BERKSHIRE HATHAWAY
BERKSHIRE HATHAWAY
BERKSHIRE HATHAWAY
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Management’s Discussion (Continued)<br />
Manufacturing, Service and Retailing (Continued)<br />
Marmon<br />
Through Marmon, we operate approximately 150 manufacturing and service businesses that operate independently within<br />
eleven diverse business sectors. Marmon’s revenues in 2012 were approximately $7.2 billion, an increase of 3.6% over 2011.<br />
Revenue increases attributable to bolt-on acquisitions in the Crane Services, Highway Technologies, Engineered Wire & Cable<br />
and Distribution Services sectors were substantially offset by the impact of lower copper prices in the Building Wire and Flow<br />
Products sectors. However, significant organic growth occurred within the Distribution Services, Transportation Services &<br />
Engineered Products (“TSEP”), Highway Technologies and Water Treatment sectors. Despite falling steel prices, Distribution<br />
Services increased market share in their market niches, driving annual revenues up 5% over 2011. Higher rail fleet utilization<br />
and higher rental rates, offset by lower external sales of railroad tank cars, provided most of the TSEP growth and sulfur<br />
equipment installations in the Middle East provided the balance. Commercial and heavy haul trailers have driven the increase in<br />
Highway Technologies, while projects for the Canadian Tar Sands area provided growth in Water Treatment. These increases<br />
were somewhat offset by revenue declines in the Flow Products and Building Wire sectors due to the persistent slowdown in<br />
commercial construction. Retail Store Fixtures continued to suffer from a reduction in volume from its major customer, which<br />
resulted in a 14% decline in revenues for 2012.<br />
Pre-tax earnings in 2012 were $1.1 billion, an increase of 14.6% over 2011. Approximately 25% of the overall increase in<br />
pre-tax earnings was attributable to bolt-on acquisitions. Excluding the effects of these acquisitions, eight of the eleven Marmon<br />
business sectors produced increased pre-tax earnings in 2012 compared to 2011. Among the sectors reporting the largest dollar<br />
increases in pre-tax earnings were the TSEP, Highway Technologies, Distribution Services and Water Treatment sectors<br />
reflecting the aforementioned revenue growth. In addition, Engineered Wire & Cable sector’s pre-tax earnings rose 24%<br />
attributable to restructuring actions taken in 2011 in the utility and commodity-driven businesses, along with growth in that<br />
sector’s specialty wire niches. Flow Products, Building Wire and Retail Store Fixtures sectors reported lower 2012 pre-tax<br />
earnings consistent with the revenue declines previously discussed. In 2012, consolidated pre-tax earnings as a percentage of<br />
revenues were 15.9% compared to 14.3% in 2011.<br />
The improvement in operating results in 2012 reflects the continued emphasis of Marmon’s business model, which fosters<br />
margin growth. Consistent with this model, most of the growth in 2012 was in higher margin sectors that focus on niche<br />
markets. In addition, improvements in revenues and pre-tax earnings also generally reflected continued strength in some of<br />
Marmon’s end markets, recent new product introductions and ongoing efforts to control overhead costs.<br />
Revenues in 2011 were $6.9 billion, an increase of approximately 16% over 2010. An estimated 25% of the aggregate<br />
revenue increase was attributed to increased copper prices affecting the Building Wire and Flow Products sectors, where copper<br />
cost increases are passed on to customers with little or no margin. Ten of the eleven business sectors produced comparative<br />
revenue increases. The only sector reporting a comparative revenue decrease was the Retail Store Fixtures sector, where its<br />
largest customer significantly reduced its purchases. Pre-tax earnings in 2011 were $992 million, an increase of approximately<br />
22% over 2010. Pre-tax earnings in 2011 increased in all sectors except Retail Store Fixtures consistent with the revenue decline<br />
previously discussed. Pre-tax earnings as a percent of revenues were 14.3% in 2011 and 13.6% in 2010.<br />
McLane Company<br />
Through McLane, we operate a wholesale distribution business that provides grocery and non-food products to retailers,<br />
convenience stores and restaurants. McLane’s business is marked by high sales volume and very low profit margins. McLane’s<br />
significant customers include Wal-Mart, 7-Eleven and Yum! Brands. In 2010, McLane acquired Empire Distributors<br />
(“Empire”), based in Georgia and North Carolina, and Horizon Wine and Spirits Inc. (“Horizon”), based in Tennessee. Empire<br />
and Horizon are wholesale distributors of distilled spirits, wine and beer. On August 24, 2012, McLane acquired Meadowbrook<br />
Meat Company, Inc. (“MBM”). MBM, based in Rocky Mount, North Carolina, is a large customized foodservice distributor for<br />
national restaurant chains with annual revenues of approximately $6 billion. MBM’s revenues and earnings were included in<br />
McLane’s results beginning as of the acquisition date. Approximately 28% of McLane’s consolidated revenues in 2012 were<br />
attributable to Wal-Mart. A curtailment of purchasing by Wal-Mart or another of its significant customers could have a material<br />
adverse impact on McLane’s periodic revenues and earnings.<br />
McLane’s revenues were approximately $37.4 billion in 2012, an increase of about $4.2 billion (12.5%) over 2011. The<br />
increase in revenues was attributable to the MBM acquisition, as well as 6% to 8% revenue increases in McLane’s grocery,<br />
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