube ads, which includes revenues generated on YouTube properties; and29Table of ContentsAlphabet Inc.•Google Network, which includes revenues generated on Google Network properties participating in AdMob, AdSense, and Google Ad Manager.We use certain metrics to track how well traffic across various properties is monetized as it relates to our advertising revenues: paid clicks and cost-per-click pertain to traffic on Google Search & other properties, while impressions and cost-per-impressions pertain to traffic on our Network partners’ properties.Paid clicks represent engagement by users and include clicks on advertisements by end-users on Google search properties and other Google owned and operated properties including Gmail, Google Maps, and Google Play. Cost-per-click is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users.Impressions include impressions displayed to users on Google Network properties participating primarily in AdMob, AdSense, and Google Ad Manager. Cost-per-impression is defined as impression-based and click-based revenues divided by our total number of impressions, and represents the average amount we charge advertisers for each impression displayed to users.As our business evolves, we periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and the number of impressions, and for identifying the revenues generated by the corresponding click and impression activity.Our advertising revenue growth, as well as the change in paid clicks and cost-per-click on Google Search & other properties and the change in impressions and cost-per-impression on Google Network properties and the correlation between these items, have been affected and may continue to be affected by various factors, including:•advertiser competition for keywords;•changes in advertising quality, formats, delivery or policy;•changes in device mix;•changes in foreign currency exchange rates;•fees advertisers are willing to pay based on how they manage their advertising costs;•general economic conditions, including the effect of COVID-19;•seasonality; and•traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels.Google OtherGoogle other revenues are comprised of the following:•Google Play, which includes sales of apps and in-app purchases and digital content sold in the Google Play store;•Devices and Services, which includes sales of hardware, including Fitbit wearable devices, Google Nest home products, and Pixel phones;•YouTube non-advertising, which includes YouTube Premium and YouTube TV subscriptions; and•other products and services.Google CloudGoogle Cloud revenues are comprised of the following:•Google Cloud Platform, which includes fees for infrastructure, platform, and other services;•Google Workspace, which includes fees for cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar and Meet; and •other enterprise services.Other BetsRevenues from Other Bets are generated primarily from the sale of health technology and internet services.30Table of ContentsAlphabet Inc.For further details on how we recognize revenue, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.Costs and Expenses Our cost structure has two components: cost of revenues and operating expenses. Our operating expenses include costs related to R&D, sales and marketing, and general and administrative functions. Certain of these expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to the changes in revenue.Cost of RevenuesCost of revenues is comprised of TAC and other costs of revenues.•TAC includes: ◦Amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers.◦Amounts paid to Google Network partners primarily for ads displayed on their properties.•Other cost of revenues includes:◦Content acquisition costs, which are payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated or a flat fee).◦Expenses associated with our data centers (including bandwidth, compensation expenses, depreciation, energy, and other equipment costs) as well as other operations costs (such as content review as well as customer and product support costs).◦Inventory and other costs related to the hardware we sell.The cost of revenues as a percentage of revenues generated from ads placed on Google Network properties are significantly higher than the cost of revenues as a percentage of revenues generated from ads placed on Google Search & other properties, because most of the advertiser revenues from ads served on Google Network properties are paid as TAC to our Google Network partners.Operating ExpensesOperating expenses are generally incurred during our normal course of business, which we categorize as either R&D, sales and marketing, or general and administrative.The main components of our R&D expenses are:•compensation expenses for engineering and technical employees responsible for R&D related to our existing and new products and services; •depreciation; and•professional services fees primarily related to consulting and outsourcing services.The main components of our sales and marketing expenses are:•compensation expenses for employees engaged in sales and marketing, sales support, and certain customer service functions; and•spending relating to our advertising and promotional activities in support of our products and services.The main components of our general and administrative expenses are:•compensation expenses for employees in finance, human resources, information technology, legal, and other administrative support functions; •expenses related to legal matters, including fines and settlements; and •professional services fees, including audit, consulting, outside legal, and outsourcing services.31Table of ContentsAlphabet Inc.Other Income (Expense), Net Other income (expense), net primarily consists of interest income (expense), the effect of foreign currency exchange gains (losses), net gains (losses) and impairment on our marketable and non-marketable securities, performance fees, and income (loss) and impairment from our equity method investments. For additional details, including how we account for our investments and factors that can drive fluctuations in the value of our investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K as well as Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”.Provision for Income Taxes Provision for income taxes represents the estimated amount of federal, state, and foreign income taxes incurred in the U.S. and the many jurisdictions in which we operate. The provision includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties.For additional details, including a reconciliation of the U.S. federal statutory rate to our effective tax rate, see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.Executive OverviewThe following table summarizes consolidated financial results for the years ended December 31, 2020 and 2021 unless otherwise specified (in millions, except for per share information and percentages):Year Ended December 31,20202021$ Change% ChangeConsolidated revenues$182,527 $257,637 $75,110 41 %Change in consolidated constant currency revenues39 %Cost of revenues$84,732 $110,939 $26,207 31 %Operating expenses$56,571 $67,984 $11,413 20 %Operating income$41,224 $78,714 $37,490 91 %Operating margin23 %31 %8 %Other income (expense), net$6,858 $12,020 $5,162 75 %Net Income$40,269 $76,033 $35,764 89 %Diluted EPS$58.61 $112.20 $53.59 91 %Number of Employees135,301156,50021,19916 %•Revenues were $257.6 billion, an increase of 41%. The increase in revenues was primarily driven by Google Services and Google Cloud. The adverse effect of COVID-19 on 2020 advertising revenues also contributed to the year-over-year growth.•Cost of revenues was $110.9 billion, an increase of 31%, primarily driven by increases in TAC and content acquisition costs. An overall increase in data centers and other operations costs was partially offset by a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment.•Operating expenses were $68.0 billion, an increase of 20%, primarily driven by headcount growth, increases in advertising and promotional expenses and charges related to legal matters.Other information:•Operating cash flow was $91.7 billion, primarily driven by revenues generated from our advertising products.•Share repurchases were $50.3 billion, an increase of 62%. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information. 32Table of ContentsAlphabet Inc.•Capital expenditures, which primarily reflected investments in technical infrastructure, were $24.6 billion.•In January 2021, we updated the useful lives of certain of our servers and network equipment, resulting in a reduction in depreciation expense of $2.6 billion recorded primarily in cost of revenues and R&D. See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.•Our acquisition of Fitbit closed in early January 2021, and the related revenues are included in Google other. See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.•On February 1, 2022, the Company announced that the Board of Directors had approved and declared a 20-for-one stock split in the form of a one-time special stock dividend on each share of the Company’s Class A, Class B, and Class C stock. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information.The Effect of COVID-19 on our Financial Results We began to observe the effect of COVID-19 on our financial results in March 2020 when, despite an increase in users' search activity, our advertising revenues declined compared to the prior year. This was due to a shift of user search activity to less commercial topics and reduced spending by our advertisers. For the quarter ended June 30, 2020 our advertising revenues declined due to the continued effects of COVID-19 and the related reductions in global economic activity, but we observed a gradual return in user search activity to more commercial topics. This was followed by increased spending by our advertisers, which continued throughout the second half of 2020. Additionally, over the course of 2020, we experienced variability in our margins as many of our expenses are less variable in nature and/or may not correlate to changes in revenues. Market volatility contributed to fluctuations in the valuation of our equity investments. Further, our assessment of the credit deterioration of our customers due to changes in the macroeconomic environment during the period was reflected in our allowance for credit losses for accounts receivable. Throughout 2021 we remained focused on innovating and investing in the services we offer to consumers and businesses to support our long-term growth. The impact of COVID-19 on 2020 financial results affected year-over-year growth trends. The COVID-19 pandemic continues to evolve, be unpredictable and affect our business and financial results. Our past results may not be indicative of our future performance, and historical trends in our financial results may differ materially.Financial ResultsRevenuesThe following table presents revenues by type (in millions):Year Ended December 31,20202021Google Search & other$104,062 $148,951 YouTube ads19,772 28,845 Google Network23,090 31,701 Google advertising146,924 209,497 Google other21,711 28,032 Google Services total168,635 237,529 Google Cloud13,059 19,206 Other Bets657 753 Hedging gains (losses)176 149 Total revenues$182,527 $257,637 Google ServicesGoogle advertising revenuesGoogle Search & otherGoogle Search & other revenues increased $44.9 billion from 2020 to 2021. The overall growth was driven by interrelated factors including increases in search queries resulting from growth in user adoption and usage, primarily 33Table of ContentsAlphabet Inc.on mobile devices, growth in advertiser spending, and improvements we have made in ad formats and delivery. The adverse effect of COVID-19 on 2020 revenues also contributed to the year-over-year increase.YouTube adsYouTube ads revenues increased $9.1 billion from 2020 to 2021. Growth was driven by our direct response and brand advertising products. Growth for our direct response advertising products was primarily driven by increased advertiser spending as well as improvements to ad formats and delivery. Growth for our brand advertising products was primarily driven by increased spending by our advertisers and the adverse effect of COVID-19 on 2020 revenues.Google NetworkGoogle Network revenues increased $8.6 billion from 2020 to 2021. The growth was primarily driven by strength in AdMob, Google Ad Manager, and AdSense. The adverse effect of COVID-19 on 2020 revenues also contributed to the year-over-year increase.Monetization MetricsPaid clicks and cost-per-clickThe following table presents changes in paid clicks and cost-per-click (expressed as a percentage) from 2020 to 2021: Year Ended December 31, 2021Paid clicks change23 %Cost-per-click change15 %Paid clicks increased from 2020 to 2021 driven by a number of interrelated factors, including an increase in search queries resulting from growth in user adoption and usage, primarily on mobile devices; an increase in clicks relating to ads on Google Play; growth in advertiser spending; and improvements we have made in ad formats and delivery. The adverse effect of COVID-19 on 2020 paid clicks also contributed to the increase.The increase in cost-per-click from 2020 to 2021 was driven by a number of interrelated factors including changes in device mix, geographic mix, growth in advertiser spending, ongoing product changes, and property mix, as well as the adverse effect of COVID-19 in 2020.Impressions and cost-per-impressionThe following table presents changes in impressions and cost-per-impression (expressed as a percentage) from 2020 to 2021: Year Ended December 31, 2021Impressions change2 %Cost-per-impression change35 %Impressions increased from 2020 to 2021 primarily driven by growth in AdMob, partially offset by a decline in impressions related to AdSense. The increase in cost-per-impression was primarily driven by the adverse effect of COVID-19 in 2020 as well as the effect of interrelated factors including ongoing product and policy changes and improvements we have made in ad formats and delivery, changes in device mix, geographic mix, product mix, and property mix.Google other revenuesGoogle other revenues increased $6.3 billion from 2020 to 2021. The growth was primarily driven by YouTube non-advertising and hardware, followed by Google Play. Growth for YouTube non-advertising was primarily due to an increase in paid subscribers. Growth in hardware reflects the inclusion of Fitbit revenues, as the acquisition closed in January 2021, and an increase in phone sales. Growth for Google Play was primarily driven by sales of apps and in-app purchases.34Table of ContentsAlphabet Inc.Google CloudGoogle Cloud revenues increased $6.1 billion from 2020 to 2021. The growth was primarily driven by GCP followed by Google Workspace offerings. Google Cloud's infrastructure and platform services were the largest drivers of growth in GCP.Revenues by GeographyThe following table presents revenues by geography as a percentage of revenues, determined based on the addresses of our customers: Year Ended December 31, 20202021United States47 %46 %EMEA30 %31 %APAC18 %18 %Other Americas5 %5 %For further details on revenues by geography, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.Use of Constant Currency Revenues and Constant Currency Revenue Percentage ChangeThe effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. We use non-GAAP constant currency revenues and non-GAAP percentage change in constant currency revenues for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of results on a constant currency basis in addition to U.S. Generally Accepted Accounting Principles (GAAP) results helps improve the ability to understand our performance because it excludes the effects of foreign currency volatility that are not indicative of our core operating results.Constant currency information compares results between periods as if exchange rates had remained constant period over period. We define constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and use it to determine the constant currency revenue percentage change on a year-on-year basis. Constant currency revenues are calculated by translating current period revenues using prior year comparable period exchange rates, as well as excluding any hedging effects realized in the current period.Constant currency revenue percentage change is calculated by determining the change in current period revenues over prior year comparable period revenues where current period foreign currency revenues are translated using prior year comparable period exchange rates and hedging effects are excluded from revenues of both periods.These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP.35Table of ContentsAlphabet Inc.The following table presents the foreign exchange effect on international revenues and total revenues (in millions, except percentages): Year Ended December 31,20202021% Change from Prior YearEMEA revenues$55,370 $79,107 43 %EMEA constant currency revenues76,321 38 %APAC revenues32,550 46,123 42 %APAC constant currency revenues45,666 40 %Other Americas revenues9,417 14,404 53 %Other Americas constant currency revenues14,317 52 %United States revenues85,014 117,854 39 %Hedging gains (losses)176 149 Total revenues$182,527 $257,637 41 %Revenues, excluding hedging effect$182,351 $257,488 Exchange rate effect(3,330)Total constant currency revenues$254,158 39 %EMEA revenue growth from 2020 to 2021 was favorably affected by foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Euro and British pound.APAC revenue growth from 2020 to 2021 was favorably affected by foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Australian dollar, partially offset by the U.S. dollar strengthening relative to the Japanese yen.Other Americas growth change from 2020 to 2021 was favorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Canadian dollar, partially offset by the U.S. dollar strengthening relative to the Argentine peso and the Brazilian real.Costs and ExpensesCost of RevenuesThe following tables present cost of revenues, including TAC (in millions, except percentages): Year Ended December 31, 20202021TAC$32,778 $45,566 Other cost of revenues51,954 65,373 Total cost of revenues$84,732 $110,939 Total cost of revenues as a percentage of revenues46.4 %43.1 %Cost of revenues increased $26.2 billion from 2020 to 2021. The increase was due to an increase in other cost of revenues and TAC of $13.4 billion and $12.8 billion, respectively.The increase in TAC from 2020 to 2021 was due to an increase in TAC paid to distribution partners and to Google Network partners, primarily driven by growth in revenues subject to TAC. The TAC rate decreased from 22.3% to 21.8% from 2020 to 2021 primarily due to a revenue mix shift from Google Network properties to Google Search & other properties. The TAC rate on Google Search & other properties revenues and the TAC rate on Google Network revenues were both substantially consistent from 2020 to 2021.The increase in other cost of revenues from 2020 to 2021 was driven by increases in content acquisition costs primarily for YouTube, data center and other operations costs, and hardware costs. The increase in data center and 36Table of ContentsAlphabet Inc.other operations costs was partially offset by a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment beginning in the first quarter of 2021.Research and DevelopmentThe following table presents R&D expenses (in millions, except percentages): Year Ended December 31, 20202021Research and development expenses$27,573 $31,562 Research and development expenses as a percentage of revenues15.1 %12.3 %R&D expenses increased $4.0 billion from 2020 to 2021. The increase was primarily due to an increase in compensation expenses of $3.5 billion, largely resulting from an 11% increase in headcount, and an increase in professional service fees of $516 million. This increase was partially offset by a reduction in depreciation expense of $450 million including the effect of our change in the estimated useful life of our servers and certain network equipment.Sales and MarketingThe following table presents sales and marketing expenses (in millions, except percentages): Year Ended December 31, 20202021Sales and marketing expenses$17,946 $22,912 Sales and marketing expenses as a percentage of revenues9.8 %8.9 %Sales and marketing expenses increased $5.0 billion from 2020 to 2021, primarily driven by an increase in advertising and promotional activities of $2.5 billion and an increase in compensation expenses of $2.2 billion. The increase in advertising and promotional activities was driven by both increased spending in the current period and a reduction in spending in 2020 due to COVID-19. The increase in compensation expenses was largely due to a 14% increase in headcount.General and AdministrativeThe following table presents general and administrative expenses (in millions, except percentages): Year Ended December 31, 20202021General and administrative expenses$11,052 $13,510 General and administrative expenses as a percentage of revenues6.1 %5.2 %General and administrative expenses increased $2.5 billion from 2020 to 2021. The increase was primarily driven by a $1.7 billion increase in charges relating to legal matters and a $664 million increase in compensation expenses, largely resulting from a 14% increase in headcount. These increases were partially offset by a reduction in expense of $808 million related to a decline in allowance for credit losses for accounts receivable, as 2020 reflected a higher allowance related to the economic effect of COVID-19.37Table of ContentsAlphabet Inc.Segment ProfitabilityThe following table presents segment operating income (loss) (in millions).Year Ended December 31,20202021Operating income (loss):Google Services$54,606 $91,855 Google Cloud(5,607)(3,099)Other Bets(4,476)(5,281)Corporate costs, unallocated(1)(3,299)(4,761)Total income from operations$41,224 $78,714 (1)Unallocated corporate costs primarily include corporate initiatives, corporate shared costs, such as finance and legal, including certain fines and settlements, as well as costs associated with certain shared R&D activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs.Google ServicesGoogle services operating income increased $37.2 billion from 2020 to 2021. The increase was due to growth in revenues partially offset by increases in TAC, content acquisition costs, compensation expenses, advertising and promotional expenses, and charges related to certain legal matters. The increase in expenses was partially offset by a reduction in costs driven by the change in the estimated useful life of our servers and certain network equipment. The effect of COVID-19 on 2020 results affected the year-over-year increase in operating income.Google CloudGoogle Cloud operating loss decreased $2.5 billion from 2020 to 2021. The decrease in operating loss was primarily driven by growth in revenues, partially offset by an increase in expenses, primarily driven by compensation expenses. The increase in expenses was partially offset by a reduction in costs driven by the change in the estimated useful life of our servers and certain network equipment.Other BetsOther Bets operating loss increased $805 million from 2020 to 2021. The increase in operating loss was primarily driven by increases in compensation expenses, including an increase in valuation-based compensation charges during the second quarter of 2021.Other Income (Expense), NetThe following table presents other income (expense), net, (in millions): Year Ended December 31, 20202021Other income (expense), net$6,858 $12,020 Other income (expense), net, increased $5.2 billion from 2020 to 2021. The increase was primarily driven by increases in net unrealized gains recognized for our marketable and non-marketable equity securities of $6.9 billion, partially offset by an increase in accrued performance fees related to certain investments of $1.3 billion.See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.Provision for Income TaxesThe following table presents provision for income taxes (in millions, except for effective tax rate): Year Ended December 31, 20202021Provision for income taxes$7,813 $14,701 Effective tax rate16.2 %16.2 %The provision for income taxes increased from 2020 to 2021, primarily due to an increase in pre-tax earnings, including in countries that have higher statutory rates, partially offset by an increase in the stock-based compensation related tax benefit, and the U.S. federal Foreign-Derived Intangible Income tax deduction benefit. Our effective tax rate 38Table of ContentsAlphabet Inc.was substantially consistent from 2020 to 2021. See Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.Financial ConditionCash, Cash Equivalents, and Marketable SecuritiesAs of December 31, 2021, we had $139.6 billion in cash, cash equivalents, and short-term marketable securities. Cash equivalents and marketable securities are comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities, and marketable equity securities.Sources, Uses of Cash and Related TrendsOur principal sources of liquidity are cash, cash equivalents, and marketable securities, as well as the cash flow that we generate from operations. The primary use of capital continues to be to invest for the long-term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace and form of capital return to stockholders.The following table presents our cash flows (in millions): Year Ended December 31, 20202021Net cash provided by operating activities$65,124 $91,652 Net cash used in investing activities$(32,773)$(35,523)Net cash used in financing activities$(24,408)$(61,362)Cash Provided by Operating ActivitiesOur largest source of cash provided by operations are advertising revenues generated by Google Search & other properties, Google Network properties, and YouTube ads. Additionally, we generate cash through sales of apps and in-app purchases, digital content products, and hardware; and licensing and service fees including fees received for Google Cloud offerings and subscription-based products.Our primary uses of cash from operating activities include payments to distribution and Google Network partners, for compensation and related costs, and for content acquisition costs. In addition, uses of cash from operating activities include hardware inventory costs, income taxes, and other general corporate expenditures.Net cash provided by operating activities increased from 2020 to 2021 primarily due to the net effect of an increase in cash received from revenues and cash paid for cost of revenues and operating expenses, and changes in operating assets and liabilities.Cash Used in Investing ActivitiesCash provided by investing activities consists primarily of maturities and sales of our investments in marketable and non-marketable securities. Cash used in investing activities consists primarily of purchases of marketable and non-marketable securities, purchases of property and equipment, and payments for acquisitions.Net cash used in investing activities increased from 2020 to 2021 primarily due to a decrease in maturities and sales of marketable securities, an increase in purchases of property and equipment, offset by a decrease in purchases of non-marketable securities.Cash Used in Financing ActivitiesCash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from the sale of interest in consolidated entities. Cash used in financing activities consists primarily of repurchases of common and capital stock, net payments related to stock-based award activities, and repayments of debt.Net cash used in financing activities increased from 2020 to 2021 primarily due to repayment of debt and an increase in cash payments for repurchases of common and capital stock.Liquidity and Material Cash RequirementsWe expect existing cash, cash equivalents, short-term marketable securities, cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future.39Table of ContentsAlphabet Inc.Capital Expenditures and LeasesWe make investments in land and buildings for data centers and offices and information technology assets through purchases of property and equipment and lease arrangements to provide capacity for the growth of our services and products. Capital ExpendituresOur capital investments in property and equipment consist primarily of the following major categories:•technical infrastructure, which consists of our investments in servers and network equipment for computing, storage and networking requirements for ongoing business activities, including machine learning (collectively referred to as our information technology assets) and data center land and building construction; and•office facilities, ground up development projects and related building improvements.Construction in progress consists primarily of technical infrastructure and office facilities which have not yet been placed in service for our intended use. The time frame from date of purchase to placement in service of these assets may extend from months to years. For example, our data center construction projects are generally multi-year projects with multiple phases, where we acquire qualified land and buildings, construct buildings, and secure and install information technology assets. During the years ended December 31, 2020 and 2021, we spent $22.3 billion and $24.6 billion on capital expenditures, respectively. Depreciation of our property and equipment commences when the deployment of such assets are completed and are ready for our intended use. Land is not depreciated. For the years ended December 31, 2020 and 2021, our depreciation and impairment expenses on property and equipment were $12.9 billion and $11.6 billion, respectively.LeasesFor the years ended December 31, 2020 and 2021, we recognized total operating lease assets of $2.8 billion and $3.0 billion, respectively. As of December 31, 2021, the amount of total future lease payments under operating leases, which had a weighted average remaining lease term of 8 years, was $15.5 billion, of which $2.5 billion is short-term. As of December 31, 2021, we have entered into leases that have not yet commenced with future short-term and long-term lease payments of $606 million and $5.2 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2022 and 2026 with non-cancelable lease terms of 1 to 25 years.For the years ended December 31, 2020 and 2021, our operating lease expenses (including variable lease costs) were $2.9 billion and $3.4 billion, respectively. Finance lease costs were not material for the years ended December 31, 2020 and 2021. See Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information on leases.FinancingWe have a short-term debt financing program of up to $10.0 billion through the issuance of commercial paper, which increased from $5.0 billion in September 2021. Net proceeds from this program are used for general corporate purposes. As of December 31, 2021, we had no commercial paper outstanding. As of December 31, 2021, we had $10.0 billion of revolving credit facilities with no amounts outstanding. In April 2021, we terminated the existing revolving credit facilities, which were scheduled to expire in July 2023, and entered into two new revolving credit facilities in the amounts of $4.0 billion and $6.0 billion, which will expire in April 2022 and April 2026, respectively. The interest rates for the new credit facilities are determined based on a formula using certain market rates, as well as our progress toward the achievement of certain sustainability goals. No amounts have been borrowed under the new credit facilities.As of December 31, 2021, we have senior unsecured notes outstanding with a total carrying value of $12.8 billion with short-term and long-term future interest payments of $231 million and $4.0 billion, respectively. See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information on our debt.Share Repurchase ProgramIn April 2021, the Board of Directors of Alphabet authorized the company to repurchase up to $50.0 billion of its Class C stock. In July 2021, the Alphabet board approved an amendment to the April 2021 authorization, permitting the company to repurchase both Class A and Class C shares in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading 40Table of ContentsAlphabet Inc.prices and volumes of the Class A and Class C shares. In accordance with the authorizations of the Board of Directors of Alphabet, during 2021 we repurchased and subsequently retired 20.3 million aggregate shares for $50.3 billion. Of the aggregate amount repurchased and subsequently retired, 1.2 million shares were Class A stock repurchased for $3.4 billion. As of December 31, 2021, $17.4 billion remains available for Class A and Class C share repurchases under the amended authorization. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.European Commission FinesIn 2017, 2018 and 2019, the EC announced decisions that certain actions taken by Google infringed European competition law and imposed fines of €2.4 billion ($2.7 billion as of June 27, 2017), €4.3 billion ($5.1 billion as of June 30, 2018), and €1.5 billion ($1.7 billion as of March 20, 2019), respectively. While each EC decision is under appeal, we included the fines in accrued expenses and other current liabilities on our Consolidated Balance Sheets as we provided bank guarantees (in lieu of a cash payment) for the fines.TaxesAs of December 31, 2021, we had short-term and long-term income taxes payable of $784 million and $5.7 billion related to a one-time transition tax payable incurred as a result of the U.S. Tax Cuts and Jobs Act ("Tax Act"). As permitted by the Tax Act, we will pay the transition tax in annual interest-free installments through 2025. We also have taxes payable of $3.5 billion primarily related to uncertain tax positions as of December 31, 2021. Purchase Commitments We regularly enter into significant non-cancelable contractual obligations primarily related to data center operations and build-outs, information technology assets, office buildings, purchases of inventory, and network capacity arrangements. As of December 31, 2021, such purchase commitments, which do not qualify for recognition on our Consolidated Balance Sheets, amount to $13.7 billion, of which $11.9 billion is short-term. These amounts represent the non-cancelable portion of agreements or the minimum cancellation fee. For those agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2021.Critical Accounting EstimatesWe prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit and compliance committee of our Board of Directors.See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.Fair Value Measurements of Non-Marketable Equity SecuritiesWe measure certain financial instruments at fair value on a nonrecurring basis, consisting primarily of our non-marketable equity securities. These investments are accounted for under the measurement alternative and are measured at cost, less impairment, subject to upward and downward adjustments resulting from observable price changes for identical or similar investments of the same issuer. These adjustments require quantitative assessments of the fair value of our securities, which may require the use of unobservable inputs. Pricing adjustments are determined by using various valuation methodologies and involve the use of estimates using the best information available, which may include cash flow projections or other available market data.Non-marketable equity securities are also evaluated for impairment, based on qualitative factors including the companies' financial and liquidity position and access to capital resources, among others. When indicators of impairment exist, we prepare quantitative measurements of the fair value of our equity investments using a market approach or an income approach, which requires judgment and the use of unobservable inputs, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others. When our assessment indicates that an impairment exists, we write down the investment to its fair value.41Table of ContentsAlphabet Inc.We also have compensation arrangements with payouts based on realized returns from certain investments, i.e. performance fees. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized, and may require the use of unobservable inputs.Property and EquipmentWe assess the reasonableness of the useful lives of our property and equipment periodically as well as when other changes occur, such as when there are changes to ongoing business operations, changes in the planned use and utilization of assets, or technological advancements, that could indicate a change in the period over which we expect to benefit from the assets. Income TaxesWe are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.Recording an uncertain tax position involves various qualitative considerations, including evaluation of comparable and resolved tax exposures, applicability of tax laws, and likelihood of settlement. We evaluate uncertain tax positions periodically, considering changes in facts and circumstances, such as new regulations or recent judicial opinions, as well as the status of audit activities by taxing authorities. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made.The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Services (IRS) and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes.Loss ContingenciesWe are regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury consumer protection, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We evaluate, on a regular basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Change in Accounting EstimateIn January 2021, we completed an assessment of the useful lives of our servers and certain network equipment. In doing so, we determined we should adjust the estimated useful life. This change in accounting estimate was effective beginning fiscal year 2021 and is detailed further in Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe are exposed to financial market risks, including changes in foreign currency exchange rates, interest rates, and equity investment risks. Foreign Currency Exchange RiskWe transact business globally in multiple currencies. International revenues, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Principal currencies hedged included the Australian dollar, British pound, Canadian dollar, Euro, and Japanese yen. For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in 42Table of ContentsAlphabet Inc.foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term.We use foreign exchange forward contracts to offset the foreign exchange risk on assets and liabilities denominated in currencies other than the functional currency of the subsidiary. These forward contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements on our assets and liabilities. The foreign currency gains and losses on these assets and liabilities are recorded in other income (expense), net, which are offset by the gains and losses on the forward contracts.If an adverse 10% foreign currency exchange rate change was applied to total monetary assets, liabilities, and commitments denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in an adverse effect on income before income taxes of approximately $497 million and $285 million as of December 31, 2020 and 2021, respectively, after consideration of the effect of foreign exchange contracts in place for the years ended December 31, 2020 and 2021.We use foreign currency forwards and option contracts, including collars (an option strategy comprised of a combination of purchased and written options) to protect forecasted U.S. dollar-equivalent earnings from changes in foreign currency exchange rates. When the U.S. dollar strengthens, gains from foreign currency options and forwards reduce the foreign currency losses related to our earnings. When the U.S. dollar weakens, losses from foreign currency collars and forwards offset the foreign currency gains related to our earnings. These hedging contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements. We designate these contracts as cash flow hedges for accounting purposes. We reflect the gains or losses of foreign currency spot rate changes as a component of AOCI and subsequently reclassify them into revenues to offset the hedged exposures as they occur. If the U.S. dollar weakened by 10% as of December 31, 2020 and 2021, the amount recorded in AOCI related to our foreign exchange contracts before tax effect would have been approximately $912 million and $1.3 billion lower as of December 31, 2020 and 2021, respectively. The change in the value recorded in AOCI would be expected to offset a corresponding foreign currency change in forecasted hedged revenues when recognized.We use foreign exchange forward contracts designated as net investment hedges to hedge the foreign currency risks related to investment in foreign subsidiaries. These forward contracts serve to offset the foreign currency translation risk from our foreign operations.If the U.S. dollar weakened by 10%, the amount recorded in cumulative translation adjustment (CTA) within AOCI related to our net investment hedge would have been approximately $1.0 billion lower as of both December 31, 2020 and 2021. The change in value recorded in CTA would be expected to offset a corresponding foreign currency translation gain or loss from our investment in foreign subsidiaries.Interest Rate RiskOur Corporate Treasury investment strategy is to achieve a return that will allow us to preserve capital and maintain liquidity. We invest primarily in debt securities, including those of the U.S. government and its agencies, corporate debt securities, mortgage-backed securities, money market and other funds, municipal securities, time deposits, asset backed securities, and debt instruments issued by foreign governments. By policy, we limit the amount of credit exposure to any one issuer. Our investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Unrealized gains or losses on our marketable debt securities are primarily due to interest rate fluctuations as compared to interest rates at the time of purchase. For certain fixed and variable rate debt securities, we have elected the fair value option for which changes in fair value are recorded in other income (expense), net. We measure securities for which we have not elected the fair value option at fair value with gains and losses recorded in AOCI until the securities are sold, less any expected credit losses. We use value-at-risk (VaR) analysis to determine the potential effect of fluctuations in interest rates on the value of our marketable debt security portfolio. The VaR is the expected loss in fair value, for a given confidence interval, for our investment portfolio due to adverse movements in interest rates. We use a variance/covariance VaR model with 95% confidence interval. The estimated one-day loss in fair value of marketable debt securities as of December 31, 2020 and 2021 are shown below (in millions): As of December 31,12-Month Average As of December 31, 2020202120202021Risk Category - Interest Rate$144 $139 $145 $148 43Table of ContentsAlphabet Inc.Actual future gains and losses associated with our marketable debt security portfolio may differ materially from the sensitivity analyses performed as of December 31, 2020 and 2021 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates and our actual exposures and positions. VaR analysis is not intended to represent actual losses but is used as a risk estimation.Equity Investment RiskOur marketable and non-marketable equity securities are subject to a wide variety of market-related risks that could substantially reduce or increase the fair value of our holdings.Our marketable equity securities are publicly traded stocks or funds and our non-marketable equity securities are investments in privately held companies, some of which are in the startup or development stages.We record marketable equity securities not accounted for under the equity method at fair value based on readily determinable market values, of which publicly traded stocks and mutual funds are subject to market price volatility, and represent $5.9 billion and $7.8 billion of our investments as of December 31, 2020 and 2021, respectively. A hypothetical adverse price change of 10% on our December 31, 2021 balance, which could be experienced in the near term, would decrease the fair value of marketable equity securities by $780 million. From time to time, we may enter into derivatives to hedge the market price risk on certain of our marketable equity securities.Our non-marketable equity securities not accounted for under the equity method are adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). The fair value measured at the time of the observable transaction is not necessarily an indication of the current fair value as of the balance sheet date. These investments, especially those that are in the early stages, are inherently risky because the technologies or products these companies have under development are typically in the early phases and may never materialize, and they may experience a decline in financial condition, which could result in a loss of a substantial part of our investment in these companies. The success of our investment in any private company is also typically dependent on the likelihood of our ability to realize appreciation in the value of investments through liquidity events such as public offerings, acquisitions, private sales or other market events. As of December 31, 2020 and 2021, the carrying value of our non-marketable equity securities, which were accounted for under the measurement alternative, was $18.9 billion and $27.6 billion, respectively. Valuations of our equity investments in private companies are inherently more complex due to the lack of readily available market data. Volatility in the global economic climate and financial markets could result in a significant impairment charge relating to our non-marketable equity securities. Changes in valuation of non-marketable equity securities may not directly correlate with changes in valuation of marketable equity securities. Additionally, observable transactions at lower valuations could result in significant losses on our non-marketable equity securities. The effect of COVID-19 on our impairment assessment requires significant judgment due to the uncertainty around the duration and severity of the effect.The carrying values of our equity method investments, which totaled approximately $1.4 billion and $1.5 billion as of December 31, 2020 and 2021, respectively, generally do not fluctuate based on market price changes. However, these investments could be impaired if the carrying value exceeds the fair value and is not expected to recover.For further information about our equity investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.44Table of ContentsAlphabet Inc.ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAAlphabet Inc.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReports of Independent Registered Public Accounting Firm (PCAOB ID: 42)46Financial Statements:Consolidated Balance Sheets49Consolidated Statements of Income50Consolidated Statements of Comprehensive Income51Consolidated Statements of Stockholders’ Equity52Consolidated Statements of Cash Flows53Notes to Consolidated Financial Statements5445Table of ContentsAlphabet Inc.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors of Alphabet Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Alphabet Inc. (the Company) as of December 31, 2020 and 2021, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 1, 2022 expressed an unqualified opinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 46Table of ContentsAlphabet Inc.Loss Contingencies Description of the MatterThe Company is regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by its users, goods and services offered by advertisers or publishers using their platforms, personal injury, consumer protection, and other matters. As described in Note 10 to the consolidated financial statements “Contingencies” such claims, suits, regulatory and government investigations, and other proceedings could result in adverse consequences.Significant judgment is required to determine both the likelihood, and the estimated amount, of a loss related to such matters. Auditing management’s accounting for and disclosure of loss contingencies from these matters involved challenging and subjective auditor judgment in assessing the Company’s evaluation of the probability of a loss, and the estimated amount or range of loss.How We Addressed the Matter in Our AuditWe tested relevant controls over the identified risks associated with management’s accounting for and disclosure of these matters. This included controls over management’s assessment of the probability of incurrence of a loss and whether the loss or range of loss was reasonably estimable and the development of related disclosures.Our audit procedures included gaining an understanding of previous rulings issued by regulators and the status of ongoing lawsuits, reviewing letters addressing the matters from internal and external legal counsel, meeting with internal legal counsel to discuss the allegations, and obtaining a representation letter from management on these matters. We also evaluated the Company’s disclosures in relation to these matters./s/ Ernst & Young LLPWe have served as the Company's auditor since 1999.San Jose, CaliforniaFebruary 1, 202247Table of ContentsAlphabet Inc.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors of Alphabet Inc.Opinion on Internal Control over Financial ReportingWe have audited Alphabet Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Alphabet Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company and our report dated February 1, 2022 expressed an unqualified opinion thereon. Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ Ernst & Young LLPSan Jose, CaliforniaFebruary 1, 202248Table of ContentsAlphabet Inc.Alphabet Inc.CONSOLIDATED BALANCE SHEETS(In millions, except share amounts which are reflected in thousands, and par value per share amounts)As of December 31,20202021AssetsCurrent assets:Cash and cash equivalents$26,465 $20,945 Marketable securities110,229 118,704 Total cash, cash equivalents, and marketable securities136,694 139,649 Accounts receivable, net30,930 39,304 Income taxes receivable, net454 966 Inventory728 1,170 Other current assets5,490 7,054 Total current assets174,296 188,143 Non-marketable securities20,703 29,549 Deferred income taxes1,084 1,284 Property and equipment, net84,749 97,599 Operating lease assets12,211 12,959 Intangible assets, net1,445 1,417 Goodwill21,175 22,956 Other non-current assets3,953 5,361 Total assets$319,616 $359,268 Liabilities and Stockholders’ EquityCurrent liabilities:Accounts payable$5,589 $6,037 Accrued compensation and benefits11,086 13,889 Accrued expenses and other current liabilities28,631 31,236 Accrued revenue share7,500 8,996 Deferred revenue2,543 3,288 Income taxes payable, net1,485 808 Total current liabilities56,834 64,254 Long-term debt13,932 14,817 Deferred revenue, non-current481 535 Income taxes payable, non-current8,849 9,176 Deferred income taxes3,561 5,257 Operating lease liabilities11,146 11,389 Other long-term liabilities2,269 2,205 Total liabilities97,072 107,633 Contingencies (Note 10)Stockholders’ equity:Preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding0 0 Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 675,222 (Class A 300,730, Class B 45,843, Class C 328,649) and 662,121 (Class A 300,737, Class B 44,665, Class C 316,719) shares issued and outstanding58,510 61,774 Accumulated other comprehensive income (loss)633 (1,623)Retained earnings163,401 191,484 Total stockholders’ equity222,544 251,635 Total liabilities and stockholders’ equity$319,616 $359,268 See accompanying notes.49Table of ContentsAlphabet Inc.Alphabet Inc.CONSOLIDATED STATEMENTS OF INCOME(In millions, except per share amounts) Year Ended December 31, 201920202021Revenues$161,857 $182,527 $257,637 Costs and expenses:Cost of revenues71,896 84,732 110,939 Research and development26,018 27,573 31,562 Sales and marketing18,464 17,946 22,912 General and administrative9,551 11,052 13,510 European Commission fines1,697 0 0 Total costs and expenses127,626 141,303 178,923 Income from operations34,231 41,224 78,714 Other income (expense), net5,394 6,858 12,020 Income before income taxes 39,625 48,082 90,734 Provision for income taxes5,282 7,813 14,701 Net income$34,343 $40,269 $76,033 Basic net income per share of Class A and B common stock and Class C capital stock$49.59 $59.15 $113.88 Diluted net income per share of Class A and B common stock and Class C capital stock$49.16 $58.61 $112.20 See accompanying notes.50Table of ContentsAlphabet Inc.Alphabet Inc.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions) Year Ended December 31, 201920202021Net income$34,343 $40,269 $76,033 Other comprehensive income (loss):Change in foreign currency translation adjustment(119)1,139 (1,442)Available-for-sale investments:Change in net unrealized gains (losses)1,611 1,313 (1,312)Less: reclassification adjustment for net (gains) losses included in net income(111)(513)(64)Net change, net of income tax benefit (expense) of $(221), $(230), and $3941,500 800 (1,376)Cash flow hedges:Change in net unrealized gains (losses)22 42 716 Less: reclassification adjustment for net (gains) losses included in net income(299)(116)(154)Net change, net of income tax benefit (expense) of $42, $11, and $(122)(277)(74)562 Other comprehensive income (loss)1,104 1,865 (2,256)Comprehensive income$35,447 $42,134 $73,777 See accompanying notes.51Table of ContentsAlphabet Inc.Alphabet Inc.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(In millions, except share amounts which are reflected in thousands) Class A and Class BCommon Stock, Class C Capital Stock andAdditional Paid-In CapitalAccumulatedOtherComprehensiveIncome (Loss)RetainedEarningsTotalStockholders’Equity SharesAmountBalance as of December 31, 2018695,556 $45,049 $(2,306)$134,885 $177,628 Cumulative effect of accounting change0 0 (30)(4)(34)Common and capital stock issued8,120 202 0 0 202 Stock-based compensation expense0 10,890 0 0 10,890 Income tax withholding related to vesting of restricted stock units and other0 (4,455)0 0 (4,455)Repurchases of capital stock(15,341)(1,294)0 (17,102)(18,396)Sale of interest in consolidated entities0 160 0 0 160 Net income0 0 0 34,343 34,343 Other comprehensive income (loss)0 0 1,104 0 1,104 Balance as of December 31, 2019688,335 50,552 (1,232)152,122 201,442 Common and capital stock issued8,398 168 0 0 168 Stock-based compensation expense0 13,123 0 0 13,123 Income tax withholding related to vesting of restricted stock units and other0 (5,969)0 0 (5,969)Repurchases of capital stock(21,511)(2,159)0 (28,990)(31,149)Sale of interest in consolidated entities0 2,795 0 0 2,795 Net income0 0 0 40,269 40,269 Other comprehensive income (loss)0 0 1,865 0 1,865 Balance as of December 31, 2020675,222 58,510 633 163,401 222,544 Common and capital stock issued7,225 12 0 0 12 Stock-based compensation expense0 15,539 0 0 15,539 Income tax withholding related to vesting of restricted stock units and other0 (10,273)0 0 (10,273)Repurchases of common and capital stock(20,326)(2,324)0 (47,950)(50,274)Sale of interest in consolidated entities0 310 0 0 310 Net income0 0 0 76,033 76,033 Other comprehensive income (loss)0 0 (2,256)0 (2,256)Balance as of December 31, 2021662,121 $61,774 $(1,623)$191,484 $251,635 See accompanying notes.52Table of ContentsAlphabet Inc.Alphabet Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions) Year Ended December 31, 201920202021Operating activitiesNet income$34,343 $40,269 $76,033 Adjustments:Depreciation and impairment of property and equipment10,856 12,905 11,555 Amortization and impairment of intangible assets925 792 886 Stock-based compensation expense10,794 12,991 15,376 Deferred income taxes173 1,390 1,808 Gain on debt and equity securities, net(2,798)(6,317)(12,270)Other(592)1,267 (213)Changes in assets and liabilities, net of effects of acquisitions:Accounts receivable(4,340)(6,524)(9,095)Income taxes, net(3,128)1,209 (625)Other assets(621)(1,330)(1,846)Accounts payable428 694 283 Accrued expenses and other liabilities7,170 5,504 7,304 Accrued revenue share1,273 1,639 1,682 Deferred revenue37 635 774 Net cash provided by operating activities54,520 65,124 91,652 Investing activitiesPurchases of property and equipment(23,548)(22,281)(24,640)Purchases of marketable securities(100,315)(136,576)(135,196)Maturities and sales of marketable securities97,825 132,906 128,294 Purchases of non-marketable securities(1,932)(7,175)(2,838)Maturities and sales of non-marketable securities405 1,023 934 Acquisitions, net of cash acquired, and purchases of intangible assets(2,515)(738)(2,618)Other investing activities589 68 541 Net cash used in investing activities(29,491)(32,773)(35,523)Financing activitiesNet payments related to stock-based award activities(4,765)(5,720)(10,162)Repurchases of common and capital stock(18,396)(31,149)(50,274)Proceeds from issuance of debt, net of costs317 11,761 20,199 Repayments of debt(585)(2,100)(21,435)Proceeds from sale of interest in consolidated entities, net220 2,800 310 Net cash used in financing activities(23,209)(24,408)(61,362)Effect of exchange rate changes on cash and cash equivalents(23)24 (287)Net increase (decrease) in cash and cash equivalents1,797 7,967 (5,520)Cash and cash equivalents at beginning of period16,701 18,498 26,465 Cash and cash equivalents at end of period$18,498 $26,465 $20,945 Supplemental disclosures of cash flow informationCash paid for income taxes, net of refunds$8,203 $4,990 $13,412 See accompanying notes.53Table of ContentsAlphabet Inc.Alphabet Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1. Summary of Significant Accounting Policies Google was incorporated in California in September 1998 and re-incorporated in the State of Delaware in August 2003. In 2015, we implemented a holding company reorganization, and as a result, Alphabet Inc. ("Alphabet") became the successor issuer to Google.Basis of ConsolidationThe consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. All intercompany balances and transactions have been eliminated.Use of EstimatesPreparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates due to uncertainties, including the effects of COVID-19. On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses; fair values of financial instruments, intangible assets, and goodwill; useful lives of intangible assets and property and equipment; income taxes; and contingent liabilities, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, and the results of which form the basis for making judgments about the carrying values of assets and liabilities.In January 2021, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years. This change in accounting estimate was effective beginning in fiscal year 2021. Based on the carrying value of servers and certain network equipment as of December 31, 2020 and those acquired during the year ended December 31, 2021, the effect of this change in estimate was a reduction in depreciation expense of $2.6 billion and an increase in net income of $2.0 billion, or $3.02 per basic share and $2.98 per diluted share, for the year ended December 31, 2021.Revenue RecognitionRevenues are recognized when control of the promised goods or services is transferred to our customers, and the collectibility of an amount that we expect in exchange for those goods or services is probable. Sales and other similar taxes are excluded from revenues. Advertising RevenuesWe generate advertising revenues primarily by delivering advertising on:•Google Search and other properties, including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc. and other Google owned and operated properties like Gmail, Google Maps, and Google Play;•YouTube properties; and•Google Network properties, including revenues from Google Network properties participating in AdMob, AdSense, and Google Ad Manager.Our customers generally purchase advertising inventory through Google Ads, Google Ad Manager, and Google Marketing Platform, among others.We offer advertising by delivering both performance and brand advertising. We recognize revenues for performance advertising when a user engages with the advertisement, such as a click, a view, or a purchase. For brand advertising, we recognize revenues when the ad is displayed, or a user views the ad.For ads placed on Google Network properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues for ads placed on Google Network properties on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to Google Network partners are recorded as cost of revenues. Where we are the principal, we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing.54Table of ContentsAlphabet Inc.Google Cloud RevenuesGoogle Cloud revenues consist of revenues from:•Google Cloud Platform, which includes fees for infrastructure, platform, and other services;•Google Workspace, which includes fees for cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and •other enterprise services.Our cloud services are generally provided on either a consumption or subscription basis and may have contract terms longer than a year. Revenues related to cloud services provided on a consumption basis are recognized when the customer utilizes the services, based on the quantity of services consumed. Revenues related to cloud services provided on a subscription basis are recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services.Google Other Revenues Google other revenues consist of revenues from:•Google Play, which includes sales of apps and in-app purchases and digital content sold in the Google Play store;•hardware, which includes sales of Fitbit wearable devices, Google Nest home products, and Pixel phones;•YouTube non-advertising, which includes YouTube Premium and YouTube TV subscriptions; and•other products and services.As it relates to Google other revenues, the most significant judgment is determining whether we are the principal or agent for app sales and in-app purchases through the Google Play store. We report revenues from these transactions on a net basis because our performance obligation is to facilitate a transaction between app developers and end users, for which we earn a service fee. Arrangements with Multiple Performance ObligationsOur contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost plus margin.Customer Incentives and CreditsCertain customers receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues. We believe that there will not be significant changes to our estimates of variable consideration.Sales CommissionsWe expense sales commissions when incurred and when the amortization period (the period of the expected benefit) is one year or less. We recognize an asset for certain sales commissions if we expect the period of benefit of these costs to exceed one year and recognize the expense over the amortization period. These costs are recorded within sales and marketing expenses.Cost of RevenuesCost of revenues consists of TAC and other costs of revenues.•TAC includes: ◦Amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers.◦Amounts paid to Google Network partners primarily for ads displayed on their properties.•Other cost of revenues includes:◦Content acquisition costs, which are payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated or a flat fee).55Table of ContentsAlphabet Inc.◦Expenses associated with our data centers (including bandwidth, compensation expenses, depreciation, energy, and other equipment costs) as well as other operations costs (such as content review as well as customer and product support costs).◦Inventory and other costs related to the hardware we sell.Software Development CostsWe expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. As a result, development costs that meet the criteria for capitalization were not material for the periods presented.Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented.Stock-based CompensationStock-based compensation primarily consists of Alphabet restricted stock units (RSUs). RSUs are equity classified and measured at the fair market value of the underlying stock at the grant date. We recognize RSU expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur.For RSUs, shares are issued on the vesting dates net of the applicable statutory income tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued than the number of RSUs outstanding, and the income tax withholding is recorded as a reduction to additional paid-in capital.Additionally, stock-based compensation also includes other stock-based awards, such as performance stock units (PSUs) that include market conditions and awards that may be settled in cash or the stock of certain Other Bets. PSUs and certain Other Bet awards are equity classified and expense is recognized over the requisite service period. Certain Other Bet awards are liability classified and remeasured at fair value through settlement. The fair value of Other Bet awards is based on the equity valuation of the respective Other Bet.Advertising and Promotional ExpensesWe expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2019, 2020 and 2021, advertising and promotional expenses totaled approximately $6.8 billion, $5.4 billion, and $7.9 billion, respectively.Performance FeesPerformance fees refer to compensation arrangements with payouts based on realized returns from certain investments. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized, and may require the use of unobservable inputs. Performance fees are recorded as a component of other income (expense), net.Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.Level 3 - Unobservable inputs that are supported by little or no market activities.56Table of ContentsAlphabet Inc.The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative financial instruments, and certain non-marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities. Other financial assets and liabilities are carried at cost with fair value disclosed, if required.We measure certain other instruments, including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, also at fair value on a nonrecurring basis. The determination of fair value involves the use of appropriate valuation methods and relevant inputs into valuation models. Financial InstrumentsOur financial instruments include cash, cash equivalents, marketable and non-marketable securities, derivative financial instruments and accounts receivable. Credit RisksWe are subject to credit risk from cash equivalents, marketable securities, derivative financial instruments, including foreign exchange contracts, and accounts receivable. We manage our credit risk exposure through timely assessment of our counterparty creditworthiness, credit limits and use of collateral management. Foreign exchange contracts are transacted with various financial institutions with high credit standing. Accounts receivable are typically unsecured and are derived from revenues earned from customers located around the world. We manage our credit risk exposure by performing ongoing evaluations to determine customer credit and we limit the amount of credit we extend. We generally do not require collateral from our customers.Cash EquivalentsWe invest excess cash primarily in government bonds, corporate debt securities, mortgage-backed and asset-backed securities, time deposits, and money market funds.Marketable SecuritiesWe classify all marketable debt securities that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities on our Consolidated Balance Sheets. We determine the appropriate classification of our investments in marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as available to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders’ equity, except for the changes in allowance for expected credit losses, which are recorded in other income (expense), net. For certain marketable debt securities we have elected the fair value option, for which changes in fair value are recorded in other income (expense), net. We determine any realized gains or losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net.Our investments in marketable equity securities are measured at fair value with the related gains and losses, including unrealized, recognized in other income (expense), net. We classify our marketable equity securities subject to long-term lock-up restrictions beyond twelve months as other non-current assets on the Consolidated Balance Sheets. Non-Marketable SecuritiesWe account for non-marketable equity securities through which we exercise significant influence but do not have control over the investee under the equity method. Our non-marketable equity securities not accounted for under the equity method are primarily accounted for under the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of other income (expense), net.Non-marketable debt securities are classified as available-for-sale securities.57Table of ContentsAlphabet Inc.Non-marketable securities that do not have stated contractual maturity dates are classified as other non-current assets on the Consolidated Balance Sheets.Derivative Financial InstrumentsSee Note 3 for the accounting policy pertaining to derivative financial instruments. Accounts ReceivableOur payment terms for accounts receivable vary by the types and locations of our customers and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customers, we require payment before the products or services are delivered to the customer. We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as general and administrative expense in the Consolidated Statements of Income. We assess collectibility by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions (such as the effects caused by COVID-19), and reasonable and supportable forecasts of future economic conditions. The allowance for credit losses on accounts receivable was $789 million and $550 million as of December 31, 2020 and 2021, respectively.OtherOur financial instruments also include debt and equity investments in companies with which we also have commercial arrangements. For these transactions, judgment is required to assess the substance of the arrangements, such as the market value of similar transactions or the fair value of the investment based on stand-alone transactions, and whether the agreements should be accounted for as separate transactions under the applicable GAAP. Impairment of InvestmentsWe periodically review our debt and non-marketable equity securities for impairment. For debt securities in an unrealized loss position, we determine whether a credit loss exists. The credit loss is estimated by considering available information relevant to the collectibility of the security and information about past events, current conditions, and reasonable and supportable forecasts. Any credit loss is recorded as a charge to other income (expense), net, not to exceed the amount of the unrealized loss. Unrealized losses other than the credit loss are recognized in accumulated other comprehensive income (AOCI). If we have an intent to sell, or if it is more likely than not that we will be required to sell a debt security in an unrealized loss position before recovery of its amortized cost basis, we will write down the security to its fair value and record the corresponding charge as a component of other income (expense), net. For non-marketable equity securities, including equity method investments, we consider whether impairment indicators exist by evaluating the companies' financial and liquidity position and access to capital resources, among other indicators. If the assessment indicates that the investment is impaired, we write down the investment to its fair value by recording the corresponding charge as a component of other income (expense), net. We prepare quantitative measurements of the fair value of our equity investments using a market approach or an income approach.InventoryInventory consists primarily of finished goods and is stated at the lower of cost and net realizable value. Cost is computed using the first-in, first-out method.Variable Interest EntitiesWe determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity (VIE). We consolidate VIEs when we are the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP.Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether we are the primary beneficiary. 58Table of ContentsAlphabet Inc.Property and EquipmentProperty and equipment includes the following categories: land and buildings, information technology assets, construction in progress, leasehold improvements, and furniture and fixtures. Land and buildings include land, offices, data centers, and related building improvements. Information technology assets include servers and network equipment. We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which we regularly evaluate. We depreciate buildings over periods of seven to 25 years. We depreciate information technology assets generally over periods of four to five years (generally, four years for servers and five years for network equipment).We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Construction in progress is the construction or development of property and equipment that have not yet been placed in service for our intended use. Depreciation for equipment, buildings, and leasehold improvements commences once they are ready for our intended use. Land is not depreciated.LeasesWe determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities.Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments contingent on wind or solar production for power purchase arrangements, and payments for maintenance and utilities.Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments and lease incentives.Operating lease assets and liabilities are included on our Consolidated Balance Sheet. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in operating lease liabilities. Finance lease assets are included in property and equipment, net. Finance lease liabilities are included in accrued expenses and other current liabilities or long-term debt.Operating lease expense (excluding variable lease costs) is recognized on a straight-line basis over the lease term.Long-Lived Assets, Goodwill and Other Acquired Intangible AssetsWe review property and equipment and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets or asset group is not recoverable, the impairment recognized is measured as the amount by which the carrying value exceeds its fair value. Impairments were not material for the periods presented.We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units periodically, as well as when changes in our operating segments occur. For changes in reporting units, we reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were not material for the periods presented.Intangible assets with definite lives are amortized over their estimated useful lives on a straight-line basis generally over periods ranging from one to twelve years.59Table of ContentsAlphabet Inc.Income TaxesWe account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized.We recognize the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision.Business CombinationsWe include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.Foreign CurrencyWe translate the financial statements of our international subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in AOCI as a component of stockholders’ equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in other income (expense), net.Prior Period ReclassificationsCertain amounts in prior periods have been reclassified to conform with current period presentation. Note 2. Revenues Revenue RecognitionThe following table presents revenues disaggregated by type (in millions):Year Ended December 31,201920202021Google Search & other$98,115 $104,062 $148,951 YouTube ads15,149 19,772 28,845 Google Network21,547 23,090 31,701 Google advertising134,811 146,924 209,497 Google other17,014 21,711 28,032 Google Services total151,825 168,635 237,529 Google Cloud8,918 13,059 19,206 Other Bets659 657 753 Hedging gains (losses)455 176 149 Total revenues$161,857 $182,527 $257,637 No individual customer or groups of affiliated customers represented more than 10% of our revenues in 2019, 2020, or 2021. 60Table of ContentsAlphabet Inc.The following table presents revenues disaggregated by geography, based on the addresses of our customers (in millions):Year Ended December 31, 201920202021United States$74,843 46 %$85,014 47 %$117,854 46 %EMEA(1)50,645 31 55,370 30 79,107 31 APAC(1)26,928 17 32,550 18 46,123 18 Other Americas(1)8,986 6 9,417 5 14,404 5 Hedging gains (losses)455 0 176 0 149 0 Total revenues$161,857 100 %$182,527 100 %$257,637 100 %(1)    Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America ("Other Americas").Revenue Backlog and Deferred RevenuesAs of December 31, 2021 we had $51.0 billion of remaining performance obligations (“revenue backlog”), primarily related to Google Cloud, and expect to recognize approximately half of this amount as revenues over the next 24 months with the remaining thereafter. Our revenue backlog represents commitments in customer contracts for future services that have not yet been recognized as revenues. The amount and timing of revenue recognition for these commitments is largely driven by when our customers utilize services and our ability to deliver in accordance with relevant contract terms, which could affect our estimate of revenue backlog and when we expect to recognize such as revenues. Revenue backlog includes related deferred revenue currently recorded as well as amounts that will be invoiced in future periods, and excludes contracts with an original expected term of one year or less and cancellable contracts.We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenues primarily relate to Google Cloud and Google other. Total deferred revenue as of December 31, 2020 was $3.0 billion, of which $2.3 billion was recognized as revenues for the year ending December 31, 2021.Note 3. Financial Instruments Debt SecuritiesWe classify our marketable debt securities, which are accounted for as available-for-sale within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.For certain marketable debt securities, we have elected the fair value option for which changes in fair value are recorded in other income (expense), net. The fair value option was elected for these securities to align with the unrealized gains and losses from related derivative contracts. Unrealized net gains (losses) related to debt securities still held where we have elected the fair value option were $87 million and $(35) million as of December 31, 2020 and December 31, 2021, respectively. As of December 31, 2020 and December 31, 2021, the fair value of these debt securities was $2.0 billion and $4.7 billion, respectively. 61Table of ContentsAlphabet Inc. The following tables summarize debt securities, for which we did not elect the fair value option, by significant investment categories as of December 31, 2020 and 2021 (in millions): As of December 31, 2020 AdjustedCostGrossUnrealizedGainsGrossUnrealizedLossesFairValueCash andCashEquivalentsMarketableSecuritiesLevel 2:Time deposits(1)$3,564 $0 $0 $3,564 $3,564 $0 Government bonds55,156 793 (9)55,940 2,527 53,413 Corporate debt securities31,521 704 (2)32,223 8 32,215 Mortgage-backed and asset-backed securities16,767 364 (7)17,124 0 17,124 Total$107,008 $1,861 $(18)$108,851 $6,099 $102,752  As of December 31, 2021 AdjustedCostGrossUnrealizedGainsGrossUnrealizedLossesFairValueCash andCashEquivalentsMarketableSecuritiesLevel 2:Time deposits(1)$5,133 $0 $0 $5,133 $5,133 $0 Government bonds53,288 258 (238)53,308 5 53,303 Corporate debt securities35,605 194 (223)35,576 12 35,564 Mortgage-backed and asset-backed securities18,829 96 (112)18,813 0 18,813 Total$112,855 $548 $(573)$112,830 $5,150 $107,680 (1)The majority of our time deposits are domestic deposits.We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. We recognized gross realized gains of $292 million, $899 million, and $432 million for the years ended December 31, 2019, 2020, and 2021, respectively. We recognized gross realized losses of $143 million, $184 million, and $329 million for the years ended December 31, 2019, 2020, and 2021, respectively. We reflect these gains and losses as a component of other income (expense), net.The following table summarizes the estimated fair value of investments in marketable debt securities by stated contractual maturity dates (in millions):As ofDecember 31, 2021Due in 1 year or less$16,192 Due in 1 year through 5 years78,625 Due in 5 years through 10 years4,675 Due after 10 years12,864 Total$112,356 The following tables present fair values and gross unrealized losses recorded to AOCI as of December 31, 2020 and 2021, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions): As of December 31, 2020 Less than 12 Months12 Months or GreaterTotal Fair ValueUnrealizedLossFair ValueUnrealizedLossFair ValueUnrealizedLossGovernment bonds$5,516 $(9)$3 $0 $5,519 $(9)Corporate debt securities1,999 (1)0 0 1,999 (1)Mortgage-backed and asset-backed securities929 (5)242 (2)1,171 (7)Total$8,444 $(15)$245 $(2)$8,689 $(17)62Table of ContentsAlphabet Inc. As of December 31, 2021 Less than 12 Months12 Months or GreaterTotal Fair ValueUnrealizedLossFair ValueUnrealizedLossFair ValueUnrealizedLossGovernment bonds$32,843 $(236)$71 $(2)$32,914 $(238)Corporate debt securities22,737 (152)303 (5)23,040 (157)Mortgage-backed and asset-backed securities11,502 (106)248 (6)11,750 (112)Total$67,082 $(494)$622 $(13)$67,704 $(507)During the years ended December 31, 2020 and 2021, we did not recognize significant credit losses and the ending allowance for credit losses was immaterial. See Note 7 for further details on other income (expense), net.Equity InvestmentsThe following discusses our marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity securities, as well as our equity securities accounted for under the equity method.Our marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 2 in the fair value hierarchy because we use quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.Our non-marketable equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable equity securities is adjusted to fair value upon observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). Non-marketable equity securities that have been remeasured during the period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities we hold. The fair value of non-marketable equity securities that have been remeasured due to impairment are classified within Level 3.Gains and losses on marketable and non-marketable equity securitiesGains and losses reflected in other income (expense), net, for marketable and non-marketable equity securities are summarized below (in millions):Year Ended December 31, 20202021Net gain (loss) on equity securities sold during the period$1,339 $1,196 Unrealized gain (loss) on equity securities held as of the end of the period4,253 11,184 Total gain (loss) recognized in other income (expense), net$5,592 $12,380 In the table above, net gain (loss) on equity securities sold during the period reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the period or the purchase date, if later. Cumulative net gains (losses) on equity securities sold during the period, which is summarized in the following table (in millions), represents the total net gains (losses) recognized after the initial purchase date of the equity security. While these net gains may have been reflected in periods prior to the period of sale, we believe they are important supplemental information as they reflect the economic net gains recognized on the securities sold during the period. Cumulative net gains are calculated as the difference between the sale price and the initial purchase price for the equity security sold during the period.63Table of ContentsAlphabet Inc.Equity Securities Sold During the Year Ended December 31, 20202021Total sale price$4,767 $5,604 Total initial cost2,674 1,206 Cumulative net gains(1)$2,093 $4,398 (1)Cumulative net gains excludes cumulative losses of $738 million resulting from our equity derivatives, which hedged the changes in fair value of certain marketable equity securities sold during the year ended December 31, 2021. The associated derivative liabilities arising from these losses were settled against our holdings of the underlying equity securities. Carrying value of marketable and non-marketable equity securitiesThe carrying value is measured as the total initial cost plus the cumulative net gain (loss). The carrying values for marketable and non-marketable equity securities are summarized below (in millions):As of December 31, 2020Marketable Equity SecuritiesNon-Marketable Equity SecuritiesTotalTotal initial cost$2,227 $14,616 $16,843 Cumulative net gain (loss)(1)3,631 4,277 7,908 Carrying value(2)$5,858 $18,893 $24,751 (1)Non-marketable equity securities cumulative net gain (loss) is comprised of $6.1 billion gains and $1.9 billion losses (including impairment).(2)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $429 million is included within other non-current assets.As of December 31, 2021Marketable Equity SecuritiesNon-Marketable Equity SecuritiesTotal Total initial cost$4,211 $15,135 $19,346 Cumulative net gain (loss)(1)3,587 12,436 16,023 Carrying value(2)$7,798 $27,571 $35,369 (1)Non-marketable equity securities cumulative net gain (loss) is comprised of $14.1 billion gains and $1.7 billion losses (including impairment).(2)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $1.4 billion is included within other non-current assets.Marketable equity securitiesThe following table summarizes marketable equity securities measured at fair value by significant investment categories as of December 31, 2020 and 2021 (in millions): As of December 31, 2020As of December 31, 2021 Cash and Cash EquivalentsMarketable EquitySecuritiesCash and Cash EquivalentsMarketable EquitySecuritiesLevel 1:Money market funds$12,210 $0 $7,499 $0 Marketable equity securities(1)(2)0 5,470 0 7,447 12,210 5,470 7,499 7,447 Level 2:Mutual funds0 388 0 351 Total$12,210 $5,858 $7,499 $7,798 (1)    The balance as of December 31, 2020 and 2021 includes investments that were reclassified from non-marketable equity securities following the commencement of public market trading of the issuers or acquisition by public entities (certain investments are subject to short-term lock-up restrictions). (2)    As of December 31, 2020 and 2021, the long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $429 million and $1.4 billion, respectively, is included within other non-current assets. 64Table of ContentsAlphabet Inc.Non-marketable equity securitiesThe following is a summary of unrealized gains and losses recorded in other income (expense), net, which are included as adjustments to the carrying value of non-marketable equity securities held as of the end of the period (in millions):Year Ended December 31,20202021Unrealized gains on non-marketable equity securities$3,020 $9,971 Unrealized losses on non-marketable equity securities (including impairment)(1,489)(122)Total unrealized gain (loss) recognized on non-marketable equity securities$1,531 $9,849 During the year ended December 31, 2021, included in the $27.6 billion of non-marketable equity securities held as of the end of the period, $18.6 billion were measured at fair value resulting in a net unrealized gain of $9.8 billion.Equity securities accounted for under the Equity MethodAs of December 31, 2020 and 2021, equity securities accounted for under the equity method had a carrying value of approximately $1.4 billion and $1.5 billion, respectively. Our share of gains and losses, including impairments, are included as a component of other income (expense), net, in the Consolidated Statements of Income. See Note 7 for further details on other income (expense), net.Derivative Financial InstrumentsWe enter into derivative instruments to manage risks relating to our ongoing business operations. The primary risk managed with derivative instruments is foreign exchange risk. We use foreign currency contracts to reduce the risk that our cash flows, earnings, and investment in foreign subsidiaries will be adversely affected by foreign currency exchange rate fluctuations. We also enter into derivative instruments to partially offset our exposure to other risks and enhance investment returns.We recognize derivative instruments as either assets or liabilities in the Consolidated Balance Sheets at fair value and classify the derivatives primarily within Level 2 in the fair value hierarchy. We present our collar contracts (an option strategy comprised of a combination of purchased and written options) at net fair values where both the purchased and written options are with the same counterparty. For other derivative contracts, we present at gross fair values. We primarily record changes in the fair value in the Consolidated Statements of Income as either other income (expense), net, or revenues, or in the Consolidated Balance Sheets in AOCI, as discussed below.We enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. Further, we enter into collateral security arrangements that provide for collateral to be received or pledged when the net fair value of certain financial instruments fluctuates from contractually established thresholds. Cash collateral received related to derivative instruments under our collateral security arrangements are included in other current assets with a corresponding liability. Cash and non-cash collateral pledged related to derivative instruments under our collateral security arrangements are included in other current assets.Cash Flow HedgesWe designate foreign currency forward and option contracts (including collars) as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. These contracts have maturities of 24 months or less.Cash flow hedge amounts included in the assessment of hedge effectiveness are deferred in AOCI and subsequently reclassified to revenue when the hedged item is recognized in earnings. We exclude the change in forward points and time value from our assessment of hedge effectiveness. The initial value of the excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI. If the hedged transactions become probable of not occurring, the corresponding amounts in AOCI are reclassified to other income (expense), net in the period of de-designation.As of December 31, 2021, the net accumulated gain on our foreign currency cash flow hedges before tax effect was $518 million, which is expected to be reclassified from AOCI into earnings within the next 12 months.Fair Value HedgesWe designate foreign currency forward contracts as fair value hedges to hedge foreign currency risks for our investments denominated in currencies other than the U.S. dollar. Fair value hedge amounts included in the 65Table of ContentsAlphabet Inc.assessment of hedge effectiveness are recognized in other income (expense), net, along with the offsetting gains and losses of the related hedged items. We exclude changes in forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net.Net Investment HedgesWe designate foreign currency forward contracts as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. Net investment hedge amounts included in the assessment of hedge effectiveness are recognized in AOCI along with the foreign currency translation adjustment. We exclude changes in forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net.Other DerivativesOther derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. Gains and losses on these contracts, as well as the related costs, are recognized in other income (expense), net, along with the foreign currency gains and losses on monetary assets and liabilities. We also use derivatives not designated as hedging instruments to manage risks relating to interest rates, commodity prices, credit exposures and to enhance investment returns. Additionally, from time to time, we enter into derivatives to hedge the market price risk on certain of our marketable equity securities. Gains (losses) arising from these derivatives are reflected within the "other" component of other income (expense), net and the offsetting recognized gains (losses) on the marketable equity securities are reflected within the gain (loss) on equity securities, net component of other income (expense), net. See Note 7 for further details on other income (expense), net. The gross notional amounts of outstanding derivative instruments were as follows (in millions):As of December 31,20202021Derivatives Designated as Hedging Instruments:Foreign exchange contracts    Cash flow hedges $10,187 $16,362     Fair value hedges$1,569 $2,556     Net investment hedges$9,965 $10,159 Derivatives Not Designated as Hedging Instruments:Foreign exchange contracts$39,861 $41,031 Other contracts$2,399 $4,275 66Table of ContentsAlphabet Inc.The fair values of outstanding derivative instruments were as follows (in millions):  As of December 31, 2020  Balance Sheet LocationFair Value ofDerivativesDesignated asHedging InstrumentsFair Value ofDerivatives NotDesignated asHedging InstrumentsTotal FairValueDerivative Assets:Level 2:Foreign exchange contractsOther current and non-current assets$33 $316 $349 Other contractsOther current and non-current assets0 16 16 Total$33 $332 $365 Derivative Liabilities: Level 2:Foreign exchange contractsAccrued expenses and other liabilities, current and non-current$395 $185 $580 Other contractsAccrued expenses and other liabilities, current and non-current0 942 942 Total $395 $1,127 $1,522   As of December 31, 2021  Balance Sheet LocationFair Value ofDerivativesDesignated asHedging InstrumentsFair Value ofDerivatives NotDesignated asHedging InstrumentsTotal FairValueDerivative Assets:Level 2:Foreign exchange contractsOther current and non-current assets$867 $42 $909 Other contractsOther current and non-current assets0 52 52 Total$867 $94 $961 Derivative Liabilities: Level 2:Foreign exchange contractsAccrued expenses and other liabilities, current and non-current$8 $452 $460 Other contractsAccrued expenses and other liabilities, current and non-current0 121 121 Total $8 $573 $581 67Table of ContentsAlphabet Inc.The gains (losses) on derivatives in cash flow hedging and net investment hedging relationships recognized in other comprehensive income (OCI) were summarized below (in millions): Gains (Losses) Recognized in OCIon Derivatives Before Tax Effect Year Ended December 31,201920202021Derivatives in Cash Flow Hedging Relationship:Foreign exchange contractsAmount included in the assessment of effectiveness$38 $102 $806 Amount excluded from the assessment of effectiveness(14)(37)48 Derivatives in Net Investment Hedging Relationship:Foreign exchange contractsAmount included in the assessment of effectiveness131 (851)754 Total$155 $(786)$1,608 The effect of derivative instruments on income was summarized below (in millions): Gains (Losses) Recognized in IncomeYear Ended December 31,201920202021RevenuesOther income (expense), netRevenuesOther income (expense), netRevenuesOther income (expense), netTotal amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded$161,857 $5,394 $182,527 $6,858 $257,637 $12,020 Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:Foreign exchange contractsAmount of gains (losses) reclassified from AOCI to income$367 $0 $144 $0 $165 $0 Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach88 0 33 0 (16)0 Gains (Losses) on Derivatives in Fair Value Hedging Relationship:Foreign exchange contractsHedged items0 (19)0 18 0 (95)Derivatives designated as hedging instruments0 19 0 (18)0 95 Amount excluded from the assessment of effectiveness0 25 0 4 0 8 Gains (Losses) on Derivatives in Net Investment Hedging Relationship:Foreign exchange contractsAmount excluded from the assessment of effectiveness0 243 0 151 0 82 Gains (Losses) on Derivatives Not Designated as Hedging Instruments:Foreign exchange contracts0 (413)0718 0 (860)Other Contracts0 0 0 (906)0 101 Total gains (losses)$455 $(145)$177 $(33)$149 $(669)68Table of ContentsAlphabet Inc.Offsetting of DerivativesThe gross amounts of derivative instruments subject to master netting arrangements with various counterparties, and cash and non-cash collateral received and pledged under such agreements were as follows (in millions):Offsetting of AssetsAs of December 31, 2020Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to OffsetGross Amounts of Recognized AssetsGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsFinancial Instruments Cash Collateral ReceivedNon-Cash Collateral ReceivedNet Assets Exposed Derivatives$397 $(32)$365 $(295)(1)$(16)$0 $54 As of December 31, 2021Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to OffsetGross Amounts of Recognized AssetsGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNon-Cash Collateral ReceivedNet Assets ExposedDerivatives$999 $(38)$961 $(434)(1)$(394)$(12)$121 (1)    The balances as of December 31, 2020 and 2021 were related to derivative liabilities which are allowed to be net settled against derivative assets in accordance with our master netting agreements. Offsetting of LiabilitiesAs of December 31, 2020Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to OffsetGross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsFinancial Instruments Cash Collateral PledgedNon-Cash Collateral PledgedNet LiabilitiesDerivatives$1,554 $(32)$1,522 $(295)(2)$(1)$(943)$283 As of December 31, 2021Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to OffsetGross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsFinancial Instruments Cash Collateral PledgedNon-Cash Collateral PledgedNet LiabilitiesDerivatives$619 $(38)$581 $(434)(2)$(4)$(110)$33 (2)    The balances as of December 31, 2020 and 2021 were related to derivative assets which are allowed to be net settled against derivative liabilities in accordance with our master netting agreements.Note 4. Leases We have entered into operating lease agreements primarily for data centers, land and offices throughout the world with lease periods expiring between 2022 and 2063. Components of operating lease expense were as follows (in millions):Year Ended December 31,20202021Operating lease cost$2,267 $2,699 Variable lease cost619 726 Total operating lease cost$2,886 $3,425 69Table of ContentsAlphabet Inc.Supplemental information related to operating leases was as follows (in millions):Year Ended December 31,20202021Cash payments for operating leases$2,004 $2,489 New operating lease assets obtained in exchange for operating lease liabilities$2,765 $2,951 As of December 31, 2021, our operating leases had a weighted average remaining lease term of 8 years and a weighted average discount rate of 2.3%. Future lease payments under operating leases as of December 31, 2021 were as follows (in millions):2022$2,539 20232,527 20242,226 20251,815 20261,401 Thereafter4,948 Total future lease payments15,456 Less imputed interest(1,878)Total lease liability balance$13,578 As of December 31, 2021, we have entered into leases that have not yet commenced with short-term and long-term future lease payments of $606 million and $5.2 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2022 and 2026 with non-cancelable lease terms of 1 to 25 years.Note 5. Variable Interest Entities Consolidated VIEsWe consolidate VIEs in which we hold a variable interest and are the primary beneficiary. The results of operations and financial position of these VIEs are included in our consolidated financial statements. For certain consolidated VIEs, their assets are not available to us and their creditors do not have recourse to us. As of December 31, 2020 and 2021, assets that can only be used to settle obligations of these VIEs were $5.7 billion and $6.0 billion, respectively, and the liabilities for which creditors only have recourse to the VIEs were $2.3 billion and $2.5 billion, respectively. Total noncontrolling interests (NCI), including redeemable noncontrolling interests (RNCI), in our consolidated subsidiaries was $3.9 billion and $4.3 billion as of December 31, 2020 and 2021, respectively. NCI and RNCI are included within additional paid-in capital. Net loss attributable to noncontrolling interests was not material for any period presented and is included within the "other" component of other income (expense), net. See Note 7 for further details on other income (expense), net.WaymoIn June 2021, Waymo, a self-driving technology development company and a consolidated VIE, completed an investment round of $2.5 billion, the majority of which represented investment from Alphabet. The investments from external parties were accounted for as equity transactions and resulted in recognition of noncontrolling interests. Unconsolidated VIEsWe have investments in VIEs in which we are not the primary beneficiary. These VIEs include private companies that are primarily early stage companies and certain renewable energy entities in which activities involve power generation using renewable sources. We have determined that the governance structures of these entities do not allow us to direct the activities that would significantly affect their economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of these VIEs are not included in our consolidated financial statements. We account for these investments as non-marketable equity securities or equity method investments. The maximum exposure of these unconsolidated VIEs is generally based on the current carrying value of the investments and any future funding commitments. We have determined that the single source of our exposure to these 70Table of ContentsAlphabet Inc.VIEs is our capital investments in them. The carrying value, and maximum exposure of these unconsolidated VIEs were $1.7 billion and $1.9 billion, respectively, as of December 31, 2020 and $2.7 billion and $2.9 billion, respectively, as of December 31, 2021.Note 6. Debt Short-Term DebtWe have a debt financing program of up to $10.0 billion through the issuance of commercial paper, which increased from $5.0 billion in September 2021. Net proceeds from this program are used for general corporate purposes. We had no commercial paper outstanding as of December 31, 2020 and 2021. Our short-term debt balance also includes the current portion of certain long-term debt.Long-Term DebtTotal outstanding debt is summarized below (in millions, except percentages):Effective Interest RateAs of December 31,MaturityCoupon Rate20202021Debt2011-2020 Notes Issuances2024 - 20600.45% - 3.38%0.57% - 3.38%$14,000 $13,000 Future finance lease payments, net(1)1,201 2,086       Total debt15,201 15,086 Unamortized discount and debt issuance costs(169)(156)Less: Current portion of Notes(2)(999)— Less: Current portion future finance lease payments, net(1)(2)(101)(113)       Total long-term debt$13,932 $14,817 (1)Net of imputed interest.(2)Total current portion of long-term debt is included within other accrued expenses and current liabilities. See Note 7.The notes in the table above are comprised of fixed-rate senior unsecured obligations and generally rank equally with each other. We may redeem the notes at any time in whole or in part at specified redemption prices. The effective interest rates are based on proceeds received with interest payable semi-annually.The total estimated fair value of the outstanding notes, including the current portion, was approximately $14.0 billion and $12.4 billion as of December 31, 2020 and December 31, 2021, respectively. The fair value was determined based on observable market prices of identical instruments in less active markets and is categorized accordingly as Level 2 in the fair value hierarchy.As of December 31, 2021, the aggregate future principal payments for long-term debt, including finance lease liabilities, for each of the next five years and thereafter were as follows (in millions):2022$187 202314620241,15920251,16220262,165Thereafter10,621Total$15,440 Credit FacilityAs of December 31, 2021, we have $10.0 billion of revolving credit facilities. No amounts were outstanding under the credit facilities as of December 31, 2020 and 2021.71Table of ContentsAlphabet Inc.In April 2021, we terminated the existing $4.0 billion revolving credit facilities, which were scheduled to expire in July 2023, and entered into two new revolving credit facilities in the amounts of $4.0 billion and $6.0 billion, which will expire in April 2022 and April 2026, respectively. The interest rates for the new credit facilities are determined based on a formula using certain market rates, as well as our progress toward the achievement of certain sustainability goals. No amounts have been borrowed under the new credit facilities.Note 7. Supplemental Financial Statement Information Property and Equipment, NetProperty and equipment, net, consisted of the following (in millions):As of December 31,20202021Land and buildings$49,732 $58,881 Information technology assets45,906 55,606 Construction in progress23,111 23,171 Leasehold improvements7,516 9,146 Furniture and fixtures197 208 Property and equipment, gross126,462 147,012 Less: accumulated depreciation(41,713)(49,414)Property and equipment, net$84,749 $97,599 Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities consisted of the following (in millions):As of December 31,20202021European Commission fines(1)$10,409 $9,799 Payables to brokers for unsettled investment trades754 397 Accrued customer liabilities3,118 3,505 Accrued purchases of property and equipment2,197 2,415 Current operating lease liabilities1,694 2,189 Other accrued expenses and current liabilities10,459 12,931 Accrued expenses and other current liabilities$28,631 $31,236 (1)    Includes the effects of foreign exchange and interest. See Note 10 for further details.72Table of ContentsAlphabet Inc.Accumulated Other Comprehensive Income (Loss)Components of AOCI, net of income tax, were as follows (in millions):Foreign Currency Translation AdjustmentsUnrealized Gains (Losses) on Available-for-Sale InvestmentsUnrealized Gains (Losses) on Cash Flow HedgesTotalBalance as of December 31, 2018$(1,884)$(688)$266 $(2,306)Cumulative effect of accounting change0 0 (30)(30)Other comprehensive income (loss) before reclassifications(119)1,611 36 1,528 Amounts excluded from the assessment of hedge effectiveness recorded in AOCI0 0 (14)(14)Amounts reclassified from AOCI0 (111)(299)(410)Other comprehensive income (loss)(119)1,500 (277)1,104 Balance as of December 31, 2019(2,003)812 (41)(1,232)Other comprehensive income (loss) before reclassifications1,139 1,313 79 2,531 Amounts excluded from the assessment of hedge effectiveness recorded in AOCI0 0 (37)(37)Amounts reclassified from AOCI0 (513)(116)(629)Other comprehensive income (loss)1,139 800 (74)1,865 Balance as of December 31, 2020(864)1,612 (115)633 Other comprehensive income (loss) before reclassifications(1,442)(1,312)668 (2,086)Amounts excluded from the assessment of hedge effectiveness recorded in AOCI0 0 48 48 Amounts reclassified from AOCI0 (64)(154)(218)Other comprehensive income (loss)(1,442)(1,376)562 (2,256)Balance as of December 31, 2021$(2,306)$236 $447 $(1,623)The effects on net income of amounts reclassified from AOCI were as follows (in millions):Gains (Losses) Reclassified from AOCI to the Consolidated Statements of IncomeYear Ended December 31, AOCI ComponentsLocation201920202021Unrealized gains (losses) on available-for-sale investmentsOther income (expense), net$149 $650 $82 Benefit (provision) for income taxes(38)(137)(18)Net of income tax111 513 64 Unrealized gains (losses) on cash flow hedgesForeign exchange contractsRevenue367 144 165 Interest rate contractsOther income (expense), net6 6 6 Benefit (provision) for income taxes(74)(34)(17)Net of income tax299 116 154 Total amount reclassified, net of income tax$410 $629 $218 73Table of ContentsAlphabet Inc.Other Income (Expense), Net Components of other income (expense), net, were as follows (in millions):  Year Ended December 31, 201920202021Interest income$2,427 $1,865 $1,499 Interest expense(1)(100)(135)(346)Foreign currency exchange gain (loss), net (2)103 (344)(240)Gain (loss) on debt securities, net149 725 (110)Gain (loss) on equity securities, net2,649 5,592 12,380 Performance fees(326)(609)(1,908)Income (loss) and impairment from equity method investments, net390 401 334 Other(3)102 (637)411 Other income (expense), net$5,394 $6,858 $12,020 (1)    Interest expense is net of interest capitalized of $167 million, $218 million, and $163 million for the years ended December 31, 2019, 2020, and 2021, respectively.(2)    Our foreign currency exchange gain (loss), net, is primarily related to the forward points for our foreign currency hedging contracts and foreign exchange transaction gains and losses from the conversion of the transaction currency to the functional currency, offset by the foreign currency hedging contracts' losses and gains.(3)    During the year ended December 31, 2020, we entered into derivatives that hedged the changes in fair value of certain marketable equity securities, which resulted in losses of $902 million and gains of $92 million for the years ended December 31, 2020 and 2021, respectively. The offsetting recognized gains and losses on the marketable equity securities are reflected in Gain (loss) on equity securities, net.Note 8. Acquisitions FitbitIn January 2021, we closed the acquisition of Fitbit, a leading wearables brand for $2.1 billion. The addition of Fitbit to Google Services is expected to help spur innovation in wearable devices. The assets acquired and liabilities assumed were recorded at fair value. The purchase price excludes post acquisition compensation arrangements. The purchase price was attributed to $440 million cash acquired, $590 million of intangible assets, $1.2 billion of goodwill and $92 million of net liabilities assumed. Goodwill was recorded in the Google Services segment and primarily attributable to synergies expected to arise after the acquisition. Goodwill is not expected to be deductible for tax purposes.Other Acquisitions During the year ended December 31, 2021, we completed other acquisitions and purchases of intangible assets for total consideration of approximately $885 million, net of cash acquired, of which the total amount of goodwill expected to be deductible for tax purposes is approximately $118 million. Pro forma results of operations for these acquisitions have not been presented because they are not material to our consolidated results of operations, either individually or in the aggregate.74Table of ContentsAlphabet Inc.Note 9. Goodwill and Other Intangible Assets GoodwillChanges in the carrying amount of goodwill for the years ended December 31, 2020 and 2021 were as follows (in millions):GoogleGoogle ServicesGoogle CloudOther BetsTotalBalance as of December 31, 2019$19,921 $0 $0 $703 $20,624 Acquisitions204 53 189 0 446 Foreign currency translation and other adjustments46 56 5 (2)105 Allocation in the fourth quarter of 2020(1)(20,171)18,408 1,763 0 0 Balance as of December 31, 20200 18,517 1,957 701 21,175 Acquisitions0 1,325 382 103 1,810 Foreign currency translation and other adjustments0 (16)(2)(11)(29)Balance as of December 31, 2021$0 $19,826 $2,337 $793 $22,956 (1)Represents reallocation of goodwill as a result of our change in segments in the fourth quarter of 2020. See Note 15 for further details.Other Intangible AssetsInformation regarding purchased intangible assets was as follows (in millions): As of December 31, 2020 GrossCarryingAmountAccumulatedAmortizationNetCarryingAmountPatents and developed technology$4,639 $3,649 $990 Customer relationships266 49 217 Trade names and other624 461 163 Total definite-lived intangible assets5,529 4,159 1,370 Indefinite-lived intangible assets75 0 75 Total intangible assets$5,604 $4,159 $1,445  As of December 31, 2021 GrossCarryingAmountAccumulatedAmortizationNetCarryingValuePatents and developed technology$4,786 $4,112 $674 Customer relationships506 140 366 Trade names and other534 295 239 Total definite-lived intangible assets5,826 4,547 1,279 Indefinite-lived intangible assets138 0 138 Total intangible assets$5,964 $4,547 $1,417 Patents and developed technology, customer relationships, and trade names and other have weighted-average remaining useful lives of 0.7 years, 3.5 years, and 4.5 years, respectively. For all intangible assets acquired and purchased during the year ended December 31, 2021, patents and developed technology have a weighted-average useful life of 4.1 years, customer relationships have a weighted-average useful life of 4.3 years, and trade names and other have a weighted-average useful life of 9.9 years.Amortization expense relating to purchased intangible assets was $795 million, $774 million, and $875 million for the years ended December 31, 2019, 2020, and 2021, respectively.75Table of ContentsAlphabet Inc.As of December 31, 2021, expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter was as follows (in millions): 2022$537 2023255 2024226 202598 202661 Thereafter102 $1,279 Note 10. Contingencies IndemnificationsIn the normal course of business, including to facilitate transactions in our services and products and corporate activities, we indemnify certain parties, including advertisers, Google Network partners, customers of Google Cloud offerings, lessors and service providers with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents.It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims, and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of December 31, 2021, we did not have any material indemnification claims that were probable or reasonably possible. Legal MattersAntitrust InvestigationsOn November 30, 2010, the EC's Directorate General for Competition opened an investigation into various antitrust-related complaints against us. On June 27, 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposed a €2.4 billion ($2.7 billion as of June 27, 2017) fine. On September 11, 2017, we appealed the EC decision to the General Court, and on September 27, 2017, we implemented product changes to bring shopping ads into compliance with the EC's decision. We recognized a charge of $2.7 billion for the fine in the second quarter of 2017. On November 10, 2021, the General Court rejected our appeal, and we subsequently filed an appeal with the European Court of Justice on January 20, 2022.On July 18, 2018, the EC announced its decision that certain provisions in Google’s Android-related distribution agreements infringed European competition law. The EC decision imposed a €4.3 billion ($5.1 billion as of June 30, 2018) fine and directed the termination of the conduct at issue. On October 9, 2018, we appealed the EC decision. On October 29, 2018, we implemented changes to certain of our Android distribution practices. We recognized a charge of $5.1 billion for the fine in the second quarter of 2018.On March 20, 2019, the EC announced its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law. The EC decision imposed a fine of €1.5 billion ($1.7 billion as of March 20, 2019) and directed actions related to AdSense for Search partners' agreements, which we implemented prior to the decision. On June 4, 2019, we appealed the EC decision. We recognized a charge of $1.7 billion for the fine in the first quarter of 2019.While each EC decision is under appeal, we included the fines in accrued expenses and other current liabilities on our Consolidated Balance Sheets as we provided bank guarantees (in lieu of a cash payment) for the fines.76Table of ContentsAlphabet Inc.From time to time we are subject to formal and informal inquiries and investigations on competition matters by regulatory authorities in the U.S., Europe, and other jurisdictions. In August 2019, we began receiving civil investigative demands from the U.S. Department of Justice (DOJ) requesting information and documents relating to our prior antitrust investigations and certain aspects of our business. The DOJ and a number of state Attorneys General filed a lawsuit on October 20, 2020 alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. Separately, on December 16, 2020, a number of state Attorneys General filed an antitrust complaint against Google in the U.S. District Court for the Eastern District of Texas, alleging that Google violated U.S. antitrust laws as well as state deceptive trade laws relating to its advertising technology. On June 22, 2021, the EC opened a formal investigation into Google's advertising technology business practices. On July 7, 2021, a number of state Attorneys General filed an antitrust complaint against us in the U.S. District Court for the Northern District of California, alleging that Google’s operation of Android and Google Play violated U.S. antitrust laws and state antitrust and consumer protection laws. We believe these complaints are without merit and will defend ourselves vigorously. The DOJ and state Attorneys General continue their investigations into certain aspects of our business. We continue to cooperate with federal and state regulators in the U.S., the EC and other regulators around the world.Patent and Intellectual Property ClaimsWe have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe others' intellectual property rights. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services. As a result, we may have to change our business practices and develop non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, the U.S. International Trade Commission (ITC) has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss in an ITC action can result in a prohibition on importing infringing products into the U.S. Because the U.S. is an important market, a prohibition on importation could have an adverse effect on us, including preventing us from importing many important products into the U.S. or necessitating workarounds that may limit certain features of our products.Furthermore, many of our agreements with our customers and partners require us to indemnify them against certain intellectual property infringement claims, which would increase our costs as a result of defending such claims, and may require that we pay significant damages if there were an adverse ruling in any such claims. In addition, our customers and partners may discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business.In 2010, Oracle America, Inc. (Oracle) brought a copyright lawsuit against Google in the Northern District of California, alleging that Google's Android operating system infringes Oracle's copyrights related to certain Java application programming interfaces (Java APIs). After trial, final judgment was entered by the district court in favor of Google on June 8, 2016, and the court decided post-trial motions in favor of Google. Oracle appealed and on March 27, 2018, the Federal Circuit Court of Appeals reversed and remanded the case for a trial on damages. On May 29, 2018, we filed a petition for a rehearing at the Federal Circuit, and on August 28, 2018, the Federal Circuit denied the petition. On January 24, 2019, we filed a petition to the U.S. Supreme Court to review the case. On April 29, 2019, the Supreme Court requested the views of the Solicitor General regarding our petition. On September 27, 2019, the Solicitor General recommended denying our petition, and we provided our response on October 16, 2019. On November 15, 2019, the Supreme Court granted our petition and made a decision to review the case. The Supreme Court heard oral arguments in our case on October 7, 2020. On April 5, 2021, the Supreme Court reversed the Federal Circuit's ruling and found that Google’s use of the Java APIs was a fair use as a matter of law. The Supreme Court remanded the case to the Federal Circuit for further proceedings in conformity with the Supreme Court opinion. On May 14, 2021, the Federal Circuit entered an order affirming the district court’s final judgment in favor of Google. On June 21, 2021, the Federal Circuit issued a mandate returning the case to the district court, and the case is now concluded. Other We are also regularly subject to claims, suits, regulatory and government investigations, other proceedings, and consent decrees involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. For example, we have a number of privacy investigations and suits ongoing in multiple jurisdictions. Such claims, suits, regulatory and government investigations, other proceedings, and consent decrees could result in substantial fines and penalties, injunctive relief, ongoing auditing and monitoring obligations, changes to our products and services, alterations to our business models and operations, and collateral related civil litigation or other adverse consequences, all of which could harm our business, reputation, financial condition, and operating results. 77Table of ContentsAlphabet Inc.Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has been incurred, and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both the likelihood of there being and the estimated amount of a loss related to such matters.With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.We expense legal fees in the period in which they are incurred.Non-Income TaxesWe are under audit by various domestic and foreign tax authorities with regards to non-income tax matters. The subject matter of non-income tax audits primarily arises from disputes on the tax treatment and tax rate applied to the sale of our products and services in these jurisdictions and the tax treatment of certain employee benefits. We accrue non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from our expectations.For information regarding income tax contingencies, see Note 14.Note 11. Stockholders' Equity Preferred StockOur Board of Directors has authorized 100 million shares of preferred stock, $0.001 par value, issuable in series. As of December 31, 2020 and 2021, no shares were issued or outstanding.Class A and Class B Common Stock and Class C Capital StockOur Board of Directors has authorized three classes of stock, Class A and Class B common stock, and Class C capital stock. The rights of the holders of each class of our common and capital stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share. Class C capital stock has no voting rights, except as required by applicable law. Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically convert upon sale or transfer to Class A common stock.Share RepurchasesIn April 2021, the Board of Directors of Alphabet authorized the company to repurchase up to $50.0 billion of its Class C stock. In July 2021, the Alphabet board approved an amendment to the April 2021 authorization, permitting the company to repurchase both Class A and Class C shares in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading prices and volumes of the Class A and Class C shares. As of December 31, 2021, $17.4 billion remains available for Class A and Class C share repurchases under the amended authorization. In accordance with the authorizations of the Board of Directors of Alphabet, during the years ended December 31, 2020 and 2021, we repurchased and subsequently retired 21.5 million and 20.3 million aggregate shares for $31.1 billion and $50.3 billion, respectively. Of the aggregate amount repurchased and subsequently retired during 2021, 1.2 million shares were Class A stock for $3.4 billion.Stock Split Effected in Form of Stock Dividend (“Stock Split”)On February 1, 2022, the Company announced that the Board of Directors had approved and declared a 20-for-one stock split in the form of a one-time special stock dividend on each share of the Company’s Class A, Class B, and Class C stock. The Stock Split is subject to stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A, Class B, and Class C stock to accommodate the Stock Split.78Table of ContentsAlphabet Inc.If approval is obtained, each of the Company’s stockholders of record at the close of business on July 1, 2022 (the “Record Date”), will receive, after the close of business on July 15, 2022, a dividend of 19 additional shares of the same class of stock for every share held by such stockholder as of the Record Date.Note 12. Net Income Per Share We compute net income per share of Class A, Class B, and Class C stock using the two-class method. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of restricted stock units and other contingently issuable shares. The dilutive effect of outstanding restricted stock units and other contingently issuable shares is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A stock assumes the conversion of Class B stock, while the diluted net income per share of Class B stock does not assume the conversion of those shares.The rights, including the liquidation and dividend rights, of the holders of our Class A, Class B, and Class C stock are identical, except with respect to voting. Furthermore, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our Board of Directors from declaring or paying unequal per share dividends on our Class A, Class B, and Class C stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock must be approved by the class of stock adversely affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our Board of Directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A, Class B, and Class C stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. In the years ended December 31, 2019, 2020 and 2021, the net income per share amounts are the same for Class A, Class B, and Class C stock because the holders of each class are entitled to equal per share dividends or distributions in liquidation in accordance with the Amended and Restated Certificate of Incorporation of Alphabet Inc.The following tables set forth the computation of basic and diluted net income per share of Class A, Class B, and Class C stock (in millions, except share amounts which are reflected in thousands and per share amounts): Year Ended December 31, 2019 Class AClass BClass CBasic net income per share:NumeratorAllocation of undistributed earnings $14,846 $2,307 $17,190 DenominatorNumber of shares used in per share computation299,402 46,527 346,667 Basic net income per share$49.59 $49.59 $49.59 Diluted net income per share:NumeratorAllocation of undistributed earnings for basic computation $14,846 $2,307 $17,190 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares2,307 0 0 Reallocation of undistributed earnings(126)(20)126 Allocation of undistributed earnings$17,027 $2,287 $17,316 DenominatorNumber of shares used in basic computation299,402 46,527 346,667 Weighted-average effect of dilutive securitiesAdd:Conversion of Class B to Class A shares outstanding46,527 0 0 Restricted stock units and other contingently issuable shares413 0 5,547 Number of shares used in per share computation346,342 46,527 352,214 Diluted net income per share$49.16 $49.16 $49.16 79Table of ContentsAlphabet Inc. Year Ended December 31, 2020 Class AClass BClass CBasic net income per share:NumeratorAllocation of undistributed earnings$17,733 $2,732 $19,804 DenominatorNumber of shares used in per share computation299,815 46,182 334,819 Basic net income per share$59.15 $59.15 $59.15 Diluted net income per share:NumeratorAllocation of undistributed earnings for basic computation $17,733 $2,732 $19,804 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares2,732 0 0 Reallocation of undistributed earnings(180)(25)180 Allocation of undistributed earnings$20,285 $2,707 $19,984 DenominatorNumber of shares used in basic computation299,815 46,182 334,819 Weighted-average effect of dilutive securitiesAdd:Conversion of Class B to Class A shares outstanding46,182 0 0 Restricted stock units and other contingently issuable shares87 0 6,125 Number of shares used in per share computation346,084 46,182 340,944 Diluted net income per share$58.61 $58.61 $58.61  Year Ended December 31, 2021 Class AClass BClass CBasic net income per share:NumeratorAllocation of undistributed earnings$34,200 $5,174 $36,659 DenominatorNumber of shares used in per share computation300,310 45,430 321,910 Basic net income per share$113.88 $113.88 $113.88 Diluted net income per share:NumeratorAllocation of undistributed earnings for basic computation $34,200 $5,174 $36,659 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares5,174 0 0 Reallocation of undistributed earnings(581)(77)581 Allocation of undistributed earnings$38,793 $5,097 $37,240 DenominatorNumber of shares used in basic computation300,310 45,430 321,910 Weighted-average effect of dilutive securitiesAdd:Conversion of Class B to Class A shares outstanding45,430 0 0 Restricted stock units and other contingently issuable shares15 0 10,009 Number of shares used in per share computation345,755 45,430 331,919 Diluted net income per share$112.20 $112.20 $112.20 80Table of ContentsAlphabet Inc.Note 13. Compensation Plans Stock PlansOur stock plans include the Alphabet Amended and Restated 2012 Stock Plan, the Alphabet 2021 Stock Plan and Other Bet stock-based plans. Under our stock plans, RSUs and other types of awards may be granted. An RSU award is an agreement to issue shares of our Class C stock at the time the award vests. RSUs generally vest over four years contingent upon employment on the vesting date.As of December 31, 2021, there were 37,479,707 shares of Class C stock reserved for future issuance under the Alphabet 2021 Stock Plan.Stock-Based CompensationFor the years ended December 31, 2019, 2020, and 2021, total stock-based compensation expense was $11.7 billion, $13.4 billion, and $15.7 billion, including amounts associated with awards we expect to settle in Alphabet stock of $10.8 billion, $12.8 billion, and $15.0 billion, respectively.For the years ended December 31, 2019, 2020, and 2021, we recognized tax benefits on total stock-based compensation expense, which are reflected in the provision for income taxes in the Consolidated Statements of Income, of $1.8 billion, $2.7 billion, and $3.1 billion, respectively.For the years ended December 31, 2019, 2020, and 2021, tax benefit realized related to awards vested or exercised during the period was $2.2 billion, $3.6 billion, and $5.9 billion, respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the R&D tax credit.Stock-Based Award ActivitiesThe following table summarizes the activities for unvested Alphabet RSUs for the year ended December 31, 2021:Unvested Restricted Stock Units     Number of    SharesWeighted-AverageGrant-DateFair ValueUnvested as of December 31, 202019,288,793 $1,262.13 Granted10,582,700 $1,949.16 Vested(11,209,486)$1,345.98 Forfeited/canceled(1,767,294)$1,425.48 Unvested as of December 31, 202116,894,713 $1,626.13 The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2019 and 2020 was $1,092.36 and $1,407.97, respectively. Total fair value of RSUs, as of their respective vesting dates, during the years ended December 31, 2019, 2020, and 2021 were $15.2 billion, $17.8 billion, and $28.8 billion, respectively.As of December 31, 2021, there was $25.8 billion of unrecognized compensation cost related to unvested employee RSUs. This amount is expected to be recognized over a weighted-average period of 2.5 years. 401(k) PlansWe have two 401(k) Savings Plans that qualify as deferred salary arrangements under Section 401(k) of the Internal Revenue Code. Under these 401(k) Plans, matching contributions are based upon the amount of the employees’ contributions subject to certain limitations. We recognized expense of approximately $724 million, $855 million, and $916 million for the years ended December 31, 2019, 2020, and 2021, respectively.Note 14. Income Taxes Income from continuing operations before income taxes consisted of the following (in millions):Year Ended December 31, 201920202021Domestic operations$16,426 $37,576 $77,016 Foreign operations23,199 10,506 13,718 Total$39,625 $48,082 $90,734 81Table of ContentsAlphabet Inc.Provision for income taxes consisted of the following (in millions):Year Ended December 31, 201920202021Current:Federal and state$2,424 $4,789 $10,126 Foreign2,713 1,687 2,692 Total5,137 6,476 12,818 Deferred:Federal and state286 1,552 2,018 Foreign(141)(215)(135)Total145 1,337 1,883 Provision for income taxes$5,282 $7,813 $14,701 The reconciliation of federal statutory income tax rate to our effective income tax rate was as follows:Year Ended December 31, 201920202021U.S. federal statutory tax rate21.0 %21.0 %21.0 %Foreign income taxed at different rates(4.9)(0.3)0.2 Foreign-derived intangible income deduction(0.7)(3.0)(2.5)Stock-based compensation expense(0.7)(1.7)(2.5)Federal research credit(2.5)(2.3)(1.6)Deferred tax asset valuation allowance0.0 1.4 0.6 State and local income taxes1.1 1.1 1.0 Effective tax rate13.3 %16.2 %16.2 %Our effective tax rate for 2019 was affected significantly by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate because substantially all of the income from foreign operations was earned by an Irish subsidiary. As of December 31, 2019, we have simplified our corporate legal entity structure and now license intellectual property from the U.S. that was previously licensed from Bermuda resulting in an increase in the portion of our income earned in the U.S.On July 27, 2015, the U.S. Tax Court, in an opinion in Altera Corp. v. Commissioner, invalidated the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. The U.S. Tax Court issued the final decision on December 28, 2015. As a result of that decision, we recorded a tax benefit related to the anticipated reimbursement of cost share payment for previously shared stock-based compensation costs.On June 7, 2019, the U.S. Court of Appeals for the Ninth Circuit overturned the 2015 Tax Court decision in Altera Corp. v. Commissioner, and upheld the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. As a result of the Ninth Circuit court decision, our cumulative net tax benefit of $418 million related to previously shared stock-based compensation costs was reversed in the year ended December 31, 2019.In 2020, there was an increase in valuation allowance for net deferred tax assets that are not likely to be realized relating to certain of our Other Bets.82Table of ContentsAlphabet Inc.Deferred Income TaxesDeferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows (in millions):As of December 31,20202021Deferred tax assets:Accrued employee benefits$580 $549 Accruals and reserves not currently deductible1,049 1,816 Tax credits3,723 5,179 Net operating losses1,085 1,790 Operating leases2,620 2,503 Intangible assets1,525 2,034 Other981 925 Total deferred tax assets11,563 14,796 Valuation allowance(4,823)(7,129)Total deferred tax assets net of valuation allowance6,740 7,667 Deferred tax liabilities:Property and equipment, net(3,382)(5,237)Net investment gains(1,901)(3,229)Operating leases(2,354)(2,228)Other(1,580)(946)Total deferred tax liabilities(9,217)(11,640)Net deferred tax assets (liabilities)$(2,477)$(3,973)As of December 31, 2021, our federal, state, and foreign net operating loss carryforwards for income tax purposes were approximately $5.6 billion, $4.6 billion, and $1.7 billion respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2023, foreign net operating loss carryforwards will begin to expire in 2025 and the state net operating loss carryforwards will begin to expire in 2028. It is more likely than not that certain net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions.As of December 31, 2021, our California R&D carryforwards for income tax purposes were approximately $5.0 billion that can be carried over indefinitely. We believe the state tax credit is not likely to be realized.As of December 31, 2021, our investment tax credit carryforwards for state income tax purposes were approximately $700 million and will begin to expire in 2025. We use the flow-through method of accounting for investment tax credits. We believe this tax credit is not likely to be realized.As of December 31, 2021, we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, certain state tax credits, net deferred tax assets relating to certain Other Bets, and certain foreign net operating losses that we believe are not likely to be realized. We continue to reassess the remaining valuation allowance quarterly, and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly. 83Table of ContentsAlphabet Inc.Uncertain Tax PositionsThe following table summarizes the activity related to our gross unrecognized tax benefits (in millions):Year Ended December 31, 201920202021Beginning gross unrecognized tax benefits$4,652 $3,377 $3,837 Increases related to prior year tax positions938 372 529 Decreases related to prior year tax positions(143)(557)(263)Decreases related to settlement with tax authorities(2,886)(45)(329)Increases related to current year tax positions816 690 1,384 Ending gross unrecognized tax benefits$3,377 $3,837 $5,158 The total amount of gross unrecognized tax benefits was $3.4 billion, $3.8 billion, and $5.2 billion as of December 31, 2019, 2020, and 2021, respectively, of which $2.3 billion, $2.6 billion, and $3.7 billion, if recognized, would affect our effective tax rate, respectively. As of December 31, 2020 and 2021, we accrued $222 million and $270 million in interest and penalties in provision for income taxes, respectively.We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. Our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS is currently examining our 2016 through 2018 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend any and all such claims as presented.The tax years 2014 through 2020 remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements.We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Although the timing of resolution, settlement, and closure of audits is not certain, it is reasonably possible that our unrecognized tax benefits from certain U.S. federal, state and non U.S. tax positions could decrease by approximately $2.0 billion in the next 12 months. Positions that may be resolved include various U.S. and non-U.S. matters.Note 15. Information about Segments and Geographic Areas We report our segment results as Google Services, Google Cloud, and Other Bets:•Google Services includes products and services such as ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. Google Services generates revenues primarily from advertising; sales of apps and in-app purchases, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.•Google Cloud includes Google’s infrastructure and platform services, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues from fees received for Google Cloud Platform services, Google Workspace collaboration tools and other enterprise services.•Other Bets is a combination of multiple operating segments that are not individually material. Revenues from Other Bets are generated primarily from the sale of health technology and internet services. Revenues, certain costs, such as costs associated with content and traffic acquisition, certain engineering activities, and hardware, as well as certain operating expenses are directly attributable to our segments. Due to the integrated nature of Alphabet, other costs and expenses, such as technical infrastructure and office facilities, are managed centrally at a consolidated level. The associated costs, including depreciation and impairment, are allocated to operating segments as a service cost generally based on usage or headcount.84Table of ContentsAlphabet Inc.Unallocated corporate costs primarily include corporate initiatives, corporate shared costs, such as finance and legal, including certain fines and settlements, as well as costs associated with certain shared R&D activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs. Our operating segments are not evaluated using asset information.Information about segments during the periods presented were as follows (in millions). For comparative purposes, amounts in prior periods have been recast:Year Ended December 31,201920202021Revenues:Google Services$151,825 $168,635 $237,529 Google Cloud8,918 13,059 19,206 Other Bets659 657 753 Hedging gains (losses)455 176 149 Total revenues$161,857 $182,527 $257,637 Operating income (loss):Google Services$48,999 $54,606 $91,855 Google Cloud(4,645)(5,607)(3,099)Other Bets(4,824)(4,476)(5,281)Corporate costs, unallocated(1)(5,299)(3,299)(4,761)Total income from operations$34,231 $41,224 $78,714 (1)    Corporate costs, unallocated includes a fine and legal settlement totaling $2.3 billion for the year ended December 31, 2019.For revenues by geography, see Note 2.The following table presents long-lived assets by geographic area, which includes property and equipment, net and operating lease assets (in millions):As of December 31, 20202021Long-lived assets:United States$69,315 $80,207 International27,645 30,351 Total long-lived assets$96,960 $110,558 85Table of ContentsAlphabet Inc.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K.Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.Changes in Internal Control over Financial ReportingWe rely extensively on information systems to manage our business and summarize and report operating results. In 2019, we began a multi-year implementation of a new global ERP system, which will replace much of our existing core financial systems. The ERP system is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management and provide timely information to our management team. The implementation is expected to continue in phases over the next few years. We completed the implementation of certain of our subledgers, which included changes to our processes, procedures and internal controls over financial reporting during the second quarter of 2021. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as the phased implementation of the new ERP system continues, we will change our processes and procedures, which in turn, could result in changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.As a result of COVID-19, our global workforce continued to operate primarily in a work from home environment for the quarter ended December 31, 2021. While we continue to evolve our work model in response to the uneven effects of the ongoing pandemic around the world, we believe that our internal controls over financial reporting continue to be effective. We have continued to re-evaluate and refine our financial reporting process to provide reasonable assurance that we could report our financial results accurately and in a timely manner.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021. Management reviewed the results of its assessment with our Audit and Compliance Committee. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K.Limitations on Effectiveness of Controls and ProceduresIn designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.ITEM 9B.OTHER INFORMATIONNone.86Table of ContentsAlphabet Inc.ITEM 9C.     DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONSNot applicable.87Table of ContentsAlphabet Inc.PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this item will be included under the caption “Directors, Executive Officers, and Corporate Governance” in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021 (2022 Proxy Statement) and is incorporated herein by reference. The information required by this item regarding delinquent filers pursuant to Item 405 of Regulation S-K will be included under the caption “Delinquent Section 16(a) Reports” in the 2022 Proxy Statement and is incorporated herein by reference.ITEM 11.EXECUTIVE COMPENSATIONThe information required by this item will be included under the captions “Director Compensation,” “Executive Compensation” and “Directors, Executive Officers, and Corporate Governance—Corporate Governance and Board Matters—Compensation Committee Interlocks and Insider Participation” in the 2022 Proxy Statement and is incorporated herein by reference.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by this item will be included under the captions “Common Stock Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the 2022 Proxy Statement and is incorporated herein by reference.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item will be included under the captions “Certain Relationships and Related Transactions” and “Directors, Executive Officers, and Corporate Governance—Corporate Governance and Board Matters—Director Independence” in the 2022 Proxy Statement and is incorporated herein by reference.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this item will be included under the caption “Independent Registered Public Accounting Firm” in the 2022 Proxy Statement and is incorporated herein by reference.88Table of ContentsAlphabet Inc.PART IVITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULESWe have filed the following documents as part of this Annual Report on Form 10-K:1. Consolidated Financial StatementsReports of Independent Registered Public Accounting Firm46Financial Statements:Consolidated Balance Sheets49Consolidated Statements of Income50Consolidated Statements of Comprehensive Income51Consolidated Statements of Stockholders’ Equity52Consolidated Statements of Cash Flows53Notes to Consolidated Financial Statements542. Financial Statement SchedulesSchedule II: Valuation and Qualifying AccountsThe table below details the activity of the allowance for credit losses and sales credits for the years ended December 31, 2019, 2020 and 2021 (in millions):Balance atBeginning of YearAdditionsUsageBalance atEnd of YearYear ended December 31, 2019$729 $1,481 $(1,457)$753 Year ended December 31, 2020$753 $2,013 $(1,422)$1,344 Year ended December 31, 2021$1,344 $2,092 $(2,047)$1,389 Note:Additions to the allowance for credit losses are charged to expense. Additions to the allowance for sales credits are charged against revenues.All other schedules have been omitted because they are not required, not applicable, or the required information is otherwise included.3. ExhibitsExhibitNumberDescriptionIncorporated by reference hereinFormDate2.01Agreement and Plan of Merger, dated October 2, 2015, by and among Google Inc., the Registrant and Maple Technologies Inc.Current Report on Form 8-K (File No. 001-37580) October 2, 20153.01Amended and Restated Certificate of Incorporation of the Registrant, dated October 2, 2015Current Report on Form 8-K (File No. 001-37580) October 2, 20153.02Amended and Restated Bylaws of the Registrant, dated October 21, 2020Current Report on Form 8-K/A (File No. 001-37580)October 27, 20204.01Specimen Class A Common Stock certificateCurrent Report on Form 8-K (File No. 001-37580)October 2, 20154.02Specimen Class C Capital Stock certificateCurrent Report on Form 8-K (File No. 001-37580)October 2, 20154.03Alphabet Inc. Deferred Compensation PlanCurrent Report on Form 8-K (File No. 001-37580)October 2, 20154.04Transfer Restriction Agreement, dated October 2, 2015, between the Registrant and Larry Page and certain of his affiliates Current Report on Form 8-K (File No. 001-37580)October 2, 20154.05Transfer Restriction Agreement, dated October 2, 2015, between the Registrant and Sergey Brin and certain of his affiliates Current Report on Form 8-K (File No. 001-37580)October 2, 20154.06*Joinder Agreement, dated December 31, 2021, among the Registrant, Sergey Brin and certain of his affiliates 89Table of ContentsAlphabet Inc.ExhibitNumberDescriptionIncorporated by reference hereinFormDate4.07Transfer Restriction Agreement, dated October 2, 2015, between the Registrant and Eric E. Schmidt and certain of its affiliatesCurrent Report on Form 8-K (File No. 001-37580)October 2, 20154.08Class C Undertaking, dated October 2, 2015, executed by the RegistrantCurrent Report on Form 8-K (File No. 001-37580)October 2, 20154.09Indenture, dated February 12, 2016, between the Registrant and The Bank of New York Mellon Trust Company, N.A., as TrusteeRegistration Statement on Form S-3 (File No. 333-209510)February 12, 20164.10Registrant Registration Rights Agreement dated December 14, 2015Registration Statement on Form S-3 (File No. 333-209518)February 12, 20164.11First Supplemental Indenture, dated April 27, 2016, between the Registrant and The Bank of New York Mellon Trust Company, N.A., as trusteeCurrent Report on Form 8-K(File No. 001-37580)April 27, 20164.12Form of the Registrant’s 3.375% Notes due 2024 (included in Exhibit 4.11)4.13Form of the Registrant’s 1.998% Note due 2026Current Report on Form 8-K (File No. 001-37580)August 9, 20164.14Form of Global Note representing the Registrant’s 0.450% notes due 2025Current Report on Form 8-K (File No. 001-37580)August 5, 20204.15Form of Global Note representing the Registrant’s 0.800% notes due 2027Current Report on Form 8-K (File No. 001-37580)August 5, 20204.16Form of Global Note representing the Registrant’s 1.100% notes due 2030Current Report on Form 8-K (File No. 001-37580)August 5, 20204.17Form of Global Note representing the Registrant’s 1.900% notes due 2040Current Report on Form 8-K (File No. 001-37580)August 5, 20204.18Form of Global Note representing the Registrant’s 2.050% notes due 2050Current Report on Form 8-K (File No. 001-37580)August 5, 20204.19Form of Global Note representing the Registrant’s 2.250% notes due 2060Current Report on Form 8-K (File No. 001-37580)August 5, 20204.20*Description of Registrant’s Securities10.01uForm of Indemnification Agreement entered into between the Registrant, its affiliates and its directors and officers Current Report on Form 8-K (File No. 001-37580)October 2, 201510.02uCompensation Plan Agreement, dated October 2, 2015, between Google Inc. and the RegistrantCurrent Report on Form 8-K (File No. 001-37580)October 2, 201510.03uDirector Arrangements Agreement, dated October 2, 2015, between Google Inc. and the RegistrantCurrent Report on Form 8-K (File No. 001-37580)October 2, 201510.04uAlphabet Inc. Deferred Compensation PlanCurrent Report on Form 8-K (File No. 001-37580)October 2, 201510.05uGoogle Inc. 2004 Stock Plan, as amendedCurrent Report on Form 8-K (File No. 000-50726)June 7, 201110.05.1uGoogle Inc. 2004 Stock Plan - Form of Google Stock Option AgreementAnnual Report on Form 10-K(File No. 000-50726)March 30, 200510.05.2uGoogle Inc. 2004 Stock Plan - Form of Google Restricted Stock Unit AgreementAnnual Report on Form 10-K(File No. 000-50726)March 30, 200510.05.3uGoogle Inc. 2004 Stock Plan - Amendment to Stock Option AgreementsRegistration Statement on Form S-3 (File No. 333-142243)April 20, 200710.06uAlphabet Inc. Amended and Restated 2012 Stock PlanCurrent Report on Form 8-K(File No. 001-37580)June 5, 202090Table of ContentsAlphabet Inc.ExhibitNumberDescriptionIncorporated by reference hereinFormDate10.06.1uAlphabet Inc. Amended and Restated 2012 Stock Plan - Form of Alphabet Restricted Stock Unit AgreementAnnual Report on Form 10-K(File No. 001-37580)February 4, 202010.06.2uAlphabet Inc. Amended and Restated 2012 Stock Plan - Performance Stock Unit AgreementAnnual Report on Form 10-K(File No. 001-37580)February 4, 202010.07uAlphabet Inc. 2021 Stock PlanCurrent Report on Form 8-K (file No. 001-37580)June 4, 202110.07.1uAlphabet Inc. 2021 Stock Plan - Form of Alphabet Restricted Stock Unit AgreementQuarterly Report on Form 10-Q (file No. 001-37580)July 28, 202110.07.2u*Alphabet Inc. 2021 Stock Plan - Form of Alphabet 2022 Non-CEO Performance Stock Unit Agreement10.08u*Alphabet Inc. Company Bonus Plan14.01Code of Conduct of the Registrant as amended on September 21, 2017Annual Report on Form 10-K(File No. 001-37580)February 6, 201821.01*Subsidiaries of the Registrant23.01*Consent of Independent Registered Public Accounting Firm24.01*Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K)31.01*Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.02*Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.01‡Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS*Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document101.SCH*Inline XBRL Taxonomy Extension Schema Document101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document104Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)91Table of ContentsAlphabet Inc._________________uIndicates management compensatory plan, contract, or arrangement.*Filed herewith.‡Furnished herewith.ITEM 16.FORM 10-K SUMMARYNone.92Table of ContentsAlphabet Inc.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.Date: February 1, 2022  ALPHABET INC.By:/S/    SUNDAR PICHAI        Sundar PichaiChief Executive Officer(Principal Executive Officer of the Registrant)POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Sundar Pichai and Ruth M. Porat, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.  93Table of ContentsAlphabet Inc.SignatureTitleDate/S/ SUNDAR PICHAIChief Executive Officer and Director (Principal Executive Officer)February 1, 2022Sundar Pichai/S/    RUTH M. PORAT        Senior Vice President and Chief Financial Officer (Principal Financial Officer)February 1, 2022Ruth M. Porat/S/    AMIE THUENER O'TOOLE        Vice President and Chief Accounting Officer (Principal Accounting Officer)February 1, 2022Amie Thuener O'Toole/S/    FRANCES H. ARNOLD        DirectorFebruary 1, 2022Frances H. Arnold/S/    SERGEY BRIN        Co-Founder and DirectorFebruary 1, 2022Sergey Brin/S/    L. JOHN DOERR        DirectorFebruary 1, 2022L. John Doerr/S/    ROGER W. FERGUSON, JR.       DirectorFebruary 1, 2022Roger W. Ferguson, Jr./S/    JOHN L. HENNESSY        Director, ChairFebruary 1, 2022John L. Hennessy/S/    ANN MATHER       DirectorFebruary 1, 2022Ann Mather/S/    ALAN R. MULALLYDirectorFebruary 1, 2022Alan R. Mulally/S/    LARRY PAGE        Co-Founder and DirectorFebruary 1, 2022Larry Page/S/    K. RAM SHRIRAM       DirectorFebruary 1, 2022K. Ram Shriram/S/    Robin L. Washington      DirectorFebruary 1, 2022Robin L. Washington94
8-K_1045810_0001045810-16-000268.htm
8-K 1 form8-k2016annualmeetingre.htm FORM 8-K SEC Document UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K______________CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): May 18, 2016NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdictionof incorporation)(CommissionFile Number)(IRS EmployerIdentification No.)2701 San Tomas Expressway, Santa Clara, CA(Address of principal executive offices)95050(Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))     Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.(e) Amendment and Restatement of Amended and Restated 2007 Equity Incentive Plan On May 18, 2016, at the 2016 Annual Meeting of Stockholders, or the 2016 Annual Meeting, of NVIDIA Corporation, our stockholders approved an amendment and restatement of the NVIDIA Corporation Amended and Restated 2007 Equity Incentive Plan, or the 2007 Plan, to increase the available share reserve by 18,800,000 shares as described in our definitive proxy statement for the 2016 Annual Meeting filed with the Securities and Exchange Commission on April 7, 2016, or the Proxy Statement. The 2007 Plan previously had been approved, subject to stockholder approval, by the Compensation Committee of the Board of Directors of NVIDIA, or the Committee. A summary of the 2007 Plan is set forth in our Proxy Statement. That summary and the foregoing description of the 2007 Plan are qualified in their entirety by reference to the text of the 2007 Plan, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.Amendment and Restatement of 2012 Employee Stock Purchase PlanAt the 2016 Annual Meeting, our stockholders also approved an amendment and restatement of the NVIDIA Corporation Amended and Restated 2012 Employee Stock Purchase Plan, or the 2012 Plan, to increase the available share reserve by 10,000,000 shares as described in the Proxy Statement. The 2012 Plan previously had been approved, subject to stockholder approval, by the Committee. A summary of the 2012 Plan is set forth in our Proxy Statement. That summary and the foregoing description of the 2012 Plan are qualified in their entirety by reference to the text of the 2012 Plan, which is filed as Exhibit 10.2 hereto and incorporated herein by reference.Item 5.07. Submission of Matters to a Vote of Security Holders.At the 2016 Annual Meeting, the following proposals were adopted by the margin indicated. Proxies for the 2016 Annual Meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, and there was no solicitation in opposition of management’s solicitation.1.    The election of twelve (12) directors to serve for a one-year term until the 2017 Annual Meeting of Stockholders of NVIDIA Corporation. The results of the voting were as follows:a. Robert K. Burgess     Number of shares For406,396,167     Number of shares Withheld609,979     Number of shares Abstaining863,331     Number of Broker Non-Votes61,314,492b. Tench Coxe     Number of shares For401,503,666     Number of shares Withheld861,824     Number of shares Abstaining5,503,987     Number of Broker Non-Votes61,314,492c. Persis S. Drell     Number of shares For406,618,232     Number of shares Withheld656,972     Number of shares Abstaining594,273     Number of Broker Non-Votes61,314,492d. James C. Gaither     Number of shares For403,084,500     Number of shares Withheld1,313,960     Number of shares Abstaining3,471,017     Number of Broker Non-Votes61,314,492e. Jen-Hsun Huang     Number of shares For405,744,009     Number of shares Withheld403,096     Number of shares Abstaining1,722,372     Number of Broker Non-Votes61,314,492f. Dawn Hudson     Number of shares For406,878,070     Number of shares Withheld406,624     Number of shares Abstaining584,783     Number of Broker Non-Votes61,314,492g. Harvey C. Jones     Number of shares For403,048,625     Number of shares Withheld1,118,129     Number of shares Abstaining3,702,723     Number of Broker Non-Votes61,314,492h. Michael G. McCaffery     Number of shares For404,788,854     Number of shares Withheld782,230     Number of shares Abstaining2,298,393     Number of Broker Non-Votes61,314,492i. William J. Miller     Number of shares For399,927,158     Number of shares Withheld1,019,064     Number of shares Abstaining6,923,255     Number of Broker Non-Votes61,314,492j. Mark L. Perry     Number of shares For403,107,160     Number of shares Withheld663,217     Number of shares Abstaining4,099,100     Number of Broker Non-Votes61,314,492k. A. Brooke Seawell     Number of shares For403,297,620     Number of shares Withheld686,157     Number of shares Abstaining3,885,700     Number of Broker Non-Votes61,314,492l. Mark A. Stevens     Number of shares For404,079,206     Number of shares Withheld1,283,228     Number of shares Abstaining2,507,043     Number of Broker Non-Votes61,314,4922.    The approval, on an advisory basis, of the compensation of our named executive officers as disclosed in the Proxy Statement. The results of the voting were as follows:     Number of shares For398,480,045     Number of shares Against8,260,412     Number of shares Abstaining1,129,020     Number of Broker Non-Votes61,314,4923.    The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered accounting firm for our fiscal year ending January 29, 2017. The results of the voting were as follows:     Number of shares For465,916,054     Number of shares Against2,821,978     Number of shares Abstaining445,937     Number of Broker Non-Votes—4.    The approval of the 2007 Plan. The results of the voting were as follows:     Number of shares For306,952,065     Number of shares Against100,422,286     Number of shares Abstaining495,126     Number of Broker Non-Votes61,314,4925.    The approval of the 2012 Plan. The results of the voting were as follows:     Number of shares For405,733,504     Number of shares Against1,750,528     Number of shares Abstaining385,445     Number of Broker Non-Votes61,314,492Item 9.01. Financial Statements and Exhibits.(d) ExhibitsExhibitNumber                                                           Description  .10.1 Amended and Restated 2007 Equity Incentive Plan 10.2 Amended and Restated 2012 Employee Stock Purchase PlanSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  NVIDIA CorporationDate: May 23, 2016By: /s/ Rebecca Peters  Rebecca Peters Vice President, Corporate Affairs and Assistant Secretary  EXHIBIT INDEXExhibitNumber                                                           Description  .10.1 Amended and Restated 2007 Equity Incentive Plan 10.2 Amended and Restated 2012 Employee Stock Purchase Plan
8-K_320193_0000320193-17-000006.htm
8-K 1 a8-kq32017712017.htm 8-K Document  UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 8-KCURRENT REPORTPursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934August 1, 2017Date of Report (Date of earliest event reported) Apple Inc.(Exact name of Registrant as specified in its charter)California 001-36743 94-2404110(State or other jurisdictionof incorporation) (CommissionFile Number) (IRS. EmployerIdentification No.)1 Infinite LoopCupertino, California 95014(Address of principal executive offices) (Zip Code)(408) 996-1010(Registrant’s telephone number, including area code)Not applicable(Former name or former address, if changed since last report.)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).Emerging growth company ☐If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Item 2.02Results of Operations and Financial Condition.On August 1, 2017, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its third fiscal quarter ended July 1, 2017 and a related data sheet. A copy of Apple’s press release is attached hereto as Exhibit 99.1 and a copy of the related data sheet is attached hereto as Exhibit 99.2.The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01Financial Statements and Exhibits. (d)Exhibits.ExhibitNumber  Exhibit Description  99.1  Press release issued by Apple Inc. on August 1, 2017.  99.2  Data sheet issued by Apple Inc. on August 1, 2017.SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: August 1, 2017 Apple Inc.         By: /s/ Luca Maestri     Luca MaestriSenior Vice President,Chief Financial OfficerExhibit Index ExhibitNumber  Exhibit Description  99.1  Press release issued by Apple Inc. on August 1, 2017.  99.2  Data sheet issued by Apple Inc. on August 1, 2017.
8-K_1730168_0001193125-20-099626.htm
8-K false 0001730168 0001730168 2020-04-06 2020-04-06 0001730168 us-gaap:CommonStockMember 2020-04-06 2020-04-06 0001730168 us-gaap:SeriesAPreferredStockMember 2020-04-06 2020-04-06     UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549   FORM 8-K   CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): April 6, 2020   BROADCOM INC. (Exact Name of Registrant as Specified in Charter)   Delaware   001-38449   35-2617337 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 1320 Ridder Park Drive, San Jose, California   95131 (Address of principal executive offices)   (Zip Code) (408) 433-8000 (Registrant’s telephone number, including area code)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act: Title of each class   Trading Symbol(s)   Name of each exchange on which registered Common Stock, $0.001 par value   AVGO   The NASDAQ Global Select Market 8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value   AVGOP   The NASDAQ Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). Emerging growth company  ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐     Item 8.01 Other Events. Pricing of Offering of Senior Notes and Upsize of Previously Announced Debt Tender Offer In a press release issued on April 6, 2020, Broadcom Inc. (“Broadcom”) announced that it priced its previously announced offering (the “Offering”) of $2.25 billion of 4.700% Senior Notes due 2025 (the “2025 Notes”) and $2.25 billion of 5.000% Senior Notes due 2030 (the “2030 Notes” and, together with the 2025 Notes, the “New Notes”). Concurrently with the Offering, Broadcom is conducting cash tender offers (each, a “Tender Offer”) to purchase the outstanding notes described below, in each case subject to market conditions and other factors. The notes offered to be purchased in the Tender Offers, listed in the order of priority, are the (i) 3.000% senior notes due January 15, 2022, issued by Broadcom Corporation, (ii) 3.125% senior notes due April 15, 2021, issued by Broadcom Inc. and (iii) 2.200% senior notes due January 15, 2021, issued by Broadcom Corporation (the “Tender Offer Notes”) up to an aggregate purchase price, excluding accrued and unpaid interest, of $3.75 billion (the “Aggregate Purchase Price”), of which up to $250 million may be used to purchase the 2.200% senior notes due January 15, 2021. The Aggregate Purchase Price represents an increase in the size of the Offering from the previously announced Offering amount of $1.0 billion. Broadcom intends to use the net proceeds from the sale of the New Notes to repay certain of its existing indebtedness, including funding the purchase of the Tender Offers and the payment of accrued and unpaid interest, premiums, if any, fees and expenses in connection therewith. The New Notes are being sold in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States under Regulation S under the Securities Act. The foregoing description is qualified in its entirety by reference to the press release dated April 6, 2020, a copy of which is attached hereto as Exhibit 99.1. Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as “will”, “expect”, “believe”, “anticipate”, “estimate”, “should”, “intend”, “plan”, “potential”, “predict” “project”, “aim”, and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially affect future results include risks associated with: our acquisition of Symantec Corporation’s Enterprise Security business (“Symantec Business”), including (1) potential difficulties in employee retention, (2) unexpected costs, charges or expenses, and (3) our ability to successfully integrate the Symantec Business and achieve the anticipated benefits of the transaction; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; global economic conditions and concerns; international political and economic conditions; any acquisitions we may make, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired businesses with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions, including our recent acquisition of the Symantec Business; government regulations and trade restrictions; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors and resellers of our products; dependence on senior management and our ability to attract and retain qualified personnel; involvement in legal or administrative proceedings; quarterly and annual fluctuations in operating results; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities, warehouses or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; sales to our government clients; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; market acceptance of the end products into which our products are designed; our ability to sell to new types of customers and to keep pace with technological advances; our compliance with privacy and data security laws; our ability to protect against a breach of security systems; changes in accounting standards; fluctuations in foreign exchange rates; our provision for income taxes and overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Item 9.01 Financial Statements and Exhibits. ExhibitNo.     Description             99.1     Press release, dated April 6, 2020, entitled “Broadcom Inc. Announces Pricing of Private Offering of Senior Notes and Upsize of Previously Announced Debt Tender Offer”             104     Cover Page Interactive Data File (formatted as Inline XBRL). SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.     BROADCOM INC.               Date: April 6, 2020     By:   /s/ Thomas H. Krause, Jr.     Name:   Thomas H. Krause, Jr.     Title:   Chief Financial Officer
8-K_59478_0000059478-24-000032.htm
lly-202402060000059478false00000594782024-02-062024-02-060000059478us-gaap:CommonClassAMember2024-02-062024-02-060000059478lly:A718NotesDueJune12025Member2024-02-062024-02-060000059478lly:A1.625NotesDueJune22026Member2024-02-062024-02-060000059478lly:A2.125NotesDueJune32030Member2024-02-062024-02-060000059478lly:A625Notesdue2031Member2024-02-062024-02-060000059478lly:A500NotesDue2033Member2024-02-062024-02-060000059478lly:A6.77NotesDueJanuary12036Member2024-02-062024-02-060000059478lly:A1625NotesDue2043Member2024-02-062024-02-060000059478lly:A1.700Notesdue2049Member2024-02-062024-02-060000059478lly:A1125NotesDue2051Member2024-02-062024-02-060000059478lly:A1375NotesDue2061Member2024-02-062024-02-06 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 8-K CURRENT REPORTPursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934Date of Report (Date of Earliest Event Reported): February 6, 2024ELI LILLY AND COMPANY (Exact Name of Registrant as Specified in its Charter) Indiana 001-06351 35-0470950(State or Other Jurisdictionof Incorporation) (CommissionFile Number) (I.R.S. EmployerIdentification No.)  Lilly Corporate CenterIndianapolis,Indiana46285(Address of Principal Executive Offices)(Zip Code) Registrant’s Telephone Number, Including Area Code: (317) 276-2000 Not Applicable (Former Name or Former Address, if Changed Since Last Report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act: Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock (no par value)LLYNew York Stock Exchange7 1/8% Notes due 2025LLY25New York Stock Exchange1.625% Notes due 2026LLY26New York Stock Exchange2.125% Notes due 2030LLY30New York Stock Exchange0.625% Notes due 2031LLY31New York Stock Exchange0.500% Notes due 2033LLY33New York Stock Exchange6.77% Notes due 2036LLY36New York Stock Exchange1.625% Notes due 2043LLY43New York Stock Exchange1.700% Notes due 2049LLY49ANew York Stock Exchange1.125% Notes due 2051LLY51New York Stock Exchange1.375% Notes due 2061LLY61New York Stock ExchangeIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 2.02. Results of Operations and Financial Condition.The information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933 or the Exchange Act, except as otherwise expressly stated in such filing.Attached hereto as Exhibit 99.1 and incorporated by reference into this Item 2.02 is a copy of the press release, dated February 6, 2024, announcing the financial results of Eli Lilly and Company for the quarter and year ended December 31, 2023.Item 9.01. Financial Statements and Exhibits.Exhibit No.Description99.1Press Release of Eli Lilly and Company, dated February 6, 2024.104Cover Page Interactive Data File (embedded within the Inline XBRL document). SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ELI LILLY AND COMPANY(Registrant)By:/s/ Donald A. ZakrowskiName:Donald A. ZakrowskiTitle:Senior Vice President, Finance, and Chief Accounting OfficerDate: February 6, 2024
8-K_1045810_0001045810-21-000056.htm
nvda-202105210001045810false00010458102021-05-212021-05-21UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549______________FORM 8-K CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934Date of Report (Date of earliest event reported): May 21, 2021 NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware0-2398594-3177549(State or other jurisdiction(Commission(IRS Employerof incorporation)File Number)Identification No.)   2788 San Tomas Expressway, Santa Clara, CA 95051 (Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable(Former name or former address, if changed since last report)Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).      Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Item 8.01. Other Events.On May 21, 2021, the board of directors of NVIDIA Corporation, or the Company, declared a four-for-one split of Company’s common stock in the form of a stock dividend, conditioned on obtaining stockholder approval at the Company’s 2021 Annual Meeting of Stockholders to be held on June 3, 2021, of an amendment to NVIDIA’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 4 billion shares. The press release announcing the stock dividend and other matters relating to the Company’s 2021 Annual Meeting of Stockholders is attached as Exhibit 99.1 and is incorporated herein by reference. Item 9.01. Financial Statements and Exhibits.(d) Exhibits ExhibitNumber Description99.1 Press Release, dated May 21, 2021, entitled "NVIDIA Announces Four-for-One Stock Split, Pending Stockholder Approval at Annual Meeting Set for June 3"104 Cover Page Interactive Data File (embedded within the Inline XBRL document)SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  NVIDIA CorporationDate: May 21, 2021By: /s/ Colette M. Kress Colette M. Kress Executive Vice President and Chief Financial Officer
8-K_1018724_0001193125-20-159531.htm
8-K AMAZON COM INC false 0001018724 0001018724 2020-06-03 2020-06-03     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549   FORM 8-K   CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 June 3, 2020 Date of Report (Date of earliest event reported)   AMAZON.COM, INC. (Exact name of registrant as specified in its charter)   Delaware   000-22513   91-1646860 (State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.) 410 Terry Avenue North, Seattle, Washington 98109-5210 (Address of principal executive offices, including Zip Code) (206) 266-1000 (Registrant’s telephone number, including area code)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered Common Stock, par value $.01 per share   AMZN   Nasdaq Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).     Emerging growth company   ☐       If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐     TABLE OF CONTENTS ITEM 8.01. OTHER EVENTS.     3             ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.     4             SIGNATURES     5             EXHIBIT 1.1                 EXHIBIT 4.1                 EXHIBIT 4.2                 EXHIBIT 4.3                 EXHIBIT 4.4                 EXHIBIT 4.5                 EXHIBIT 4.6                 EXHIBIT 4.7                 EXHIBIT 5.1                 EXHIBIT 23.1       2 ITEM 8.01. OTHER EVENTS. On June 3, 2020, Amazon.com, Inc. (the “Company”) closed the sale of $1,000,000,000 aggregate principal amount of its 0.400% notes due 2023 (the “2023 Notes”), $1,250,000,000 aggregate principal amount of its 0.800% notes due 2025 (the “2025 Notes”), $1,250,000,000 aggregate principal amount of its 1.200% notes due 2027 (the “2027 Notes”), $2,000,000,000 aggregate principal amount of its 1.500% notes due 2030 (the “2030 Notes”), $2,500,000,000 aggregate principal amount of its 2.500% notes due 2050 (the “2050 Notes”), and $2,000,000,000 aggregate principal amount of its 2.700% notes due 2060 (the “2060 Notes” and, together with the 2023 Notes, 2025 Notes, 2027 Notes, 2030 Notes, and 2050 Notes, the “Notes”) pursuant to an underwriting agreement dated June 1, 2020 (the “Underwriting Agreement”) among the Company and Goldman Sachs & Co. LLC, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., and J.P. Morgan Securities LLC, as managers of the several underwriters named in Schedule II therein. The sale of the Notes was registered under the Company’s registration statement on Form S-3 filed on June 1, 2020 (File No. 333-238831). The aggregate public offering price of the Notes was $9.946 billion and the estimated net proceeds from the offering were approximately $9.918 billion, after deducting underwriting discounts from the public offering price and before deducting offering expenses payable by us. The Notes were issued pursuant to an indenture dated as of November 29, 2012 (the “Indenture”) between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”), together with the officers’ certificate dated as of June 3, 2020 issued pursuant thereto establishing the terms of each series of the Notes (the “Officers’ Certificate”). The foregoing descriptions of the Underwriting Agreement and the Officers’ Certificate are qualified in their entirety by the terms of such agreements, which are filed as Exhibit 1.1 and Exhibit 4.1, respectively, and incorporated herein by reference. The foregoing description of the Notes is qualified in its entirety by reference to the full text of the form of 2023 Note, form of 2025 Note, form of 2027 Note, form of 2030 Note, form of 2050 Note, and form of 2060 Note, which are filed hereto as Exhibit 4.2, Exhibit 4.3, Exhibit 4.4, Exhibit 4.5, Exhibit 4.6, and Exhibit 4.7, respectively, and incorporated herein by reference. 3 ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (d) Exhibits. ExhibitNumber     Description               1.1     Underwriting Agreement, dated as of June 1, 2020, among Amazon.com, Inc. and Goldman Sachs & Co. LLC, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., and J.P. Morgan Securities LLC, as managers of the several underwriters named in Schedule II therein.               4.1     Officers’ Certificate of Amazon.com, Inc., dated as of June 3, 2020.               4.2     Form of 0.400% Note due 2023 (included in Exhibit 4.1).               4.3     Form of 0.800% Note due 2025 (included in Exhibit 4.1).               4.4     Form of 1.200% Note due 2027 (included in Exhibit 4.1).               4.5     Form of 1.500% Note due 2030 (included in Exhibit 4.1).               4.6     Form of 2.500% Note due 2050 (included in Exhibit 4.1).               4.7     Form of 2.700% Note due 2060 (included in Exhibit 4.1).               5.1     Opinion of Gibson, Dunn & Crutcher LLP.             23.1     Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).             104     The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101). 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.       AMAZON.COM, INC. (REGISTRANT)                     /s/ Antonio Masone Dated: June 3, 2020       Antonio Masone       Treasurer 5
8-K_789019_0001193125-22-202034.htm
8-K false 0000789019 0000789019 2022-07-26 2022-07-26 0000789019 us-gaap:CommonStockMember 2022-07-26 2022-07-26 0000789019 msft:NotesThreePointOneTwoFivePercentDueDecemberSixTwentyTwentyEightMember 2022-07-26 2022-07-26 0000789019 msft:NotesTwoPointSixTwoFivePercentDueMayTwoTwentyThirtyThreeMember 2022-07-26 2022-07-26   UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) July 26, 2022     Microsoft Corporation       Washington   001-37845   91-1144442 (State or Other Jurisdiction of Incorporation)   (Commission File Number)   (IRS Employer Identification No.)   One Microsoft Way, Redmond, Washington   98052-6399 (425) 882-8080 www.microsoft.com/investor Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class    Trading Symbol    Name of exchange on which registered Common stock, $0.00000625 par value per share    MSFT    NASDAQ 3.125% Notes due 2028    MSFT    NASDAQ 2.625% Notes due 2033    MSFT    NASDAQ Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐     Item 2.02. Results of Operations and Financial Condition On July 26, 2022, Microsoft Corporation issued a press release announcing its financial results for the fiscal quarter and year ended June 30, 2022. A copy of the press release is furnished as Exhibit 99.1 to this report. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 9.01. Financial Statements and Exhibits (d) Exhibits:   99.1    Press release, dated July 26, 2022, issued by Microsoft Corporation 104    Cover Page Interactive Data File (embedded within the Inline XBRL document) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.        MICROSOFT CORPORATION    (Registrant) Date: July 26, 2022    /S/ ALICE L. JOLLA    Alice L. Jolla    Corporate Vice President and Chief AccountingOfficer
8-K_789019_0001193125-21-210827.htm
8-K false 0000789019 0000789019 2021-07-08 2021-07-08 0000789019 us-gaap:CommonStockMember 2021-07-08 2021-07-08 0000789019 msft:NotesTwoPointOneTwoFivePercentDueDecemberSixTwentyTwentyOneMember 2021-07-08 2021-07-08 0000789019 msft:NotesThreePointOneTwoFivePercentDueDecemberSixTwentyTwentyEightMember 2021-07-08 2021-07-08 0000789019 msft:NotesTwoPointSixTwoFivePercentDueMayTwoTwentyThirtyThreeMember 2021-07-08 2021-07-08     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549     FORM 8-K     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) July 8, 2021     Microsoft Corporation (Exact Name of Registrant as Specified in Charter)       Washington   001-37845   91-1144442 (State of Incorporation)   (CommissionFile Number)   (I.R.S. ID)   One Microsoft Way, Redmond, Washington   98052-6399 [Address]   (425) 882-8080 www.microsoft.com/investor     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:   Title of each class   TradingSymbol   Name of exchangeon which registered Common stock, $0.00000625 par value per share   MSFT   NASDAQ 2.125% Notes due 2021   ​MSFT   NASDAQ 3.125% Notes due 2028   MSFT   NASDAQ 2.625% Notes due 2033   MSFT   NASDAQ Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐       Item 8.01 - Other Events. On July 8, 2021, Microsoft Corporation (the “Company”) announced that it will redeem all of the Company’s outstanding 2.125% Notes due December 6, 2021 (ISIN XS1001749107) issued in the principal amount of €1,750,000,000 (the “Notes”) on September 6, 2021 (the “Redemption Date”). Pursuant to the terms set forth in the indenture dated as of May 18, 2009 (the “Base Indenture”) between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), as supplemented by the seventh supplemental indenture, dated as of December 6, 2013, the cash redemption price (the “Redemption Price”) will be equal to the €1,750,000,000 principal amount of the outstanding Notes plus accrued and unpaid interest to, but excluding, the Redemption Date. The information contained in this Current Report on Form 8-K does not constitute a notice of redemption of the Notes. Holders of the Notes should refer to the notice of redemption delivered to the registered holders of the Notes by the Trustee with respect to the Notes.   Item 9.01. Financial Statements and Exhibits.   (d) Exhibits.   Exhibit Number    Description 99.1    Press release of Microsoft Corporation dated July 8, 2021. 104    Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document and contained in Exhibit 101) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.         MICROSOFT CORPORATION       (Registrant) Date: July 8, 2021       /s/ Keith R. Dolliver       Keith R. Dolliver       VP and Deputy General Counsel