Fruit of the Loom Sees Strong Q1 Earnings Gains

Berkshire Hathaway said higher profits in its apparel business, particularly Fruit of the Loom, helped lift Q1 pre-tax earnings in its Other Manufacturing segment by 89% to $332 million. Also driving gains were increases at ISCAR Metalworking Companies (IMC) and Forest River as well as several of its smaller manufacturing operations, partially offset by lower overall earnings from the building products group, according to its 10-Q filing.


According to its filing, following the acquisitions of Russell (including Brooks Sports, Spalding, Mossy Oak and Bike Athletic) in August 2006; and Vanity Fair/Bestform in April 2007; and in response to the economic downturn, substantial restructuring was undertaken to reduce costs and tap cross-synergies. In all, the three combined apparel businesses – Fruit of the Loom, Russell and Vanity Fair/Bestform – reduced employees to 31,000 by the close of 2009 from 46,000 in April 2007, a 33% reduction. All three businesses, under the Fruit of the Loom Inc. umbrella, are now headquartered in Bowling Green, KY.

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Fruit of the Loom Sees Strong Q1 Earnings Gains

Berkshire Hathaway said pre-tax earnings in its Other Manufacturing
businesses jumped 89% in the first quarter to $332 million. The gains were driven by higher profits in its apparel businesses, Fruit of the Loom (FOL) in
particular.

Also helping drive the gains was increases at ISCAR Metalworking Companies and Forest River as well as several of its smaller
manufacturing operations, partially offset by lower overall earnings
from the building products group. Berkshire's building products group continues
to be adversely affected by relatively low residential and commercial
construction activity, while its other manufacturers benefited from
higher customer demand and the effects of cost reduction efforts over
the past two years.

Revenues in its Other Manufacturing segment grew 12% to $4.08 billion. In its 10Q filing, Berkshire said the increase in revenues was primarily due to increased sales by Forest River, IMC and the apparel group. These operations rebounded somewhat from slow activity in the first quarter of 2009, whereas revenues from the building products businesses in 2010 were relatively unchanged from the first quarter of 2009.

Berkshire Other Manufacturing businesses include a wide array of businesses. Included in this group are several manufacturers of building products (Acme Building Brands, Benjamin Moore, Johns Manville, Shaw and MiTek) and apparel (led by Fruit of the Loom which includes the Russell, Spalding and Brooks athletic business and the Vanity Fair Brands women's intimate apparel business). Also included in this group are Forest River, a manufacturer of leisure vehicles and ISCAR Metalworking Companies, a maker of metal cutting tools business.

According to its 10K, Berkshire said that following the acquisitions of Russell in August 2006 and Vanity Fair/Bestform in April 2007 and in response to the economic downturn, substantial restructuring actions were completed to take advantage of cross-company synergies and reduce FOL, Inc.'s global cost structure. In all, the three combined apparel businesses – FOL, Russell and Vanity Fair/Bestform – reduced its employee count to 31,000 by the close of 2009 from 46,000, a 33% reduction in workforce. All three businesses, under the Fruit of the Loom Inc. umbrella, are now headquartered in Bowling Green, KY. Berkshire bought FOL in 2002.

FOL Inc.'s brands also include Spalding, Brooks, American Athletic, BVD, Cross Creek, Mossy Oak, Moving Comfort, Bike, Dudley, Discus, Vassarette, Lily of France, Sherrin, Gemma, Lou, Intima, and Variance. In 2009, approximately one-third of FOL Inc.'s sales were to Wal-Mart.

Berkshire's Other Manufacturing business in the apparel/footwear space also includes Fechheimer, H.H. Brown Shoe Group, Garan and Justin Brands. Berkshire noted that its apparel revenues were down 11% in 2009.

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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