Maybe Williams-Sonoma should start selling corporate jets…
It’s the start of Memorial Day weekend and judging by the various news reports, the $4 a gallon gas is having a major impact on people’s travel plans this weekend. But some folks are still managing to travel and judging by the planes leaving Teterboro right now, Martha’s Vineyard appears to be a top destination.
Indeed, the market for corporate jets has apparently never been better, judging by this 8K which Williams-Sonoma (WSM) filed late yesterday and which a footnoted regular brought to my attention. As the filing notes, the company sold its Bombardier Global Express for $46.8 million last week, netting a pre-tax gain of $16 million, which the company estimates will be 9 cents a share. The big payday, the filing notes, was due to a “robust private aviation market”. The jet was sold to an unidentified and unrelated third party. A quick skim of earlier filings shows that Williams-Sonoma redacted the cost of the plane when it was purchased several years ago, so we have to take their word that it cost just over $30 million.
The second part of the filing notes that “in order to address the company’s ongoing aircraft needs”, Williams-Sonoma entered into an agreement with a company controlled by Chairman and CEO, W. Howard Lester, to lease a Bombardier Global 5000 for $375K a month for the next 36 months. In the filing, the company says that this will save it lots of money and promises to give a fuller accounting of the cost savings when it files its next 10Q.
Enjoy your Memorial Day weekend, no matter where you’re traveling to. I’ll be back on Tuesday with whatever filings are dumped later today.
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May 23rd, 2008 at 12:03 pm
It’s always fun to see the convulted and tortured financial “logic” that companies will use to try to rationalze why the CEO needs the latest Bentley of the skies. Actually I think I see a business opportunity here, why not just prepare pre-formatted excel templates that a company could use to justify that new $35mm time-machine? Let’s see, it could include things like: flying at 51,000 feet versus 48,000 will allow flight speed to be increased by 2 MPH, thereby saving $25mm over six months. That tends to be the sort of logic that Board of Directors seem to be comfortable with.
May 27th, 2008 at 12:17 pm
Wait a minute - the CEO forms a shell company to buy a jet to lease it to the public company that he runs himself. He is the only user of this plane. So he profits personally from his own use of the jet that he is supposedly using to save money for shareholders.
Is this some new level of corruption in the corporate suite, or have I just not been paying attention?
May 27th, 2008 at 1:11 pm
Sorry to be the bearer of bad news, but you haven’t been paying attention. While I can’t tick them off the top of my head, there’s definitely quite a few companies that have similar arrangements with their CEOs, including (I’m pretty sure) Apple. What’s different here is the cost-savings happy-talk. And the fact that Williams-Sonoma is somewhat late to discover this.
May 27th, 2008 at 1:56 pm
Thanks for letting me know how clueless I am, Michelle
It *is* hard to keep up.
So the previous plane was owned by the corporation/shareholders, who profited when the plane was sold at a profit.
But under this new level of corruption, if the plane is sold at lease end for a profit, then the CEO profits personally, while the shareholders pay for his trips to Martha’s Vineyard.
The amazing thing is that no one sees anything wrong with this. Or at least no one who is in a position to do anything about it.
June 3rd, 2008 at 6:10 am
Just saw a story in the Miami Herald about perks which included two examples of companies with similar deals, which shows just how prevalent this perk is:
MasTec charters aircraft from a third party that leases two planes from companies owned in part by Chairman Jorge Mas and President and CEO Jose Mas. MasTec paid the chartering company about $800,000 last year. Same deal at Perry Ellis International, which paid $743,000 to charter an aircraft from a company owned by Perry Ellis CEO George Feldenkreis and President Oscar Feldenkreis.
A link to the full story, which includes various other perks is here.