Berkshire Hathaway 2014 Annual Report Download - page 100

Management’s Discussion (Continued)
Manufacturing, Service and Retailing (Continued)
McLane Company
McLane operates a wholesale distribution business that provides grocery and non-food products to retailers, convenience
stores and restaurants. In 2012, McLane acquired Meadowbrook Meat Company, Inc. (“MBM”), a large foodservice distributor
for national restaurant chains. Through its subsidiaries, McLane also operates as a wholesale distributor of distilled spirits, wine
and beer. McLane’s grocery and foodservice businesses are marked by high sales volume and very low profit margins and have
several significant customers, including Wal-Mart, 7-Eleven and Yum! Brands. A curtailment of purchasing by any of its
significant customers could have a significant adverse impact on McLane’s periodic revenues and earnings.
Revenues in 2014 of $46.6 billion increased $710 million (1.5%) compared to 2013. The overall revenue increase reflected
increased foodservice and beverage revenues, while grocery revenues were relatively flat. Pre-tax earnings in 2014 declined $51
million (10.5%) from 2013. Earnings in 2013 included a pre-tax gain of $24 million from the sale of a logistics business. Before
the impact of this gain, McLane’s earnings in 2014 decreased 6% compared to 2013. The decline reflected higher earnings from
the grocery and beverage businesses which was more than offset by lower earnings from the foodservice business. In 2014, our
foodservice operations experienced higher per unit processing costs and higher other operating costs which more than offset the
increase in revenues.
McLane’s revenues in 2013 were approximately $45.9 billion, representing an increase of approximately $8.5 billion
(23%) over revenues in 2012. The increase in revenues reflected the impact of the MBM acquisition, 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 in 2012 and 2013. McLane’s pre-tax earnings in 2013
increased $83 million (21%) 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 a logistics business, partially offset by slightly lower
operating margins.
Manufacturing
This group includes a variety of businesses that manufacture industrial and end-user products and include: The Lubrizol
Corporation (“Lubrizol”), a specialty chemical manufacturer; IMC International Metalworking Companies (“IMC”), an industry
leader in the metal cutting tools business with operations worldwide; Forest River, a leading manufacturer of leisure vehicles;
and CTB, a manufacturer of equipment and systems for the livestock and agricultural industries. Also included are the
diversified manufacturing operations of Marmon, which in prior years were presented separately with its transportation
equipment manufacturing and leasing operations. In this report, Marmon’s transportation equipment manufacturing and leasing
businesses are included in our finance and financial products group. Our manufacturing businesses also include several building
products businesses (Acme Building Brands, Benjamin Moore, Johns Manville, Shaw and MiTek) and six apparel businesses
(led by Fruit of the Loom which includes Russell athletic apparel and Vanity Fair Brands women’s intimate apparel).
Revenues Pre-tax earnings
2014 2013 2012 2014 2013 2012
Industrial and end-user products ............................. $22,314 $20,325 $19,003 $3,460 $3,044 $2,912
Building products ........................................ 10,124 9,640 8,953 896 846 748
Apparel ................................................ 4,335 4,293 4,149 455 315 251
$36,773 $34,258 $32,105 $4,811 $4,205 $3,911
Aggregate revenues of our manufacturers in 2014 increased $2.5 billion (7%) to $36.8 billion. Pre-tax earnings of this
group of businesses were $4.8 billion in 2014, an increase of $606 million (14%) versus 2013.
Revenues in 2014 from our industrial and end-user products manufacturers increased $2.0 billion (10%) to $22.3 billion.
Pre-tax earnings from these businesses in 2014 increased $416 million (14%) to $3.5 billion. Lubrizol’s revenues in 2014
increased $546 million (9%) to $6.9 billion, while pre-tax earnings increased 10% compared to 2013. The increases were
primarily due to the impact of bolt-on acquisitions. Forest River’s revenues in 2014 increased 14% to $3.8 billion due to
increased unit sales. Forest River’s pre-tax earnings in 2014 increased 21% over 2013 due primarily to the aforementioned
increase in unit sales and relatively lower manufacturing costs. In 2014, IMC’s pre-tax earnings increased 18% over 2013 which
reflected the impact of a 6% year-to-date increase in sales, as well as increased gross margin rates and lower operating expense
rates.
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