Berkshire Hathaway 2010 Annual Report Download - page 79

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Management’s Discussion (Continued)
Utilities and Energy (“MidAmerican”) (Continued)
options that had been granted to certain members of management at the time of Berkshire’s acquisition of MidAmerican in
2000. EBIT from other activities in 2008 includes approximately $1.1 billion related to our investment in Constellation Energy
and a related breakup fee we received from Constellation Energy.
Manufacturing, Service and Retailing
A summary of revenues and earnings of our manufacturing, service and retailing businesses follows. Amounts are
in millions.
Revenues Earnings
2010 2009 2008 2010 2009 2008
Marmon ................................................ $ 5,967 $ 5,067 $ 5,529 $ 813 $ 686 $ 733
McLane Company ........................................ 32,687 31,207 29,852 369 344 276
Other manufacturing ...................................... 17,664 15,937 19,179 1,911 958 1,880
Other service ............................................ 7,355 6,585 8,435 984 (91) 971
Retailing ............................................... 2,937 2,869 3,104 197 161 163
$66,610 $61,665 $66,099
Pre-tax earnings .......................................... $4,274 $2,058 $4,023
Income taxes and noncontrolling interests ..................... 1,812 945 1,740
$2,462 $1,113 $2,283
Marmon
We acquired a 60% controlling interest in Marmon Holdings, Inc. (“Marmon”) on March 18, 2008 and as of December 31,
2010 we owned approximately 64% of its outstanding common stock. In the first quarter of 2011, we will acquire additional
shares and increase our ownership interest to about 80.2%. Marmon’s revenues, costs and expenses are included in our
Consolidated Financial Statements beginning as of the initial acquisition date in 2008. Through Marmon, we operate
approximately 130 manufacturing and service businesses that operate independently within eleven diverse business sectors.
Marmon’s revenues in 2010 were $5,967 million, an increase of approximately 18% over 2009. About 40% of the revenues
increase was the result of increased copper prices, the cost of which is passed to customers with little or no margin. The balance
of the revenues increase in 2010 was associated with a gradual rebound in other sectors as Marmon’s end markets improved
from 2009’s low levels. Earnings in 2010 increased $127 million (19%) to $813 million in comparison with 2009. Revenues in
2010 increased in all sectors, except Transportation Services & Engineered Products and Water Treatment sectors. With the
exception of Distribution Services, all sectors had improvement in earnings in 2010. Earnings as a percent of revenues were
13.6% in 2010 and 13.5% in 2009. Operating margins in 2010 were negatively impacted by the increase in copper prices. The
Transportation Services & Engineered Products and Building Wire sectors had the largest increases in earnings in 2010
compared to 2009. Earnings in 2010 also benefitted from lower interest expense.
Revenues in 2009 declined approximately 27% from 2008 (including periods in 2008 prior to our acquisition). The revenue
decline in 2009 reflected the impact of the recession which led to lower customer demand across all sectors, and particularly in
the Building Wire, Engineered Wire & Cable, Flow Products and Distribution Services sectors. Pre-tax earnings in 2009
declined approximately 26% from the full year of 2008 which reflects the decline in revenues, somewhat offset by a
$160 million reduction in operating costs resulting from cost reduction efforts. In 2009, the Retail Store Fixtures, Food Service
Equipment and Water Treatment sectors produced comparable or improved earnings with 2008 despite lower revenues. The
remaining sectors experienced lower earnings in 2009 compared to 2008.
McLane Company
Through McLane, we operate a wholesale distribution business that provides grocery and non-food products to retailers,
convenience stores and restaurants. McLane’s business is marked by high sales volume and very low profit margins, and the
fact that about 30% of its annual revenues are from sales to Wal-Mart. A curtailment of purchasing by Wal-Mart could have a
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