Wednesday, November 18, 2009
Virgin CFO Outlines Cost Cutting
CFO says looking to continually take costs out of the business * CFO says broadband pricing environment now more benign * CFO says pricing power will be sustainable in future * CFO says doesn't see any pressure to open up their network * CFO says expects to reduce numbers of properties to save costs The Virgin Media CFO was speaking at the Morgan Stanley TMT conference carried live on the group's Web site.
CitiGroup CFO to Get Pay Raise
Citigroup Inc. said its chief financial officer and co-head of global markets are getting raises, while CEO Vikram Pandit will continue to collect a salary of $1 per year.
Citigroup, based in New York, faces restrictions on executive compensation because it received $45 billion in government bailout money after the peak of the credit crisis last fall. Salary caps for top executives were recently set by the Obama administration's pay czar, Kenneth Feinberg, for Citi and six other companies that received big bailouts.
The new compensation packages at Citigroup fall within the guidelines set last month by Feinberg, Citi said in a regulatory filing submitted to the Securities and Exchange Commission.
There has been some justified concern that top executives might leave banks where compensation is restricted, said Nancy Atkinson, a senior analyst at research firm Aite Group.
But Atkinson noted that there are only so many high-ranking banking jobs available in the industry, making it unlikely that a large portion of Citi's would leave for better-paying jobs. Many other banks face similar restrictions, she said.
"We're in an economy where there's not that many other opportunities," Atkinson said.
In the case of some Citi executives, while they are getting cash raises, that could be offset by reductions in other forms of compensation such as year-end bonuses or other perks. Citi said earlier in the year it was changing the mix between employees' salary and bonuses.
CFO John Gerspach's salary was increased to $500,000 from $400,000, according to the filing late Tuesday. James Forese, co-head of global markets, will now make $475,000, more than double the $225,000 he previously earned.
The pair will also receive "stock salary" for 2009. Gerspach will receive stock valued at $2.9 million as part of his compensation for 2009. Forese will receive stock valued at $5.4 million.
Stephen Volk, a vice chairman at the bank, will continue to receive a base salary of $500,000. He will receive stock worth $3.4 million.
Pandit did not receive any stock compensation.
The stock portion of the pay will be awarded on Nov. 30. The number of shares given to each employee will be based on Citi's closing price that day.
Shares of Citigroup rose 3 cents to $4.27 in afternoon trading.
The shares awarded can only be sold or transferred in three equal installments beginning Jan. 20, 2011, and only if Citigroup repays its bailout money.
In late October, the Treasury Department released the compensation plan that restricts cash salaries for the top 25 highest-paid executives at the seven companies, in most cases, to $500,000. Perks are capped at $25,000.
Part of the change in pay was to more closely tie top employees' compensation to the long-term health of the company so workers would not take similar risks to those seen as leading to the credit crisis and leading the government to bail out major financial firms.
Citigroup was among the hardest hit banks by the credit crisis, losing billions of dollars on risky investments and failing consumer loans. The government provided Citi with $45 billion to help it stabilize its operations. A majority of that investment was recently swapped for a 34 percent stake in the banking giant.
The remaining stake has yet to be repaid.
Citigroup, based in New York, faces restrictions on executive compensation because it received $45 billion in government bailout money after the peak of the credit crisis last fall. Salary caps for top executives were recently set by the Obama administration's pay czar, Kenneth Feinberg, for Citi and six other companies that received big bailouts.
The new compensation packages at Citigroup fall within the guidelines set last month by Feinberg, Citi said in a regulatory filing submitted to the Securities and Exchange Commission.
There has been some justified concern that top executives might leave banks where compensation is restricted, said Nancy Atkinson, a senior analyst at research firm Aite Group.
But Atkinson noted that there are only so many high-ranking banking jobs available in the industry, making it unlikely that a large portion of Citi's would leave for better-paying jobs. Many other banks face similar restrictions, she said.
"We're in an economy where there's not that many other opportunities," Atkinson said.
In the case of some Citi executives, while they are getting cash raises, that could be offset by reductions in other forms of compensation such as year-end bonuses or other perks. Citi said earlier in the year it was changing the mix between employees' salary and bonuses.
CFO John Gerspach's salary was increased to $500,000 from $400,000, according to the filing late Tuesday. James Forese, co-head of global markets, will now make $475,000, more than double the $225,000 he previously earned.
The pair will also receive "stock salary" for 2009. Gerspach will receive stock valued at $2.9 million as part of his compensation for 2009. Forese will receive stock valued at $5.4 million.
Stephen Volk, a vice chairman at the bank, will continue to receive a base salary of $500,000. He will receive stock worth $3.4 million.
Pandit did not receive any stock compensation.
The stock portion of the pay will be awarded on Nov. 30. The number of shares given to each employee will be based on Citi's closing price that day.
Shares of Citigroup rose 3 cents to $4.27 in afternoon trading.
The shares awarded can only be sold or transferred in three equal installments beginning Jan. 20, 2011, and only if Citigroup repays its bailout money.
In late October, the Treasury Department released the compensation plan that restricts cash salaries for the top 25 highest-paid executives at the seven companies, in most cases, to $500,000. Perks are capped at $25,000.
Part of the change in pay was to more closely tie top employees' compensation to the long-term health of the company so workers would not take similar risks to those seen as leading to the credit crisis and leading the government to bail out major financial firms.
Citigroup was among the hardest hit banks by the credit crisis, losing billions of dollars on risky investments and failing consumer loans. The government provided Citi with $45 billion to help it stabilize its operations. A majority of that investment was recently swapped for a 34 percent stake in the banking giant.
The remaining stake has yet to be repaid.
Remy International Announces New CFO
Remy International, Inc., a leading worldwide manufacturer, remanufacturer, and distributor of heavy duty systems, starters, and alternators, locomotive products, and hybrid technology announced today that Fred Knechtel has joined the company as Senior Vice President and Chief Financial Officer. Fred was most recently CFO at Stanley Bostitch, a $550 million division of Stanley Works. He has a vast amount of financial experience at Northrup Grumman, Stern Stewart, Millennium Chemicals and DuPont Teijin Films. Fred has a Bachelor's Degree in Mechanical Engineering from Stonybrook University, and an MBA from Hofstra University.
John Weber, President & CEO of Remy International, stated, "I am very excited to have Fred join our Company. His unique background in engineering and finance will be a great asset to Remy International." Fred replaces Doug Laux who served as Senior Vice President and Chief Financial Officer for the past two years and is leaving to pursue other endeavors.
John Weber, President & CEO of Remy International, stated, "I am very excited to have Fred join our Company. His unique background in engineering and finance will be a great asset to Remy International." Fred replaces Doug Laux who served as Senior Vice President and Chief Financial Officer for the past two years and is leaving to pursue other endeavors.
Monday, November 16, 2009
Strategies for Surplus Real Estate
WHY IS SUBLEASING THE ONLY RECOGNIZED OPTION FOR
MITIGATING THE LOSS OF SURPLUS OFFICE SPACE?
Up until the savings and loan scandal of the eighties, real estate developers enjoyed some latitude with lenders as to the value and potential pro-forma of their office projects. Since that time regulations on lending practices have forced developer/landlords to a much tighter qualification process. Before, developer/landlords had more latitude in deciding the best alternatives for empty space, the lenders leaving much to the discretion of the landlords.
Today, lenders almost exclusively base the quality of their loans on the “income approach” to valuation. Therefore, to loose a percentage of a loan’s income can, and will de-value the loan forcing the lender to require additional equity in the project – or justify the loss to their stockholders.
Since then, landlords have required tenants who no longer need or are using space in their buildings to “sublease” the space themselves. This gives the landlord the luxury of maintaining the income and guarantees from the tenant, even if they find a subtenant. It also creates a tremendous loss for the tenant needing to sublease the space.
If your company has surplus space and time remaining on the lease, what are you to do? If you call your landlord you are likely to receive the answer – “Sublease it”. They will probably offer their own brokers services which will seem reasonable. But the landlord’s broker works for your landlord. The landlord will see to it that any potential tenants are shown their own empty space before yours.
ONCE YOU BEGIN THE SUBLEASE ODYSSEY – KEEP THIS IN MIND:
1. A SURPLUS LEASE IS NOT A REAL ESTATE ISSUE – IT’S A CASH-FLOW ISSUE.
Finding a subtenant is not the issue at hand. Timing and speed of execution are the true issues. Every month the space sits vacant costs your company thousands in lost after-tax income. The goal should be to find the fastest and least expensive method of mitigating this loss. Subleasing is neither.
2. ASUBLEASE IS PERCEIVED BY THE MARKET AS A "FIRE SALE"
According to the Business Post, “Most commercial real estate brokers will advise a potential tenant wanting to sublease their space that their space will trade in the 50 cents on the dollar range.” (Business Post, Subleasing Can Be Painful, February 2005). After leasehold improvement allowances,
Copyright © 2007 Cambridge Real Estate Consulting, All Rights Reserved
broker commissions, and numerous other costs – some known and some hidden, a sublease will rarely return more than 37 cents on the dollar – and that’s a best case scenario.
3. SUBLEASING ATTRACTS BOTTOM FEEDING TENANTS
High credit companies do not seek sublease space. Subleases attract cash and credit poor tenants who usually are unable to qualify for a new lease. Also, once their sublease ends – the new tenant is subject to a new rental rate which the landlord controls. But more importantly, what happens when your new subtenant can't pay the rent?
4. FINANCIAL REGULATIONS SPECIFICALLY TARGET SUBLEASE ACCOUNTING
According to GAAP financial rules (FASB 13 – Interpretation 27), surplus space must be written off at the time you intend to vacate the space. If you sublease the space and the subtenant defaults, you may be required to immediately write off the entire remaining lease balance including all anticipated costs including the furniture, fixtures and equipment you may have installed. Furthermore, if you are trying to sublease and your reported sublease income expectations are below your expectations, you may be required to immediately write off that additional loss.
5. ASUBLEASE REQUIRES YOU TO PUT UP "AT RISK" CAPITAL
A sublease typically requires an up front cash investment for leasehold improvements as well as your broker’s commission. These standard out-of-the-gate expenses are needed to attract what often ends up being a poor credit subtenant who is at great risk of default, essentially making it more of a gamble than an investment.
6. ASUBLEASE PUTS YOU IN THE REAL ESTATE MANAGEMENT BUSINESS
Subleasing means you are now a landlord since the sublease is between your company and your new subtenant – not the landlord. Therefore any of your subtenant’s office building requests and requirements must be handled by you first, not the landlord. All requests for repairs and maintenance, collecting rent, parking lot accident liability, etc. are your responsibility. When the toilet backs up the subtenant must call you, not the original landlord – who is no longer directly liable for such repairs. This takes a lot more time and money than most expect and is a “dirty little secret” of subleasing.
7. THE VALUE OF YOUR SUBLEASE DECREASES WITH EVERY DAY
Every month that your space sits vacant it becomes less attractive to prospects. Subtenants know that shorter term subleases mean they will soon face large rent increases once the sublease terminates. History shows that opportunities to sublease fall dramatically when the lease term remaining drop below 36 months.
For complete white paper
MITIGATING THE LOSS OF SURPLUS OFFICE SPACE?
Up until the savings and loan scandal of the eighties, real estate developers enjoyed some latitude with lenders as to the value and potential pro-forma of their office projects. Since that time regulations on lending practices have forced developer/landlords to a much tighter qualification process. Before, developer/landlords had more latitude in deciding the best alternatives for empty space, the lenders leaving much to the discretion of the landlords.
Today, lenders almost exclusively base the quality of their loans on the “income approach” to valuation. Therefore, to loose a percentage of a loan’s income can, and will de-value the loan forcing the lender to require additional equity in the project – or justify the loss to their stockholders.
Since then, landlords have required tenants who no longer need or are using space in their buildings to “sublease” the space themselves. This gives the landlord the luxury of maintaining the income and guarantees from the tenant, even if they find a subtenant. It also creates a tremendous loss for the tenant needing to sublease the space.
If your company has surplus space and time remaining on the lease, what are you to do? If you call your landlord you are likely to receive the answer – “Sublease it”. They will probably offer their own brokers services which will seem reasonable. But the landlord’s broker works for your landlord. The landlord will see to it that any potential tenants are shown their own empty space before yours.
ONCE YOU BEGIN THE SUBLEASE ODYSSEY – KEEP THIS IN MIND:
1. A SURPLUS LEASE IS NOT A REAL ESTATE ISSUE – IT’S A CASH-FLOW ISSUE.
Finding a subtenant is not the issue at hand. Timing and speed of execution are the true issues. Every month the space sits vacant costs your company thousands in lost after-tax income. The goal should be to find the fastest and least expensive method of mitigating this loss. Subleasing is neither.
2. ASUBLEASE IS PERCEIVED BY THE MARKET AS A "FIRE SALE"
According to the Business Post, “Most commercial real estate brokers will advise a potential tenant wanting to sublease their space that their space will trade in the 50 cents on the dollar range.” (Business Post, Subleasing Can Be Painful, February 2005). After leasehold improvement allowances,
Copyright © 2007 Cambridge Real Estate Consulting, All Rights Reserved
broker commissions, and numerous other costs – some known and some hidden, a sublease will rarely return more than 37 cents on the dollar – and that’s a best case scenario.
3. SUBLEASING ATTRACTS BOTTOM FEEDING TENANTS
High credit companies do not seek sublease space. Subleases attract cash and credit poor tenants who usually are unable to qualify for a new lease. Also, once their sublease ends – the new tenant is subject to a new rental rate which the landlord controls. But more importantly, what happens when your new subtenant can't pay the rent?
4. FINANCIAL REGULATIONS SPECIFICALLY TARGET SUBLEASE ACCOUNTING
According to GAAP financial rules (FASB 13 – Interpretation 27), surplus space must be written off at the time you intend to vacate the space. If you sublease the space and the subtenant defaults, you may be required to immediately write off the entire remaining lease balance including all anticipated costs including the furniture, fixtures and equipment you may have installed. Furthermore, if you are trying to sublease and your reported sublease income expectations are below your expectations, you may be required to immediately write off that additional loss.
5. ASUBLEASE REQUIRES YOU TO PUT UP "AT RISK" CAPITAL
A sublease typically requires an up front cash investment for leasehold improvements as well as your broker’s commission. These standard out-of-the-gate expenses are needed to attract what often ends up being a poor credit subtenant who is at great risk of default, essentially making it more of a gamble than an investment.
6. ASUBLEASE PUTS YOU IN THE REAL ESTATE MANAGEMENT BUSINESS
Subleasing means you are now a landlord since the sublease is between your company and your new subtenant – not the landlord. Therefore any of your subtenant’s office building requests and requirements must be handled by you first, not the landlord. All requests for repairs and maintenance, collecting rent, parking lot accident liability, etc. are your responsibility. When the toilet backs up the subtenant must call you, not the original landlord – who is no longer directly liable for such repairs. This takes a lot more time and money than most expect and is a “dirty little secret” of subleasing.
7. THE VALUE OF YOUR SUBLEASE DECREASES WITH EVERY DAY
Every month that your space sits vacant it becomes less attractive to prospects. Subtenants know that shorter term subleases mean they will soon face large rent increases once the sublease terminates. History shows that opportunities to sublease fall dramatically when the lease term remaining drop below 36 months.
For complete white paper
Playboy CFO to Resign
Playboy Enterprises Inc. said Monday Linda G. Havard will step down as executive vice president and chief financial officer at the end of the year.
The media company said it will begin its search for a successor immediately.
Havard has managed the company's financial, treasury, accounting and technology functions for the past 12 years.
Her resignation follows reports that Playboy is in talks to sell its business.
The company's shares closed up 23 cents, or 5.1 percent, at $4.78 before the resignation was announced.
The media company said it will begin its search for a successor immediately.
Havard has managed the company's financial, treasury, accounting and technology functions for the past 12 years.
Her resignation follows reports that Playboy is in talks to sell its business.
The company's shares closed up 23 cents, or 5.1 percent, at $4.78 before the resignation was announced.
New Report from CFO Magazine Cites Credit Risks
A new CFO Financial Benchmarks report examines the creditworthiness of midcap companies and finds that one in seven poses a potential risk to its suppliers and business partners.
The 2009 Credit Risk Benchmarking Report, available for $50 at www.cfo.com/creditrisk, provides suppliers with a quick way to gauge which of 550 companies within the CFO Midcap 1500 warrant closer scrutiny. A complete list of companies named in the report also is available free of charge. According to recent CFO magazine survey, 40% of CFOs plan to monitor customer credit more closely--even after an economic recovery.
"Despite signs of a recovery, at least 14% of companies have been badly strained by nearly two years of recession and more than a year of limited access to credit," says Karlo Bustos, director of financial analysis and benchmarking at CFO. "And companies that struggle to pay their bills on time or are in danger of bankruptcy pose a risk to their suppliers."
The report measures each company on three factors: cash as a percent of revenue, days payable outstanding (DPO), and DPO relative to the DPO of that company's industry. The last of these measures is intended to expose which companies are underperforming regardless of the economic condition of their industry as a whole. A company that gets poor marks in all three areas is a potential credit risk.
An article in the October issue of CFO magazine, called "Credit Check," summarizes how companies performed within the 36 different industries studied. The industries with the highest percentage of troubled companies include pharmaceuticals (46%), biotech (35%), and media (26%). Across all industries, the study found that an average of 14% of companies pose a potential credit risk to their suppliers.
As with all financial benchmarks, many factors can affect a company's performance, and this report should be used only as a guide
About The CFO Group
CFO magazine, CFO.com, CFO Conferences, and CFO Research Services together make up CFO Publishing Corporation, which is an Economist Group business. CFO Financial Benchmarks is an editorial product of CFO, the leading business publication for C-level and senior financial executives. For more information, visit www.cfo.com.
The 2009 Credit Risk Benchmarking Report, available for $50 at www.cfo.com/creditrisk, provides suppliers with a quick way to gauge which of 550 companies within the CFO Midcap 1500 warrant closer scrutiny. A complete list of companies named in the report also is available free of charge. According to recent CFO magazine survey, 40% of CFOs plan to monitor customer credit more closely--even after an economic recovery.
"Despite signs of a recovery, at least 14% of companies have been badly strained by nearly two years of recession and more than a year of limited access to credit," says Karlo Bustos, director of financial analysis and benchmarking at CFO. "And companies that struggle to pay their bills on time or are in danger of bankruptcy pose a risk to their suppliers."
The report measures each company on three factors: cash as a percent of revenue, days payable outstanding (DPO), and DPO relative to the DPO of that company's industry. The last of these measures is intended to expose which companies are underperforming regardless of the economic condition of their industry as a whole. A company that gets poor marks in all three areas is a potential credit risk.
An article in the October issue of CFO magazine, called "Credit Check," summarizes how companies performed within the 36 different industries studied. The industries with the highest percentage of troubled companies include pharmaceuticals (46%), biotech (35%), and media (26%). Across all industries, the study found that an average of 14% of companies pose a potential credit risk to their suppliers.
As with all financial benchmarks, many factors can affect a company's performance, and this report should be used only as a guide
About The CFO Group
CFO magazine, CFO.com, CFO Conferences, and CFO Research Services together make up CFO Publishing Corporation, which is an Economist Group business. CFO Financial Benchmarks is an editorial product of CFO, the leading business publication for C-level and senior financial executives. For more information, visit www.cfo.com.
Saturday, November 14, 2009
CFO Changes at Disney
Walt Disney Co stepped up an overhaul of its management by announcing that two top executives, its finance chief and the head of its parks division, will swap jobs at the end of this year. Chief Financial Officer Tom Staggs has served in his current job for more than a decade, presiding over acquisitions of Capital Cities/ABC, Pixar and the pending purchase of Marvel Entertainment. Jay Rasulo assumed the role of parks chairman in 2000. Thursday's announcement follows a restructuring of Disney's film studio's marketing, distribution, and operations divisions on Wednesday and the departure on Monday of Mark Zoradi, president of Disney's motion pictures group. Those moves came on the heels of the abrupt departures of former Disney Studios Chairman Dick Cook in September, which shocked both Hollywood and Wall Street, and of Miramax Films President Daniel Battsek last month. Analysts said Thursday's job swap likely reflected Disney's desire to deepen the experience of two highly regarded executives, particularly Staggs. Disney may also be aiming to bolster its parks operations with a fresh perspective as it moves forward in the tough economic environment and prepares for a new theme park in Shanghai. The division encompasses Disney's theme parks, resorts, cruise lines, and vacation and time share operations. "There are two reasons they could be doing this," said analyst David Bank of RBC Capital Markets. "The parks business is really challenging right now and they believe Staggs could help it, or they want Staggs to have more operational experience on the road to something bigger." Rasulo, meanwhile, as the parks division boss oversaw expansions of Disney's California Adventure in Anaheim and Hong Kong Disneyland, and led negotiations with the Chinese government for the new Shanghai theme park. Both will continue to report to Disney Chief Executive Bob Iger. Shares of Disney were down 1 percent at $28.99 on the New York Stock Exchange.
Friday, November 13, 2009
Lawson Strategy to Cuts Costs
If not a match made in heaven, Lawson Software and its CFO, Rob Schriesheim, are at least a solid fit. To keep its footing in a market dominated by two much larger competitors, the company must have a very strategic orientation. And the finance chief, far from an accounting geek, has spent most of his career at the high end of the strategy spectrum, embroiled in complex restructurings and the analysis of capital-allocation options.
That harmony notwithstanding, taking the CFO chair was not part of the plan when Schriesheim joined the company's board in 2006. Lawson — the third-largest publicly traded vendor of enterprise resource planning systems behind Oracle and SAP, according to Schriesheim — had recently merged with Intentia, a Swedish ERP supplier. The company's board and CEO decided that the newly constituted company needed a different type of CFO than the incumbent, and Schriesheim was charged with finding the replacement.
Before long, though, several board members urged him to take the role himself. They were motivated by observing the strong relationship Schriesheim had quickly developed with the CEO and the two executives' complementary skills. "It wasn't in my business plan at the time, but I did think it was an exciting situation," Schriesheim said during an interview with CFO editors in New York City on November 5. "It was a chance to fundamentally transform the company and a substantial intellectual challenge. There were a lot of strategic and operational issues where I felt I could add value."
Not the least of the challenges was helping to engineer a shift in the Lawson culture to heighten the focus on profit growth. That involved seismic cost-cutting and, on the product side, paying more attention to evolving customer needs rather than "falling in love with" the company's existing technology.
An edited version of the interview follows.
So what's it like competing with Oracle and SAP?
Everyone asks that! They're formidable competitors. We tend to be very selective in the verticals in which we compete. Most software companies go to market in a vertical way, so it's not like that is unique. But we have become very disciplined about how we allocate our financial and human capital among our six key areas. We try to compete on our ground — in verticals in which we have leading positions.
We're the third-largest publicly traded ERP company in the world, but on the other hand we're not that big. We're $760 million in revenue, 4,500 customers, and 3,500 employees. So we have to be very judicious about how we invest, and that's been the whole theme behind how we've transformed the company over the past three years. We've gone from a 3% operating margin to 15%, and from a nickel in earnings per share to 35 cents in EPS. We've actually grown on a constant currency basis in a recessionary environment by being very focused.
schriesheim2
"When I look at businesses, I like to develop an analytical framework that allows me to understand how we should optimally allocate capital."
— Robert Schriesheim, Lawson Software
By "focused," you mean focused on your specific niches?
I wouldn't call them niches, but yes. Here's the interesting thing: two years ago, we derived about 35%–40% of our revenues from five vertical markets — health care, public sector, fashion, food and beverage, and equipment-service management and rental — and one horizontal market, strategic human-capital management. Now it's 65% from those areas. That's important, because the way we've allocated our capital is in markets where we know we can win.
And we've gotten very vertical within those verticals. It's very different selling an ERP system to a hospital than to a fashion manufacturer, but it's also different selling to a jeans manufacturer rather than a sports-footwear manufacturer. An ERP application is a relatively large, complex sale, and you have a lot more credibility if you really understand the issues the customer deals with. We've developed a great deal of intellectual capital in those particular verticals.
How did you arrive at them?
The merger with Intentia created a company of global scale and critical mass. But we found that we were spread too thin. We didn't have a sufficient focus in a targeted number of verticals. So we made an assessment of which verticals we were the strongest in and which had the highest growth prospects over the next three to five years.
One of the areas, equipment-service management and rental, was completely new for us. The customers are large distributors of heavy equipment, like Caterpillar dealerships. Now we have 8 of the 10 largest Caterpillar dealerships in the world as customers. It then becomes much easier to sell to other Caterpillar dealers, as well as Komatsu dealers.
Each one of these environments does business a little bit differently, and that dictates a certain degree of customization in the application. I'm not saying that Oracle and SAP don't do that. Where Lawson does well in competing against them is with companies between $250 million and $3 billion in revenue. About 75% of our customers are in that range, and our software tends to be architected in a fashion that's more suitable for that size customer because it requires less in the way of internal resources to do the implementation.
Click Here for the complete Article
That harmony notwithstanding, taking the CFO chair was not part of the plan when Schriesheim joined the company's board in 2006. Lawson — the third-largest publicly traded vendor of enterprise resource planning systems behind Oracle and SAP, according to Schriesheim — had recently merged with Intentia, a Swedish ERP supplier. The company's board and CEO decided that the newly constituted company needed a different type of CFO than the incumbent, and Schriesheim was charged with finding the replacement.
Before long, though, several board members urged him to take the role himself. They were motivated by observing the strong relationship Schriesheim had quickly developed with the CEO and the two executives' complementary skills. "It wasn't in my business plan at the time, but I did think it was an exciting situation," Schriesheim said during an interview with CFO editors in New York City on November 5. "It was a chance to fundamentally transform the company and a substantial intellectual challenge. There were a lot of strategic and operational issues where I felt I could add value."
Not the least of the challenges was helping to engineer a shift in the Lawson culture to heighten the focus on profit growth. That involved seismic cost-cutting and, on the product side, paying more attention to evolving customer needs rather than "falling in love with" the company's existing technology.
An edited version of the interview follows.
So what's it like competing with Oracle and SAP?
Everyone asks that! They're formidable competitors. We tend to be very selective in the verticals in which we compete. Most software companies go to market in a vertical way, so it's not like that is unique. But we have become very disciplined about how we allocate our financial and human capital among our six key areas. We try to compete on our ground — in verticals in which we have leading positions.
We're the third-largest publicly traded ERP company in the world, but on the other hand we're not that big. We're $760 million in revenue, 4,500 customers, and 3,500 employees. So we have to be very judicious about how we invest, and that's been the whole theme behind how we've transformed the company over the past three years. We've gone from a 3% operating margin to 15%, and from a nickel in earnings per share to 35 cents in EPS. We've actually grown on a constant currency basis in a recessionary environment by being very focused.
schriesheim2
"When I look at businesses, I like to develop an analytical framework that allows me to understand how we should optimally allocate capital."
— Robert Schriesheim, Lawson Software
By "focused," you mean focused on your specific niches?
I wouldn't call them niches, but yes. Here's the interesting thing: two years ago, we derived about 35%–40% of our revenues from five vertical markets — health care, public sector, fashion, food and beverage, and equipment-service management and rental — and one horizontal market, strategic human-capital management. Now it's 65% from those areas. That's important, because the way we've allocated our capital is in markets where we know we can win.
And we've gotten very vertical within those verticals. It's very different selling an ERP system to a hospital than to a fashion manufacturer, but it's also different selling to a jeans manufacturer rather than a sports-footwear manufacturer. An ERP application is a relatively large, complex sale, and you have a lot more credibility if you really understand the issues the customer deals with. We've developed a great deal of intellectual capital in those particular verticals.
How did you arrive at them?
The merger with Intentia created a company of global scale and critical mass. But we found that we were spread too thin. We didn't have a sufficient focus in a targeted number of verticals. So we made an assessment of which verticals we were the strongest in and which had the highest growth prospects over the next three to five years.
One of the areas, equipment-service management and rental, was completely new for us. The customers are large distributors of heavy equipment, like Caterpillar dealerships. Now we have 8 of the 10 largest Caterpillar dealerships in the world as customers. It then becomes much easier to sell to other Caterpillar dealers, as well as Komatsu dealers.
Each one of these environments does business a little bit differently, and that dictates a certain degree of customization in the application. I'm not saying that Oracle and SAP don't do that. Where Lawson does well in competing against them is with companies between $250 million and $3 billion in revenue. About 75% of our customers are in that range, and our software tends to be architected in a fashion that's more suitable for that size customer because it requires less in the way of internal resources to do the implementation.
Click Here for the complete Article
Lawson Announces New CFO
Lawson Products, Inc.(NASDAQ:LAWS) today announced that Ron Knutson will join the company as Senior Vice President and Chief Financial Officer.
Knutson most recently served as Senior Vice President and CFO of Texas-based Frozen Food Express Industries. He will join Lawson on November 16, 2009, and assume the CFO responsibilities from F. Terrence Blanchard, who has served as CFO on an interim basis since 2008. Blanchard will remain with the company to facilitate a smooth transition.
"We are very excited to have found a seasoned executive of Ron's caliber to join our leadership team. Ron brings a wealth of experience that will be critical components of our impending strategic initiatives and future growth plans," noted Thomas Neri, President and Chief Executive Officer of Lawson Products, Inc. "Ron's background complements the capabilities of our management team and I am confident he will further improve our operating and financial efficiency." Ron Knutson stated, "Lawson Products has been a highly respected industrial organization for decades and I am honored to be joining the Lawson team. I look forward to helping the company achieve its long-term strategic objectives." Prior to joining Frozen Food Express Industries, Knutson was Vice President of Finance at Ace Hardware Corporation responsible for all CFO related duties.
Knutson most recently served as Senior Vice President and CFO of Texas-based Frozen Food Express Industries. He will join Lawson on November 16, 2009, and assume the CFO responsibilities from F. Terrence Blanchard, who has served as CFO on an interim basis since 2008. Blanchard will remain with the company to facilitate a smooth transition.
"We are very excited to have found a seasoned executive of Ron's caliber to join our leadership team. Ron brings a wealth of experience that will be critical components of our impending strategic initiatives and future growth plans," noted Thomas Neri, President and Chief Executive Officer of Lawson Products, Inc. "Ron's background complements the capabilities of our management team and I am confident he will further improve our operating and financial efficiency." Ron Knutson stated, "Lawson Products has been a highly respected industrial organization for decades and I am honored to be joining the Lawson team. I look forward to helping the company achieve its long-term strategic objectives." Prior to joining Frozen Food Express Industries, Knutson was Vice President of Finance at Ace Hardware Corporation responsible for all CFO related duties.
Planning Needed to Fund Greend Green Projects
Finding Money to Green Your Business
By Andrew Winston
Contrary to the popular misconception that going green is expensive, in a very large range of cases, environmental initiatives don't raise costs, they lower them — and fast. In operational areas such as facilities (heating, cooling, lighting), fleet, IT, and waste, leading companies continue to find large savings in shockingly simple actions, such as changing lighting or using outside air to cool a data center.
But even for the most head-slappingly obvious changes with super-fast paybacks, companies still need to find the capital to buy the new bulbs, optimize the HVAC system, or add auxiliary power units (APUs) to trucks. And even if one sees these initiatives as investments, not costs (which is the right way to look at it), there will still be competition for dollars. During a recession — heck, at any time — it's normal to struggle to get funds for even worthy projects. So what to do?
A few leading companies have hit on one incredibly simple solution to this problem — set aside funds for green priorities. I don't mean coming up with a new pool of money; just assign a percentage of the existing capital expenditure budget to green priorities.
In 2008, to find hidden gems of savings, DuPont set aside 1% of capital expenditures solely for energy-saving ideas. With $50MM of spending, the company found $50MM of savings per year — a one-year payback that keeps on giving. All projects still met the corporate hurdle rate, so there was no special dispensation besides making the money available for worthy initiatives managers had overlooked. Building products maker Owens Corning goes even further, dedicating 10% of capex to energy projects. This is a tool nearly anyone can use. Set aside the funds for green and you'll unleash a wave of creativity and short paybacks.
So if there are so many quick, high-ROI projects sitting around, why aren't companies jumping on them? Two big reasons. First, energy efficiency just hasn't seemed sexy. Dawn Rittenhouse, DuPont's director of sustainable development, told me, "If business units can invest in growth or energy efficiency projects, it's more glamorous to go after growth." But in tight times, saving money starts to feel a lot more exciting, doesn't it?
The second reason is the classic problem of the urgent versus the important. Most capital expenditures go to fix things that are already broken. But as Frank O'Brien-Bernini, Owens Corning's chief sustainability officer, puts it, "It's really about redefining what 'broken' means." Think about it: a process that wastes energy may not feel broken with oil at $40, or even $80, a barrel. But it may look like a money-eating disaster at $200 a barrel. In essence, when it comes to energy and resource efficiency, all companies are broken.
Of course reserving some funds could meet resistance. One of my clients pointed out that their capex budget is not one pool, but really a bunch of sub-budgets for different groups. A green set-aside would have to draw money from somebody's hard-fought budget. But DuPont only allocated 1% to great effect. So it doesn't necessarily take a giant land grab to make this operational and cultural shift happen.
So when people say you don't have the money to invest in green, show them that you do. The reality is that unless you're in liquidation, you have a capex budget, even if it shrank this year. You're spending money on things all the time; it's simply an issue of where you place your bets.
Take a piece of what you're already spending, point it in the right direction, and you will find enormous green savings to help survive these (still) hard times — and invest in the future.
Andrew Winston is s the co-author of the best-seller Green to Gold and the author of Green Recovery (www.thegreenrecovery.com). He is dedicated to helping companies use environmental strategy to grow and create enduring value for their communities, customers, employees, and shareholders. His earlier career included advising companies on corporate strategy while at Boston Consulting Group and management positions in strategy and marketing at Time Warner and MTV. Today, Andrew advises the world’s biggest companies – including Bank of America, Pepsi, HP, and Boeing – and acts as a practical evangelist for the benefits of going green.
Follow Andrew on Twitter:twitter.com/GreenAdvantage
By Andrew Winston
Contrary to the popular misconception that going green is expensive, in a very large range of cases, environmental initiatives don't raise costs, they lower them — and fast. In operational areas such as facilities (heating, cooling, lighting), fleet, IT, and waste, leading companies continue to find large savings in shockingly simple actions, such as changing lighting or using outside air to cool a data center.
But even for the most head-slappingly obvious changes with super-fast paybacks, companies still need to find the capital to buy the new bulbs, optimize the HVAC system, or add auxiliary power units (APUs) to trucks. And even if one sees these initiatives as investments, not costs (which is the right way to look at it), there will still be competition for dollars. During a recession — heck, at any time — it's normal to struggle to get funds for even worthy projects. So what to do?
A few leading companies have hit on one incredibly simple solution to this problem — set aside funds for green priorities. I don't mean coming up with a new pool of money; just assign a percentage of the existing capital expenditure budget to green priorities.
In 2008, to find hidden gems of savings, DuPont set aside 1% of capital expenditures solely for energy-saving ideas. With $50MM of spending, the company found $50MM of savings per year — a one-year payback that keeps on giving. All projects still met the corporate hurdle rate, so there was no special dispensation besides making the money available for worthy initiatives managers had overlooked. Building products maker Owens Corning goes even further, dedicating 10% of capex to energy projects. This is a tool nearly anyone can use. Set aside the funds for green and you'll unleash a wave of creativity and short paybacks.
So if there are so many quick, high-ROI projects sitting around, why aren't companies jumping on them? Two big reasons. First, energy efficiency just hasn't seemed sexy. Dawn Rittenhouse, DuPont's director of sustainable development, told me, "If business units can invest in growth or energy efficiency projects, it's more glamorous to go after growth." But in tight times, saving money starts to feel a lot more exciting, doesn't it?
The second reason is the classic problem of the urgent versus the important. Most capital expenditures go to fix things that are already broken. But as Frank O'Brien-Bernini, Owens Corning's chief sustainability officer, puts it, "It's really about redefining what 'broken' means." Think about it: a process that wastes energy may not feel broken with oil at $40, or even $80, a barrel. But it may look like a money-eating disaster at $200 a barrel. In essence, when it comes to energy and resource efficiency, all companies are broken.
Of course reserving some funds could meet resistance. One of my clients pointed out that their capex budget is not one pool, but really a bunch of sub-budgets for different groups. A green set-aside would have to draw money from somebody's hard-fought budget. But DuPont only allocated 1% to great effect. So it doesn't necessarily take a giant land grab to make this operational and cultural shift happen.
So when people say you don't have the money to invest in green, show them that you do. The reality is that unless you're in liquidation, you have a capex budget, even if it shrank this year. You're spending money on things all the time; it's simply an issue of where you place your bets.
Take a piece of what you're already spending, point it in the right direction, and you will find enormous green savings to help survive these (still) hard times — and invest in the future.
Andrew Winston is s the co-author of the best-seller Green to Gold and the author of Green Recovery (www.thegreenrecovery.com). He is dedicated to helping companies use environmental strategy to grow and create enduring value for their communities, customers, employees, and shareholders. His earlier career included advising companies on corporate strategy while at Boston Consulting Group and management positions in strategy and marketing at Time Warner and MTV. Today, Andrew advises the world’s biggest companies – including Bank of America, Pepsi, HP, and Boeing – and acts as a practical evangelist for the benefits of going green.
Follow Andrew on Twitter:twitter.com/GreenAdvantage
Wednesday, November 11, 2009
NOVA Chemicals Announces Board of Directors
NOVA Chemicals today announced the membership of its new Board of Directors, including the appointment of Dr. Gerhard Roiss as Chairman of the Board and Mohamed Al Mehairi as Vice Chairman. International Petroleum Investment Corporation (IPIC) and OMV Aktiengesellschaft (OMV) recently received clearance from the European Commission with respect to their plans for potential joint control of NOVA Chemicals. Accordingly, effective November 10, 2009, NOVA Chemicals' Board was expanded to consist of seven directors.
The members of the new NOVA Chemicals Board are:
* Gerhard Roiss, Chairman – Deputy CEO of OMV and Chairman of Borealis AG (Borealis) Supervisory Board
* Mohamed Al Mehairi, Vice Chairman – Director, Investments of IPIC, member of Borealis Supervisory Board
* David C. Davies – Chief Financial Officer (CFO) of OMV, member of Borealis Supervisory Board
* Georg F. Thoma – Shearman Sterling LLP
* Philip J. Brown – Torys LLP
* Mark Garrett – Chief Executive Officer (CEO) of Borealis
* Randy G. Woelfel – CEO Designate of NOVA Chemicals
In addition, NOVA Chemicals confirmed that November 16, 2009 is the effective date for the previously announced appointments of Randy Woelfel as CEO and Todd Karran as CFO and Treasurer.
NOVA Chemicals develops and manufactures chemicals, plastic resins and end-products that make everyday life safer, healthier and easier. Our employees work to ensure health, safety, security and environmental stewardship through our commitment to sustainability and Responsible Care®. NOVA Chemicals is a wholly owned subsidiary of The International Petroleum Investment Company (IPIC) of the Emirate of Abu Dhabi. Learn more at www.novachemicals.com.
The members of the new NOVA Chemicals Board are:
* Gerhard Roiss, Chairman – Deputy CEO of OMV and Chairman of Borealis AG (Borealis) Supervisory Board
* Mohamed Al Mehairi, Vice Chairman – Director, Investments of IPIC, member of Borealis Supervisory Board
* David C. Davies – Chief Financial Officer (CFO) of OMV, member of Borealis Supervisory Board
* Georg F. Thoma – Shearman Sterling LLP
* Philip J. Brown – Torys LLP
* Mark Garrett – Chief Executive Officer (CEO) of Borealis
* Randy G. Woelfel – CEO Designate of NOVA Chemicals
In addition, NOVA Chemicals confirmed that November 16, 2009 is the effective date for the previously announced appointments of Randy Woelfel as CEO and Todd Karran as CFO and Treasurer.
NOVA Chemicals develops and manufactures chemicals, plastic resins and end-products that make everyday life safer, healthier and easier. Our employees work to ensure health, safety, security and environmental stewardship through our commitment to sustainability and Responsible Care®. NOVA Chemicals is a wholly owned subsidiary of The International Petroleum Investment Company (IPIC) of the Emirate of Abu Dhabi. Learn more at www.novachemicals.com.
Tyler Rose New CFO at Kilroy Realty
Real estate investment trust Kilroy Realty Corp. said Tuesday its senior vice president and treasurer, Tyler H. Rose, will be promoted to executive vice president and chief financial officer starting at the end of the year.
The company said Tyler will take over from Richard E. Moran Jr., who will step down after serving in that role since 1997.
Kilroy Realty also announced that Michelle Ngo, senior director of corporate finance, will be promoted to vice president and treasurer. She joined the company in 2006 after holding finance positions in the real estate, private equity and investment banking industries.
Shares of Kilroy Realty fell 28 cents to close at $28.61.
TechniScan Hires New CFO
TechniScan, Inc. a medical device company engaged in the development and commercialization of an automated breast ultrasound imaging system, today announced that Steven K. Passey, CPA, has joined the Company as its new Chief Financial Officer. TechniScan, which recently became a publicly-traded company, conducted an extensive search of qualified candidates and found Mr. Passey's background and qualifications lined up perfectly with the needs of a firm that is now publicly-owned.
"Steve is a fantastic addition to our roster of talented professionals," Chief Executive Officer David C. Robinson commented. "His background with publicly-traded companies, IPOs, budget planning and cost control ensures we will maintain the highest standards as a public company. More importantly, Steve's background will help us secure the additional investment we need to ensure our Svara(TM) automated, 3D ultrasound system is launched properly and is available to help doctors improve breast cancer detection and to ultimately save lives." TechniScan's new CFO was most recently the Vice President, Chief Accounting Officer and Treasurer for Mrs. Fields' Famous Brands (Mrs. Fields and TCBY brands) in Salt Lake City, UT. Prior to that, Mr. Passey was hired to spearhead all SEC filings for Extra Space Storage, another publicly-traded company based in Salt Lake. As Controller of REIT Properties for that $200M revenue company, he played a key role in helping launch 34 newly acquired properties. Previously, Mr. Passey also spent several years as a Senior Manager for public accounting firm Ernst & Young. Mr. Passey received his Bachelor of Science degree in accounting from the University of Utah, and is a certified public accountant.
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