Berkshire Hathaway 2002 Annual Report Download - page 62

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61
Non-Insurance Businesses (Continued)
Finance and financial products (Continued)
GRS had a pre-tax loss in 2002 of $173 million compared to earnings of $11 million in 2001. In January
2002, it was announced that GRS would commence a long-term run-off of its business. During the run-off period,
GRS will limit new business to certain risk management transactions and will unwind existing asset and liability
positions in an orderly manner. It is expected that the run-off will take a number of years to complete. The pre-tax
loss in 2002 included a charge of $31 million for employee severance and related run-off costs as well as net
transaction and position losses of $68 million. Additional losses will likely be incurred over time in connection
with the run-off. The timing and amounts of such losses is uncertain.
In August 2001, Berkadia LLC commenced operation by lending $5.6 billion to FINOVA in connection
with that company’ s bankruptcy reorganization. The structure of this transaction and risks associated with this
transaction are described in Note 11 to the Consolidated Financial Statements. This special purpose lender
generated pre-tax earnings of $115 million in 2002 compared to a loss of $40 million in 2001, which included a
charge of $189 million from the writedown of FINOVA common stock received in the loan transaction. Earnings
of Berkadia are directly correlated with the outstanding amount of the loan to FINOVA, which declined $2.725
billion in 2002 to $2.175 billion at December 31, 2002. Consequently, Berkadia’ s earnings will decline in 2003.
Flight services
This segment includes FlightSafety, a leading provider of high technology training to operators of aircraft
and ships and NetJets, the world's leading provider of fractional ownership programs for general aviation aircraft.
FlightSafety's worldwide clients include corporations, the military and government agencies. Revenues in 2002
from flight services increased $274 million (10.7%) over 2001 due to increases in flight operations and aircraft sales
at NetJets. Total revenues from FlightSafety in 2002 were relatively unchanged as compared to 2001 as a decline in
training and product revenues was offset by a one-time gain of $60 million from the disposition of its interest in a
joint venture training operation with Boeing. Excluding the aforementioned gain, pre-tax earnings from flight
services in 2002 decreased $21 million from 2001 due to a slowdown in business aviation activity. NetJet's pre-tax
earnings in 2002 were relatively unchanged from 2001 as each year’ s results reflect losses related to expansion into
Europe somewhat offset by small profits from its domestic operations.
Retail
Berkshire's retailing businesses consist of four independently managed retailers of home furnishings
(Nebraska Furniture Mart and its subsidiaries (“NFM”), R.C. Willey Home Furnishings (“R.C. Willey”), Star
Furniture (“Star”) and Jordan's Furniture) and three independently managed retailers of fine jewelry (Borsheim's
Jewelry, Helzberg's Diamond Shops (“Helzberg”), and Ben Bridge Jeweler). Revenues of the retail businesses in
2002 increased $105 million (5.3%) as compared to 2001. The increase in revenues in 2002 was primarily
attributed to comparatively higher sales at R.C. Willey’ s recently opened Nevada location and to several new
Helzberg stores. Comparative pre-tax earnings of the retail group in 2002 declined $9 million (5.1%) from 2001.
Higher earnings associated with the new R.C. Willey store were more than offset by start-up costs incurred in
connection with a new store being built in metropolitan Kansas City by NFM and comparatively lower pre-tax
earnings at Star and Helzberg.
Scott Fetzer Companies
The Scott Fetzer companies are a group of about twenty diverse manufacturing and distribution businesses
under common management. Principal businesses in this group of companies sell products under the Kirby (home
cleaning systems), Campbell Hausfeld (air compressors, paint sprayers, generators and pressure washers) and World
Book (encyclopedias and other educational products) names. Revenues in 2002 from Scott Fetzer's businesses
decreased $15 million (1.6%) as compared to 2001. Pre-tax earnings in 2002 were $129 million, unchanged from
2001.
Shaw Industries
Shaw is a leading manufacturer and distributor of carpet and rugs for residential and commercial use.
Shaw also provides installation services and offers hardwood floor and other floor coverings. Shaw's revenues in
2002 of $4.3 billion increased by $322 million (8.0%) from 2001. The increase in revenues reflects a 5% increase
in the volume of residential carpets sold and increased sales of hard floor surfaces. In 2002, Shaw's pre-tax earnings
totaled $424 million, an increase of $132 million (45.2%) over 2001. Shaw's operating results in 2002 benefited
from higher operating efficiencies and the increased levels of unit sales.