Aetna today announced that it expects to incur a fourth-quarter 2009 charge of approximately $60 million to $65 million, after tax.1 This charge is due to the previously announced and completed reduction of approximately 625 positions and real estate consolidation that together are expected to result in a charge of approximately $40 million, after tax, and a similarly sized workforce reduction to be completed by the end of the first quarter of 2010 that is expected to result in a charge of approximately $20 million to $25 million, after tax.
These actions relate to Aetna’s previously announced plan to reduce its workforce based upon the company’s membership outlook for 2010 and in preparation for the impact that health care reform and regulatory changes may have on Aetna’s business. Once the company completes the additional job reductions in the first quarter of 2010, Aetna will have approximately 34,300 employees. Employees affected by the first quarter 2010 job reductions will be notified at a future date to be determined. Eligible employees will receive severance benefits based on length of service as well as outplacement and other support programs. The company is not exiting any markets as a result of this announcement.
1 As Aetna believes this charge neither relates to the ordinary course of its business nor reflects underlying business performance, the company will reflect the charge as an “other item” and exclude it from 2009 operating earnings
Companies can save millions of dollars by managing their commercial real estate leases. Subleasing unused space is not the best solution and does not create a more positive cash position. Cambridge Consulting Group is an advocate for CFOs looking for creative real estate, financial, legal and tax advice. To learn how they are helping Fortune 500 companies please visit their website www.ccgiweb.com
Wednesday, December 30, 2009
Georgia Tech Study Shows Industry Sectors With Improving Cash Flow
Free cash margin, a measure of cash-flow performance, improved for 11 of 20 industry sectors during the 12 months ended in September, according to a new report from the Georgia Tech Financial Analysis Lab. The authors of the report, which was released last week, say the improvement reflects an upward trend that began in the first 3 months of the year.
Collectively, free cash margin for the 20 industries reached 5.36% for the period. That is the highest level recorded by Georgia Tech researchers since they began tracking the metric in March 2000 (see chart at the end of this article). The previous high was 5.14%, reached during June 2004.
But the improvement stemmed primarily from reductions in capital spending, says the report. Indeed, measured as a percentage of revenue, capital spending for the latest reporting period was lower than it had been for any other period since March 2000 (see chart at the end of this article). Capital spending at nonfinancial companies dropped to 3.02% for the 12 months ended in September. By comparison, the metric never dipped below 4.68% during the 2001 recession.
Ultimately, when capital spending does rise again, free cash margin could fall unless other factors compensate, such as reductions in taxes paid, better inventory turns, and more efficient collection of receivables.
Free cash margin is a cash-flow profit margin, derived by dividing free cash flow by revenue. In practical terms, the metric measures what percentage of revenue is left for shareholders in the form of free and discretionary cash flow. The Georgia Tech lab monitors the free cash margin (and its drivers, such as inventory, taxes, operating profit, and cash flow) for 3,704 nonfinancial companies with market caps greater than $50 million.
"What is especially remarkable about the improvement in free cash margin is that it is coming despite a continuing weakness in revenues," says Georgia Tech accounting professor Charles Mulford, director of the lab and co-author of the report. Normally, profit margins, including free cash margins, should decline along with revenue. Mulford says median revenue for the sample companies peaked at $751.1 million for the 12-month period ended in September 2008 and have been declining ever since. Median revenue for the 12 months ended in September 2009 was $528.4 million, a 29.7% decline from a year ago.
"Firms have been quite adept at wringing as much cash flow from operations as possible," says the report. The 11 industry sectors that improved their free cash margins included materials, capital goods, automobiles and components, consumer durables and apparel, retailing, household and personal products, and food, beverage, and tobacco. Eight industries, including energy, transportation, software and services, and utilities, had stable free cash margins, while one industry — pharmaceuticals, biotechnology, and life sciences — had a declining free cash margin.
The report makes special note of several "standout" sectors and companies regarding changes to their free cash margins. For instance, the automobiles and components industry sector improved its free cash margin to 2.94% for the 12-month period ended in September 2009, up 2.17% from a year ago. In particular, Ford Motor Co.'s free cash margin improved significantly, jumping to 5.61% from 0.27% in September 2008, even though its capital spending rose from 4.17% to 4.61% during the same period.
Contributing to Ford's improved free cash margin was a reduction in the company's cash cycle, in which the automaker dropped its inventory days to 21.19 in the third quarter, compared with 27.44 a year earlier. (Inventory days are the average number of days goods remain in inventory before being sold.) Rest of Article at CFO.com
Collectively, free cash margin for the 20 industries reached 5.36% for the period. That is the highest level recorded by Georgia Tech researchers since they began tracking the metric in March 2000 (see chart at the end of this article). The previous high was 5.14%, reached during June 2004.
But the improvement stemmed primarily from reductions in capital spending, says the report. Indeed, measured as a percentage of revenue, capital spending for the latest reporting period was lower than it had been for any other period since March 2000 (see chart at the end of this article). Capital spending at nonfinancial companies dropped to 3.02% for the 12 months ended in September. By comparison, the metric never dipped below 4.68% during the 2001 recession.
Ultimately, when capital spending does rise again, free cash margin could fall unless other factors compensate, such as reductions in taxes paid, better inventory turns, and more efficient collection of receivables.
Free cash margin is a cash-flow profit margin, derived by dividing free cash flow by revenue. In practical terms, the metric measures what percentage of revenue is left for shareholders in the form of free and discretionary cash flow. The Georgia Tech lab monitors the free cash margin (and its drivers, such as inventory, taxes, operating profit, and cash flow) for 3,704 nonfinancial companies with market caps greater than $50 million.
"What is especially remarkable about the improvement in free cash margin is that it is coming despite a continuing weakness in revenues," says Georgia Tech accounting professor Charles Mulford, director of the lab and co-author of the report. Normally, profit margins, including free cash margins, should decline along with revenue. Mulford says median revenue for the sample companies peaked at $751.1 million for the 12-month period ended in September 2008 and have been declining ever since. Median revenue for the 12 months ended in September 2009 was $528.4 million, a 29.7% decline from a year ago.
"Firms have been quite adept at wringing as much cash flow from operations as possible," says the report. The 11 industry sectors that improved their free cash margins included materials, capital goods, automobiles and components, consumer durables and apparel, retailing, household and personal products, and food, beverage, and tobacco. Eight industries, including energy, transportation, software and services, and utilities, had stable free cash margins, while one industry — pharmaceuticals, biotechnology, and life sciences — had a declining free cash margin.
The report makes special note of several "standout" sectors and companies regarding changes to their free cash margins. For instance, the automobiles and components industry sector improved its free cash margin to 2.94% for the 12-month period ended in September 2009, up 2.17% from a year ago. In particular, Ford Motor Co.'s free cash margin improved significantly, jumping to 5.61% from 0.27% in September 2008, even though its capital spending rose from 4.17% to 4.61% during the same period.
Contributing to Ford's improved free cash margin was a reduction in the company's cash cycle, in which the automaker dropped its inventory days to 21.19 in the third quarter, compared with 27.44 a year earlier. (Inventory days are the average number of days goods remain in inventory before being sold.) Rest of Article at CFO.com
Tuesday, December 29, 2009
Inventory Location Not Basis for Lease Termination
Facts: After signing a lease and moving into its new space, a tenant was notified via inspection that its sprinkler system violated several fire code provisions and that it was storing merchandise too close to the sprinkler riser. The tenant asked the owner to correct the sprinkler system deficiencies. The owner responded by giving the tenant a notice stating that it would terminate the lease if the tenant did not move the items away from the sprinkler.
After a second inspection revealed the same problems, the owner served a written notice to the tenant that it had to vacate based on its failure to maintain a safe storeroom. The owner then sued to have the tenant removed. The trial court ruled in favor of the tenant, and the owner appealed.
Decision: The appeals court upheld the trial court's decision.
Reasoning: The appeals court found that the lease required the owner to comply with the fire codes and provided a right to terminate the tenant's lease for only nonpayment of rent. Accordingly, the location of inventory did not constitute a basis for termination of the lease.
Mila Investments, Ltd. v. Family Dollar Stores of Ohio, January 2009
Expert Commentary: Prohibit Safety Violations with Lease Clause
Marie A. Moore, a Louisiana real estate attorney, says that, frequently, courts are unwilling to permit an owner to terminate a lease based on a default that the court views as “technical,” such as in this case. She notes that it appears that this lease made it easy for the court to avoid termination because first, the owner assumed the obligation of complying with fire codes, and second, the lease permitted termination only for nonpayment of rent. Instead, Moore says, the lease should have contained a clear provision stating that if the tenant is not operating in accordance with the law or is causing a violation of fire codes or insurance requirements, the tenant will be in default, and the owner has the right to terminate.
To avoid the unfavorable outcome for the owner in this case, New Jersey real estate attorney Mark Morfopoulos advises owners to make sure that their leases provide that the tenant will not do anything that will cause the premises to violate any “law, statute, ordinance or governmental rule, regulation, or requirement now in force or which may hereafter be enacted, including any building code requirements or the requirements of any board of fire underwriters or other similar body now or hereafter constituted (collectively, Governmental Requirements).” The clause should also state that the tenant will, at its sole cost and expense, promptly comply with all Governmental Requirements “as and when enacted, relating to or affecting the condition, use, or occupancy of the premises,” he adds.
Morfopoulos also says that to be fair, an owner should exclude costs to change the structure of its building unless such changes are required as a result of the tenant's improvements to or particular use of the premises. “If an owner desires additional rights to terminate, it should expressly include them in the lease,” he concludes.
Expert Commentators
Marie A. Moore, Esq.: Member, Sher Garner Cahill Richter Klein & Hilbert, LLC, 909 Poydras St., 28th Fl., New Orleans, LA 70112; (504) 299-2108; mmoore@shergarner.com.
Mark Morfopoulos, Esq.: Meislik & Meislik, 66 Park St., Montclair, NJ 07042; (973) 783-3000; mmorfopoulos@meislik.com.
reprinted from CommercialLeaselawinsider.com
Terminating a Commercial real estate can substantially increase your bottom line. This is a very complicated transaction that demands expertise in commercial real estate, corporate finance and legal issues. One firm that has a successful track record in saving large companies millions of dollars by terminating or buying out their lease obligations is Cambridge Consulting Group. For more information please visit their website- www.ccgiweb.com
AIG and CitiGroup selling Real Estate Investment Groups
Three real estate money managers are up for sale as their owners attempt to deleverage their balance sheets, sources say.
At least two major firms — AIG and Citigroup — are looking to sell their real estate investment businesses. Sources expect these deals would be straight sales, rather than manager buyouts.
Sources say that a third, Bank of America, is selling Merrill Lynch's real estate investment management business. Jackie Fitzgerald, Bank of America spokeswoman, would confirm only that the bank wants to transfer the general partnership interest in the $2.65 billion Merrill Lynch Asia Opportunity Fund, which closed in October 2008.
She declined to comment on whether Bank of America is exploring selling the general partnership interests in any of Merrill Lynch's other real estate funds.
Other firms are jettisoning business segments. For example, Morgan Stanley Real Estate has exited the direct separate account business, confirmed Alyson Barnes, Morgan Stanley spokeswoman. This means it is not seeking new business and has wound down some separate accounts, she said. She would not give the size of the separate account business.
The potential sales illustrate the damage the economic downturn has done to some of the nation's largest real estate investment managers. The business has turned from a revenue source, providing cross-selling opportunities, to an albatross on the parent companies' balance sheets.
American International Group Inc.'s decision to sell its $24.3 billion global real estate business follows the Sept. 5 announcement that the company sold an $88.7 billion portion of its investment management business — covering private equity, hedge funds of funds, equities and fixed income — to Bridge Partners LP for $500 million and a share of profits. In the meantime, AIG is continuing to manage the real estate business and explore options.
In January, AIG announced the business was up for sale but in August, it hired Robert G. Gifford as president and CEO for real estate. Sources say any deal to sell AIG's real estate business could include continued employment for the AIG unit's top executive as it did in the Bridge Partners transaction, in which Win J. Neuger will continue as CEO.
“AIG Global Real Estate continues to evaluate its options with respect to its fund management business,” said Lauren Day, AIG spokeswoman. Sources said AIG could do everything from selling the real estate business in one piece to selling off funds piecemeal.
Rest of article click here
Bank CFOs should look to their branch locations for savings through real estate Lease Terminations or Buyouts. Financial Institutions employing this strategy have saved millions of dollars in lease obligations. An expert in this field is Cambridge Consulting Group. For a white paer onthis subject please go to www.commercialleaseterminations.comDisney CFO Becomes Chairmen of Walt Disney Parks and Resorts
For two decades, Tom Staggs has plotted strategy for the Walt Disney Co., helping steer the entertainment giant through multibillion-dollar decisions ranging from the acquisitions of ABC and Pixar to the construction of new cruise ships and theme parks.
Now, however, Disney's longtime chief financial officer has to do something for the company that he has never done before: actually run one of its businesses.
This week, Staggs formally takes over as chairman of Walt Disney Parks and Resorts, assuming day-to-day responsibility for an $11billion vacation empire with resorts on three continents and nearly 100,000 employees — including 60,000 in Central Florida. He succeeds Jay Rasulo, who is, in turn, taking Staggs' place as CFO in a leadership swap orchestrated by Disney Co.'s president and chief executive officer, Bob Iger.
Although the company has disputed it, the move has been widely interpreted as a sign that Disney is grooming Staggs, 49, to be Iger's eventual successor as CEO. By handing him the keys to its theme parks, Disney is giving Staggs the chance to gain operational experience and plug the one obvious hole in his résumé. But before Staggs can ascend to the top job, he must demonstrate that he can handle a division that generates nearly one-third of Disney's overall revenue.
The challenges are substantial. Profits at Disney's parks have slumped this year amid a recession-driven drop in consumer spending and travel. And the unit is in the midst of its biggest construction spree in years, building a pair of new cruise ships and a Hawaiian resort; expanding parks in Orlando, California and Hong Kong; and planning a new park in Shanghai.
At the same time, Staggs will have to adapt to an unfamiliar role. As CFO, he oversees a relatively narrow circle of financial executives and interacts with Wall Street analysts. As parks chairman, he must rally a global work force that includes everyone from industrial engineers to aspiring actors and must learn the minds of the 118million guests who visit Disney's theme parks each year.
Friends and colleagues say they expect Staggs, a trumpet player with a taste for Italian wine, will succeed.
"I am 100percent confident — 100percent — that he will be fantastic," said Michael Eisner, the former Disney chief executive who promoted Staggs to CFO in 1998.
Disney declined to make Staggs or Iger available for interviews.
Staggs joined Disney in 1990, after the company hired him away from his job as an investment banker at Morgan Stanley. Disney was looking for someone to handle mergers and acquisitions in its strategic-planning department, and it targeted Staggs, who has an undergraduate business degree from the University of Minnesota and an MBA from Stanford University.
He advanced rapidly through strategic planning, which was charged with identifying growth opportunities and scrutinizing the performance of the company's operating divisions. The department was not always well-loved by other Disney managers, some of whom referred to it as "the goon squad," according to the book DisneyWar, which chronicles Eisner's tenure as CEO.
Former executives say Staggs proved a shrewd negotiator who analyzed potential deals carefully and without being clouded by emotion. "He was not a guy who had an ego need to do deals for their own sake," said Larry Murphy, a former chief strategic officer at Disney and Staggs' former boss.
When the company was debating whether to buy the CBS or ABC television networks in 1995, Staggs, according to DisneyWar, argued for the more-expensive ABC deal in part because Disney could gain ABC's 80percent share in the ESPN cable-TV sports network. Disney ultimately bought ABC for $19billion, and ESPN is now one of its most valuable properties.
Former parks-and-resorts executives who worked with Staggs praise him as a financial manager who had the ability to see beyond an idea's bottom-line numbers. Paul Pressler, who was parks chairman before Rasulo, said Staggs supported expanding Disney Cruise Line because he recognized its effect beyond the parks division.
In 1998, Eisner elevated the then-37-year-old Staggs to CFO. The former Disney chief said in a recent interview that Staggs was an invaluable adviser and a "steady force" for the company, particularly through the uncertainty that followed the Sept.11, 2001, terrorist attacks in New York and Washington.
"Every time I had to speak or I had to deal with the finances of the company or I had to appear before an analyst group, my last call before going on stage was always to Tom," Eisner said. The former Disney CEO had such warm feelings for Staggs that he based the family dog in a cartoon show he created for Nickelodeon, Glenn Martin DDS, on Staggs' own dog.
Friends say Staggs' even temperament helped during what may have been the most trying period of his career: the corporate upheaval that erupted in 2003, when the late Roy Disney, nephew of the Walt Disney Co.'s legendary namesake, clashed with Eisner and led a shareholder revolt seeking Eisner's ouster. The prolonged battle ended in 2005, when Eisner stepped down and was replaced by Iger.
It often fell to Staggs to deliver Disney's response to the critical presentations from Roy Disney and others about the company's financial performance, and to defend controversial decisions such as potentially ending the company's relationship with Pixar Animation Studios amid a falling-out between Eisner and Apple Chief Executive Steve Jobs.
"It was incredibly challenging for him," said Richard Nanula, who was Disney CFO before Staggs and who remains close friends with him. But Nanula said Staggs hid the stress well. "Tom never goes too high and never goes too low."
One of the ways Staggs deals with stress: working out, which he does almost daily. "The last time Tom put a carbohydrate in his body was the prior millennium," Nanula said.
Staggs and his wife have three sons, ages 4 through 11. He is said to spend much of his free time with them, including coaching youth basketball. He's also something of an amateur gastronome; Staggs' Beverly Hills home, which is currently being rebuilt, will have multiple varieties of stoves.
People who have talked to him say Staggs was surprised when Iger informed him earlier this year that he wanted him to take over parks and resorts — as were many analysts who follow the company. But Disney has said not to expect overarching strategies to change because of the executive shuffle.
"We all have pretty much bought into the same set of principles as we manage this company," Iger said at an investor conference in New York this month.
Under Rasulo, Walt Disney Parks and Resorts has emphasized growth in international markets and into businesses beyond theme parks, including cruises, time shares and group tours. Rasulo also centralized leadership of Disney's parks, bringing management of Walt Disney World and Disneyland under a single team rather than running them as independent operations.
Staggs already has some familiarity with the business. Because the parks unit sucks up so much of Disney's overall capital spending — building a theme park, after all, is much more expensive than making a movie — Staggs has over the years had to be involved with major decisions at the unit.
"I would characterize Tom as always an enthusiastic supporter of the parks-and-resorts strategy," said Rasulo, who said he has worked closely with Staggs over the years. Rasulo added: "I would think, as you looked back historically, that has not always been the case with" previous financial executives at Disney.
Still, Staggs faces numerous challenges.
In the immediate future, he must engineer a turnaround at Disney's U.S. theme parks by weaning consumers off discounts without sending attendance into a tailspin. Longer term, he will have to successfully incorporate a cruise line that will double in capacity by 2012 and a Hawaiian hotel and time share that will be Disney's first major standalone resort when it opens in 2011.
Staggs also will oversee the development of a new theme park in Shanghai — a vital plank in Disney's overall strategy to build a customer base in the world's most populous country — while maintaining a smooth relationship with the Chinese government and avoiding the early stumbles that plagued Disney parks in Paris and Hong Kong.
Disney theme-park executives are under constant pressure to drive more earnings growth, something that is difficult for a business that is already dominant in its industry and that requires spending hundreds of millions of dollars to make meaningful expansions. And what may be the most tempting response — raising prices and cutting expenses — can have disastrous long-term consequences if guests rebel.
"There's an intuitive side that's important for running the [theme-park] business. You have to be able to step away from the pro forma and the numbers at some point," said Matt Ouimet, a former president of Disneyland in Anaheim, Calif. "I think he has the ability to do it."
Staggs will likely lean on the parks' existing management, at least early on, particularly president of worldwide operations Al Weiss. Weiss, a former Disney World president, has spent his entire 37-year career with Disney's parks division and has long been seen as a potential parks chairman himself.
"The theme-park resort experience, I think, is distinctly different than any other division in the company," said Judson Green, who has been both CFO and parks chairman for Disney. "You must genuinely like other people and empathize with other people. And he's clearly capable of doing that."
In a written statement, Staggs pronounced himself "excited and honored" to take on the new role.
"Having worked with the parks for years and experienced the product as a dad, I know and love this business," Staggs said. "I also know there is a great deal more I can learn, and I am fortunate to have such a strong team in place to help me in that process."
Jason Garcia can be reached at 407-420-5414
or jrgarcia@orlandosentinel.com. ictures of kids crying in Santa's lap.
Now, however, Disney's longtime chief financial officer has to do something for the company that he has never done before: actually run one of its businesses.
This week, Staggs formally takes over as chairman of Walt Disney Parks and Resorts, assuming day-to-day responsibility for an $11billion vacation empire with resorts on three continents and nearly 100,000 employees — including 60,000 in Central Florida. He succeeds Jay Rasulo, who is, in turn, taking Staggs' place as CFO in a leadership swap orchestrated by Disney Co.'s president and chief executive officer, Bob Iger.
Although the company has disputed it, the move has been widely interpreted as a sign that Disney is grooming Staggs, 49, to be Iger's eventual successor as CEO. By handing him the keys to its theme parks, Disney is giving Staggs the chance to gain operational experience and plug the one obvious hole in his résumé. But before Staggs can ascend to the top job, he must demonstrate that he can handle a division that generates nearly one-third of Disney's overall revenue.
The challenges are substantial. Profits at Disney's parks have slumped this year amid a recession-driven drop in consumer spending and travel. And the unit is in the midst of its biggest construction spree in years, building a pair of new cruise ships and a Hawaiian resort; expanding parks in Orlando, California and Hong Kong; and planning a new park in Shanghai.
At the same time, Staggs will have to adapt to an unfamiliar role. As CFO, he oversees a relatively narrow circle of financial executives and interacts with Wall Street analysts. As parks chairman, he must rally a global work force that includes everyone from industrial engineers to aspiring actors and must learn the minds of the 118million guests who visit Disney's theme parks each year.
Friends and colleagues say they expect Staggs, a trumpet player with a taste for Italian wine, will succeed.
"I am 100percent confident — 100percent — that he will be fantastic," said Michael Eisner, the former Disney chief executive who promoted Staggs to CFO in 1998.
Disney declined to make Staggs or Iger available for interviews.
Staggs joined Disney in 1990, after the company hired him away from his job as an investment banker at Morgan Stanley. Disney was looking for someone to handle mergers and acquisitions in its strategic-planning department, and it targeted Staggs, who has an undergraduate business degree from the University of Minnesota and an MBA from Stanford University.
He advanced rapidly through strategic planning, which was charged with identifying growth opportunities and scrutinizing the performance of the company's operating divisions. The department was not always well-loved by other Disney managers, some of whom referred to it as "the goon squad," according to the book DisneyWar, which chronicles Eisner's tenure as CEO.
Former executives say Staggs proved a shrewd negotiator who analyzed potential deals carefully and without being clouded by emotion. "He was not a guy who had an ego need to do deals for their own sake," said Larry Murphy, a former chief strategic officer at Disney and Staggs' former boss.
When the company was debating whether to buy the CBS or ABC television networks in 1995, Staggs, according to DisneyWar, argued for the more-expensive ABC deal in part because Disney could gain ABC's 80percent share in the ESPN cable-TV sports network. Disney ultimately bought ABC for $19billion, and ESPN is now one of its most valuable properties.
Former parks-and-resorts executives who worked with Staggs praise him as a financial manager who had the ability to see beyond an idea's bottom-line numbers. Paul Pressler, who was parks chairman before Rasulo, said Staggs supported expanding Disney Cruise Line because he recognized its effect beyond the parks division.
In 1998, Eisner elevated the then-37-year-old Staggs to CFO. The former Disney chief said in a recent interview that Staggs was an invaluable adviser and a "steady force" for the company, particularly through the uncertainty that followed the Sept.11, 2001, terrorist attacks in New York and Washington.
"Every time I had to speak or I had to deal with the finances of the company or I had to appear before an analyst group, my last call before going on stage was always to Tom," Eisner said. The former Disney CEO had such warm feelings for Staggs that he based the family dog in a cartoon show he created for Nickelodeon, Glenn Martin DDS, on Staggs' own dog.
Friends say Staggs' even temperament helped during what may have been the most trying period of his career: the corporate upheaval that erupted in 2003, when the late Roy Disney, nephew of the Walt Disney Co.'s legendary namesake, clashed with Eisner and led a shareholder revolt seeking Eisner's ouster. The prolonged battle ended in 2005, when Eisner stepped down and was replaced by Iger.
It often fell to Staggs to deliver Disney's response to the critical presentations from Roy Disney and others about the company's financial performance, and to defend controversial decisions such as potentially ending the company's relationship with Pixar Animation Studios amid a falling-out between Eisner and Apple Chief Executive Steve Jobs.
"It was incredibly challenging for him," said Richard Nanula, who was Disney CFO before Staggs and who remains close friends with him. But Nanula said Staggs hid the stress well. "Tom never goes too high and never goes too low."
One of the ways Staggs deals with stress: working out, which he does almost daily. "The last time Tom put a carbohydrate in his body was the prior millennium," Nanula said.
Staggs and his wife have three sons, ages 4 through 11. He is said to spend much of his free time with them, including coaching youth basketball. He's also something of an amateur gastronome; Staggs' Beverly Hills home, which is currently being rebuilt, will have multiple varieties of stoves.
People who have talked to him say Staggs was surprised when Iger informed him earlier this year that he wanted him to take over parks and resorts — as were many analysts who follow the company. But Disney has said not to expect overarching strategies to change because of the executive shuffle.
"We all have pretty much bought into the same set of principles as we manage this company," Iger said at an investor conference in New York this month.
Under Rasulo, Walt Disney Parks and Resorts has emphasized growth in international markets and into businesses beyond theme parks, including cruises, time shares and group tours. Rasulo also centralized leadership of Disney's parks, bringing management of Walt Disney World and Disneyland under a single team rather than running them as independent operations.
Staggs already has some familiarity with the business. Because the parks unit sucks up so much of Disney's overall capital spending — building a theme park, after all, is much more expensive than making a movie — Staggs has over the years had to be involved with major decisions at the unit.
"I would characterize Tom as always an enthusiastic supporter of the parks-and-resorts strategy," said Rasulo, who said he has worked closely with Staggs over the years. Rasulo added: "I would think, as you looked back historically, that has not always been the case with" previous financial executives at Disney.
Still, Staggs faces numerous challenges.
In the immediate future, he must engineer a turnaround at Disney's U.S. theme parks by weaning consumers off discounts without sending attendance into a tailspin. Longer term, he will have to successfully incorporate a cruise line that will double in capacity by 2012 and a Hawaiian hotel and time share that will be Disney's first major standalone resort when it opens in 2011.
Staggs also will oversee the development of a new theme park in Shanghai — a vital plank in Disney's overall strategy to build a customer base in the world's most populous country — while maintaining a smooth relationship with the Chinese government and avoiding the early stumbles that plagued Disney parks in Paris and Hong Kong.
Disney theme-park executives are under constant pressure to drive more earnings growth, something that is difficult for a business that is already dominant in its industry and that requires spending hundreds of millions of dollars to make meaningful expansions. And what may be the most tempting response — raising prices and cutting expenses — can have disastrous long-term consequences if guests rebel.
"There's an intuitive side that's important for running the [theme-park] business. You have to be able to step away from the pro forma and the numbers at some point," said Matt Ouimet, a former president of Disneyland in Anaheim, Calif. "I think he has the ability to do it."
Staggs will likely lean on the parks' existing management, at least early on, particularly president of worldwide operations Al Weiss. Weiss, a former Disney World president, has spent his entire 37-year career with Disney's parks division and has long been seen as a potential parks chairman himself.
"The theme-park resort experience, I think, is distinctly different than any other division in the company," said Judson Green, who has been both CFO and parks chairman for Disney. "You must genuinely like other people and empathize with other people. And he's clearly capable of doing that."
In a written statement, Staggs pronounced himself "excited and honored" to take on the new role.
"Having worked with the parks for years and experienced the product as a dad, I know and love this business," Staggs said. "I also know there is a great deal more I can learn, and I am fortunate to have such a strong team in place to help me in that process."
Jason Garcia can be reached at 407-420-5414
or jrgarcia@orlandosentinel.com. ictures of kids crying in Santa's lap.
CALPERS Commercial Real Estate Strategy Led to Large Loss in 2009
By Arleen Jacobius
Pensions & Investment Age
Behind CalPERS' staggering real estate losses lies a strategy that took on too much risk and lacked adequate oversight.
Once the fund's star asset class, the real estate portfolio of the $201.1 billion California Public Employees' Retirement System lost nearly half its value during the one-year period ended Sept. 30. The fund's real estate consultant, Pension Consulting Alliance Inc., predicts losses will continue for at least another year.
At the heart of the problem is a freewheeling approach that took on massive leverage, gave enormous discretion to staff and experienced poor timing with its investments.
The decision-making process and risk management need to be much more rigorous, acknowledged Joseph A. Dear, who joined CalPERS as chief investment officer earlier this year. The control over leverage was not as robust as it needs to be, he added. The system will focus more on income-producing, less risky core investments in the future, he said.
“We're inclined toward investment vehicles where we have control,” Mr. Dear said. “This does not rule out fund investing,” he added.
“Hindsight suggests that a large number of CalPERS' real estate investments were extraordinarily ill-timed and inadequately underwritten,” said Stuart Gabriel, professor of finance and director, UCLA Ziman Center for Real Estate in Los Angeles. Mr. Gabriel is not connected with CalPERS.
In recognition of the portfolio's problems, the CalPERS board has imposed new limits on staff's independent investment authority, system officials are revamping its $13.5 billion portfolio and they might ax some of the fund's roughly 70 external real estate managers. (Already, MacFarlane Partners has resigned its account after a nearly $1 billion failed land deal.)
What went wrong?
Just more than two years ago, CalPERS' real estate portfolio was valued at $20.1 billion and staff estimated it would grow to $30 billion over the next five years.
What went awry? In the first half of this decade, when the real estate market was soaring, CalPERS began selling off its least risky, higher-income-producing core properties and shifting the portfolio emphasis to non-core, riskier investments. In particular, the system went after value-added real estate, taking on a bit more risk in the major property types, hotels, student and senior housing, and investing in opportunistic transactions, those taking on the most risk and leverage, according to CalPERS' 2007 strategic plan for real estate.
Some 61% of the portfolio now is in non-core investments as of June 30, the most current information available. So far, some of these strategies have been the worst performers. For example, the system's California Urban Real Estate portfolio lost 40.9% for the quarter and 56.7% for the year, ended June 30. Senior housing dropped 68.2% for the quarter and 71.9% for the year. Article continues at
For information on how you can reduce your commercial real estate lease obligations please visit www.commercialleaseterminations.com
Pensions & Investment Age
Behind CalPERS' staggering real estate losses lies a strategy that took on too much risk and lacked adequate oversight.
Once the fund's star asset class, the real estate portfolio of the $201.1 billion California Public Employees' Retirement System lost nearly half its value during the one-year period ended Sept. 30. The fund's real estate consultant, Pension Consulting Alliance Inc., predicts losses will continue for at least another year.
At the heart of the problem is a freewheeling approach that took on massive leverage, gave enormous discretion to staff and experienced poor timing with its investments.
The decision-making process and risk management need to be much more rigorous, acknowledged Joseph A. Dear, who joined CalPERS as chief investment officer earlier this year. The control over leverage was not as robust as it needs to be, he added. The system will focus more on income-producing, less risky core investments in the future, he said.
“We're inclined toward investment vehicles where we have control,” Mr. Dear said. “This does not rule out fund investing,” he added.
“Hindsight suggests that a large number of CalPERS' real estate investments were extraordinarily ill-timed and inadequately underwritten,” said Stuart Gabriel, professor of finance and director, UCLA Ziman Center for Real Estate in Los Angeles. Mr. Gabriel is not connected with CalPERS.
In recognition of the portfolio's problems, the CalPERS board has imposed new limits on staff's independent investment authority, system officials are revamping its $13.5 billion portfolio and they might ax some of the fund's roughly 70 external real estate managers. (Already, MacFarlane Partners has resigned its account after a nearly $1 billion failed land deal.)
What went wrong?
Just more than two years ago, CalPERS' real estate portfolio was valued at $20.1 billion and staff estimated it would grow to $30 billion over the next five years.
What went awry? In the first half of this decade, when the real estate market was soaring, CalPERS began selling off its least risky, higher-income-producing core properties and shifting the portfolio emphasis to non-core, riskier investments. In particular, the system went after value-added real estate, taking on a bit more risk in the major property types, hotels, student and senior housing, and investing in opportunistic transactions, those taking on the most risk and leverage, according to CalPERS' 2007 strategic plan for real estate.
Some 61% of the portfolio now is in non-core investments as of June 30, the most current information available. So far, some of these strategies have been the worst performers. For example, the system's California Urban Real Estate portfolio lost 40.9% for the quarter and 56.7% for the year, ended June 30. Senior housing dropped 68.2% for the quarter and 71.9% for the year. Article continues at
For information on how you can reduce your commercial real estate lease obligations please visit www.commercialleaseterminations.com
Monday, December 28, 2009
Small Banks May Have A Tough Year in 2010
The New Year is shaping up to be a rough one for community lenders.
By Colin Barr
Senior Editor
Fortune Magazine
Dozens if not hundreds of small banks figure to disappear in 2010, as a weak economy and regulatory pressure lead to more failures and mergers.
President Obama met Tuesday with eight community bank executives, including the chiefs of German American Bancorp (GABC) and Monadnock Bancorp. Obama hailed the bankers as playing a "vital function," and cited "enormous opportunities" for economic growth if they keep lending.
The community bankers surely made for a more receptive audience than the big-bank CEOs Obama addressed last week. Small-business lending, after all, is what smaller banks do best. The Independent Community Bankers of America trade group notes that community banks account for almost a third of small business loans under $1 million.
But the smallest banks have been dropping like flies for years, as they labor to master expensive new technologies and regulatory changes -- at a time when giant banks spawned in a rash of megamergers are expanding their reach.
The consolidation trend should only strengthen in the coming year. Dozens of banks will fail as their customers retrench in a weak economy. Meanwhile, regulators will keep pressuring bankers to lend cautiously -- prompting weaker banks to merge into stronger ones as growth remains elusive.
"A lot of the regional and community banks are going to struggle to remain independent," said Terry Moore, a managing director at Accenture. "We're going to see those numbers shrinking."
They have shrunk a lot already. The number of commercial banks with assets of $50 million or less has dropped by more than 3,600 since 1994, to 1,198, according to recent Federal Deposit Insurance Corp. data.
At the same time, the deposits held by the biggest banks have soared, following years of megamergers punctuated by last year's bailouts. The five biggest banks -- Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citi and PNC (PNC, Fortune 500) -- held 37% of all deposits at June 30. That's triple the top five's share 15 years ago, according to the FDIC.
Questions about concentration at the top of the industry have been intensified by a steady drumbeat of small bank failures. This year has brought 140 bank failures, and nearly four times as many institutions are now classified by regulators as troubled -- meaning failures in 2010 are likely to reach into triple digits again.
Given those daunting numbers, the FDIC appears to be focusing on closing weak banks rather than luring in new capital from the likes of private equity investors.
Yet at the same time, even troubled megabanks such as Citi have been able to raise staggering sums in the marketplace, in part because it has become clear the government won't let them fail. This apparent disconnect chafes some observers who say private investors could be helping to rebuild small banks.
"What Citi tells you is there are enormous pools of capital willing to take risk, given the right circumstances," said Hal Reichwald, a lawyer at Manatt Phelps & Phillips in Los Angeles who represents investors.
With tens of billions of dollars of souring construction and commercial real estate loans on their books, regional and community banks could use some of that capital. But the weak economy and the wave of bank failures have made it hard for smaller banks to raise new funds.
Of course, economic stress spells opportunity for stronger community banks. Ted Peters, CEO of Bryn Mawr Bank Corp. (BMTC) in suburban Philadelphia, said he sees the wide-open merger landscape in financial services as "a once-in-a-career opportunity" for him and his $1.2 billion firm.
Bryn Mawr agreed last month to acquire First Keystone Financial, a Media, Pa., savings bank, and Peters said he's considering possible tie-ups with investment firms and other financial institutions.
Peters said the fact that community banks didn't help blow up the economy with derivatives has resonated with lawmakers and now creates another selling point with customers.
"Right now, the big banks are being portrayed as the bad guys and the other 8,100 banks are being seen as the good guys," he said.
He expects this perception to enable his bank to continue to grab market share over the next year. But he isn't expecting any miracles.
For instance, Obama pledged Tuesday, in response to complaints from the Independent Community Bankers of America about heavy-handed regulation, to "see if there are possibilities to cut some of the red tape."
But Peters remains skeptical. "I've been a bank president for 25 years, and I'm still waiting for them to cut red tape for the first time," he said.
Bank CFOs should look to their branch locations for savings through real estate Lease Terminations or Buyouts. Financial Institutions employing this strategy have saved millions of dollars in lease obligations. An expert in this field is Cambridge Consulting Group. For a white paer onthis subject please go to www.commercialleaseterminations.com
By Colin Barr
Senior Editor
Fortune Magazine
Dozens if not hundreds of small banks figure to disappear in 2010, as a weak economy and regulatory pressure lead to more failures and mergers.
President Obama met Tuesday with eight community bank executives, including the chiefs of German American Bancorp (GABC) and Monadnock Bancorp. Obama hailed the bankers as playing a "vital function," and cited "enormous opportunities" for economic growth if they keep lending.
The community bankers surely made for a more receptive audience than the big-bank CEOs Obama addressed last week. Small-business lending, after all, is what smaller banks do best. The Independent Community Bankers of America trade group notes that community banks account for almost a third of small business loans under $1 million.
But the smallest banks have been dropping like flies for years, as they labor to master expensive new technologies and regulatory changes -- at a time when giant banks spawned in a rash of megamergers are expanding their reach.
The consolidation trend should only strengthen in the coming year. Dozens of banks will fail as their customers retrench in a weak economy. Meanwhile, regulators will keep pressuring bankers to lend cautiously -- prompting weaker banks to merge into stronger ones as growth remains elusive.
"A lot of the regional and community banks are going to struggle to remain independent," said Terry Moore, a managing director at Accenture. "We're going to see those numbers shrinking."
They have shrunk a lot already. The number of commercial banks with assets of $50 million or less has dropped by more than 3,600 since 1994, to 1,198, according to recent Federal Deposit Insurance Corp. data.
At the same time, the deposits held by the biggest banks have soared, following years of megamergers punctuated by last year's bailouts. The five biggest banks -- Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citi and PNC (PNC, Fortune 500) -- held 37% of all deposits at June 30. That's triple the top five's share 15 years ago, according to the FDIC.
Questions about concentration at the top of the industry have been intensified by a steady drumbeat of small bank failures. This year has brought 140 bank failures, and nearly four times as many institutions are now classified by regulators as troubled -- meaning failures in 2010 are likely to reach into triple digits again.
Given those daunting numbers, the FDIC appears to be focusing on closing weak banks rather than luring in new capital from the likes of private equity investors.
Yet at the same time, even troubled megabanks such as Citi have been able to raise staggering sums in the marketplace, in part because it has become clear the government won't let them fail. This apparent disconnect chafes some observers who say private investors could be helping to rebuild small banks.
"What Citi tells you is there are enormous pools of capital willing to take risk, given the right circumstances," said Hal Reichwald, a lawyer at Manatt Phelps & Phillips in Los Angeles who represents investors.
With tens of billions of dollars of souring construction and commercial real estate loans on their books, regional and community banks could use some of that capital. But the weak economy and the wave of bank failures have made it hard for smaller banks to raise new funds.
Of course, economic stress spells opportunity for stronger community banks. Ted Peters, CEO of Bryn Mawr Bank Corp. (BMTC) in suburban Philadelphia, said he sees the wide-open merger landscape in financial services as "a once-in-a-career opportunity" for him and his $1.2 billion firm.
Bryn Mawr agreed last month to acquire First Keystone Financial, a Media, Pa., savings bank, and Peters said he's considering possible tie-ups with investment firms and other financial institutions.
Peters said the fact that community banks didn't help blow up the economy with derivatives has resonated with lawmakers and now creates another selling point with customers.
"Right now, the big banks are being portrayed as the bad guys and the other 8,100 banks are being seen as the good guys," he said.
He expects this perception to enable his bank to continue to grab market share over the next year. But he isn't expecting any miracles.
For instance, Obama pledged Tuesday, in response to complaints from the Independent Community Bankers of America about heavy-handed regulation, to "see if there are possibilities to cut some of the red tape."
But Peters remains skeptical. "I've been a bank president for 25 years, and I'm still waiting for them to cut red tape for the first time," he said.
Bank CFOs should look to their branch locations for savings through real estate Lease Terminations or Buyouts. Financial Institutions employing this strategy have saved millions of dollars in lease obligations. An expert in this field is Cambridge Consulting Group. For a white paer onthis subject please go to www.commercialleaseterminations.com
Subscribe to:
Posts (Atom)
Posts
