Sokol’s Resignation Raises Questions Regarding Lubrizol Transaction

In a press release issued this afternoon, Berkshire Hathaway Chairman and CEO Warren Buffett announced the resignation of David Sokol. Mr. Sokol served as Chairman of several Berkshire subsidiaries and many observers, including The Rational Walk, previously believed that he was the front runner to eventually assume the CEO position at Berkshire Hathaway. Read this article for our views on the resignation.

NetJets Posts Profits But Margins Remain Under Pressure

In a recent interview with Aviation Week, NetJets Chairman and CEO David Sokol stated that he is “comfortable” with his previous prediction that the company will post pre-tax profits of $200 million for 2010 and that “the business should always be profitable” in the future. However, Mr. Sokol also indicated that NetJets is likely to evolve into a fundamentally low margin business that may deliver 4 to 5 percent net profit margins in a “steady state, long term” environment. Berkshire Hathaway paid $725 million to acquire NetJets in 1998 and incurred cumulative pre-tax losses of $157 million from the time of the acquisition through the end of 2009. Read this article for more details.

Examining Berkshire’s Q3 Results With Special Focus on NetJets

Berkshire Hathaway posted significantly higher operating profits for the third quarter of 2010 mainly due to the contribution of Burlington Northern Santa Fe, which was acquired in February, along with improved results in the company’s diverse collection of economically sensitive businesses which have seen improved conditions this year. However, while operating earnings increased 35.6 percent from the prior year period to $2.8 billion, net earnings declined to $3 billion for the quarter which represents a 7.7 percent drop from the prior year period. The decline in net earnings was due to a small loss in Berkshire’s overall derivatives portfolio compared to a large gain in the third quarter of 2009. Berkshire’s book value per share increased to $90,823 representing a 4.8 percent increase for the quarter. Read this article for more details and analysis.

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