Berkshire Hathaway 2009 Annual Report Download - page 74

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Management’s Discussion (Continued)
Manufacturing, Service and Retailing (Continued)
Other manufacturing (Continued)
Nearly all of the businesses in our manufacturing group experienced the adverse effects of the global economic recession in
2009 as consumers and customers cut purchases. Revenues in 2009 were $11,926 million, a decrease of $2,201 million
(16%) from 2008. Revenues were lower for apparel (11%), building products (20%) and other businesses (16%) as compared to
2008. Pre-tax earnings of our other manufacturing businesses were $814 million in 2009, a decrease of $861 million
(51%) versus 2008. The declines in earnings reflected the lower revenues as well as relatively higher costs resulting from lower
manufacturing efficiencies. Revenues of $14,127 million in 2008 declined $332 million (2%) versus 2007. Pre-tax earnings
were $1,675 million in 2008, a decline of $362 million (18%) versus 2007. Pre-tax earnings declined or were relatively
unchanged in nearly all of our other manufacturing operations. All of our other manufacturing businesses have taken actions to
reduce costs and reduce or delay capital spending until the economy improves.
Other service
Our other service businesses include NetJets, the world’s leading provider of fractional ownership programs for general
aviation aircraft, and FlightSafety, a provider of high technology training to operators of aircraft. Among the other businesses
included in this group are: TTI, a leading electronic components distributor (acquired March 2007); Business Wire, a leading
distributor of corporate news, multimedia and regulatory filings; The Pampered Chef, a direct seller of high quality kitchen
tools; International Dairy Queen, a licensor and service provider to about 5,800 stores that offer prepared dairy treats and food;
The Buffalo News, a publisher of a daily and Sunday newspaper; and businesses that provide management and other services to
insurance companies.
Revenues in 2009 were $6,585 million, a decrease of $1,850 million (22%) compared to 2008. Essentially all of our service
businesses generated lower revenues in 2009, particularly at NetJets and to a lesser degree at TTI. In 2009, NetJets’ revenues
declined $1,465 million (32%) versus 2008 due to a 77% decline in aircraft sales as well as lower flight operations revenues
primarily due to a 19% decline in flight revenue hours. Revenues at TTI were 17% lower in 2009 than in 2008 which we
attribute primarily to the economic recession.
NetJets produced a pre-tax loss in 2009 of $711 million compared to pre-tax earnings of $213 million in 2008. The pre-tax
loss at NetJets in 2009 included asset writedowns and other downsizing costs of $676 million compared to $54 million of such
charges in 2008. NetJets owns more planes than is required for its present level of operations and plans to dispose of selected
aircraft over time provided that prices are reasonable. We do not believe at this point that further downsizing will be required.
We also believe, as a result of actions taken to date, that NetJets is likely to operate at a profit in 2010, assuming there is no
further deterioration in the U.S. economy or negative actions directed at the ownership of private aircraft.
Excluding the results of NetJets, our other service businesses produced pre-tax earnings of $620 million in 2009 compared
to pre-tax earnings of $758 million in 2008. The negative impact of the global recession was evident on substantially all of our
other service businesses.
In 2008, revenues were $8,435 million, an increase of $643 million (8%) over 2007. The inclusion of twelve months of
revenues from TTI in 2008 versus nine months in 2007 accounted for over 80% of the revenue increase. Excluding the impact
of TTI, other service revenues in 2008 increased 2% over 2007. Pre-tax earnings in 2008 were $971 million, relatively
unchanged from 2007. The impact from the TTI acquisition and increased earnings of FlightSafety were offset by lower
earnings from NetJets and The Pampered Chef.
Retailing
Our retailing operations consist of four home furnishings businesses (Nebraska Furniture Mart, R.C. Willey, Star Furniture
and Jordan’s), three jewelry businesses (Borsheims, Helzberg and Ben Bridge) and See’s Candies. Retailing revenues were
$2,869 million in 2009, a decrease of $235 million (8%) compared to 2008. In 2009, our home furnishings revenues declined
7% while jewelry revenues declined 12% versus 2008. Pre-tax earnings in 2009 of $161 million were relatively unchanged from
2008. See’s Candies, Star Furniture and Nebraska Furniture Mart generated increased pre-tax earnings, while in the aggregate
our jewelry businesses posted a pre-tax loss. Throughout 2008 as the impact of the economic recession in the U.S. worsened,
consumer spending declined and these conditions continued in 2009.
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