Berkshire Hathaway 2012 Annual Report Download - page 16

Union Tank Car has been around a long time, having been owned by the Standard Oil Trust until that
empire was broken up in 1911. Look for its UTLX logo on tank cars when you watch trains roll by. As a Berkshire
shareholder, you own the cars with that insignia. When you spot a UTLX car, puff out your chest a bit and enjoy the
same satisfaction that John D. Rockefeller undoubtedly experienced as he viewed his fleet a century ago.
Tank cars are owned by either shippers or lessors, not by railroads. At yearend Union Tank Car and Procor
together owned 97,000 cars having a net book value of $4 billion. A new car, it should be noted, costs upwards of
$100,000. Union Tank Car is also a major manufacturer of tank cars – some of them to be sold but most to be
owned by it and leased out. Today, its order book extends well into 2014.
At both BNSF and Marmon, we are benefitting from the resurgence of U.S. oil production. In fact, our
railroad is now transporting about 500,000 barrels of oil daily, roughly 10% of the total produced in the “lower 48”
(i.e. not counting Alaska and offshore). All indications are that BNSF’s oil shipments will grow substantially in
coming years.
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Space precludes us from going into detail about the many other businesses in this segment. Company-
specific information about the 2012 operations of some of the larger units appears on pages 76 to 79.
Finance and Financial Products
This sector, our smallest, includes two rental companies, XTRA (trailers) and CORT (furniture), as well as
Clayton Homes, the country’s leading producer and financer of manufactured homes. Aside from these 100%-
owned subsidiaries, we also include in this category a collection of financial assets and our 50% interest in Berkadia
Commercial Mortgage.
We include Clayton in this sector because it owns and services 332,000 mortgages, totaling $13.7 billion.
In large part, these loans have been made to lower and middle-income families. Nevertheless, the loans have
performed well throughout the housing collapse, thereby validating our conviction that a reasonable down payment
and a sensible payments-to-income ratio will ward off outsized foreclosure losses, even during stressful times.
Clayton also produced 25,872 manufactured homes last year, up 13.5% from 2011. That output accounted
for about 4.8% of all single-family residences built in the country, a share that makes Clayton America’s number
one homebuilder.
CORT and XTRA are leaders in their industries as well. Our expenditures for new rental equipment at
XTRA totaled $256 million in 2012, more than double its depreciation expense. While competitors fret about
today’s uncertainties, XTRA is preparing for tomorrow.
Berkadia continues to do well. Our partners at Leucadia do most of the work in this venture, an
arrangement that Charlie and I happily embrace.
Here’s the pre-tax earnings recap for this sector:
2012 2011
(in millions)
Berkadia ........................ $ 35 $ 25
Clayton ......................... 255 154
CORT .......................... 42 29
XTRA .......................... 106 126
Net financial income* ............. 410 440
$848 $774
*Excludes capital gains or losses
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