Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in
a number of diverse business activities. The most important of these are insurance
businesses conducted on both a primary basis and a reinsurance basis. Berkshire
also owns and operates a large number of other businesses engaged in a variety
of activities, as identified herein. Berkshire is domiciled in the state of
Delaware, and its corporate headquarters is located in Omaha, Nebraska.
Berkshire’s operating businesses are managed on an unusually decentralized
basis. There are essentially no centralized or integrated business functions
(such as sales, marketing, purchasing, legal or human resources) and there is
minimal involvement by Berkshire’s corporate headquarters in the day-to-day
business activities of the operating businesses. Berkshire’s corporate
office management participates in and is ultimately responsible for significant
capital allocation decisions, investment activities and the selection of the
Chief Executive to head each of the operating businesses.
Insurance and Reinsurance Businesses
Berkshire’s insurance and reinsurance business activities are conducted
through approximately 70 domestic and foreign-based insurance entities. Berkshire’s
insurance businesses provide insurance and reinsurance of property and casualty
risks world-wide and also reinsure life, accident and health risks world-wide.
In primary (or direct) insurance activities, the insurer assumes the risk of
loss from persons or organizations that are directly subject to the risks. Such
risks may relate to property, casualty (or liability), life, accident, health,
financial or other perils that may arise from an insurable event. In reinsurance
activities, the reinsurer assumes defined portions of risks that other primary
insurers or reinsurers have assumed in their own insuring activities.
Reinsurance contracts are normally classified as treaty or facultative contracts.
Treaty reinsurance refers to reinsurance coverage for all or a portion of a
specified class of risks ceded by the primary insurer, while facultative reinsurance
involves coverage of specific individual risks. Reinsurance contracts are further
classified as quota-share or excess. Under quota-share (proportional or pro-rata)
reinsurance, the reinsurer shares proportionally in the original premiums, losses
and expenses of the primary insurer or reinsurer. Excess (or non-proportional)
reinsurance provides for the indemnification of the primary insurer or reinsurer
for all or a portion of the loss in excess of an agreed upon amount or “retention.”
Both quota-share and excess reinsurance may provide for aggregate limits of
indemnification.
Railroad Business
BNSF operates one of the largest railroad systems in North America with approximately
32,000 route miles of track, excluding multiple main tracks, yard tracks and
sidings, approximately 23,000 miles of which are owned route miles, including
easements, in 28 states and two Canadian provinces. Approximately 9,000 route
miles of BNSF’s system consist of trackage rights that permit BNSF to
operate its trains with its crews over other railroads’ tracks.
Utilities and Energy Businesses
Berkshire currently owns an 89.5% voting common stock interest in MidAmerican
Energy Holdings Company (“MidAmerican”), an international energy
company.
MidAmerican’s businesses are managed as separate operating units. MidAmerican’s
domestic regulated energy interests are comprised of two regulated utility companies
serving more than 3 million retail customers and two interstate natural gas
pipeline companies with approximately 17,000 miles of pipeline and a design
capacity of more than 7.0 billion cubic feet of natural gas per day. Its United
Kingdom electricity distribution subsidiaries serve about 3.8 million electricity
end-users. In addition, MidAmerican’s interests include a diversified
portfolio of domestic independent power projects, a hydroelectric facility in
the Philippines and the second-largest residential real estate brokerage firm
in the United States.
Marmon consists of approximately 130 manufacturing and service businesses that
operate independently within eleven diverse business sectors. These sectors
are Building Wire, providing copper electrical building wire for residential,
commercial and industrial construction; Construction Services, providing the
leasing and operation of mobile cranes primarily to the energy, mining and petrochemical
markets; Distribution Services, supplying specialty metal pipe and tubing, bar
and sheet products to markets including construction, industrial, aerospace
and many others; Engineered Wire & Cable, providing electrical and electronic
wire and cable for energy related markets and other industries; Flow Products,
producing copper, aluminum and brass products and materials for the plumbing,
heating, air conditioning, refrigeration, construction, automotive and industrial
markets; Food Service Equipment, supplying commercial food preparation equipment
for restaurants and shopping carts for retail stores; Highway Technologies,
primarily serving the heavy-duty highway transportation industry with trailers,
fifth wheel coupling devices and undercarriage products such as brake parts
and suspension systems, and also serving the light vehicle and heavy-duty aftermarkets
with clutches and related products; Industrial Products, consisting of metal
fasteners for the building, furniture, cabinetry, industrial and other markets,
safety products such as gloves for industrial markets, portable lighting equipment
for mining and safety markets, and overhead electrification equipment for mass
transit systems, and custom-machined brass, aluminum and copper forgings for
the construction, valve and other industries; Retail Store Fixtures, providing
shelving and other merchandising displays and related services for retail stores
worldwide; Transportation Services & Engineered Products, including manufacturing,
leasing and maintenance of railroad tank cars, leasing of intermodal tank containers,
in-plant rail services, manufacturing of bi-modal railcar movers, wheel, axle
and gear sets for light rail transit and gear products for locomotives, manufacturing
of steel tank heads, and services, equipment and technology for processing and
distributing sulfur; and Water Treatment equipment including residential water
softening, purification and refrigeration filtration systems, treatment systems
for industrial markets including power generation, oil and gas, chemical, and
pulp and paper, gear drives for irrigation systems and cooling towers, and air-cooled
heat exchangers.
McLane Company—McLane Company, Inc. (“McLane”) provides wholesale
distribution and logistics services in all 50 states and internationally in
Brazil to customers that include discount retailers, convenience stores, quick
service restaurants, drug stores and movie theatre complexes. Prior to Berkshire’s
acquisition in 2003, McLane was an integral part of the Wal-Mart Stores, Inc.
(“Wal-Mart”) distribution network. McLane continues to provide wholesale
distribution services to Wal-Mart, which accounts for approximately one-third
of McLane’s revenues. McLane’s business model is based on a high
volume of sales, rapid inventory turnover and tight expense control. Operations
are divided into two business units: grocery distribution and foodservice distribution.
Other Manufacturing, Service and Retailing Businesses
Apparel Manufacturing—Berkshire’s apparel manufacturing businesses
include manufacturers of a variety of clothing and footwear. Businesses engaged
in the manufacture and distribution of clothing products include Fruit of the
Loom (“FOL”), Russell Corporation (“Russell”), Vanity
Fair Brands (“VFB”), Garan and Fechheimer Brothers. Berkshire’s
footwear businesses include H.H. Brown Shoe Group and Justin Brands.
Service Businesses
FlightSafety International Inc. (“FSI”), headquartered at LaGuardia
Airport in Flushing, New York, is engaged primarily in the business of providing
high technology training to operators of aircraft. FSI’s training activities
include: advanced pilot training in the operation of aircraft and air traffic
control procedures; aircrew training for military and other government personnel;
aircraft maintenance technician training; and ab-initio (primary) pilot training
to qualify individuals for private and commercial pilots’ licenses. FSI
also develops classroom instructional systems and materials for use in its training
business and for sale to others.
NetJets Inc. (“NJ”) is the world’s leading provider of fractional
ownership programs for general aviation aircraft. NJ’s executive offices
and U.S. operations are located in Columbus, Ohio, with most of its logistical
and flight operations based at Port Columbus International Airport. NJ’s
European operations are based in Lisbon, Portugal. The fractional aircraft ownership
concept permits customers to acquire a specific percentage of a certain aircraft
type and allows them to utilize the aircraft for a specified number of flight
hours per annum. In addition, NJ provides management, ground support and flight
operation services. NJ is subject to the rules and regulations of the Federal
Aviation Administration, which address aircraft registration, maintenance requirements,
pilot qualifications and airport operations, including flight planning and scheduling
as well as security issues. NJ also maintains an “exclusive alliance”
with an independent company, Marquis Jet Partners, Inc. (“Marquis”).
Under this alliance, Marquis leases and purchases fractional interests and management
services from NJ and resells them to its customers in the form of a prepaid
Marquis Jet Card, which entitles the customer to 25 hours of flight time.
Berkshire acquired TTI, Inc. (“TTI”), an electronic component distributor
headquartered in Fort Worth, Texas. TTI is a global specialty distributor of
passive, interconnect and discrete components, which are readily adaptable to
a wide variety of end-users over a broad range of industries. TTI’s customer
base includes original equipment manufacturers, electronic manufacturing services,
contract manufacturers, military, industrial users and commercial customers.
TTI’s business model is organized between its core business of supporting
high volume production business and its catalog division which supports lower
volume purchases with a broader customer base and higher margins. TTI operates
distribution centers in North America, Europe and Asia. TTI operates from more
than 80 locations throughout North America, Europe and Asia.
Business Wire provides electronic dissemination of full-text news releases
daily to the media, the Internet, online services and databases and the global
investment community in 150 countries and 45 languages. Roughly 90% of the company’s
revenue comes from the core business of news distribution. The Pampered Chef,
LTD (“TPC”) is the premier direct seller of high quality kitchen
tools in the United States. Products are researched, designed and tested by
TPC and manufactured by third-party suppliers. The Buffalo News publishes three
editions on Saturday and Sunday and five editions each weekday from its headquarters
in Buffalo, New York. International Dairy Queen services a system of about 5,800
stores operating under the names Dairy Queen®, Orange Julius® and Karmelkorn®
that offer various dairy desserts, beverages, prepared foods, blended fruit
drinks, popcorn and other snack foods.
Retailing Businesses—Berkshire’s retailing businesses principally
consist of several independently managed home furnishings and jewelry operations.
Finance and Financial Products
Clayton Homes, Inc. (“Clayton”), headquartered near Knoxville,
Tennessee, is a vertically integrated manufactured housing company. Financing
is offered to purchasers of Clayton’s manufactured homes as well as those
purchasing homes from selected independent retailers, through its finance subsidiaries.
Clayton is also currently developing 24 housing subdivisions in eight states.
XTRA Corporation (“XTRA”), headquartered in St. Louis, Missouri,
is a leading transportation equipment lessor operating under the XTRA Lease
brand name. XTRA manages a diverse fleet of approximately 97,000 units located
at 71 facilities throughout the United States and four facilities in Canada.
The fleet includes over-the-road and storage trailers, chassis, temperature
controlled vans and flatbed trailers. XTRA is one of the two largest lessors
(in terms of units available) of over-the-road trailers in North America. Transportation
equipment customers lease equipment to cover cyclical, seasonal and geographic
needs and as a substitute for purchasing. Therefore, as a provider of marginal
capacity of transportation equipment, XTRA’s utilization rates (the number
of units on lease to total units available) and operating results tend to be
cyclical. In addition, transportation providers often use leasing to maximize
their asset utilization and reduce capital expenditures. By maintaining a large
fleet, XTRA is able to provide customers with a broad selection of equipment
and quick response times.