annual letter to shareholders released this morning<\/a>, billionaire Warren Buffett singled out Columbus-based private jet company NetJets for both negative and positive attention.<\/p>\nBuffett called NetJets “the major problem for Berkshire last year,” as Berkshire overall reported a 61 percent increase in net income compared to 2008 but lagged the Standard and Poor’s average in its per-share book value increase.<\/p>\n
“In the eleven years that we have owned the company (NetJets), it has recorded an aggregate pre-tax loss of $157,” Buffett said in his letter. “Moreover, the company’s debt has soared from $102 million at the time of purchase to $1.9 billion in April of last year. Without Berkshire’s guarantee of this debt, Net Jets would have been out of business. It’s clear that I have failed you in letting NetJets descend into this condition.”<\/p>\n
Buffett said he had been “bailed out” by David Sokol, whom he appointed CEO of NetJets in August after the abrupt resignation of longtime CEO Richard Santulli.<\/p>\n
Buffett praised Santulli for instituting “top-of-the-line standards for safety and service” at the company that are being continued, but said the leadership of Sokol who is chairman of Berkshire-owned MidAmerican Energy, and considered one of Buffett’s likely successors has been “transforming: Debt has already been reduced to $1.4 billion, and, after suffering a staggering loss of $711 million in 2009, the company is now solidly profitable.”<\/p>\n
Buffett echoed what Sokol has said about NetJets, that it is “likely to operate at a profit in 2010, assuming there is no further deterioration in the U.S. economy or negative actions directed at the ownership of private aircraft.” For 2009, NetJets posted a $711 million loss. The losses were largely due to write-downs on the value of aircraft, with a smaller amount attributable to the cost of laying off workers.<\/p>\n
For the full text of Buffett’s letter to investors, go to: http:\/\/www.berkshirehathaway.com\/letters\/2009ltr.pdf<\/a><\/p>\n<\/p>\n
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