Berkshire Hathaway 2010 Annual Report Download - page 15

• Forest River, our RV and boat manufacturer, had record sales of nearly $2 billion and record earnings
as well. Forest River has 82 plants, and I have yet to visit one (or the home office, for that matter).
There’s no need; Pete Liegl, the company’s CEO, runs a terrific operation. Come view his products at
the annual meeting. Better yet, buy one.
• CTB, our farm-equipment company, again set an earnings record. I told you in the 2008 Annual Report
about Vic Mancinelli, the company’s CEO. He just keeps getting better. Berkshire paid $140 million
for CTB in 2002. It has since paid us dividends of $160 million and eliminated $40 million of debt.
Last year it earned $106 million pre-tax. Productivity gains have produced much of this increase. When
we bought CTB, sales per employee were $189,365; now they are $405,878.
• Would you believe shoes? H. H. Brown, run by Jim Issler and best known for its Born brand, set a new
record for sales and earnings (helped by its selling 1,110 pairs of shoes at our annual meeting). Jim has
brilliantly adapted to major industry changes. His work, I should mention, is overseen by Frank
Rooney, 89, a superb businessman and still a dangerous fellow with whom to have a bet on the golf
course.
A huge story in this sector’s year-to-year improvement occurred at NetJets. I can’t overstate the
breadth and importance of Dave Sokol’s achievements at this company, the leading provider of fractional
ownership of jet airplanes. NetJets has long been an operational success, owning a 2010 market share five times
that of its nearest competitor. Our overwhelming leadership stems from a wonderful team of pilots, mechanics
and service personnel. This crew again did its job in 2010, with customer satisfaction, as delineated in our regular
surveys, hitting new highs.
Even though NetJets was consistently a runaway winner with customers, our financial results, since its
acquisition in 1998, were a failure. In the 11 years through 2009, the company reported an aggregate pre-tax loss
of $157 million, a figure that was far understated since borrowing costs at NetJets were heavily subsidized by its
free use of Berkshire’s credit. Had NetJets been operating on a stand-alone basis, its loss over the years would
have been several hundreds of millions greater.
We are now charging NetJets an appropriate fee for Berkshire’s guarantee. Despite this fee (which
came to $38 million in 2010), NetJets earned $207 million pre-tax in 2010, a swing of $918 million from 2009.
Dave’s quick restructuring of management and the company’s rationalization of its purchasing and spending
policies has ended the hemorrhaging of cash and turned what was Berkshire’s only major business problem into a
solidly profitable operation.
Dave has meanwhile maintained NetJets’ industry-leading reputation for safety and service. In many
important ways, our training and operational standards are considerably stronger than those required by the FAA.
Maintaining top-of-the-line standards is the right thing to do, but I also have a selfish reason for championing this
policy. My family and I have flown more than 5,000 hours on NetJets (that’s equal to being airborne 24 hours a
day for seven months) and will fly thousands of hours more in the future. We receive no special treatment and
have used a random mix of at least 100 planes and 300 crews. Whichever the plane or crew, we always know we
are flying with the best-trained pilots in private aviation.
The largest earner in our manufacturing, service and retailing sector is Marmon, a collection of 130
businesses. We will soon increase our ownership in this company to 80% by carrying out our scheduled purchase
of 17% of its stock from the Pritzker family. The cost will be about $1.5 billion. We will then purchase the
remaining Pritzker holdings in 2013 or 2014, whichever date is selected by the family. Frank Ptak runs Marmon
wonderfully, and we look forward to 100% ownership.
13