Berkshire Hathaway 2009 Annual Report Download - page 12

Our BNSF operation, it should be noted, has certain important economic characteristics that resemble
those of our electric utilities. In both cases we provide fundamental services that are, and will remain, essential to
the economic well-being of our customers, the communities we serve, and indeed the nation. Both will require
heavy investment that greatly exceeds depreciation allowances for decades to come. Both must also plan far
ahead to satisfy demand that is expected to outstrip the needs of the past. Finally, both require wise regulators
who will provide certainty about allowable returns so that we can confidently make the huge investments
required to maintain, replace and expand the plant.
We see a “social compact” existing between the public and our railroad business, just as is the case
with our utilities. If either side shirks its obligations, both sides will inevitably suffer. Therefore, both parties to
the compact should – and we believe will – understand the benefit of behaving in a way that encourages good
behavior by the other. It is inconceivable that our country will realize anything close to its full economic
potential without its possessing first-class electricity and railroad systems. We will do our part to see that they
exist.
In the future, BNSF results will be included in this “regulated utility” section. Aside from the two
businesses having similar underlying economic characteristics, both are logical users of substantial amounts of
debt that is not guaranteed by Berkshire. Both will retain most of their earnings. Both will earn and invest large
sums in good times or bad, though the railroad will display the greater cyclicality. Overall, we expect this
regulated sector to deliver significantly increased earnings over time, albeit at the cost of our investing many tens
– yes, tens – of billions of dollars of incremental equity capital.
Manufacturing, Service and Retailing Operations
Our activities in this part of Berkshire cover the waterfront. Let’s look, though, at a summary balance
sheet and earnings statement for the entire group.
Balance Sheet 12/31/09 (in millions)
Assets
Cash and equivalents ................. $ 3,018
Accounts and notes receivable .......... 5,066
Inventory .......................... 6,147
Other current assets .................. 625
Total current assets ................... 14,856
Goodwill and other intangibles ......... 16,499
Fixed assets ........................ 15,374
Other assets ........................ 2,070
$48,799
Liabilities and Equity
Notes payable ....................... $ 1,842
Other current liabilities ............... 7,414
Total current liabilities ................ 9,256
Deferred taxes ...................... 2,834
Term debt and other liabilities .......... 6,240
Equity ............................. 30,469
$48,799
Earnings Statement (in millions)
2009 2008 2007
Revenues ......................................................... $61,665 $66,099 $59,100
Operating expenses (including depreciation of $1,422 in 2009, $1,280 in 2008
and $955 in 2007) ................................................. 59,509 61,937 55,026
Interest expense .................................................... 98 139 127
Pre-tax earnings .................................................... 2,058* 4,023* 3,947*
Income taxes and minority interests ..................................... 945 1,740 1,594
Net income ........................................................ $ 1,113 $ 2,283 $ 2,353
*Does not include purchase-accounting adjustments.
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