Moving corporate cash to boost returns by a basis point or two could earn a CFO or treasurer a well-deserved dressing-down. But that doesn't mean that finance executives who manage growing pools of idle cash can stand pat with their current investing strategies. Safety and liquidity require constant vigilance — maybe even more so this year.
Big changes on the regulatory front, for example, could affect the returns of money-market funds and create opportunities for corporate investors to earn a bump in yield. And the Fed's market support is slowly ending, which may force companies to reposition money to maintain a government guarantee on cash accounts.
In a climate of historically low interest rates and fresh memories of the financial crisis, however, making any sort of change to your cash-management strategy can seem downright heretical. "My concern is that an investment is safe and liquid," says Katy Murray, finance chief of Taleo, a talent-management software firm that generated $50 million in cash last year. "The interest income off of cash hardly moves the needle anymore."
Money-market funds are Taleo's instrument of choice, and in fact they are one of the few areas of investment that have been largely rehabilitated. Since the collapse of the Reserve Primary Fund in September 2008, money funds have partially regained their reputations as a safe haven for principal preservation.
Money funds suit treasurers who don't want the hassle of doing instrument-level credit research and administration, says Peter Yi, director of money markets in the fixed-income group at Northern Trust. Further, "although you do get competitive yield, you also get liquidity the same day." As of mid-April, however, that competitive yield averaged less than 0.1%.
While liquidity plus a marginal gain brings some comfort, treasurers still need to perform due diligence on money-market funds and monitor them as frequently as weekly, says Matt Clay, head of commingled funds at Clearwater Analytics, maker of a portfolio reporting tool. Clearwater's clients, for example, dig into a fund's asset mix, portfolio duration, and credit exposure to the fund's parent or guarantor.
The Securities and Exchange Commission's new 2a-7 rules could help here. Starting October 7, money-market funds will have to disclose portfolio holdings on their Websites. They will also have to file a form on Edgar that gives the market-based values of each security and the entire fund.
Investors are pulling out of money-market funds en masse.
That will be useful, because there is still a big difference in risk across the money-fund universe, says Lance Pan, director of investment research at Capital Advisors Group. "In theory, all of these funds would have been scrubbed and scrubbed again," Pan says. "But we see big disparities." Some funds have reduced the weighted average life of their investments to 12 days (the maximum allowed is 120), for example, and others are overweighted, perhaps unadvisedly, in things like municipal securities and repurchase agreements.
Ken Grogan, manager of treasury services at Wakefern Food Corp., a cooperative of companies that own and operate ShopRite supermarkets, says Wakefern's money-market investments are highly diversified, both among fund types and fund families. "Look at what happened with the Reserve Primary Fund," Grogan notes. "When the Primary Fund broke the buck [dropped below $1 per share], there was a run on the Reserve U.S. Government Fund and it became illiquid."
To read rest of article-http://www.cfo.com/article.cfm/14493229/c_14493389?f=magazine_alsoinside
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.ccgiweb.com
Thursday, May 27, 2010
Costco Earning Rise by 46%- Are Consumers Back Shopping?
Costco Wholesale Corp.'s (COST) fiscal third-quarter earnings rose by nearly half as the nation's largest wholesale-style retailer saw increased demand for discretionary products and strong international sales.
Costco's comparable-store sales rose 10%, reflecting growth rates of 6% in the U.S. and 26% internationally. Excluding the impact of gasoline sales and a stronger dollar, quarterly same-store sales would have risen 4%, the Issaquah, Wash.-based retailer said.
Consumers in the U.S. purchased deli, frozen and fresh foods and other consumables, but they also spent beyond basics for discretionary merchandise such as small appliances and housewares. International markets, about a quarter of Costco's overall sales, continued to outpace demand in the U.S. as the company expands in markets such as Taiwan and Australia.
There was concern coming into the report that Costco wouldn't fare well, given its recent run of poorer-than-expected performances. But analysts said the retailer gained from a resurgence of buying by consumers who, while still cautious, are more willing to buy discretionary items. Costco benefited from not having to pull down prices in order to book sales during the quarter, and also planned its merchandise mix well, analysts said. Total inventory grew only 5.1% from a year ago, while revenue increased 12.3%.
For the quarter ended May 9, Costco posted a profit of $306 million, or 68 cents a share, up from $210 million, or 48 cents a share, a year earlier. Total revenue increased to $17.78 billion. Analysts polled by Thomson Reuters most recently estimated earnings of 66 cents and $17.6 billion in revenue.
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.ccgiweb.com
Costco's comparable-store sales rose 10%, reflecting growth rates of 6% in the U.S. and 26% internationally. Excluding the impact of gasoline sales and a stronger dollar, quarterly same-store sales would have risen 4%, the Issaquah, Wash.-based retailer said.
Consumers in the U.S. purchased deli, frozen and fresh foods and other consumables, but they also spent beyond basics for discretionary merchandise such as small appliances and housewares. International markets, about a quarter of Costco's overall sales, continued to outpace demand in the U.S. as the company expands in markets such as Taiwan and Australia.
There was concern coming into the report that Costco wouldn't fare well, given its recent run of poorer-than-expected performances. But analysts said the retailer gained from a resurgence of buying by consumers who, while still cautious, are more willing to buy discretionary items. Costco benefited from not having to pull down prices in order to book sales during the quarter, and also planned its merchandise mix well, analysts said. Total inventory grew only 5.1% from a year ago, while revenue increased 12.3%.
For the quarter ended May 9, Costco posted a profit of $306 million, or 68 cents a share, up from $210 million, or 48 cents a share, a year earlier. Total revenue increased to $17.78 billion. Analysts polled by Thomson Reuters most recently estimated earnings of 66 cents and $17.6 billion in revenue.
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.ccgiweb.com
Two of the Top 5 Banks On Forbes List Are From Kansas
As reported in USA Today
KANSAS CITY, Mo. — On a shelf near his computer monitors, UMB Financial CEO J. Mariner Kemper keeps a small bottle of amber cologne. It smells horrible, honestly, but that doesn't matter. He rarely opens it.
The cologne was made by a customer in the 1950s, who took a substantial loan to start a line of men's scents. He quickly failed, and the bank's collateral included a warehouse full of the worthless bottles. The bank, then run by Kemper's grandfather, gave them out as Christmas presents.
The bottle is a reminder to act conservatively, Kemper says."My father always said you should row close to shore," says Kemper, 37. "I've taken that to mean in everything we do, we need to manage the risks. ... Never do something that could take the whole business down."
Sticking to its conservative approach earned Kansas City, Mo.-based UMB the No. 2 spot, behind Bank of Hawaii, on Forbes magazine's rating at the end of 2009 of the 100 largest U.S. banks from best to worst.
Cross-state rival Commerce Bank, with headquarters in St. Louis and Kansas City, followed a similar strategy, landing itself at No. 3 on the Forbes list."There's something in the water here," he says.It also could be the genes. Commerce's CEO is Kemper's cousin, David Kemper.
For Complete article please visit -http://www.usatoday.com/money/industries/banking/2010-05-27-kcbanks27_CV_N.htm
Their great-grandfather, W.T. Kemper, had stakes in several banks: Two, through various name changes, became today's UMB and Commerce.
While other banks in the past decade chased profits in subprime mortgages and financial instruments whose risks most people, including the bankers, did not understand, UMB, a regional bank with operations in seven states, and Commerce, which operates in five states, made relatively conservative loans and cautiously managed customers' money.
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.ccgiweb.com
KANSAS CITY, Mo. — On a shelf near his computer monitors, UMB Financial CEO J. Mariner Kemper keeps a small bottle of amber cologne. It smells horrible, honestly, but that doesn't matter. He rarely opens it.
The cologne was made by a customer in the 1950s, who took a substantial loan to start a line of men's scents. He quickly failed, and the bank's collateral included a warehouse full of the worthless bottles. The bank, then run by Kemper's grandfather, gave them out as Christmas presents.
The bottle is a reminder to act conservatively, Kemper says."My father always said you should row close to shore," says Kemper, 37. "I've taken that to mean in everything we do, we need to manage the risks. ... Never do something that could take the whole business down."
Sticking to its conservative approach earned Kansas City, Mo.-based UMB the No. 2 spot, behind Bank of Hawaii, on Forbes magazine's rating at the end of 2009 of the 100 largest U.S. banks from best to worst.
Cross-state rival Commerce Bank, with headquarters in St. Louis and Kansas City, followed a similar strategy, landing itself at No. 3 on the Forbes list."There's something in the water here," he says.It also could be the genes. Commerce's CEO is Kemper's cousin, David Kemper.
For Complete article please visit -http://www.usatoday.com/money/industries/banking/2010-05-27-kcbanks27_CV_N.htm
Their great-grandfather, W.T. Kemper, had stakes in several banks: Two, through various name changes, became today's UMB and Commerce.
While other banks in the past decade chased profits in subprime mortgages and financial instruments whose risks most people, including the bankers, did not understand, UMB, a regional bank with operations in seven states, and Commerce, which operates in five states, made relatively conservative loans and cautiously managed customers' money.
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.ccgiweb.com
Wednesday, May 26, 2010
Harvard Business Review- M&A Complexity
Have you ever worked for a company that's acquired another, or that's been acquired? Given the worldwide volume of M&A activity, most managers would answer "yes" to that question. In 2009 alone, despite the recession and the credit crunch, 5,800 deals were announced, worth $2.3 trillion — and that was the lowest volume of M&A activity since 2004! Volume in 2010 is already significantly higher, with predictions that by the end of the year it will rise over 30%. Just in the last few weeks deals were announced by United Airlines (merging with Continental); GS Capital (buying Michael Foods); Abbott Labs (buying Piramal Healthcare); and dozens of others. In other words, no matter what the state of the economy, companies continue to merge and acquire as a pathway to growth and (hopefully) increased shareholder value.
One of the keys to creating value from an acquisition is to integrate the two companies in a way that makes it easy for people to do business both internally and with customers. But making that happen is easier said than done. Studies by various consulting firms and universities suggest that only 30% of completed M&A transactions actually pay off as expected — and one of the reasons is that too often the integration process creates complexity instead of simplicity.
http://blogs.hbr.org/ashkenas/2010/05/are-your-acquisitions-creating.html
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.ccgiweb.com
One of the keys to creating value from an acquisition is to integrate the two companies in a way that makes it easy for people to do business both internally and with customers. But making that happen is easier said than done. Studies by various consulting firms and universities suggest that only 30% of completed M&A transactions actually pay off as expected — and one of the reasons is that too often the integration process creates complexity instead of simplicity.
http://blogs.hbr.org/ashkenas/2010/05/are-your-acquisitions-creating.html
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.ccgiweb.com
Real Estate Funds Returning Money to Investors
As reported in the Wall Street Journal
"Some real-estate funds, which raised billions of dollars hoping to pounce on bargain properties, are returning money to investors after finding slim pickings, as many banks avoid dumping property by extending and restructuring loans.
A slew of private-equity funds, including ones run by Morgan Stanley, Rockpoint Group LLC and Chicago developer John Buck's firm, have taken the unusual step of allowing investors to exit their funding commitments when the funds' investment period expired. A total of 19 private-equity real-estate funds have either returned or plan to return more than $6 billion of capital to investors, said Real Estate Alert,read rest of article at www.wsjonline.com
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.ccgiweb.com
"Some real-estate funds, which raised billions of dollars hoping to pounce on bargain properties, are returning money to investors after finding slim pickings, as many banks avoid dumping property by extending and restructuring loans.
A slew of private-equity funds, including ones run by Morgan Stanley, Rockpoint Group LLC and Chicago developer John Buck's firm, have taken the unusual step of allowing investors to exit their funding commitments when the funds' investment period expired. A total of 19 private-equity real-estate funds have either returned or plan to return more than $6 billion of capital to investors, said Real Estate Alert,read rest of article at www.wsjonline.com
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.ccgiweb.com
IASB Chairman Outlines Approach for Reconciling IASB and FASB
International Accounting Standards Board Chairman Sir David Tweedie on Tuesday outlined a possible approach for reconciling the divergent IASB and FASB models for financial instruments accounting. With FASB’s comprehensive exposure draft on financial instruments expected any day, Tweedie said during a JofA exclusive interview at the AICPA Council meeting in San Diego that public comments on the boards’ proposals will play a key role in getting their two approaches closer together.
Speaking later to the AICPA Governing Council, Tweedie thanked the AICPA for its longstanding support of the IASB even before international standards were popular. To understand Tweedie’s approach to fixing the financial instruments problem requires some background on where the standards setters diverged. As a result of the subprime mortgage collapse, accounting for loans and securities derived from loans was widely criticized. When the financial crisis started in 2008, this project was already on the active agendas of both standard setters, but the crisis put enormous political pressure on the IASB and FASB to improve their standards as soon as possible.
In a move that was not followed by FASB, the IASB split its project to replace IAS 39, Financial Instruments: Recognition and Measurement, into three parts to deal separately with classification and measurement; impairment; and hedging. FASB decided to deal with all three aspects of financial instruments in a single project and plans to issue its comprehensive exposure draft by the end of this month. Despite intense joint deliberations, FASB and the IASB were unable to agree on a common approach for classification and measurement. The IASB published its approach on Nov. 12, 2009, with the release of IFRS 9, Financial Instruments. IFRS 9 may be adopted early but is not effective until Jan. 1, 2013.
Under what is expected to be the proposed FASB model:
Under the IASB model (IFRS 9):
To read the complete coverage please visit http://www.journalofaccountancy.com/Web/20102960.htm
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.ccgiweb.com
Speaking later to the AICPA Governing Council, Tweedie thanked the AICPA for its longstanding support of the IASB even before international standards were popular. To understand Tweedie’s approach to fixing the financial instruments problem requires some background on where the standards setters diverged. As a result of the subprime mortgage collapse, accounting for loans and securities derived from loans was widely criticized. When the financial crisis started in 2008, this project was already on the active agendas of both standard setters, but the crisis put enormous political pressure on the IASB and FASB to improve their standards as soon as possible.
In a move that was not followed by FASB, the IASB split its project to replace IAS 39, Financial Instruments: Recognition and Measurement, into three parts to deal separately with classification and measurement; impairment; and hedging. FASB decided to deal with all three aspects of financial instruments in a single project and plans to issue its comprehensive exposure draft by the end of this month. Despite intense joint deliberations, FASB and the IASB were unable to agree on a common approach for classification and measurement. The IASB published its approach on Nov. 12, 2009, with the release of IFRS 9, Financial Instruments. IFRS 9 may be adopted early but is not effective until Jan. 1, 2013.
Under what is expected to be the proposed FASB model:
- Most instruments would be measured on the statement of financial position at fair value with changes in fair value reflected in net income, or net income and other comprehensive income;
- A limited amortized cost option would be available for financial liabilities; and
- No reclassification would be permitted between categories.
Under the IASB model (IFRS 9):
- The scope of the standard is limited to assets only;
- Amortized cost is used when it matches the entity’s business model and cash flow characteristics of the asset;
- Fair value is used for equity instruments, most derivatives and some hybrid instruments; and
- Bifurcation of embedded derivatives is not permitted.
To read the complete coverage please visit http://www.journalofaccountancy.com/Web/20102960.htm
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.ccgiweb.com
Tuesday, May 25, 2010
New CFO At Avery Dennison
Avery Dennison Corporation (NYSE:AVY) today announced the promotion of Mitchell R. Butier to senior vice president and chief financial officer, effective June 1.
Butier has been the Company's corporate vice president, global finance, and chief accounting officer since March, 2007. He succeeds Daniel R. O'Bryant, who has been elected executive vice president, business development, in which role he will contribute to the identification and implementation of growth opportunities.
Vice President and Controller Lori J. Bondar will succeed Butier as the Company's chief accounting officer.
"Mitch is a seasoned finance executive and a strong leader, and the Board of Directors and I are delighted to welcome him to the CFO role," said Dean A.
Scarborough, Avery Dennison chairman, president and CEO. "He has served in senior finance roles in all of our major businesses and in the United States and Europe, and is already a member of the Company's Corporate Leadership Team. His promotion is the logical next step in our succession plans.
"Consistent with those plans, Dan is returning to operations, where he will continue to make significant contributions to Avery Dennison's profitable growth," Scarborough said. "He is a great strategic executive and an invaluable asset to the Company." Butier joined Avery Dennison in 2000 from PricewaterhouseCoopers. Prior to 2007 he served in finance leadership roles in the Company's Roll Materials, Retail Information Services and Office Products businesses, and in general management positions in Retail Information Services. He earned a B.S.A. at Loyola Marymount University.
O'Bryant's 20-year career with Avery Dennison includes senior operations and finance roles in its Roll Materials and Specialty Tape businesses, including four years in operating leadership roles at Fasson Roll North America. He was elected senior vice president and chief financial officer of Avery Dennison in January, 2001, and executive vice president and chief financial officer in 2005.
Lori Bondar joined Avery Dennison in April, 2008 as vice president and controller. Her 25-year career includes executive positions in finance, risk management and strategic planning at public companies.
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.ccgiweb.com
Butier has been the Company's corporate vice president, global finance, and chief accounting officer since March, 2007. He succeeds Daniel R. O'Bryant, who has been elected executive vice president, business development, in which role he will contribute to the identification and implementation of growth opportunities.
Vice President and Controller Lori J. Bondar will succeed Butier as the Company's chief accounting officer.
"Mitch is a seasoned finance executive and a strong leader, and the Board of Directors and I are delighted to welcome him to the CFO role," said Dean A.
Scarborough, Avery Dennison chairman, president and CEO. "He has served in senior finance roles in all of our major businesses and in the United States and Europe, and is already a member of the Company's Corporate Leadership Team. His promotion is the logical next step in our succession plans.
"Consistent with those plans, Dan is returning to operations, where he will continue to make significant contributions to Avery Dennison's profitable growth," Scarborough said. "He is a great strategic executive and an invaluable asset to the Company." Butier joined Avery Dennison in 2000 from PricewaterhouseCoopers. Prior to 2007 he served in finance leadership roles in the Company's Roll Materials, Retail Information Services and Office Products businesses, and in general management positions in Retail Information Services. He earned a B.S.A. at Loyola Marymount University.
O'Bryant's 20-year career with Avery Dennison includes senior operations and finance roles in its Roll Materials and Specialty Tape businesses, including four years in operating leadership roles at Fasson Roll North America. He was elected senior vice president and chief financial officer of Avery Dennison in January, 2001, and executive vice president and chief financial officer in 2005.
Lori Bondar joined Avery Dennison in April, 2008 as vice president and controller. Her 25-year career includes executive positions in finance, risk management and strategic planning at public companies.
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.ccgiweb.com
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