Berkshire Hathaway 2014 Annual Report Download - page 106

Management’s Discussion (Continued)
Financial Condition (Continued)
On December 1, 2014, BHE completed its acquisition of AltaLink, a regulated electric transmission-only company serving
customers in Alberta, Canada. BHE purchased AltaLink for cash of approximately C$3.1 (approximately $2.7 billion). The
acquisition was funded through loans from Berkshire’s insurance subsidiaries and the issuance of $1.5 billion of senior
unsecured notes due in 2020, 2025 and 2045.
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 2014, aggregate capital expenditures of these businesses were approximately $11.8 billion, including $6.6 billion by BHE and
$5.2 billion by BNSF. BNSF and BHE forecast aggregate capital expenditures of approximately $12.3 billion in 2015. Future
capital expenditures are expected to be funded from cash flows from operations and debt issuances.
In 2014, BNSF issued $3.0 billion of senior unsecured debentures with maturities in 2024 and 2044. BNSF’s outstanding
debt was $19.3 billion as of December 31, 2014. Outstanding borrowings of BHE and its subsidiaries were approximately $36.3
billion as of December 31, 2014, which excludes borrowings from Berkshire insurance subsidiaries. BNSF and BHE have
aggregate debt and capital lease maturities in 2015 of about $3 billion. Berkshire’s commitment to provide additional capital to
BHE to permit the repayment of its debt obligations or to fund its regulated utility subsidiaries expired in 2014. 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 BHE or BNSF or any of their subsidiaries.
Finance and financial products assets were approximately $33.5 billion as of December 31, 2014 and $33.2 billion as of
December 31, 2013. Assets of these businesses consisted primarily of loans and finance receivables, cash and cash equivalents,
a portfolio of fixed maturity and equity investments, as well as a sizable portfolio of various types of equipment and furniture
held for lease. The carrying values of assets held for lease were approximately $7.3 billion at December 31, 2014 and $7.0
billion at December 31, 2013.
Finance and financial products liabilities were $18.9 billion as of December 31, 2014 and $19.8 billion as of December 31,
2013, which included notes payable and other borrowings of $12.7 billion and $13.1 billion, respectively. As of December 31,
2014, notes payable included $11.2 billion of notes issued by Berkshire Hathaway Finance Corporation (“BHFC”). In 2014,
BHFC issued $1.15 billion of senior unsecured notes to replace maturing notes. The new senior notes mature in 2017 and 2018.
An additional $1.0 billion of BHFC debt matured in January 2015 and at that time BHFC issued $1.0 billion of new senior notes
that mature in 2017 and 2018. The proceeds from the BHFC notes are used to fund originated loans and acquired loans of
Clayton Homes.
As described in Note 12 to the accompanying Consolidated Financial Statements, our finance and financial products
businesses are party to equity index put option and credit default contracts. With limited exception, these contracts contain no
collateral posting requirements under any circumstances, including changes in either the fair value or intrinsic value of the
contracts or a downgrade in Berkshire’s credit ratings. At December 31, 2014, the liabilities recorded for such contracts were
approximately $4.8 billion and we had no collateral posting requirements. The full and timely payment of principal and interest
on the BHFC notes and payment of amounts due at the expiration of the equity index put option and credit default contracts is
guaranteed by Berkshire.
We regularly access the credit markets, particularly through our railroad, utilities and energy and finance and financial
products businesses. Restricted access to credit markets at affordable rates in the future could have a significant negative impact
on our operations.
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was signed into law. The
Reform Act reshapes financial regulations in the United States by creating new regulators, regulating new markets and market
participants and providing new enforcement powers to regulators. Virtually all major areas of the Reform Act have been subject
to extensive rulemaking proceedings being conducted both jointly and independently by multiple regulatory agencies, some of
which have been completed and others that are expected to be finalized during the next several months. Although the Reform
Act may adversely affect some of our business activities, it is not currently expected to have a material impact on our
consolidated financial results or financial condition.
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