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Burlington Northern Acquisition Boosts Berkshire Hathaway's Operating Profits .. Again

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Warren Buffett's Berkshire Hathaway reports a 35.6 percent surge in after-tax operating profits for its third quarter, with "major contributor" Burlington Northern getting a lot of the credit.

That's similar to the company's second quarter, when Burlington was also cited as a "major contributor" to that period's 73 percent earnings jump.

In a news releaselate today (Friday), Berkshire says Burlington was responsible for $706 million of its $2.79 billion in operating earnings for the period. (More extensive information on the quarter is included in Berkshire's 10-Q filing with the SEC.)

Berkshire says another "major reason" for the improvement is a swing from losses to profits at its NetJets subsidiary.

Those gains helped offset a 42.4 percent decline in Berkshire's insurance underwriting businesses to $199 million from the year-ago's $346 million. Investment income for the insurance businesses fell 14.2 percent to $873 million from $1.02 billion.

Earnings per Class A share increased 27.7 percent to $1,692. The release notes that Berkshires shares outstanding were increased by 6.1 percent as a result of the Burlington buy, which was finalized in February.

The consensus forecast from the handful of analysts who follow the stock called for a per share operating profit of $1,677.

With $307 million in gains from investment sales, and $95 million in recorded losses from derivatives, Berkshire's net earnings fell 7.7 percent to $2.99 billion from $3.24 billion in last year's third quarter. Berkshire reported $1.13 billion in gains from derivatives in that quarter, but the release repeats Buffett's assertion that gains and losses from investments and derivatives in any given quarter or year are "often meaningless."

Berkshire is required to report gains or losses on the derivatives contracts it has sold, including what amounts to large insurance policies for buyers seeking protection from a long-term catastrophic loss for global stock markets. Those 'paper' gains and losses, however, can't be realized for at least eight years, because the contracts can not be exercised before expiration.

In its 10-Q, Berkshire reports a $700 million dollar pre-tax loss on these equity index put options, despite generally higher stock prices around the world. That was partially offset by a $519 million gain for credit default obligations that insure buyers against certain bond defaults. With another $35 million in gains on other derivatives, the total loss for the quarter is $146 million, compared to a $1.73 billion gain in 2009's Q3.

Berkshire reports that its book value, a metric that Buffett has called a good indicator of changes in the company's intrinsic value, increased 7.5 percent to $90,823 per Class A share as of September 30.

Its insurance float was $66 billion on that date.

An $462 million increase in the total cost basis for Wells Fargo during the quarter indicates we'll see an increase in Berkshire's holdings of the stock when it files its Q3 portfolio snapshot just over a week from now.

A decrease of $78 million for Procter and Gamble's total cost basis points to a smaller position in that stock.

Current Berkshire stock prices:

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Class B:

Class A:

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