More Good News About Consumer Spending and Confidence

The Consumer Confidence Index followed up its March rebound by picking up 5.6 points in April, finishing the month at 57.9.

Lynn Franco, director of the Consumer Research Center at The Conference Board, which compiles the monthly indicator, noted that the April reading was the highest for the index since September 2008, when it registered 61.4.

“Consumers’ concerns about current business and labor market conditions eased again,” Franco said. “And their outlook regarding business conditions and the labor market was also more positive than last month.”

Reflecting Franco’s observations, both key components of the overall index gained ground this month. The Present Situations Index totaled 28.6, 3.4 points ahead of March’s level; and the Expectations Index rose seven points to 77.4.

Consumers who were surveyed by The Conference Board for the index reported more positive viewpoints of current and future economic conditions, and the current and future jobs picture as well. “Looking ahead, continued job growth will be key in sustaining positive momentum,” Franco said.

Cost Containment Programs For CFOS

Sponsor: Cambridge Consulting Group provides cost containment and risk management services to CFOs at major Fortune 500 Companies. With experience in Corporate Finance and Commercial Real Estate, Cambridge provides specific programs that reduce real estate and operational expenses. For more information please visit their website at www.commercialleasterminations.com

Google Changing Investor Reporting

Google's announcement last week that it is revamping some of its investor-relations processes may well open the way for other companies to streamline their own.A key feature of the revamp: Google will no longer distribute financial news through newswire services, such as Business Wire and PR Newswire, but instead will post it solely on its own investor-relations Website. "We felt it made a lot of sense, given that we're a technology company and that we announce virtually all of our company news on our blogs," says Google spokesperson Jane Penner.

While this type of change has been legally permissible since August 2008, when the Securities and Exchange Commission (in an update to Regulation FD guidance) approved company Websites as acceptable disclosure vehicles under certain circumstances, few companies have made the switch. Reis, a real estate data firm, and online travel company Expedia are among those that have done so, according to the blog IR Web Report.

Now, though, more companies are likely to at least consider releasing financial news via Website only. "This is another example of where Google is on the leading edge of the marketplace, and I think you're going to see more companies adopt similar practices over time," says Michael Littenberg, a partner with Schulte Roth & Zabel.

What qualifies a company's Website as a "recognized channel of distribution" according to the SEC? A number of factors are involved, including whether a company normally posts news to the site, keeps the site current, and makes the news prominent and easily accessible to a broad audience. Site traffic and media attention are also considerations, as is the use of "push" technology, such as RSS feeds, that can alert the public to the presence of a new posting.

See rest of article at www.cfo.com

Sponsor: Cambridge Consulting Group provides Cost Cutting/Risk Management programs for Financial Institutions. They have saved organizations including Ford Credit and Key Corp millions of dollars by reducing their operational costs through Negotiated Lease Buy Outs. For more information please visit their website-www.commercialleaseterminations.com

Double Dip Recession- No Says Citigroup Pandit

Citigroup Inc. Chief Executive Officer Vikram Pandit, who runs the third-biggest U.S. bank, said the economy may rebound without “slipping backward” into another recession.

“There are still some of us who believe there could be a double-dip,” Pandit said today in a speech at a New York conference to discuss the economic impact of new financial regulations. “I think we are likely to avoid slipping backward.”

Citigroup reported a $4.4 billion quarterly profit last week, its first since 2007, as the economic rebound curbed consumer loan losses and bolstered trading profit. The New York- based bank had to get a $45 billion bailout in late 2008 after plunging home prices and borrower defaults led to record losses.

The bank repaid $20 billion of its bailout in December. The rest was converted into a 27 percent U.S. stake, which the government plans to start selling, according to a registration statement filed today.

Pandit, 53, said economic growth may come from “continued support and funding of education and research” and policies making it easier for companies to tap foreign markets.

“The rise of diversified and strong consumer bases around the world will have multinationals and global institutions think about how to capitalize on these new consumer bases,” Pandit said. This will benefit Citigroup, which has operations in more than 100 countries, he said.

New energy policies and investments in infrastructure such as the energy grid are the third and fourth pillars for restoring economic growth, Pandit said. No. 5 was restoring “confidence in financial markets,” he said.

--From Business Week Editors: Rick Green, Gregory Mott

Sponsor: Cambridge Consulting Group provides Cost Cutting/Risk Management programs for Financial Institutions. They have saved organizations including Ford Credit and Key Corp millions of dollars by reducing their operational costs through Negotiated Lease Buy Outs. For more information please visit their website-www.commercialleaseterminations.com

Citigroup Q&A With Business Week

From Business week.com...Citigroup Inc. reported a first-quarter profit Monday that far exceeded most expectations.

Citigroup was able to offset ongoing loan losses with strong trading revenue, similar to some of other big banks that reported results last week. The New York-based bank, among the hardest hit by the credit crisis, earned $4.4 billion, or 15 cents per share. Analysts had been expecting a slight loss.

The bank said loan losses are starting to moderate. However, Citigroup executives remain cautious about saying the economy is fully recovered. On a conference call with analysts, Citigroup's chief financial officer John Gerspach discussed what might trigger the bank releasing loss reserves already on hand to cover bad loans instead of completely covering those costs with new revenue each quarter.

QUESTION: Just wondering at what point and what will drive your consumption of reserves. What will be the drivers of yours -- we started to see some (consumption) from some other big banks? What will drive that for you guys as we look ahead?

ANSWER: "I think you got a pretty good answer in our results. We have been releasing some reserves for several quarters now.

"For the last three quarters, we've actually had small loan-loss reserve releases on our corporate loan book, where we've seen good underlying credit trends and got a sense that the book was in good shape.

For the rest of article please visit-http://www.businessweek.com/ap/financialnews/D9F697400.htm


















Sponsor: Cambridge Consulting Group provides Cost Cutting/Risk Management programs for Financial Institutions. They have saved organizations including Ford Credit and Key Corp millions of dollars by reducing their operational costs through Negotiated Lease Buy Outs. For more information please visit their website-www.commercialleaseterminations.com

Regions First Quarter Results Shows Initial Impact of Cost Cutting Program

Regions Financial Corporation today reported financial results for the quarter ending March 31, 2010. 
 
“During the first quarter, asset quality continued to stabilize and deposit growth remained strong; however, substantial credit costs continued to more than offset the underlying strength of our core business. Despite the strong fundamentals of our business, we are not satisfied with our financial performance and we remain intensely focused on returning the company to profitability,” said Grayson Hall, president and chief executive officer. “In addition to restoring financial performance, we will continue to focus on serving our customers, continue to de-risk our balance sheet and implement best-in-class risk management practices.”


Cost Containment Strategies Successful
 
The Company successfully completed the consolidation of 120 branches during the first quarter with minimal customer impact, which should provide an annual $21 million net cost savings starting in the second quarter. The company continues to aggressively control day-to-day operating costs and seek opportunities to further improve our operating efficiency. Benefits of cost control efforts should become increasingly evident as, over time, recession-related and credit costs return to more normalized levels.

While loan demand remains sluggish, commitment levels remain strong and for the first time in several quarters, declines in commercial line utilization rates have begun to level off. Regions remains a leader in small business lending, ranking third nationally by the Small Business Administration, and will continue to focus on this important line of business. In spite of the Company’s efforts, loans outstanding declined 2.8 percent as compared to last quarter. Regions continues to seek opportunities to lend to its customers in need of credit and anticipates loan growth as the general economy improves.  

   * "Loss of 21 cents per diluted share for the quarter ended March 31, 2010, reflects stabilizing net charge-offs and minimal reserve build. Inflows of non-performing loans declined for third consecutive quarter.

    * Core pre-tax pre-provision net revenue increased $11 million or 2.9% linked quarter

    * Net interest margin improved to 2.77 percent driven by 15 basis point improvement in average deposit cost to 1 percent; net interest margin expected to rise to 3.00 percent by year-end 2010

    * Morgan Keegan net income rises 39 percent linked quarter; solid private client, equity capital markets and trust revenues; reduced operating costs

    * Non-interest expense declined 3 percent, after excluding branch consolidation charges and loss on the early extinguishment of debt

    * Record account and deposit growth continues. Average low-cost deposits increased for the fifth consecutive quarter, growing 6.5 percent linked quarter, up nearly $9.6 billion or 16 percent year-over-year.

    * Loan growth remains challenged but commercial line utilization beginning to stabilize. New and renewed loan commitments remained solid, totaling $11.6 billion for the quarter, but total loans outstanding contracted 2.8 percent.

    * Allowance for credit losses increased to 3.69 percent of loans with $770 million provision for loan losses exceeding net charge-offs by $70 million

    * Tier 1 Capital ratio was an estimated 11.7 percent, while the Tier 1 Common ratio stood at an estimated 7.1 percent. Both ratios were essentially unchanged versus the previous quarter.


For more information please visit their website www.regions.com


Sponsor: Cambridge Consulting Group provides banks and other financial institutions with risk management and cost cutting programs that improve their bottom line. Cutting operational costs is a key strategy for most companies. Other than labor, one of the largest cost areas is leased commercial real estate. There are dramatic savings possible by reducing the amount of leased real estate used by consolidation or elimination of branches or operating groups. In the past long term lease agreements have been an expense that was considered untouchable. Cambridge Consulting has developed a new product/strategy- Negotiated Lease Buy Outs. For more information please visit their website at www.commercialleaseterminations.com

TD Bank Acquires Three Failed Florida Banks

TD Bank said late Friday that it has acquired the banking operations, including all the deposits, of three failed Florida-based banks in a deal assisted by the Federal Deposit Insurance Corp. The deal moves TD from roughly 30 to 100 branches, almost triples its deposits and gives the bank its first Florida presence outside the southeast portion of the state.

TD, a subsidiary of Toronto-based TD Bank Financial Group (NYSE:TD), said it acquired assets and liabilities from Riverside National Bank of Florida of Fort Pierce, Fla., First Federal Bank of North Florida of Palatka, Fla., and AmericanFirst Bank of Clermont, Fla., from the FDIC, effective immediately. In the case of each of the acquired banks, they were closed by their respective chartering authority, and the FDIC was named receiver. The three failed institutions were not affiliated with one another and are expected to tap the FDIC’s deposit insurance fund for $508.3 million.

In the purchase and assumption agreement with the FDIC, TD acquires Riverside-based 58 branches, First Federal’s eight locations and AmericanFirst’s three locations. In addition, TD Bank will gain a total of 80 ATMs from the three banks.

As of Dec. 31, Riverside had total assets of $3.42 billion and total deposits of $2.76 billion; First Federal had total assets of $393.3 million and total deposits of $324.2 million; and AmericanFirst had total assets of $90.5 million and total deposits of $81.9 million. Besides assuming all the deposits, the FDIC said TD will purchase virtually all their assets.

The FDIC said it and TD entered into a loss-share transaction on $2.2 billion of the failed institutions’ assets. Initially, the regulator and TD will equally share in the asset losses. TD said the FDIC will cover 50 percent of loan losses up to the following thresholds and then cover 80 percent in excess of these thresholds: Riverside, $442 million; First Federal, $58 million; AmericanFirst Bank, $18 million.

TD said the deal allows it to advance its growth strategy in Florida with no material earnings or capital impact. TD Bank Financial President and CEO Ed Clark said the deal allows TD to accelerate its organic growth in Florida by five years.

TD Bank will pick up 69 branches in the transaction and $2.1 billion in deposits. On June 30, TD Bank had 28 offices and $1.19 billion in deposits in South Florida and it has opened three locations since then.

The deal gives TD its first Florida branches outside Miami-Dade, Broward and Palm Beach counties. TD predecessor Commerce Bank first entered Florida in 2005 when it bought Palm Beach County Bank and had grown exclusively in the southeast portion of the state. TD bought Commerce in 2008.

Riverside, one of the 20 largest banks in Florida by deposits, has eight branches and $961 million in deposits in St. Lucie County, 14 branches and $541 million in deposits in Brevard County and 14 branches with $420 million in assets in Volusia County. It also has locations in Highlands, Indian River, Lake, Martin, Okeechobee, Palm Beach and Polk counties.

First Federal’s locations are in Putnam and St Johns counties. AmericanFirst has a branch each in Lake, Orange and Osceola counties.

Read more: TD Bank buys Riverside, First Federal, AmericanFirst - Philadelphia Business Journal:

New PriceWaterhouse Coopers Survey Addresses Cost Containment

While companies are growing more optimistic about their prospects, they are unlikely to unleash significant new capital spending any time soon, a new survey finds.

Of nearly 1,200 respondents to PricewaterhouseCooper's 13th annual global CEO Survey, 31 percent said they were very confident about their companies' prospects for revenue growth over the next 12 months, up from 21 percent last year. But they remain hesitant to spend their cash.

Of 100 US CEOs surveyed, 98 percent implemented a cost-reduction initiative in 2009, and 65 percent expect to do so again in 2010.The survey also finds companies aren't rushing to restore spending; they are keen to sustain their efforts and improve their margins with smaller but more productive workforces. Sixty nine percent said their companies' experienced a decrease in headcount, a trend 28 percent expect to continue this year. Over the next three years, 75 percent of CEOs will increase focus on initiatives to realize cost efficiencies, while less than half are planning to increase investments in areas like R&D and new product innovation (48 percent), and advertising and brand building (40 percent).


To read the entire article at CFOZONE please visit-http://www.cfozone.com/index.php?option=com_myblog&show=Companies-still-risk-averse-despite-improved-revenue-outlook.html&Itemid=713&newsletter=cfozone_daily

Sponsor: Cambridge Consulting Group.One of the largest fixed costs for a company is commercial real estate. Many corporations have downsized and now find themselves with real estate space they no longer need but still under a long term lease agreement with a landlord. Fortune 500 companies have been using a new strategy, Negotiated Lease Buy Out to free capital and improve their bottom line. Cambridge Consulting Group reviews your situation with your landlord and creates a new Buy-Out agreement that frees you from long term office space costs. For more information please visit www.commercialleaseterminations.com

Subleasing Office Space Not Always the Answer

By Patrick Braswell
MOS Atlanta

Over the last several days, I’ve learned a very valuable lesson with one of my clients.  We found great office space  for sublease that met every one of their needs at a discounted rental rate.  Every company’s dream, right?  Right.  However, there was one thing that was overlooked, and I fear when dealing with subleases gets overlooked a great deal.  What happens if the sub-landlord doesn’t move out or deliver the space in time for the sub-tenant to move in?  Think that won’t happen, think that the sub-landlord obviously wants to get the sub-tenant into the space and paying rent as soon as possible, think again.

I am not an attorney so I am not going to even try to give legal advice.  My goal here is to make you aware that when subleasing office space, make sure to set up penalties in the sublease document for the chance that the sub-landlord doesn’t deliver their office space on the agreed upon move-in date.  There could be a whole host of reasons for why it happens.  That isn’t important.  What’s important is to make sure if it is does happen, there are pre-determined penalties in place.  Don’t leave it up to chance and get it in writing.

In my case with my client, everything worked out and they moved into the office space on schedule.  But, the idea of the sub-landlord not being out in time, with no penalties already in the sublease document, got me thinking about all the times other subleases documents have been signed with no clear understanding of the penalties.  Save yourself the headaches and do it.


For more information please visit www.mosatlanta.com



Sponsor: Cambridge Consulting Group assists CFOs with their commercial real estate and corporate finance issues. Cambridge group is one of the few companies that provides Negotiated Lease Buy-Out strategies. Fortune 500 companies have saved millions of dollars using this strategy. Rather than subleasing your unused commercial real estate space you can reduce or eliminate your lease obligations. For more information please visit www.commercialleaseterminations.com

A CFO Talks About Greening The Company

CFOs haven't been at the center of the corporate sustainability movement. After all, people usually think of us as bean counters, not social activists. But in my job as CFO, sustainability is a strategic imperative. And it should be for your CFO, too. But it's up to you, as someone who cares about sustainability, to convince your chief financial leader that sustainability matters.

In the wake of the global recession, the CFO's role has shifted from fancy accountant to co-driver of corporate strategy. We can't just worry about quarterly results; we must focus on long-term growth strategies, which are inseparable from economic, social and environmental issues. A CFO's job is about using resources wisely and ensuring that an enterprise can thrive for decades to come. That makes sustainability part of a CFO's remit.

My own journey at UPS helped me to prioritize sustainability. Early in my 33-year career, I was an industrial engineer. I did time-and-motion studies to determine the best ways for our people to perform certain tasks. By cutting a step here and a movement there, we could save time and money. Today, those kinds of processes save gallons of fuel and reduce carbon emissions, too. So there's no question that lean is green, both in terms of the environment and in dollars.

To help your CFO see how sustainability matters to your business, you must use terms he or she appreciates, such as risk mitigation, cost savings, and productivity gains. To get the conversation going, here are five things you can say to your CFO about how sustainability pays off, and some success stories you can share from one CFO to another.

1. Being sustainable reduces costs and improves efficiency. Environmentalism is rooted in using resources wisely. In the logistics industry, there's no getting around it: It takes fossil fuels to transport goods. Fortunately, when we reduce fuel usage, we reduce costs, and in the process, we cut carbon emissions (which by the way helps any other company that ships goods via UPS).

We also reduce miles and fuel through more efficiency delivery routes. The routing is managed by our Package Flow Technology (PFT). PFT includes process enhancements like shortening delivery routes, minimizing engine idling times and combining multiple deliveries into a single stop. It also helps us minimize left turns. That's music to an engineer's ears. But here's where it translates into green – PFT has shaved 100 million miles from our delivery routes since 2003. It has also reduced fuel use by 10 million gallons and carbon emissions by more than 100,000 metric tonnes.

2. Focusing on sustainability mitigates risks. A big part of a CFO's job is to assess and reduce long-term risks.  Looking through a sustainability lens presents a new way of looking at forecasts and risks.

At UPS, we identify potential risks and prepare strategies to deal with them. One of those scenarios involves oil reaching $200 a barrel, which would be a significant challenge for us. While our issue is fuel, your company's issue might be water scarcity, climate change or activist pressure. When your CFO understands that sustainability affects an organization's long-term viability, he or she can prepare for these risks.

Another area of risk involves shareholder preferences. Socially responsible investing is growing faster than overall investments: 18 percent between 2005 and 2007, compared to 3 percent for all investments, according to Ceres. Wise investors look for companies with responsible business practices, a promising future and a long-term perspective that reduces risks.

Finally, there are regulatory risks. With the emergence of climate-change legislation, smart companies are figuring out how to report and reduce their environmental impact. Those that don't will be at financial risk. For example, in London, companies are being taxed for their electricity bills, a tax that will be returned if you meet carbon reduction targets in the next five years. We had to fork over hundreds of thousands of dollars so far. How much is your bill going to be?

3. Being green creates new competitive and revenue opportunities. CFOs aren't only interested in the cost side of the business. To get their attention, talk about revenue creation.

Please  read full article at -http://www.greenbiz.com/blog/2010/04/13/five-ways-convince-your-cfo-sustainability-pays?

New ABS Rules Hit Nonfinancial Firms, Too

By Vincent Ryan
CFO.com

If your company is an asset securitizer — even just an occasional one that doesn't publicly register its issuances — get ready to spend more money and hours on reporting and compliance. New rules proposed by the Securities and Exchange Commission would require issuers of asset-backed securities (ABS), including those doing privately placed deals, to register transactions and provide loan-level data on terms and underwriting, borrower creditworthiness, and characteristics of the property or collateral securing a loan.


The proposed rules are designed "to improve investor protection and promote more efficient asset-backed markets," the SEC says. (Total ABS issuance rose to $34.2 billion in the first quarter of 2010, up from $15.9 billion in Q1 2009 but multiples lower than the quarterly highs the market hit from 2004 to 2007.) The agency estimates that companies publicly disclosing ABS information for the first time would collectively spend an annual total of 214,791 hours gathering the data and disclosing it to investors. A large bulk of the work would probably be done by outside consultants and software programmers, the SEC suggests.

to read rest of article-http://www.cfo.com/article.cfm/14490506/c_14491274?f=home_todayinfinance

Underfunded Pensions at Auto Companies A Concern

General Motors Corp. may no longer be the world's biggest automaker, but it still operates the country's largest pension fund. The threat to its pension plans has always been an issue, butit took on a new urgency when GM disclosed April 7 that its plans were underfunded by more than $27 billion, with more than half of that being owed to U.S. workers and retirees. Across town, a post- bankrupt Chrysler faces its own pension shortfall. Moreover, a report last week from the Government Accounting Office (GAO) says the pension crisis in the auto industry could create an unprecedented crisis for the federal Pension Benefit Guarantee Corp., a government-sponsored organization to backstop company pensions.


When the two automakers emerged from bankruptcy reorganization the pension problems were seen as a more distant issue, and presumably one that would be eased by economic growth. But the auto industry is facing a slow recovery, and neither the new GM nor the new Chrysler has produced a profit. Christopher Liddell, GM's new chief financial officer, has stopped short of predicting that GM will be profitable this year, while Chrysler CEO Sergio Marchionne is hoping Chrysler can break even this year. Both GM and Chrysler are also moving to build smaller vehicles, which have traditionally produced smaller profits. The pension funding crisis could begin in 2013, or before either company is fully profitable.

Read more: http://www.time.com/time/business/article/0%2c8599%2c1981958%2c00.html?xid=rss-
Sponsor- Ford Motor Credit saved millions of dollars by reducing thier commercial real estate costs. They hired Cambridge Consulting Group to structure a Negotiated Lease Buy Out strategy. Cambridge Consulting was able to present the commercial real esate landlords with a restuctured agreement that released Ford Motor Credit from long term lease obligations. For moer information on how you can reduce your costs please visit- http://www.commercialleaseterminations.com/

Bank Of America Names New CFO

Bank of America Corp named outsider Charles Noski its next chief financial officer, filling a key position that has been vacant for months, the largest U.S. bank by assets said on Wednesday. Noski, 57, who will become CFO on May 11, most recently was chief financial officer of Northrop Grumman Corp, a defense contractor. He left Northrop in 2005.

Noski was also the chief financial officer of the telecommunications giant AT&T from 1999 to 2002. His appointment is the latest in an ongoing reshuffle of the bank's senior management ranks, begun in January by new Chief Executive Brian Moynihan. Noski's departure also leaves a void on Morgan Stanley's board, where he served as chairman of the company's audit committee -- a key board position. Noski is also chairman of Microsoft's audit committee, and will remain in that post.

BofA's former CFO Joseph Price now heads the bank's consumer, small business and credit card units. The bank's interim CFO, Neil Cotty, will re assume his responsibilities as chief accounting officer. Cotty has served in the post since January, when Moynihan announced an executive management team overhaul that moved Price from the CFO role.

Sponsor- Cambridge Consulting Group provides advanced cost cost cutting strategies to financial institutions including bank of America , Ford Motor Credit and Key Corp. For more information please visit www.commercialleaseterminations.com

Suntrust Bank Considers Selling RidgeWorth Investments

SunTrust Banks Inc said it was in discussions to sell parts of its RidgeWorth Investments unit, a multi-boutique asset management business. SunTrust did not disclose potential bidders in Monday's statement or which bits it might want to sell, but did say any possible sale would not have a significant effect on its financial results.

Anglo-American asset manager Henderson said on Friday it is in talks to buy parts of RidgeWorth, in an effort by Henderson to increase its exposure to American institutional investors. The asset manager did not specify which parts of RidgeWorth it was considering buying. RidgeWorth, which includes eight boutiques spanning fixed-income, domestic and international equity management, has $63.1 billion in assets, according to SunTrust.

"SunTrust may be motivated to make asset sales because it is the biggest bank left that has not redeemed its TARP preferred issues," Rochdale Securities analyst Richard Bove wrote to clients. SunTrust received $4.9 billion from the U.S. government's Troubled Asset Relief Program. The bank would likely have to sell $1 billion in stock and raise another $3.9 billion through asset sales and borrowings, Bove wrote, adding that the bank has not discussed its plans.

Financial institutions looking to reduce their costs and increase profits should look at unlocking the value they have in the real estate they lease and own for their own operations. Unused real estate space can cost companies millions of dollars with no productivity or bottom line returns. One strategy to consider is hiring a company with the financial and real estate expertise to work with your building owners to release you from lease obligations. For more information please visit the website- www.commercialleaseterminations.com

H&R Block Start Search for New CFO

Tax preparer H&R Block Inc. said Monday it has begun a search for a replacement for Chief Financial Officer Becky Shulman, who is scheduled to step down on April 30.The company has hired Crist/Kolder Associates to lead the search.

Spokeswoman Jennifer Love said that while Shulman helped the company sell off noncore businesses and shore up its balance sheet, H&R Block was looking to expand the CFO role to include operational leadership.
Corporate controller Jeff Brown will become interim CFO until a replacement can be found.

Shulman joined the company in 2001 and is credited with improving the company's financial health, the company said.

McKinsey Study Discusses Effectiveness of Cost Cutting

During the recent financial crisis many companies turned to aggressive cost containment or cost cutting strategies to improve their bottom line. The fourth quarter profits for many companies had more to do with cost cutting than increasing revenues.For most companies cost cutting was to be a key strategy again in 2010. Many executives were also concerned about the sustainability of the cost reduction programs they had implemented. Would there organization slip back into the spending patterns of old?

The Chicago office of McKinsey Global Survey recently released a very interesting research study, " What worked in cost cutting and what's next," that examined this issue. They found that cost containment remains a very high priority for most companies but respondents to the survey said they are worried about maintaining the cost reductions this year and concerned about cost challenges yet to come. Respondents were also asked about the most significant cost structure risks that their companies would face in 2010 and whether the company is prepared to manage the risks.

Of the 300 companies interviewed for the study, many viewed cost cutting as a key strategic move to improve organizational structure, delivery of better service and operational efficiency. These efforts would lead to long term growth for the companies rather than a short term reaction to lower demand and decreased revenue.

Nearly 75% of executives said that cost cutting remains a top priority and more than 50% have cut costs by at least 10 % since September 2008. Although the majority of these cuts were labor related, executives looked at all areas for cost reductions. For example 48% made cuts in non-labor areas and 20% cut capital assets including facilities and transport assets.

Most of the companies that focused on Capital Assets were trying to reduce variable costs in line with lower demand/volume, institute a company wide program to increase performance, cutting cost as part of normal budgeting, freeing up cash/reduce need for short term external financing or organizational restructuring of some kind.

The larger organization were more likely to adopt across the board cost cutting approaches, while smaller and medium sized businesses used a more targeted approach. Among survey respondents who used this targeted approach to cost cutting- 75% say their company reduced operational expenses. Of these 31% made cost cuts in individual branches, facilities or plants and 75 cut costs across multiple branches, facilities, or plants( cut the same across all locations.)

The majority of the survey respondents felt their cost cutting moves were effective and two thirds said they met the cost reduction targets that were set.
One area of concern for companies is continuing to keep their cost structure at the new lower level. Some companies feel that the cost cutting will not be sustainable over the next 12 to 18 months. The survey results seem to indicate that companies that made structural changes and focused on reducing operational costs were more likely to feel that the cost cutting change will be long lasting. The biggest risk executives reported to maintaining the costs cutting is the continued sluggishness or decline in demand or volume.

Looking forward ,executives plan to address fixed costs( 23% of respondents) as a source of future cost savings. This will require organizational changes that could impact how the companies products are designed, produced and/or delivered.

For more information and complete survey results from the McKinsey Global Survey please visit their website www.mckinsey.com. The survey was developed by Kevin Dolan and Michael Murray in the Chicago office of McKinsey & Company.

Other than labor one of the largest costs an organization faces is the cost of leasing or owning their office and facilities. In this time of declining demand and sales many companies are rethinking their portfolios of products and service offerings and looking at improving operational efficiency. These strategic moves are driven by cost cutting and profit enhancement. At the end of this process a company may find itself with unused office, industrial or distribution real estate.

Unused and un-occupied real estate can quickly become a large drain on cash flow and the bottom line. It is not uncommon for companies to pay millions of dollars for commercial real estate space they do not need or are not using. One solution was to sublease this space. Subleasing creates another set of concerns for the companies and does not help improve the bottom line.

An advanced strategy some large companies are utilizing is a Negotiated Lease Buy-Out. Financial institutions such as Bank Of America, Key Corp and Ford Credit have used this approach very successfully. A Lease Buy-out creates an opportunity for the company to be released from any long term real estate lease commitments. The leading practitioner of this advanced finance tool is Cambridge Consulting.
For more information please visit their website at www.commercialleaseterminations.com

IRS targeting Small and Medium Sized Business?

By David Kocieniewski of The New York Times.

Despite the federal government’s repeated pledges to crack down on big businesses that underpay their taxes, the Internal Revenue Service has decreased in recent years the time it spends auditing the returns of the nation’s largest corporations, according to a new study.And in 2009, the government audited just one in four of the largest corporations, lower than any rate in more than 20 years, according to the analysis, released Sunday by the Transactional Records Access Clearinghouse a nonpartisan research group affiliated with Syracuse University

Researchers said the audit data and other memos, which had both been obtained from the government under the Freedom of Information Act, suggested that a “perverse quota system” within the I.R.S. may be pressuring auditors to focus on small and medium-size businesses and give less scrutiny to the largest corporations — those with $250 million or more in assets.

“The decision to audit the smaller companies does not help the government collect more taxes,” the study concluded. “This is because the data indicate that the larger the business, the larger the dollar amounts of tax underreporting and back taxes on average that they may owe.”

I.R.S. officials, who have for years disputed the methodology used by TRAC, were quick to rebut the study’s findings. Steven T. Miller, the I.R.S. director of enforcement, said the study was skewed because it failed to take into account a surge in hours that I.R.S. agents spent working with businesses before they filed their returns to prevent errors or underpayments.

For the complete article please visit http://www.nytimes.com/2010/04/12/business/12audit.html?ref=business&pagewanted=print

More M&A Activity For Financial Institutions?

Regulatory reform could ultimately fuel merger and acquisition activity in the financial services sector. But, so far, the lack of clarity on the direction it will take has mostly just hindered deal making.

Still, observers expect there will be many opportunities for deals in 2010 due to continued depressed valuations, divestitures in the insurance sector and additional bank failures. There were 702 problem banks on the Federal Deposit Insurance Corp.'s watch list as of Dec. 31, for instance.

One major X-factor is the so-called Volcker rule, currently under consideration in the Senate. The controversial proposal would prompt divestitures from banks, since it requires them to exit the private equity and hedge fund businesses, as well as proprietary trading.

But the passage of such legislation is still being debated, which means it may not even be worth the time and effort to put a pitch book together on a potential deal.

"After one of its slowest years in recent memory, the financial services M&A market remains uncertain over the timing of the economy recovery and impact of proposed regulatory, healthcare and tax reform," according to a new report from PricewaterhouseCoopers.

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