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Management’s Discussion (Continued)
Manufacturing, Service and Retailing (Continued)
Marmon (Continued)
TSEP sector. Higher rail fleet utilization and higher lease rates, offset in part by lower external tank car sales provided most of
TSEP’s growth, with sulfur equipment installations in the Middle East providing the balance. Natural Resources’ pre-tax
earnings were $695 million in 2012, an increase of 23% from earnings in 2011. Earnings in 2012 reflected the impact of the
aforementioned bolt-on acquisitions, higher rail fleet utilization and lease rates and Middle East projects, as well cost savings
relating to restructuring actions taken in 2011 in the Engineered Wire & Cable sector.
Retail Technologies’ revenues were $2.2 billion in 2012, an increase of 3% compared to 2011. The 2012 revenue increase is
due to the full year impact of a bolt-on acquisition made in December 2011 and growth in Highway Technologies commercial and
heavy haul trailer products along with increased growth in projects for the Canadian Tar Sands area in the Water Treatment sector.
These increases were partially offset by a decline in the Retail Store Fixtures sector due to reduced volume from its major
customer, which resulted in a 14% decline in revenues. Retail Technologies’ pre-tax 2012 earnings were $262 million which
represented an increase of 3% over 2011. The pre-tax earnings increase was primarily due to revenue growth in the Highway
Technologies and Water Treatment sectors offset in part by the decline in the Retail Store Fixtures sector previously discussed.
McLane Company
Through McLane, we operate a wholesale distribution business that provides grocery and non-food products to retailers,
convenience stores and restaurants. Through its subsidiaries, McLane also operates as a wholesale distributor of distilled spirits,
wine and beer. On August 24, 2012, McLane acquired Meadowbrook Meat Company, Inc. (“MBM”). MBM, based in Rocky
Mount, North Carolina, is a large customized foodservice distributor for national restaurant chains with annual revenues of
approximately $6 billion. MBM’s revenues and earnings are included in McLane’s results beginning as of the acquisition date.
McLane’s grocery and foodservice businesses are marked by high sales volume and very low profit margins. McLane’s
significant customers include Wal-Mart, 7-Eleven and Yum! Brands. Approximately 25% of McLane’s consolidated revenues
in 2013 were attributable to Wal-Mart. A curtailment of purchasing by Wal-Mart or another of its significant customers could
have a material adverse impact on McLane’s periodic revenues and earnings.
McLane’s revenues in 2013 were approximately $45.9 billion, representing an increase of approximately $8.5 billion
(22.7%) over revenues in 2012. The increase in revenues in 2013 reflected the impact of MBM, as well as year-to-date revenue
increases ranging from 10% to 15% in the grocery, other foodservice and beverage businesses. Revenues of each of these
businesses in 2013 included the impact of new customers added over the past two years. McLane’s pre-tax earnings in 2013
increased $83 million (20.6%) over earnings in 2012. The increase in 2013 pre-tax earnings reflected the increases in revenues,
including the impact of the MBM acquisition, and a gain from the sale of its Brazil-based logistics business, partially offset by
slightly lower operating margins.
McLane’s revenues were approximately $37.4 billion in 2012, an increase of about $4.2 billion (12.5%) over 2011. The
increase in revenues was attributable to the MBM acquisition, as well as 6% to 8% revenue increases in McLane’s grocery,
foodservice and beverage business units. The increases in grocery and foodservice revenues reflected manufacturer price
increases as well as increased volume. Pre-tax earnings in 2012 were $403 million, an increase of $33 million (9%) over 2011.
The overall increase in earnings reflected the increases in revenues as pre-tax margin rates were relatively unchanged.
Other manufacturing
Our other manufacturing businesses include several manufacturers of building products (Acme Building Brands, Benjamin
Moore, Johns Manville, Shaw and MiTek) and apparel (led by Fruit of the Loom which includes Russell athletic apparel and
Vanity Fair Brands women’s intimate apparel). Also included in this group are Lubrizol Corporation (“Lubrizol”), a specialty
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