Greetings from Morristown, NJ. It's really hot here and the humidity is increasing. My kids are out of school so they are at each other's throats 24 hours a day! But I had a great Father's Day with them this week, even though I tried to stretch it out for a second day bonus. Sadly, the kids didn't buy it. "Nice try, Dad," commented six-year old Scott.

This issue of FEI Express is sponsored by Esker Software- Extending the Reach of Information. See the future of information delivery with Pulse™ - new from Esker. Deliver financial documents to any recipients via web, email, fax, wireless and print for improved service, lower costs, and better business. http://www.esker.com/fei0501.

Susan Schmidt Bies Appointed to the Federal Reserve Board
Recently, President Bush nominated one of our leading members, Susan Schmidt Bies, to the seven-member Federal Reserve Board. Sue has been a very active member of our Committee on Corporate Reporting and has had a great career at First Tennessee National Corp., where she was CFO and most recently EVP for Risk Management. Sue received her PhD in economics from Northwestern University, and worked for the Federal Reserve Bank of St. Louis before joining First Tennessee. Heartfelt congratulations are in order for her. It is a tremendous accomplishment! She has been a great leader in FEI, communicating our views and making presentations at our conferences. We hope she will continue to stay close to FEI. I told her that FEI could be very helpful on all future interest rate decisions!!! For more information, visit BusinessWeek Online.

Stock Compensation
John Deming of KPMG, Phil Ameen of GE and Daniel Zeyher of the FASB led a lively tele-discussion last week. The subject was compensation strategies in a volatile market. Here is a link to John's summary of how companies are dealing with underwater options. The panelists addressed the most common method, which is to get employees to cancel their existing options with the promise that they will be granted new options in six months and one day at the then-market price. This practice does not lead to unfavorable "variable accounting" treatment for the new options. Other companies are simply leaving the old options outstanding and granting a new batch of options to the option holders at the current market price. See John's presentation for a more exhaustive list of alternatives. You will need Microsoft PowerPoint loaded on your computer in order to view the presentation.

Working Capital Survey
REL Consultancy Group offered a presentation at our recent CCR meeting. Jim Terrell of Georgia Pacific introduced REL to the group with favorable comments. One of its specialty consulting practices is working capital management, and they put together an annual analysis of the top 1000 companies and their WC ratios.

It ranks companies by industry based on two metrics: cash conversion efficiency ratio (CCE), and days of working capital (DWC). CCE measures the efficiency of turning sales into cash flow (cash flow from ops / sales). DWC measures the level of working capital employed in the business (Accounts Receivable + Inventory - Accounts Payable)/ (Sales/365).

REL cites several characteristics of good working capital performance. High-margin industries have an advantage. Good performers have the ability to offset AR and AP. They also constantly strive to reduce both operating costs and working capital, seeking year-on-year improvements. Leveraging the benefits to the "extended enterprise" is a winning formula - i.e., the supply chain and customers. Alternative financing (factoring for instance) can be useful.

Working capital trends can clearly be a barometer of business performance. Declining inventory turns indicates poor sales forecasting and/or a market slowdown. Growing days sales outstanding may indicate that extended terms are being offered to win business or that dissatisfied customers are not paying. Delining days payable outstanding, REL believes, is actually most often a positive sign of prompt payment discounts.

Some companies that lead their industry include: Autos - Ford, CCE - 18%; DWC - (7); Chemicals - Eastman Chemical, CCE - 16%, DWC - 11; Food and Beverage - Coca Cola, CCE - 18%, DWC - (15); Media - NY Times, CCE - 18%, DWC - 23; Pharmaceutical - Amgen, CCE - 41%, DWC - 54.

The technology industry in total had CCE of 11% and DWC of 74.

Most industries have average CCE in the low teens and DWC in the 20 to 50 range. However, I do confess to only roughly eyeballing those figures.

Audit Fees Disclosure
Some preliminary work has been published on the dollar amount of audit fees paid by public companies. One summary analyzed over 500 of the biggest companies and found that for these companies (median revenue - $4B) the median audit fee was about $1 million, the median IT consulting spending on financial systems was zero and the median amount of all other fees was $2.1 million. The other fees cover tax work, internal audit work, accounting advice and analysis, etc. The data does not surprise me at all, and is very much in line with my own experience historically. Much ado about nothing! What a waste of time and effort involved in this research and this unnecessary disclosure brought upon our companies!!!

Free Webinar on Revenue Management
diCarta, Inc., invites you to a free Webinar on Revenue Management Best Practices with Dr. Mary Barth, Professor at Stanford University's Graduate School of Business, and Gary Matuszak, Managing Partner with Andersen. Don't wait, register now!

CFO Internet Usage Survey
A recent survey of 900 FEI member CFOs and VPs of Finance finds executives spend an average of 11 hours a week using the Internet, for both business and personal use. The most popular business uses for the Internet: e-mail, tracking business news, stock information/trading, and researching business financing options and sourcing products for the company. The top 5 most helpful business web sites, according to the survey: Yahoo!/Yahoo Finance!; FEI.ORG; Edgar; Bloomberg and the SEC. Thanks to all the participants. Find a summary presentation of the survey at on our website.

Job Posting: CFO
Private company in Atlanta, GA. CPA and MBA Desired. Five to eight years of progressive financial analysis with emphasis on: standard cost, asset utilization & rationalization, variance, analysis (P&L), acquisition analysis, strategic planning, budgeting, and trending analysis. Must be extremely proficient in EXCEL modeling and data management. Company offers competitive salary, benefits, 401-k and Profit Sharing. Email: fstinger@water.com. Please include salary history & requirements. For more career opportunities, please visit the FEI Job Center.

New Member Welcome
Congratulations to Rhonda Kemp, Controller, HCC Employee Benefits, Inc., Houston, and Steven Miller, VP and Controller, Value City Department Stores, Inc., Columbus, OH.

That's all for now,