Berkshire Hathaway 2014 Annual Report Download - page 102

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Management’s Discussion (Continued)
Manufacturing, Service and Retailing (Continued)
Service
Our 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; Business Wire, a leading distributor of corporate news,
multimedia and regulatory filings; Dairy Queen, which licenses and services a system of over 6,500 stores that offer prepared
dairy treats and food; Buffalo News and the BH Media Group (“BH Media”), which includes the Omaha World-Herald, as well
as 28 other daily newspapers and numerous other publications; and WPLG (acquired June 30, 2014), which operates a television
station in Miami, Florida.
Revenues of our service businesses in 2014 were approximately $9.85 billion, representing an increase of $858 million
(9.5%) over 2013. The increase in revenues was primarily attributable to comparative increases generated by NetJets, TTI, and
FlightSafety. The revenue increase at NetJets reflected increased flight services revenues, which was attributable to increased
flight hours as well as increased fractional aircraft sales. TTI’s revenue increase was driven by higher unit volume and, to a
lesser extent, by bolt-on acquisitions. FlightSafety’s revenue increase was primarily due to increased simulator training hours.
Pre-tax earnings of our service businesses in 2014 aggregated $1.2 billion, an increase of $109 million (10%) versus 2013. The
increase in year-to-date earnings was primarily attributable to NetJets and TTI and was primarily due to the aforementioned
increases in revenues. In addition, NetJets’ earnings increase was also due to comparatively lower aircraft impairment and
restructuring charges and financing expenses, which were partially offset by higher depreciation expense, maintenance costs and
subcontracted flight expenses.
Revenues of our service businesses in 2013 were $9.0 billion, an increase of $821 million (10%) over revenues in 2012. In
2013, revenues of NetJets increased $288 million (7.5%), driven by higher sales of fractional aircraft shares, while TTI’s
revenues increased $255 million (11%) over 2012. Revenues of BH Media increased $207 million (66%), attributable to the
impact of business acquisitions. Pre-tax earnings of $1.1 billion in 2013 increased $127 million (13%) compared to 2012. The
increase in earnings was primarily attributable to BH Media, FlightSafety, TTI and NetJets. The earnings increase of BH Media
was due to bolt-on acquisitions. TTI’s earnings increased 10% due to higher sales and changes in product mix. FlightSafety’s
earnings increased 11%, reflecting increased training revenues and relatively unchanged operating expenses. NetJets’ earnings
increased 7% as improved flight operations margins, fractional sales margins and reduced net financing costs more than offset
an increase in aircraft impairment charges.
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), See’s Candies, Pampered Chef, a direct seller of
high quality kitchen tools and Oriental Trading Company (“OTC”), a direct retailer of party supplies, school supplies and toys
and novelties.
Revenues in 2014 increased $134 million (3%), while pre-tax earnings declined $32 million (8.5%) compared to 2013. The
earnings declines in 2014 were primarily attributable to lower earnings from Nebraska Furniture Mart and Pampered Chef. The
earnings decline at Nebraska Furniture Mart was driven by costs incurred related to the build-out of a new store and warehouse
facility (approximately 1.8 million square feet) in The Colony, Texas, a suburb of Dallas. The new store will open in 2015 and
we anticipate it will generate meaningful revenues and earnings in the future. The decline in earnings of Pampered Chef resulted
from lower sales.
Revenues of our retailing businesses in 2013 were $4.3 billion, an increase of $573 million (15%) over 2012. Pre-tax
earnings of these businesses increased $70 million (23%) as compared to earnings in 2012. The comparative increases in
revenues and earnings were primarily attributable to the inclusion of OTC for the full year in 2013. Otherwise, earnings of the
home furnishings and jewelry retail groups increased while earnings of Pampered Chef and See’s Candies declined.
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