Berkshire Hathaway 2011 Annual Report Download - page 5

BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
The per-share book value of both our Class A and Class B stock increased by 4.6% in 2011. Over the
last 47 years (that is, since present management took over), book value has grown from $19 to $99,860, a rate of
19.8% compounded annually.*
Charlie Munger, Berkshire’s Vice Chairman and my partner, and I feel good about the company’s
progress during 2011. Here are the highlights:
• The primary job of a Board of Directors is to see that the right people are running the business and to
be sure that the next generation of leaders is identified and ready to take over tomorrow. I have been on
19 corporate boards, and Berkshire’s directors are at the top of the list in the time and diligence they
have devoted to succession planning. What’s more, their efforts have paid off.
As 2011 started, Todd Combs joined us as an investment manager, and shortly after yearend Ted
Weschler came aboard. Both of these men have outstanding investment skills and a deep commitment
to Berkshire. Each will be handling a few billion dollars in 2012, but they have the brains, judgment
and character to manage our entire portfolio when Charlie and I are no longer running Berkshire.
Your Board is equally enthusiastic about my successor as CEO, an individual to whom they have had a
great deal of exposure and whose managerial and human qualities they admire. (We have two superb
back-up candidates as well.) When a transfer of responsibility is required, it will be seamless, and
Berkshire’s prospects will remain bright. More than 98% of my net worth is in Berkshire stock, all of
which will go to various philanthropies. Being so heavily concentrated in one stock defies conventional
wisdom. But I’m fine with this arrangement, knowing both the quality and diversity of the businesses
we own and the caliber of the people who manage them. With these assets, my successor will enjoy a
running start. Do not, however, infer from this discussion that Charlie and I are going anywhere; we
continue to be in excellent health, and we love what we do.
• On September 16th we acquired Lubrizol, a worldwide producer of additives and other specialty
chemicals. The company has had an outstanding record since James Hambrick became CEO in 2004,
with pre-tax profits increasing from $147 million to $1,085 million. Lubrizol will have many
opportunities for “bolt-on” acquisitions in the specialty chemical field. Indeed, we’ve already agreed to
three, costing $493 million. James is a disciplined buyer and a superb operator. Charlie and I are eager
to expand his managerial domain.
• Our major businesses did well last year. In fact, each of our five largest non-insurance companies – BNSF,
Iscar, Lubrizol, Marmon Group and MidAmerican Energy – delivered record operating earnings. In
aggregate these businesses earned more than $9 billion pre-tax in 2011. Contrast that to seven years ago,
when we owned only one of the five, MidAmerican, whose pre-tax earnings were $393 million. Unless the
economy weakens in 2012, each of our fabulous five should again set a record, with aggregate earnings
comfortably topping $10 billion.
* All per-share figures used in this report apply to Berkshire’s A shares. Figures for the B shares are
1/1500th of those shown for A.
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