FEI Members and Prospective Members
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
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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
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
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
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
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
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,
CFO Internet Usage
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
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:
email@example.com. Please include
salary history & requirements. For more career opportunities, please visit
the FEI Job Center.
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,
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