The Year at Berkshire It was a good year for Berkshire on all major fronts,except one.Here are the important developments: had a record $12.4 ergy r in the Lubrizol and Marmon. Of the five,ony Berkshire Hathaway Energy,then earning$393 million.was owned by usadecade ag e purchased another he nve on an h,BNS number outstanding by6.1%nother words,the $12 billion gain in aual earnings delivered Berkshire by If the ll.T omy cd already closed or are under contract. ，o disappointed many of its customers.These shippers depend on us,and service failres can L has spent in a single year and is a truly extraordinary amount,whether compared to revenues,eamings or depreciation charges Though weather,which was particularly severe last year,will always cause railroads a variety of op can't be done ovemight The extensive work rquired to increase system capacity sometimes disrupt operations whil r,our outsi Our many dozens of smaller non-insurance businesses earned $5.1 billion las p from $4.7 billion in p,we have two Hre,as with our Powerhouse Fiveexp further gains in015.Withn this grou n ihon an x tha en $25 This colle eration again operated at an underwriting profit in 2014-that makes 12 years in a row During that 12-year stretch,our float to us ut can invest for Be has grown from generates significant investment income because of the assets it allows us to hold. lerer ll i the Goden ivearyeiers included later in ths repor.ll camings are sis unless otherwise designateThe Year at Berkshire It was a good year for Berkshire on all major fronts, except one. Here are the important developments: ‹ Our “Powerhouse Five” – a collection of Berkshire’s largest non-insurance businesses – had a record $12.4 billion of pre-tax earnings in 2014, up $1.6 billion from 2013.* The companies in this sainted group are Berkshire Hathaway Energy (formerly MidAmerican Energy), BNSF, IMC (I’ve called it Iscar in the past), Lubrizol and Marmon. Of the five, only Berkshire Hathaway Energy, then earning $393 million, was owned by us a decade ago. Subsequently we purchased another three of the five on an all-cash basis. In acquiring the fifth, BNSF, we paid about 70% of the cost in cash and, for the remainder, issued Berkshire shares that increased the number outstanding by 6.1%. In other words, the $12 billion gain in annual earnings delivered Berkshire by the five companies over the ten-year span has been accompanied by only minor dilution. That satisfies our goal of not simply increasing earnings, but making sure we also increase per-share results. If the U.S. economy continues to improve in 2015, we expect earnings of our Powerhouse Five to improve as well. The gain could reach $1 billion, in part because of bolt-on acquisitions by the group that have already closed or are under contract. ‹ Our bad news from 2014 comes from our group of five as well and is unrelated to earnings. During the year, BNSF disappointed many of its customers. These shippers depend on us, and service failures can badly hurt their businesses. BNSF is, by far, Berkshire’s most important non-insurance subsidiary and, to improve its performance, we will spend $6 billion on plant and equipment in 2015. That sum is nearly 50% more than any other railroad has spent in a single year and is a truly extraordinary amount, whether compared to revenues, earnings or depreciation charges. Though weather, which was particularly severe last year, will always cause railroads a variety of operating problems, our responsibility is to do whatever it takes to restore our service to industry-leading levels. That can’t be done overnight: The extensive work required to increase system capacity sometimes disrupts operations while it is underway. Recently, however, our outsized expenditures are beginning to show results. During the last three months, BNSF’s performance metrics have materially improved from last year’s figures. ‹ Our many dozens of smaller non-insurance businesses earned $5.1 billion last year, up from $4.7 billion in 2013. Here, as with our Powerhouse Five, we expect further gains in 2015. Within this group, we have two companies that last year earned between $400 million and $600 million, six that earned between $250 million and $400 million, and seven that earned between $100 million and $250 million. This collection of businesses will increase in both number and earnings. Our ambitions have no finish line. ‹ Berkshire’s huge and growing insurance operation again operated at an underwriting profit in 2014 – that makes 12 years in a row – and increased its float. During that 12-year stretch, our float – money that doesn’t belong to us but that we can invest for Berkshire’s benefit – has grown from $41 billion to $84 billion. Though neither that gain nor the size of our float is reflected in Berkshire’s earnings, float generates significant investment income because of the assets it allows us to hold. * Throughout this letter, as well as in the “Golden Anniversary” letters included later in this report, all earnings are stated on a pre-tax basis unless otherwise designated. 4