BerkshireHathawayWEB

8/9/2019 BerkshireHathawayWEB

1/29

Last 119,135 52 Week High 125,252

Change 735 52 Week Low 83,957

% Change 0.621 1 Year Total Return(%) 33.03

Open 116,410 3 Years Total Return(%) 8.23

High 119,357

Low 116,410 Common Primary Shares (mil) 1

Volume 588 Market Cap Consolidated (mil) 194,791

Currency USDValuation Range (mil)

217,000to

230,000

Berkshire Hathaway Inc.(BRK-A)

Class A $ 119,135Market Capitalization 196,324,000,000

Reasonably Valued 217,000,000,000

April 2009 (LAST YEAR)

Last year Berkshire Hathaway sold for

what I believed was a clearly

undervalued, $135.9 billion. My

assessment at that time was that

Berkshire Hathaway was worth, at

minimum, $160 billion, but could

reasonably command $172 billion.

April 2009 market value:

$135,946,000,000!!April 2009 estimated business value

range:!$160,000,000,000 - $172,000,000,000

April 2010 (CURRENT)

At the time of this writing, Berkshire

Hathaway sells for $200,000,000,000.

Though Mr. Market was way off last year,

Berkshire currently sells right around

where it should.

Current Business

(Intrinsic) Value Estimate

$217,000,000,000! ! ! ! to$230,000,000,000

Last year I discussed Berkshire Hathaways valuation at

length. Lets continue the tradition with an update.

MatPO Box 523714, 6200 Rolling

Springfield, Virginiamatt@mattpau

(703) 65Mat

PO Box 523714, 6200 Rolling Road Springfield, Virginia 22152 [email protected]

April 19, 2010
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


2/29

Major Shareholders....................................................... 1Debt Maturity Profile.................................................... 1

Major Subsidiaries......................................................... 2Berkshire Hathaway, Inc. Tearsheet............................... 3

Annual Financials Statements........................................ 4Balance Sheet 4Statement of Income 5Statement of Cash Flows 6Annual Financial Ratios 7Limitations of Consolidated Financial Statements 8

Overview........................................................................ 9Derivatives in More Detail 10Itemized Derivatives Contracts 11

Operating Units..............................................................12Insurance 13Total Investments 14Other Investments 15Float 18Equities 19

Value of Insurance Operations 20Non-Insurance Business 21

Burlington Northern Santa Fe........................................22BNSF Tear Sheet 23BNSF Merger 24

Berkshire Hathaway Inc., Business Value....................... 26

BERKSHIRE HATHAWAY, INC.Matt P


CONTENTS
mailto:[email protected]:[email protected]


3/29


4/29

GEICO Underwriting private passenger automobile insurance mainly by direct

response methods

General Re Underwriting excess-of-loss, quota-share and facultative reinsuranceworldwide

Berkshire Hathaway Reinsurance

Group

Underwriting excess-of-loss and quota-share reinsurance for property and

casualty insurers and reinsurers

Berkshire Hathaway Primary Group Underwriting multiple lines of property and casualty insurance policies for

primarily commercial accounts

BH Finance, Clayton Homes, XTRA,

CORT and other financial services

(Finance and financial products)

Proprietary investing, manufactured housing and related consumer financing,

transportation equipment leasing, furniture leasing, life annuities and risk

management products

Marmon An association of approximately 130 manufacturing and service businesses

that operate within 11 diverse business sectors

McLane Company Wholesale distribution of groceries and non-food items

MidAmerican Regulated electric and gas utility, including power generation and distribution

activities in the U.S. and internationally; domestic real estate brokerage

Shaw Industries Manufacturing and distribution of carpet and floor coverings under a variety

of brand names

Other Segments

Manufacturing Acme Building Brands, Benjamin Moore, H.H. Brown Shoe Group, CTB,

Fechheimer Brothers, Forest River, Fruit of the Loom, Garan, IMC, Johns

Manville, Justin Brands, Larson- Juhl, MiTek, Richline and Scott Fetzer

Service Buffalo News, Business Wire, FlightSafety, International Dairy Queen,

Pampered Chef, NetJets and TTI

Retailing Ben Bridge Jeweler, Borsheims, Helzberg Diamond Shops, Jordans Furni-

ture, Nebraska Furniture Mart, Sees Candies, Star Furniture and R.C. Willey

!"#$%&"'()*)+,-(%

!"#$%&"'(

! !!!"#$%&'#(!)'*+,'%$-

! !!!.&(/,0%#!)'1/2#'3+!.& 4

! !!!56).7

! !!!5+'8+

! ! !!"#$%&'#(!9%2+!#'*!:#2%'+!)'1/2#'3+!.&4

! ! !!;+2#$=#?#-!@11/2#'3+!.&4

+,-(%

:#'/A#3$/2%'B! @3,+!;/%(*%'B!;2#'*1

! ;+'C#,%'!:&&2+

! >4>4!;2&?'!D=&+!52&/E

! .F;

! 9+3==+%,+2!;2&$=+21

! 9&2+1$!8%G+2

! 92/%$!&A!$=+!H&&,

! 5#2#'I!):.

! J&='1!:#'G%((+

! J/1$%'!;2#'*1

! H#21&'KJ/=(

! :#2,&'

! :%F+<

! 8%3=(%'+

! D3&$$!9+$L+2

! D=#?!)'*/1$2%+1

D+2G%3+

! ;/AA#(&!"+?1

! ;/1%'+11!M%2+

! 9(%B=$D#A+$-

! )'$+2'#$%&'#(!N#%2-!O/++'

! :3H#'+!.&,E#'-

! P#,E+2+*!.=+A

! "+$J+$1

! !FF)

8+$#%(

! ;+'!;2%*B+!J+?+(+2

! ;&21=+%,1I!>+(L0+2B!N%#,&'*!

D=&E1

! .78F

! J&2*#'Q1!9/2'%$/2+

! "+02#1


5/29

Recent Price P/E Ratio Div. Yld. (%) Total Return 1 Yr. (%)121050.000 23.31 0.00

SEDOL: 2093666 Shares Out.(mil): 2 YTD High 140710.500 27.10 Ind. Ann. Div.Exchange: NYSE Market Value(mil): 199,329 YTD Low 97205.000 18.72 0.00Key Ratios FYE: 12/31/09Oper Margin 14.46 Curr Ratio 2.28Net Margin 7.19 Debt/Equity 0.25RO E 6.14 Int Coverage 6.80RO A 2.71 CF/Share 9190.46Currency: USD

PER SHARE OVERVIEWDate Earnings Dividend Sales/Shr.

Q4Y2009 5193.00 0.00 19460.62

Q3Y2009 3299.00 0.00 19271.16

Q2Y2009 1893.00 0.00 20579.36

Q1Y2009 1628.00 0.00 14682.79

Q4Y2008 3224.00 0.00 15847.92

Q3Y2008 5052.00 0.00 17996.47

Q2Y2008 7312.00 0.00 19392.96

Q1Y2008 7472.00 0.00 16223.63

INCOME STATEMENT (M illions) Y2009 Y2008 Y2007 Y2006 QUARTERLY REVENUE YEAR OVER YEAR*Net Sales 112,024 107,786 118,245 98,539Cost of Goods Sold 84,584 83,866 83,175 68,665Selling and Admin Expenses 8,117 8,052 7,098 5,932Amortization & Depreciation 3,127 2,810 2,407 2,066Operating Income 16,196 13,058 25,565 21,876Interest Expense 1,992 1,963 1,910 1,724Pretax Income 11,552 7,574 20,161 16,778Income Taxes 3,538 1,978 6,594 5,505Net Income before Extraordinary Items/Pref Div 8,055 4,994 13,213 11,015Net Income 8,055 4,994 13,213 11,015BALANCE SHEET (M illions) Y2009 Y2008 Y2007 Y2006 FIVE YR SALES TO NET INCOMEASSETSCash & Short-Term Investments 31,012 26,071 45,425 44,851Receivables - Total 28,781 28,867 25,698 24,379Inventories - Total 6,147 7,500 5,793 5,257Total Current Assets 65,940 62,438 76,916 74,487Net Property, Plant, and Equipment 46,656 45,157 36,190 33,342Total Assets 297,119 267,399 273,342 248,437LIABILITIES AND STOCKHOLDERS' EQUITYAccounts Payable 23,207 19,974 18,881 19,711Debt In Current Liabilities 4,637 3,924 7,302 5,155Total Current Liabilities 28,955 25,591 26,948 25,944Long-Term Debt - Total 33,272 32,958 26,524 27,450Total Liabilities 161,334 153,820 149,941 137,756Minority Interests 4,683 4,312 2,668 2,262 FIVE YEAR SUMMARY DATAPreferred Stock 0 0 0 0 Year Sales* Net Income* EPSCommon Stock 8 8 8 8 Y2005 81,663 8,528 5,5Retained Earnings 86,227 78,172 72,153 58,912 Y2006 98,539 11,015 7,1

Capital Surplus 27,074 27,133 26,952 26,522 Y2007 118,245 13,213 8,5Treasury Stock 0 0 0 0 Y2008 107,786 4,994 3,2Total Common Equity 131,102 109,267 120,733 108,419 Y2009 112,024 8,055 5,1

CASH FLOW SUMMARY (M illions) Y2009 Y2008 Y2007 Y2006Net Cash Provided by Operations 15,846 11,252 12,550 10,195 Growth Rate 8.22% -1.42% -1.60%Net Cash Provided by Investments 11,161 32,066 13,428 14,077Net Cash Provided by Financing 233 2,286 1,366 2,607 * MillionsCOMPANY DESCRIPTION PRIMARY SIC CODE: 6331 KEY FINANCIAL ITEMS IN US$ (M illions)

Y2009 Y2008 Y2007 Y2006Market Cap. 153,934 149,655 219,153 169,6Total Assets 297,119 267,399 273,342 248,4Sales 112,024 107,786 118,245 98,5Inc. Bef. Pref. 8,055 4,994 13,213 11,0EXECUTIVE OFFICERS

ADDRESS3555 Farnam Street Tel +1 402 346-14City: S tate ZipOmaha NEBRASKA 68131

BERKSH IRE HATHAWAY INC.

DATA SOURCE: THOMSON FINAN C

BERKSHIRE HATHAWAY TEARSHEE T

40%

Ticker/Key:

Berkshire Hathaway Inc.. The Group's principal activities are to provide insurance and reinsurance of property also casualty risks

and reinsure life, accident and health risks world-wide. The Group also manufactures and distributes variety of clothing and

footwear. It also manufactures and distributes clay brick, concrete blocks and cut limestone. It produces water and solvent-

thinnable general purpose architectural coatings; fiber glass wool insulation products for walls and floors, pipe, duct and equipment

insulation products; nonwoven mats, fabrics, and fibres' used as reinforcements in building and industrial applications and roofing

systems and components. The Group also provides rental furniture and accessories and wholesale distribution and logistics

services. On 18-Mar-2008 the Group acquired 60% of Marmon H oldings Inc and in Apr-2008 an additional 4.4% interest in

Marmon.

40.48Total Return 5 Yr. (%)

Warren E. Buffett

Marc D. Hamburg

Forrest N. Krutter

Chairman & Chief ExecutiveSenior Vice President & Chief FinancialOfficerSecretary

BRK'A

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Apr2006 Aug2006 Dec2006 Apr2007 Aug2007 Dec2007 Apr2008 Aug2008 Dec2008 Apr2009 Aug2009 Dec2009

48-Month Price Evolution

0

5000

10000

15000

20000

25000

30000

35000

-3Q -2Q -1Q 0Q

Y2008 Y2009

0

20000

40000

60000

80000

100000

120000

140000

0

2000

4000

6000

8000

10000

12000

14000

Y2005 Y2006 Y2007 Y2008 Y2009

Net Income* Sales*




6/29

5 YR ANNUAL BALANCE SHEET ASSETS 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Cash And ST Investments 31,012.00 26,071.00 45,425.00 44,851.00 45,461.00

Receivables (Net) 28,781.00 28,867.00 25,698.00 24,379.00 23,484.00

Total Inventories 6,147.00 7,500.00 5,793.00 5,257.00 4,143.00

Other Current Assets - - - - -

Current Assets - Total 65,940.00 62,438.00 76,916.00 74,487.00 73,088.00

Other Assets 58,230.00 57,564.00 53,666.00 49,858.00 35,033.00

Total Assets 297,119.00 267,399.00 273,342.00 248,437.00 198,325.00LIABILITIES & SHAREHOLDERS' EQUITY 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Accounts Payable 23,207.00 19,974.00 18,881.00 19,711.00 8,699.00

ST Debt & Current Portion of LT Debt 4,637.00 3,924.00 7,302.00 5,155.00 3,088.00

Income Taxes Payable 530.00 964.00 - 189.00 258.00Other Current Liabilities 581.00 729.00 765.00 889.00 -

Current Liabilities - Total 28,955.00 25,591.00 26,948.00 25,944.00 12,045.00

Long Term Debt 33,272.00 32,958.00 26,524.00 27,450.00 12,523.00

Other Liabilities 80,412.00 85,955.00 77,462.00 66,091.00 69,463.00

Total Liabilities 161,334.00 153,820.00 149,941.00 137,756.00 106,025.00Shareholders' EquityMinority Interest 4,683.00 4,312.00 2,668.00 2,262.00 816.00

Preferred Stock - - - - -

Common Equity 131,102.00 109,267.00 120,733.00 108,419.00 91,484.00

Retained Earnings 86,227.00 78,172.00 72,153.00 58,912.00 47,717.00

Total Liabilities & Shareholders' Equity 297,119.00 267,399.00 273,342.00 248,437.00 198,325.00Rate Used to Translate From USD to USD 1.00 1.00 1.00 1.00 1.00

BALANCE SHEET YR OVER YR % CHANGE 12/31/09 12/31/08 12/31/07 12/31/06

Total Current Assets 5.61% -18.82% 3.26% 1.91%

Total Assets 11.11% -2.17% 10.02% 25.27%

Total Current Liabilities 13.15% -5.04% 3.87% 115.39%

Total Long Term Debt 0.95% 24.26% -3.37% 119.20%

Total Liabilities 4.88% 2.59% 8.85% 29.93%

Total Shareholders' Equity 19.98% -9.50% 11.36% 18.51%

Total Liabilities & Shareholders' Equity 11.11% -2.17% 10.02% 25.27%

ANNUAL FINANCIALS




7/29

5 YR INCOME STATEMENT 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Net Sales or Revenues 112,024.00 107,786.00 118,245.00 98,539.00 81,663.00

Cost of Goods Sold 84,584.00 83,866.00 83,175.00 68,665.00 59,250.00

Depreciation, Depletion & Amortization 3,127.00 2,810.00 2,407.00 2,066.00 982.00

Gross Income 24,313.00 21,110.00 32,663.00 27,808.00 21,431.00

Selling, General & Admin Expenses 8,117.00 8,052.00 7,098.00 5,932.00 5,328.00

Operating Expenses - Total 95,828.00 94,728.00 92,680.00 76,663.00 65,560.00

Operating Income 16,196.00 13,058.00 25,565.00 21,876.00 16,103.00

Non-Operating Interest Income - - - - -

Earnings Before Interest And Taxes (EBIT) 13,544.00 9,537.00 22,071.00 18,502.00 12,991.00

Interest Expense On Debt 1,992.00 1,963.00 1,910.00 1,724.00 723.00

Pretax Income 11,552.00 7,574.00 20,161.00 16,778.00 12,268.00

IncomeTaxes 3,538.00 1,978.00 6,594.00 5,505.00 4,159.00

Minority Interest 386.00 602.00 354.00 258.00 104.00

Equity In Earnings 427.00 - - - 523.00

Net Income Before Extra Items/Preferred Div 8,055.00 4,994.00 13,213.00 11,015.00 8,528.00

Extr Items & Gain(Loss) Sale of Assets - - - - -Net Income Before Preferred Dividends 8055 4994 13213 11015 8528

Preferred Dividend Requirements - - - - -

Net Income Available to Common 8,055.00 4,994.00 13,213.00 11,015.00 8,528.00COMMON SIZE INCOME STATEMENT 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Cost of Goods Sold 75.51% 77.81% 70.34% 69.68% 72.55%

Selling, General & Admin Expenses 7.25% 7.47% 6.00% 6.02% 6.52%

Depreciation, Depletion & Amortization 2.79% 2.61% 2.04% 2.10% 1.20%

Operating Profit 14.46% 12.11% 21.62% 22.20% 19.72%

12.09% 8.85% 18.67% 18.78% 15.91%

Interest Expense On Debt 1.78% 1.82% 1.62% 1.75% 0.89%

Pretax Earnings 10.31% 7.03% 17.05% 17.03% 15.02%

IncomeTaxes 3.16% 1.84% 5.58% 5.59% 5.09%Minority Interest 0.34% 0.56% 0.30% 0.26% 0.13%

7.19% 4.63% 11.17% 11.18% 10.44%

Extr Items & Gain(Loss) Sale of Assets 0.00% 0.00% - 0.00% 0.00%

Net Income Before Preferred Dividends 7.19% 4.63% 11.17% 11.18% 10.44%

Preferred Dividend Requirements 0.00% 0.00% - 0.00% 0.00%

INCOME STMENT YR OVER YR % CHANGE 12/31/09 12/31/08 12/31/07 12/31/06

Sales 3.93% -8.85% 20.00% 20.67%

Cost of Goods Sold 0.86% 0.83% 21.13% 15.89%

Depreciation, Depletion & Amortn. 11.28% 16.74% 16.51% 110.39%

Gross Income 15.17% -35.37% 17.46% 29.76%

Selling, General & Admin Expenses 0.81% 13.44% 19.66% 11.34%

Total Operating Expenses 1.16% 2.21% 20.89% 16.94%Operating Income 24.03% -48.92% 16.86% 35.85%

Pretax Equity Interest Earnings - - - -100.00%

Earnings Bef Interest & Taxes 42.02% -56.79% 19.29% 42.42%

Interest Expense on Debt 1.48% 2.77% 10.79% 138.45%

Pretax Income 52.52% -62.43% 20.16% 36.76%

Income Taxes 78.87% -70.00% 19.78% 32.36%

Minority Interest -35.88% 70.06% 37.21% 148.08%

Equity Interest Earnings - - - -100.00%

61.29% -62.20% 19.95% 29.16%

Preferred Dividends - - - -

- - - -

Net Income Bef Preferred Dividends 61.29% -62.20% 19.95% 29.16%

Preferred Dividend Requirements - - - -

Net Income Available To Com mon 61.29% -62.20% 19.95% 29.16%

ANNUAL FINANCIALS

Earnings Before Interest And Taxes (EBIT)

Net Income Before Extra Items/Preferred Div

Net Income Bef Extordry Items & Disc Ops

Extordry Items & Gain(Loss) Sale of Asst




8/29

5 YEAR ANNUAL CASH FLOW STATEMENT 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Operating Activities Income Bef Extraordinary Items 8,055.00 4,994.00 13,213.00 11,015.00 8,528.00

Depreciation, Depletion & Amortn 3,127.00 2,810.00 2,407.00 2,066.00 982.00

Deferred Taxes - - - - -

Other Cash Flow 3,074.00 -6.00 -5,244.00 -1,811.00 -6,196.00

Funds From Operations 14,256.00 7,798.00 10,376.00 11,270.00 3,314.00

Extraordinary Items - - - - -

Funds From/For Other Oper Activs 1,590.00 3,454.00 2,174.00 -1,075.00 6,132.00

15,846.00 11,252.00 12,550.00 10,195.00 9,446.00

Investing Activities Capital Expenditures 4,937.00 6,138.00 5,373.00 4,571.00 2,195.00

Net Assets From Acquisitions 108.00 6,050.00 1,602.00 10,132.00 2,387.00

Decrease In Investments 15,198.00 40,186.00 25,033.00 15,909.00 12,014.00

Disposal of Fixed Assets - - - - -Other Use/(Source) - Investing 2,830.00 3,035.00 3,035.00 2,367.00 4,659.00

11,161.00 32,066.00 13,428.00 14,077.00 13,841.00

Financing Activities - - - - -

Long Term Borrowings 3,114.00 7,476.00 4,812.00 3,912.00 6,149.00

Inc(Dec) In ST Borrowings -885.00 1,183.00 -596.00 245.00 361.00

Reduction In Long Term Debt 1,586.00 6,241.00 3,237.00 1,751.00 947.00

Cash Dividends Paid - Total - - - - -

Other Source/(Use) - Financing 410.00 132.00 387.00 201.00 65.00

233.00 2,286.00 1,366.00 2,607.00 5,628.00

Exchange Rate Effect 101.00 -262.00 98.00 - -

Cash & Cash Equivalents - Inc(Dec) 5,019.00 -18,790.00 586.00 -1,275.00 1,233.00- - - - -

Long Term Borrowings 3,114.00 7,476.00 4,812.00 3,912.00 6,149.00

Inc./Dec. In S.T. Borrowings -885.00 1,183.00 -596.00 245.00 361.00

Reduction In L.T. Debt 1,586.00 6,241.00 3,237.00 1,751.00 947.00

Cash Dividends Paid - Total - - - - -

Other Source/(Use) - Financing 410.00 132.00 387.00 201.00 65.00

Net Cash Flow - Financing Activities 233.00 2,286.00 1,366.00 2,607.00 5,628.00

Exchange Rate Effect 101.00 -262.00 98.00 - -

Cash & Cash Equivalents - IncDec 5,019.00 -18,790.00 586.00 -1,275.00 1,233.00

ANNUAL FINANCIALS

Com/Prf Purchased,Retired,Converted,Redeemed

Net Cash Flow From Financing Activities

Com/Pfd Purchased,Retired,Converted,Redeemed

Net Cash Flow From Operating Activities

Net Cash Flow From Investing Activities




9/29

PROFITABILITY RATIOS 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Return On Equity 6.69 4.34 11.53 11.02 9.61

Reinvestment Rate 6.69 4.34 11.53 11.02 9.61

Return On Assets 3.31 2.32 5.54 5.43 4.65

Return On Invested Capital 5.77 4.08 9.62 9.66 8.60

Cash Flow To Sales 12.73 7.23 8.78 11.44 4.06

Net Margin 7.19 4.63 11.17 11.18 10.44

ASSET UTILIZATION RATIOS 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Assets Per Employee 1,338,373.87 1,086,987.80 1,173,141.63 1,144,870.97 1,032,942.71

Asset Turnover 0.38 0.40 0.43 0.40 0.41

Capital Expend Pct Total Assets 1.85 2.25 2.16 2.30 1.16

Capital Expend Pct Sales 4.41 5.69 4.54 4.64 2.69

LEVERAGE RATIOS 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Total Debt Pct Common Equity 28.92 33.75 28.02 30.07 17.06

LT Debt Pct Common Equity 25.38 30.16 21.97 25.32 13.69

LT Debt Pct Total Capital 19.68 22.49 17.69 19.87 11.95

Equity Pct Total Capital 77.55 74.57 80.53 78.49 87.27

Total Debt Pct Total Assets 12.76 13.79 12.37 13.12 7.87

Common Equity Pct Total Assets 44.12 40.86 44.17 43.64 46.13

Total Capital Pct Total Assets 56.90 54.80 54.85 55.60 52.85

Dividend Payout - - - - -

Cash Dividend Coverage Ratio - - - - -

Working Cap Pct Total Capital 21.88 25.15 33.33 35.14 58.23

LIQUIDITY RATIOS 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Quick Ratio 2.07 2.15 2.64 2.67 5.72

Current Ratio 2.28 2.44 2.85 2.87 6.07

Cash And Equiv Pct Curr Assets 47.03 41.76 59.06 60.21 62.20

Receivables Pct Current Assets 43.65 46.23 33.41 32.73 32.13

Inventories Days Held 29.45 28.93 24.25 24.98 24.60

GROWTH RATIOS 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05

Sales 1Yr Growth 3.93 -8.85 20.00 20.67 9.79

Sales5 Yr Growth 8.53 10.97 23.02 21.31 19.24

Operating Income 1Yr Growth 24.03 -48.92 16.86 35.85 15.05

Operating Income 5Yr Growth 2.96 -1.81 29.61 41.09 22.47

Net Income 1Yr Growth 61.29 -62.20 19.95 29.16 16.69

Net Income 5Yr Growth 1.97 -9.33 25.25 69.17 20.71Net Margin 1Yr Growth 55.19 -58.54 -0.04 7.04 6.29

Net Margin 5Yr Growth -6.05 -18.30 1.82 39.45 1.23

EPS 1Yr Growth 61.07 -62.28 19.65 29.00 16.52

EPS5Yr Growth 1.79 -9.49 25.05 68.82 20.44

Equity 1Yr Growth 19.98 -9.50 11.36 18.51 6.50

Equity 5Yr Growth 8.82 7.09 13.52 13.35 8.19

ANNUAL FINANCIAL RATIOS




10/29

Reported earnings andequity are significantly

misrepresented.

$ in millions As reported: 2009 2008 2007 2006

Earnings $ 8,055 $ 4,994 $ 13,213 $ 11,015

Net worth 131,102 109,267 120,733 108,419

Derivative liabilities 9,269 14,612 6,887 3,883

Necessary adjustments 2009 2008 2007 2006

Non-cash derivative gains/losses $ (2,283 ) $ 4,645 $ (3,579 ) $ (1709 )Adjusted earnings 5,772 9,639 9,634 9,306Adjusted net worth 140,371 123,879 127,620 112,302

Earnings

AdjustedEarnings

NetWorth

AdjustedN

etWorth

0

2,500

5,000

7,500

10,000

2009 2008 2007 2006

0

36,250

72,500

108,750

145,000

2009 2008 2007 2006

Investment reports generally include basic financial dataand financial ratios, both of which are almost alwaystaken from consolidated financial statements. Much ofthe time, reasonable conclusions (though of varyingquality) can be determined by use of consolidated data,however, this is not always the case. There are plenty of

instances where consolidated information is, at times,misleading or otherwise altogether useless.Consolidated information which does not accuratelyrepresent a businesss underlying economics is badinformation and conclusions drawn therefrom will beequally bad.

Berkshires consolidated presentation is not altogetheruseless. Over time, the annual compounded rate ofreturn of either equity or book value will provide arough benchmark with which investors may use to

measure changes in the value of their respectiveholdings. To arrive at any reasonable estimate of

Berkshire Hathaways underlying or intrinsic value,investors must look beyond consolidated figures.

The economics of an insurance business is quite differentfrom a retail or service business. Consolidating thesebusinesses for financial reporting purposes would not

properly illustrate the value of each business unitconsidered separately. Similarly, Berkshire Hathaway ona consolidated basis does not provide a clear picture ofwhat Berkshire is worth as separate business units.

An investor could easily look at berkshires numbers andbe confused in two very different respects. Bothreported earnings and equity are significantlymisrepresented and have been for several years. For2009, Berkshire Hathaway reported earnings of $8billion, however more accurately earned roughly $5.7

billion, a difference of about $2.3 billion.


mailto:[email protected]:[email protected]:[email protected]


11/29

BERKSHIRE HATHAWAY, INC.

!"#$%&'#"()*+&*,*-(./#0/#*+"

12%3#*24" 5+'6'+'"%7'2*24"(8(7'2*24'*6(9#/:34+%

;*23


12/29


13/29

Equity Put ContractsEquity puts are very similar to selling insurance-thepurchaser pays a premium and in return is protectedfrom future loss. The loss in this case is a decline in thegeneral stock market.

Berkshire sold puts and collected premiums of $5.9 billion up front, which Buffett invested. Derivativepremiums, like insurance premiums, are invested untilthe contracts expire. These are European style contracts,meaning the seller (Berkshire) is liable only for losses thatexist on the expiration date of the contract. Theamended contracts have an average weighted expirationof 11.5 years. In the meantime Buffett gets the benefit ofthe use of this money.

Credit Default SwapsHigh Yield IndexLast year I suggested that, of Buffetts derivative book,these were the most likely to produce a loss. Indeed itappears as though this was the case for 2009 as Berkshirehad to pay $1.9 billion in real losses. These contractsnow account for approximately $1.1 billion of Buffettsderivative float.

Individual CompaniesCounter party risk exists to the extent the purchasers ofthese contracts are able to pay the full $4 billionpremiums over the 5 year life of the contracts. AnnuallyBerkshire receives $93 million for premiums on these

contracts. Berkshire was initially liable for 42corporations. Should any of these companies default ontheir loans, Berkshire is liable for the decline in themarket value of the debt relative to the value of the debtspecified in the CDS contract.

Tax Exempt (Muni) Bond Insurance ContractsLast year I mistakenly reported that premiums for State/Muni contracts would be paid annually. Premiums werereceived upfront and therefore counter-party risk doesnot exist. These contracts are mostly second-to-pay

contracts meaning Berkshire is liable to pay only what thefirst insurer cannot.

Berkshire received premiums of $595 million in 2008 oncontracts extending as far as 40 years.

Berkshire now have total Derivative Float of about $6.3 billion primarily from Equity Puts and Credit DefaultInsurance (high yield index).

Itemizedderivative contracts




14/29

Operating units

Berkshire is made up of several separate business units. Ilike to think of Berkshire in terms of the insurancebusiness and the non-insurance business. Within thenon-insurance business there are several subgroups:manufacturing, service, & retail; utilities & energy; andfinance & financial products. Within the insurancebusiness group there are two subgroups, the insurancebusiness itself and the investment business. It may seema bit strange to separate these two as they are very much

related, however, if we look at regulatory capitalrequired for normal insurance operations we find thatBerkshire has significant excess capital better treatedseparate from the insurance business. If we compareBuffett's stated amount of float which is approximately$62 billion to cash, fixed income securities, and otherinvestments it's clear that equity investments are notrequired capital of the insurance business. Therefore Itreat equities as separate from the insurance business.

!"#$%&"'( )*+,+*+(#

-+"&"'(./.

-+"&"'+&,.0%12$'*#

3&"$4&'*$%+"56.7(%8+'(6.9(*&+,

!"#$%&'"()*+,*&'-./+

!"#$%&'"()*+

,*&'-.+01%2)*.

3*4&'01)54+0)2"4)6+01%2)*.

!"#7&54+0)2"4)6+8'192+

:)("!01'2/+

:)("!01'2+,*&'-.

:)("!(+:17&'

;1(/+

?1'4@&'*+,6&(4'"(+A"54'"B94"1*

3*4&-')4+=4"6"4.+C&'D"(&5E1'GH+I4#G+

0)6,*&'-.+8&*&')4"1*/+

0,+8&*&')4"1*+II0+FJK+2&'(&*4+"*4&'&54H

0,+3*4&'*)4"1*)6+3*D&54%&*45L+3*(G

0,+,6&(4'"(+F?EH+3*(G

0)6,*&'-.+:)("!(+M16#"*-+01'2G+

M1%&C&'D"(&5+1N+$%&'"()L+3*(G/+

0)'16+O1*&5+;,$IPQ;C

0RCMQ!,+;&)6+,54)4&

0@)%2"1*+;&)64.L+3*(G

,#"*)+;&)64.+M1%&+C&'D"(&5

,S!+;,$IPQ;C

M)''.+?1'%)*+;,$IPQ;C

MQ!,+;&)6+,54)4&

M9NN+;&)64.

317)+;&)64.

I1*-+;&)64.+01%2)*.

:'9#&*4")6+0)6"N1'*")+;&)64.

:'9#&*4")6+0)'16"*)5+;&)64.

:'9#&*4")6+T"'54+;&)64.

:'9#&*4")6+E1'


15/29

The value of an insurance company comes from theamount of investable funds it generates. Investable fundscan come from underwriting profits, from investmentincome, or from securities gains. In the simple sense, ifinsurance premiums are sufficient to cover the lossesincurred over the insurable period, the insurer producesan underwriting profit. These profits may be added tosurplus, which allows the insurer to write additionalbusiness. The amount of business an insurer can write isgenerally limited to 3 times the insurers surplus,Statutory Accounting Principles (SAP) definition forshareholders equity.

As stated above, the amount of business an insurer canwrite is dependent upon surplus. Investable funds are a

combination of surplus and float.

The amount of float depends upon the amount ofbusiness written. The amount of business writtendepends upon the amount of surplus. The amount ofsurplus depends upon underwriting profit or loss,investment income from interest and dividends, and/orcapital gains on investments. The underwriting of

insurance policies and the investment of surplus and floatare separate operations.

Berkshire Hathaway has, on average, earnedunderwriting profits. Float at the end of 2009 was $62billion, up $4 billion from last year. For several reasonsnot discussed here, most insurers earn underwritinglosses. These losses must be made up for with interestincome and securities gains. If this does not happen,surplus declines and the amount of business written mustalso decline. If a privately owned insurance companyowns very attractive securities, but consistently writes atan underwriting loss, then the owners equity interestwill decline either via liquidating investments or byraising new capital. The key here is that its critically

important to earn underwriting profit. BerkshireHathaways insurers clearly do this quite well.

Insurance o eration




16/29

It is important to recognize that Berkshire Hathawaysinsurance business holds cash, fixed income securities,and equity securities. Berkshire Hathaway has about$144 billion in cash & cash equivalents, fixed maturity

investments, and Equity investments all of which are heldwithin various insurance businesses, primarily byNational Indemnity, Columbia Insurance Company,GEICO, GenRe, National Fire and Marine InsuranceCompany, and Berkshire Hathaway Assurance Company.As of December 31, 2009, $8 billion of this $144 billion

was earmarked for the Burlington Northern Santa Feacquisition and is deducted from the cash account below.Cash and cash equivalents, fixed income securities, andother investments clearly support potential normal

insurance underwriting losses, meaning theseinvestments are required for the normal operation of theinsurance business, whereas, equity securities are not.

This is very important and a fundamentalcomponent of value which must be consideredseparately.

TOTAL INVESTMENTS2009 2008 2007 2006

Cash and cash equivalents $ 18,655 $ 18,845 $ 28,257 $ 34,590

Fixed maturity investments 32,331 27,115 28,515 25,272

Equities 56,289 49,073 79,999 61,168

Other 28,780 21,535 - -

Net investments 136,055 116,568 136,771 121,030

Float 62,000 58,500 58,700 50,887

INVESTMENTS

2009

Cashand

casheq

uivalent

s$

18,655

Fixedm

aturityinv

estments

32,33

Equities

56

Other

2

Netinvestments

1INVESTMENTS

2009 2008 2007 2006

Net investments $ 136,055 116,568 136,771 121,030

Cash and cashequivalents 18,655 $ 18,845 $ 28,257 $ 34,590

Fixed Securities 32,331 27,115 28,515 25,272

Total Fixed 53,531

+21,20

0

Other investments consist of warrants, preferreds, notes, and similarinvestment securities-itemized on the following page. Though Burlington

Northern Santa Fe is included within other assets (above,) I transfer the$6.6 billion equity securities held by Berkshire to the utilities business

for valuation purposes.


Insurance o eration

Matt P

mailto:[email protected]:[email protected]:[email protected]:[email protected]


17/29

Shares Cost

Total Per hare

PREFERREDS, WARRANTS, NOTE

Wrigleys

2018 notes 11.5s - $ ,400,000,000

Preferreds 5s - ,100,000,0002013 & 2014 senior notes - 1,000,000,000

Goldman Sachs

Preferreds 10s 50,000 ,000,000,000 $ 5,500,000,000 $ 110,000Warrants (expire 2013) 3,478,260 5,000,000,000 115,000

General Electric

Preferreds 10s 30,000 ,000,000,000 3,300,000,000 110,000

Warrants (expire 2013) 1 4,831,460 3,000,000,000 22.25

SwissRe

12% Cv Perp. 1 0,000,000 ,700,000,000 CHF 3,000,000,000 CHF 25

Dow Chemical

Preferreds 8.5s 3,000,000 ,000,000,000 53.72

Net 2 ,200,000,000

2008 - Initial Purchases

Wrigleys

Berkshire bought $4.4 billion fixed income notes yielding 11.5% 2018 and $2.2 billion cumulative preferred stock which convert i

Wrigleys equity. The preferreds also pay a 5% dividend annually.Goldman Sachs

Berkshire invested $5 billion in Goldman Sachs preferred stockyielding 10%, however attached thereto, Berkshire also receivedwarrants convertible into 43 million shares of Goldman Sachs equ

General Electric

Berkshire invested $3 billion in GE, on terms nearly identical to thGoldman deal.

2009 - Additions

Wrigleys

In addition to Securities purchased in 2008, Berkshire added $1 b

in fixed notes due 2013 & 2014.SwissRe

Berkshire bought a $2.7 billion fixed income security yielding 12%forever until converted or called (under favorable terms).

Dow Chemical

Finally, Berkshire Invested $3 billion in Dow Chemical convertiblepreferreds yielding 8.5%.

OTHER INVESTMENTS - A wonderful lesson in parsimony.If professional investors spent more time thinking, they might recognize a fallacy in theunderlying logic that prevents them from holding cash, namely the excuse, Our investorsdont pay us to do nothing. We have to be fully invested. The fundamental job of aprofessional money manager is, or at least should be, to decide when and where to invest. Forsome reason investors often forget the when. (This has everything to to with knowledge of

underlying business value and I am in no way talking about market timing so please dontconfuse the two.) Attractive investments are not always attractively priced. When sensibleinvestments arent readily available, the facts and sound logic are clearly telling you to holdcash, and by the way, so too was Warren Buffett. Berkshire Hathaway had more than $40billion in cash leading up to 2007. As the financial crisis unfolded, Buffett put to work asmuch as could be invested without overextending the insurance business. Many of theseinvestments are itemized under the line item, Other Investments. Buffetts otherinvestments were private placements, made at a time of corporate desperation (mid-2008to mid-2009). Not only did Buffett have the luxury of where and when to invest, he alsodetermined the specific terms under which he invested. (Necessity never made a goodbargain.)

To think clearly, think independently. To

think independently, base your decisions

on the facts and sound logic.Insurance operation

BERKSHIRE HATHAWAY, INC.M



18/29

EQUITY INVESTMENTS, GAAPEQUITY METHOD Shares Cost est.

Burlington Northern Santa Fe 22.5% 76,800,000 $ 6,600,000,000

Burlington Northern Santa Fe remaining 77.5% 264,500,000 26,500,000,000Burlington Northern Santa Fe 100% 33,100,000,000

PREFERREDS, WARRANTS, NOTES, BNSF 100% - NET $ 54,300,000,000

PREFERREDS, WARRANTS, NOTES, BNSF 22.5% - NET 27,800,000,000

!"#$%&'()$*"+$("*&,!("'(-$.


Insurance operation

M



19/29

Berkshires insurance float is roughly $62 billion and islargely supported with $32.3 billion fixed maturitysecurities and $21.2 billion fixed income securities, listedunder line item Other Investments (less equity in

BNSF,) the sum of which comes to $53.5 billion.Berkshire Hathaways insurance units also hold acombined $18.6 billion in cash and cash equivalents.Naturally a portion of this cash is available for equityinvestment to which I arbitrarily assign $8 billion,

leaving $10.6 billion with the insurers for the normalcourse of business. Income earned on fixed investmentsand cash generated by non-utility subsidiaries contributeto the cash account available for investing operations.

(See page 20 for a table of Berkshire Hathaway Equity

Investments.)

2009 2008 2007 2006

Float $ 62,000 $ 58,500 $ 58,700 $ 50,887

Cash & fixed maturity

investments (adjusted) 72,186 60,460 56,772 59,862

Excess cash for equities 8,000 - - 7,000

$0

$35,000

$70,000

Fixed Float

Fixed

Otherfixed

Cash

Float

INVESTMENTS2009 2008 2007 2006

Net investments $ 136,055 116,568 136,771 121,030

Fixed Maturities 32,331 27,115 28,515 25,272

(Other) Fixed income 21,200

Total Fixed 53,531

Cash and cash equivalents 18,655 $ 18,845 $ 28,257 $ 34,590

Securities held byBerkshire insurers 72,186

$72 billion exceeds Berkshiresinsurance float ($62 billion) anddoes not include equitysecurities.


Insurance o eration

Matt P



20/29

The above steps are useful only to the extent thatinvestors can reasonably estimate how much

capital from total investments is required fornormal insurance operations, the amount whichsupport float funds. In Berkshires case, the valueof float (the truly important value in insurance,)commands an economic value in excess of itscarrying amount. Meaning, residual capital notrequired for normal insurance operations shouldbe treated separately for valuation purposes.

The value of float is not easily calculated and willvary from investor to investor, however, I am of

the opinion that Berkshires float isconservatively worth $78 billion.

Berkshire Hathawaysoat isconservatively worth $78

billion./

0

$10,000

$23,750

$37,500

$51,250

$65,000

2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

BERKSHIRE HATHAWAY INSURANCE FLOAT


Insurance o eration

Matt P

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


21/29

EquitiesAs mentioned above, equities are not an essential part ofBerkshires insurance regulatory capital. We cantherefore separate equity securities from the insurance

operation. Equities are itemized below with fewexceptions-one of which is BYD. With respect to thisdiscussion, equities are valued at market as of December31, 2009 ($56,289,000,000).

Security Name Val ($MM) Ticker Pos % Port % O/S Filing Date Pos Chg % Pos Chg Val Chg ($MM) Market Cap ($MM) Filing Type!"#$%&'()&*+)#(,-#&*./&(/*0-*1)#2* 34,196.06 341,244,000 40.17 100 12-Feb-10 264,466,971 344.46 26,502.24 34,196.06 13D

1)3/41)$/*1)* 10,544.00 KO-N 200,000,000 12.39 8.68 22-Feb-10 0 0 0 122,161.78 Proxy

5-$$6*0/#')*7*1)* 8,639.19 WFC-N 320,088,385 10.15 6.18 31-Dec-09 6,732,728 2.15 181.72 139,784.77 13F

89-#%3/&*:;2#-66*1)* 6,143.27 AXP-N 151,610,700 7.22 12.67 31-Dec-09 0 0 0 45,703.00 13F

$-*1)* 5,305.33 PG-N 87,503,411 6.23 3.01 3 1-Dec-09 -8,812,599 -9.15 -534.31 183,802.64 13F

?#/@*0))A6*B&3* 3,824.62 KFT-N 138,272,500 4.49 9.35 5-Jan-10 0 0 0 42,058.52 13G

5/$4C/#(*.()#-6*B&3* 2,086.54 WMT-N 39,037,142 2.45 1.02 31-Dec-09 1,200,500 3.17 64.17 206,016.00 13F

5-63)*0%&/&3%/$*1)#2* 1,956.16 WSC-A 5,703,087 2.3 80.1 31-Dec-09 0 0 0 2,673.92 13F

1)&)3)$%3*.-#L%3-6*B&3* 234.7 RSG-N 8,290,500 0.28 2.18 31-Dec-09 4,665,500 128.7 132.08 10,720.89 13F

+/$3)*M)$A%&'*1)* 229.59 NLC-N 9,000,000 0.27 6.51 31-Dec-09 0 0 0 3,214.42 13F

.G9-(#/*0%&/&3%/$*1)#2* 223.59 SYA-N 17,400,000 0.26 14.75 21-Jan-10 17,400,000 100 223.59 1,532.68 13G

B&'-#6)$$4J/&A*%$*1)#2* 28.76 XOM-N 421,800 0.03 0.01 31-Dec-09 -854,490 -66.95 -58.27 307,573.38 13F

1)9A%63)*M)$A%&'*1)*B&3* 15.38 CDCO-U 1,538,377 0.02 38.18 31-Dec-09 0 0 0 34.45 13F

?#)9%*P)'%6OK*8=* 4.45 K1R-XE 401,863 0.01 9.74 21-Sep-09 0 0 0 43.74 Other Substantial/Declarable

H#/L-$-#6*1)6*B&3* 1.36 TRV-N 27,336 0 0.01 31-Dec-09 0 0 0 27,008.86 13F


nsurance o eration



22/29

2009 2008

Investing operations (securities at market + excess ins. cash)* $ 64,200 $ 58,500

Value of Float 78,000 70,000

Net insurance est. 142,200 128,500

For the sake of this presentation, 22.5% BNSF equity, $6.6 billion

These holdings were included in investing operations in 2008.

, at cost, transferred t utilities net worth.!


BerkshireHathaway, Inc.Insurance O erations

Matt P

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


23/29

2009 2008 2007Manufacturing, Service and Retailing

Pre-tax earnings $ 2,058 $ 4,023 $ 3,947Net earnings 1,113 2,283 2,353

Approximate net worth 16,804 17,227 12,112

Finance & Financial ProductsPre-tax earnings $ 781 $ 787 $ 1,006

Net earnings 494 479 632Approximate net worth 10,874 6,874 9,658

UtilitiesNet earnings $ 1,071 $ 1,704 $ 1,114Approximate net worth 13,963 10,970 8,600

(BNSF earmarked cash & 22.5% equity $14.6b) 28,563 - -(BNSF 100% consolidated) 47,963 - -

Manufacturing, Service and Retailing, Finance &Financial Products, and Utilities

Combined net earnings $ 2,678 $ 4,466 $ 4,099

Combined net worth 22.5% BNSFPre-merger 56,241 35,071 30,370

100% BNSF Post-merger 75,641 - -

Non-Insurance Operating Businesses

On the low end of the valuation range, Berkshires non-insura

operating businesses are worth their adjusted net worth.

Pre-merger (BNSF) net worth was roughly equal to$56,000,000,000. Post-merger (BNSF) net worth is roughly, $75,000,000,000.

Although, currently suffering from the global economic downI am still of the opinion that Berkshire Hathaways non-insuraoperating businesses command a liberal premium over basic nworth.

Estimated value of Berkshire Hathaways non-insurance operaunits sold in pr ivate transactions:BNSF 100% consolidated $88,000,000,000

2009

Non-insurance Value in Private

Negotiations $ 88,000


Non-insuranceoperations

M



24/29

BNSF is very capital intensive, why didBerkshire Hathaway buy Burlington

Northern?There is literally no close substitute to railroadtransportation, a service that is also both needed anddesired. Were the industry not subject to priceregulation, we would be talking about an economicfranchise, but we would also be talking about a clearmonopoly subject to anti-trust law. Instead, we have autility business and as is the case with utilitycompanies, railroads are effectively a regulatedmonopoly. As the cost of goods increases over timeBurlington will pass along their capital costs tocustomers. However as the cost of oil increases withinflation, the relative attractiveness of rail transportwill also increase, but without proportional costincreases. The extremely high fixed costs and similarlyhigh initial investment or replacement costs aregigantic barriers to entry. Utility and railroadbusinesses alike, have fairly calculable future earningstreams, which makes the use of leverage bothreasonable and smart.

How much is Burlington Northernworth?Debating whether or not Buffett paid a reasonableprice seems to me ridiculous. However, I hadcalculated BNSF before mention of the merger and asit turns out he appears to have paid what I thought tobe his maximum price. (This is also supported bycomments made by Buffett about the use of BerkshireHathaway shares in the acquisition.)

(It is important to recognize that Berkshire

Hathaway is enormous in size, limiting theuniverse of opportunities within which Buffett caninvest meaningful amounts of shareholder capital.As the universe gets smaller, so too must overallinvestment returns, the consequence of an ever-growing huge amount of capital. Berkshire ownerexpectations should be significantly lower over thenext 20 years. That is not to discount Berkshirealtogether-owner partners should also expect toearn quite reasonable rates of return over the sameperiod.)

In terms of replacement cost, I'm certain BNSF isworth considerably more than $34 billion. Moreover, I

find it hard to believe that anyone wanting to enter thisbusiness could acquire enough (connected) real estateto build an equivalent network of roads. The costwould certainly be well in excess of $34 billion. Themerger must be considered as a truly long-terminvestment. Sometime in the future, say 50 yearshence, Burlington may very well be a 20% returnbusiness. Today it is somewhere between 13% and15%. It has some, but not excessive leverage.

Though I consider this very much a speculative

comment, I am also of the impression that themerger will benefit the utilities operation directly.Mid-American produces significant amounts of itsenergy production via coal. The Powder RiverBasin provides 40% of all coal used in the U.S. forelectrical power generation. Significant coal bedmethane deposits are also located in the PowderRiver Basin. The Powder River Basin consists of 18coal mines, from which, 30 states receiveapproximately 400 million tons of coal every year.According to the U.S. Energy Information

Administration, coal from Powder River Basin issignificantly less expensive than coal extractedelsewhere in the U.S. selling, for instance, 1/6 theprice of Central Appalachian coal. The majority ofcoal moved from Powder River Basin must firsttravel 103 miles on a BNSF-Union Pacific jointlyowned line. Though partially owned by UnionPacific, the line is primarily owned, and fullyoperated by, BNSF. There are now a total of fourtracks jointly used in the basin by BNSF and UP.Approximately 65 unit trains (115 cars) leave

daily, laden with coal.


BurlingtonNorthern Santa Fe

Matt P



25/29

Key Ratios FYE: 12/31/09Oper Margin 23.05 Curr Ratio 0.98Net Margin 12.28 Debt/Equity 0.76ROE 13.45 Int Coverage 5.22ROA 4.45 CF/Share 10.42Currency: USD

PER SHARE OVERVIEWDate Earnings Dividend Sales/Shr.

Q4Y2009 5.01 0.40 10.80

Q3Y2009 5.25 0.40 10.55

Q2Y2009 5.83 0.40 9.73

Q1Y2009 5.64 0.40 10.05

Q4Y2008 6.08 0.40 12.83

Q3Y2008 5.75 0.40 14.40

Q2Y2008 5.23 0.32 13.14

Q1Y2008 5.43 0.32 12.51

INCOME STATEMENT (Millions) Y2009 Y2008 Y2007 Y2006 QUARTERLY REVENUE YEAR OVER YEAR*Net Sales 14,016 18,018 15,802 14,985Cost of Goods Sold 5,768 8,825 7,169 5,594Selling and Admin Expenses 3,481 3,884 3,773 3,816Amortization & Depreciation 1,537 1,397 1,293 1,130Operating Income 3,230 3,912 3,567 3,495Interest Expense 621 550 528 499Pretax Income 2,641 3,368 2,962 3,001Income Taxes 920 1,253 1,128 1,105

Net Income before Extraordinary Items/Pref Div 1,721 2,115 1,829 1,887Net Income 1,721 2,115 1,829 1,887BALANCE SHEET (Millions) Y2009 Y2008 Y2007 Y2006 FIVE YR SALES TO NET INCOMEASSETSCash & Short-Term Investments 1,303 633 330 375Receivables - Total 787 847 790 805Inventories - Total 633 525 579 488Total Current Assets 3,256 2,665 2,181 2,181Net Property, Plant, and Equipment 32,294 30,847 29,567 27,676Total Assets 38,675 36,403 33,583 31,643LIABILITIES AND STOCKHOLDERS' EQUITYAccounts Payable 244 290 296 282Debt In Current Liabilities 644 456 411 473Total Current Liabilities 3,339 3,646 3,235 3,326Long-Term Debt - Total 9,691 9,099 7,735 6,912Total Liabilities 25,877 25,272 22,439 21,247Minority Interests 0 0 0 0 FIVE YEAR SUMMARY DATAPreferred Stock 0 0 0 0 Year Sales* Net Income* EPSCommon Stock 5 5 5 5 Y2005 12,987 1,531 4Retained Earnings 13,941 12,764 11,152 9,607 Y2006 14,985 1,887 5

Capital Surplus 7,776 7,631 7,348 6,990 Y2007 15,802 1,829 5Treasury Stock 8,428 8,395 7,222 5,929 Y2008 18,018 2,115 6Total Common Equity 12,798 11,131 11,144 10,396 Y2009 14,016 1,721 5

CASH FLOW SUMMARY (Millions) Y2009 Y2008 Y2007 Y2006Net Cash Provided by Operations 3,413 3,977 3,492 3,108 Growth Rate 1.92% 2.97% 5.72%Net Cash Provided by Investments 2,637 3,073 2,415 2,086Net Cash Provided by Financing (140) (601) (1,122) (722) * MillionsCOMPANY DESCRIPTION PRIMARY SIC CODE: 4011 KEY FINANCIAL ITEMS IN US$ (Millions)

Y2009 Y2008 Y2007 Y2006Market Cap. 33,604 25,679 28,939 26,Total Assets 38,675 36,403 33,583 31,Sales 14,016 18,018 15,802 14,Inc. Bef. Pref. 1,721 2,115 1,829 1,

EXECUTIVE OFFICERS

ADDRESS2650 Lou Menk Drive Tel +1 800 795-2City: State ZipFort Worth TEXAS 76131-283

Matthew K. Rose

Carl R. Ice

Thomas N. Hund

Roger Nober

Chairman, President & Chief ExecutiveExecutive Vice President & ChiefOperating OfficerExecutive Vice President & ChiefFinancial OfficerExecutive Vice President & Secretary

BURLINGTON NORTHERN SANTA FE TEARSHEET

Burlington Northern Santa Fe Corporation. The Group's principal activity is operating railroad networks in North America. Through

its subsidiaries, it is engaged primarily in the freight rail transportation business. As on 31-Dec-2009, it operated in about 32,000

route miles covering 28 states and two Canadian provinces. Approximately 9,000 route miles of BNSF Railway's system consist of

trackage rights that permit BNSF Railway to operate its trains with its crews over other railroads' tracks. The BNSF railway

transports a range of products and commodities including transportation of consumer products, coal, industrial products and

agricultural products, derived from manufacturing, agricultural and natural resource industries.

DATA SOURCE: THOMSON FINANCIAL

$0

$20

$40

$60

$80

$100

$120

$140

Feb2006 Jun2006 Oct2006 Feb2007 Jun2007 Oct2007 Feb2008 Jun2008 Oct2008 Feb2009 Jun2009 Oct2009

48-Month Price

0

1000

2000

3000

4000

5000

6000

-3Q -2Q -1Q 0Q

Y2008 Y2009

02000400060008000100001200014000160001800020000

0

500

1000

1500

2000

2500

Y2005 Y2006 Y2007 Y2008 Y2009

Net Income* Sales*




26/29

Utilities and BNSFSignificant transportation contracts between Mid-American and Burlington Northern expire within 2

years. The new, generally long term contracts, wouldalmost certainly include rate increases chargeable toMid-American. Given the heavily regulated nature ofboth of these industries, I am uncertain whetherfavorable terms are allowable between affiliatecompanies, however I think it's fair to assume somebenefit will trickle down to the parent company.

The MergerAs of December 31, 2009, Berkshire Hathaway hadacquired 76,800,000 shares (22.5%) of Burlington

Northern through market share purchases. Theweighted cost of these share purchases wasapproximately $6.6 billion. BNSF shareholders agreedto sell the remaining 77.5% of BNSF to BerkshireHathaway in a cash and stock deal. The reported value ofthe transaction was valued at $26.4 billion, or $100 pershare, thereby valuing Burlington Northern atapproximately $34 billion.


BurlingtonNorthern Santa Fe

Matt P



27/29

% BNSF

stock

% BNSF

stock

Shares Total cost Cost per

share

outstandingacquired in

merger

Stock already owned, at cost 22.5 - 76,800,000 $ 6,600,000,000 $ 85.9375

MERGER OFFER

Acquired with cash 46.7 60.1 158,400,000 15,800,000,000 99.74747

Acquired with stock 30.8 39.9 , 105,200,000 12,000,000,000 114.0684

Net Acquisition 100.0 340,400,000 34,400,000,000 101.0511

158,400,000of BNSF shar

shares repres

es not already

nt 46.7%

owned; t

o

o

f BNSF total sh

be acquired.

res utstanding or 60%

Stock-curren(i.e. 6% for 3

y value is equi

.8%)

ivocally 6% of Berkshire Ha

th

a

ay

Berkshire acquired the remaining 77.5% of BNSF notalready owned. Were this consideration paid strictly withcash, there would be nothing further to discuss, butBerkshire used cash andstock. Meaning, stock, in effect,was used as currency. The underlying value of stock-currency (unlike cash-currency,) may be quite a bitdifferent from its traded market value; generally theimportant value as far as the seller is concerned. BerkshireHathaway's stock-currency traded for about $180 billion atthe time of offer. Shares issued in conjunction with themerger amount to approximately 6% of BerkshireHathaway. That is, 30% of BNSFs total shares (or 39.9%of BNSFs shares not already owned) were acquired inexchange for 6% of Berkshire Hathaway's stock-currency,

when Berkshire was selling for $180 billion. Based uponconservative estimates at the time of offer, Berkshiresintrinsic value was, roughly $200 billion. The stock-currency used in the transaction adjusted for underlyingvalue, suggests that the total cost of the deal wasunderstated by roughly $1.4 billion. If reference is madeto the cost as provided within the merger proxy,adjustment should be made to the value of stock purchasedat market, before merger. This number was adjusted upfrom cost to market which inflated this portion of theacquisition cost, however the increase will come throughthe income statement in the first quarter. There are manyways to treat this. I take the actual cost to berkshire andadd thereto, the cost of undervalued stock-currency.

As of Oc

30, 20tober09

ICon

pliediderationValue

Enterprise Value/2010EEBITDA

IBES 6.8 x 8.5 x

2010 Recovery Case 7.0 8.7


No Recovery Case 7.6 9.5

Deeper Recession Case 8.0 10.0

Price/2010E EPS

IBES 13.5 x 17.9 x



No Recovery Case 17.6 23.4

Deeper Recession Case 19.7 26.2

As of Oc

30, 20tober09

ImpliedConsideration

Value

Analysis of Multiples at Offer Price. Goldman Sachs calculated and compared various financial multiples and ratios for BNSF based oninformation that it obtained from BNSF management and estimates from the Institutional Brokers Estimate System (IBES):


Burlington

Northern Santa Fe

Matt P

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


28/29

INTRINSIC VALUE ESTIMATE, Berkshire Hathaway, Inc.

ADJUSTED NET WORTH 2009 2008

Net insurance est. $ 142,200 $ 128,500

Combined non-insurance operating businesses 75,641 35,071

Conservative value, Berkshire Hathaway inc. 217,841 163,571

NEGOTIATED SALE 2009 2008




CURRENT

(BNSF 100% CONSOLIDATED)

ADJUSTED NET WORTH2009 2008




DECEMBER 31, 2009(PRE-MERGER)

2009 2008

Non-In

surance

Insuran

ce

10 Years 15 Years 20 Years

Market

Cap

Equity

Retaine

dEarnings


MatPO Box 523714, 6200 Rolling

Springfield, Virginiamatt@mattpau

(703) 65Mat


29/29

CONTACT THE AUTHOR

Email questions, comments and general feedback

[email protected]

BerkshireHathawayWEB

Documents