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Archive for September, 2009

My 1-Year Goal: Board of Directors…

September 30th, 2009 Comments off

            There’s always a certain accountability in publicizing your goals, although those goals can also be subject to change due to elements beyond your control. One of the goals that I have set for myself is to secure a Board of Directors seat within the next year. I’m fortunate enough that I have some great mentors and colleagues who currently, or previously, have participated at the Board of Directors level so I’ll have some good guidance. While I have the ability to constantly work with our corporate counsel, who is also well versed in these areas, it’s an entirely different beast actually participating at that level.

 

            Today I was invited to attend a panel discussion that was sponsored by Woodruff-Sawyer and led by Paul Folino, who is the Chairman of Emulex Corporation. During the course of the discussion the panel discussed the basic elements of Board governance, committee involvement, and the value that participating on an external Board brings to your current company. There was also a lengthy discussion about the different dynamics of Board participation to consider, as well as Boards in the private, public, and non-profit sectors.

 

            There was some great information shared and I had a number of individuals who openly expressed their willingness to help in the process.  Whether this is a 12- or 18-month effort, I think I would have a great time contributing to a Board and the company I would be serving. I also look forward to sharing more of the details about today’s panel over the coming days.

 

Thanks for reading. . . .

 

Jeffrey Ishmael

Ken Tudhope Networking Notes: Linked In

September 29th, 2009 Comments off

            On nearly a daily basis, most of us receive requests to connect on LinkedIn.  For those of you who may be unfamiliar with the concept, the LinkedIn website explains it as “an interconnected network of experienced professionals from around the world, representing 170 industries and 200 countries. You can find, be introduced to, and collaborate with qualified professionals that you need to work with to accomplish your goals.”  They claim to have over 36 million members and if that number is even close, that’s pretty mind-boggling.

            Being an avid networker I am often asked by people, “Ken, should I accept the LinkedIn requests?”  Before I answer that question I must first tell you that I LOVE LinkedIn!  There are so many reasons, but mostly it’s because LinkedIn brings technology to networking.  I know how much time and effort it takes to stay in touch with my network, but now some brilliant software developers have figured out how to do it “better, faster, stronger.”  With no effort at all you can find old friends and colleagues.  Business development people can find people within targeted companies.  To make introductions even easier there are groups within LinkedIn so you can find people with common interests and experiences.  With six degrees of separation, someday I may be able to meet Treasury Secretary Henry Paulsen, a key player in Finance and Accounting and according to all accounts my look-alike separated-at-birth twin! 


            Now we get to the question of accepting invitations to connect.  First let me explain what “accepting” means.  When you accept an invitation, you do two things:  first, you allow that person to see your connections and who you know; second, you are viewed as being closely associated with them, which assumes you know them well enough to provide an introduction.  My own policy, and my recommendation to you, is to only accept invitations to connect with people you know well.  If I meet someone at a networking event and get a business card, that would not usually mean I’d accept a LinkedIn invitation. 
           

            I recommend you register on LinkedIn and explore around on it.  It is a very useful and efficient technology when used responsibly and it’s one of the more powerful networking tools.  Just remember though, bigger is not necessarily better on LinkedIn, which just might answer the question.

 

Ken Tudhope

Project Pro Search

ktudhope@projectprosearch.com

Proformative.com – A New Platform for Corporate Finance

September 28th, 2009 Comments off

            Over the last 18-months, I’ve been continuing to develop my blog and use it as a platform to provide wider insights to a primarily non-Finance population. The goal has been to improve financial awareness through all functional areas of an organization and allow those groups to better understand what “drives” the Finance department, which often, may not be the best communicator. Fortunately, I’ve been able to provide as much value for the corporate finance community as well.  Recently, I was contacted by John Kogan, the founder of Proformative.com , to provide guest blog commentary, along with some peers whom I have been fortunate enough to network with.

            After speaking with John, I immediately liked the direction he was going with Proformative.com, which is a “free, open, and independent community of corporate finance, accounting and related professionals interested in asking questions, sharing knowledge and resources, and getting work done”. The site “provides a common ground on which to meet, communicate, and help one another with day-to-day issues involved in the highly complex and technical worlds we work in”.  The other aspect of the site that I was immediately impressed with was the documented Community Conduct page.  While simple and obvious, there are rules to abide by on the site, and if not followed, will be enforced and users dropped or sanctioned.  Additionally, there is no self-promotion on the site…i.e. advertising. There are no press releases, spam, schemes, or other promotional materials allowed. Bottom line, it’s a finance-centric site that is operated by and for corporate finance professionals.

            On the site, there are a number of different areas that are of keen interest. Particularly, there is an offering of different groups, discussions, resources, jobs, blogs, and events. As an example, the offering within the Group section includes:

Ø  CFO’s

Ø  Corporate Controllers

Ø  Cost Accounting

Ø  Director / VP Finance

Ø  FEI members

Ø  Non-Profit finance

Ø  Risk Management

 

            John has put together a great platform with Proformative.com , and if you work in Finance, there’s definitely a value in helping to promote and build this platform. It’s worth taking a few minutes to review, sign-up, and be a part of this platform.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Restructured? Reassessing Your Risk & Coverage Profile.

September 24th, 2009 Comments off

            Over the last 2-years, there’s not a single person in my network that has been immune to what has transpired with the economy, both domestically and globally.  Some have been fortunate, as we have, to experience growth, in a sector that has been heavily hit and seen many players eliminated or significantly downsized. The efforts to adjust to these changes have been to scrutinize every revenue and expense stream within the company and determine where changes can be made. One of these areas, Insurance Expense, can be a pretty significant area depending on the industry you find yourself working in. From the area of workers compensation, to product & general liability, to health, it can be significant. However, the focus should not lay solely on the quotes provided by your agent at the time of renewal and what a new agent might be able to save you.

 

            If you’ve either seen a significant decrease in the scope of your business, or lucky enough to grow, then what you should really be doing is diving into the different elements of your insurance coverage to determine if that coverage is appropriate for the company.

 

More specifically:

Ø  Was your policy initiated many years prior, in a period where coverage was provided to you as a new entity?

Ø  Have you seen a major change in your employee count and the scope of activities that they are involved with?

Ø  Has the company undergone a significant change or expansion in the supply chain or the amount of product moved?

Ø  Does the current liability umbrella provide enough coverage for where the company has progressed to?

Ø  Do you have coverage for your Directors & Officers? Is it sufficient for the scope of business?

Ø  Do you have the proper levels of Employee Practices Liability for the company & is it commensurate with the risks of your industry?

 

            Conversely, if you’ve been unfortunate enough to see a significant decrease in the size of the company, are you over-insuring the company and paying too much in insurance expenses?  How many vendors are you having to deal with and can you effectively manage your insurance portfolio? Do you know what your areas you might be lacking in your current coverage?  In such a litigious environment, the cost-benefit of proper insurance coverage cannot be over emphasized. Although this area can represent a large expense for the company, this risk of a lawsuit or other event that exposes the company will be multiples of what your actual expense is. 

 

            If you have a good insurance partner, then there are also ways that you can decrease your expense exposure with respect to internal education programs, safety programs, and other employee involvement. There are also opportunities to look at deductible amounts, although this will not have as drastic an effect as the increase or decrease in your overall coverage amounts. Do you know where you stand on your insurance portfolio and scope of coverage?

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Financial Results & Operational Discipline.

September 22nd, 2009 Comments off

                I know I have touched on operational disciplines in past posts, but it’s time to revisit that topic again. What continues to surprise me is the lack of information that goes into making key strategic decisions, especially with respect to forecasting a corporate financial path. There are obviously so many things to take into consideration for this area, but simply, do you have timely & accurate data that will contribute to either the turnaround efforts for your company or the aggressive growth that you find yourself facing in the immediate future? Either way, if you lack the supporting data, you have nothing but an outlook of unsupported optimism.

                In consideration to a condition of aggressive growth, do you have the appropriate data to identify the specific growth drivers for your business, the margin performance of each one of the revenue drivers, and the recent trends of your operational expenses?  And I’m not necessarily referring to the data of last year or the first half of 2009, but also your most recent results. If you tell me that you’re still working on closing the books for the month before last then you’ve already got an embedded handicap in the decisions that you need to make. What if the most recent few months are at the height of your selling season? Since this is a common theme in the Retail and Apparel space, you better know what those results are since your entire year may hinge on those results.

                What if you’re in the midst of a turnaround and looking to reposition the company in all critical areas, which will likely include revenues, inventory, operating expenses, as well as vendor commitments?  If there is the need to work out plans with key vendors, make significant adjustments to the operating expenses, or other material decisions, do you have accurate & timely data support that decision making process?  It’s only through the timely collection of that data can you deliver a game plan that will be endorsed and supported by vendors, believed in by employees, as well as provide the foundation for executing the plan and moving the company back into a stronger position.

                You can only have this data if you have the processes and operational disciplines in place. You can’t risk putting yourself in a position where it takes month(s) to finalize your results, collect & analyze the data, and belatedly affirm any previous forecast you had in place. You need to know what the pulse is week-to-week, you need to have a handle on your period’s results within days, and finalized within a week(s). In this environment there is no room for complacency or the late delivery of information. There is too much riding on efficient execution. Any slips will affect the credibility you have with your employees, vendors, and ultimately may lead to the poor development or execution of your strategy. So what is it…are you actually executing or are you going through the motions of unsupported optimism?

Thanks for reading . . . .

Jeffrey Ishmael

Ken Tudhope on CFO Opportunities . . .

September 21st, 2009 Comments off

            All of my CFO friends are thinking to themselves, “Well, finally that Ken Tudhope is making sense!”  As I write this Networking Note we are emerging from one of the worst recessions in decades.  Every morning I look in the newspaper and read about layoffs.  I turn on the radio and they are interviewing unfortunate people who have been laid off.  It looks like my brother is being laid off from the government in the state of Washington.  Many times, it’s the CFOs and other Finance executives who are behind it all.  We all know that layoffs reduce costs and enable companies to survive tough times.  Good business indeed.  But wait a minute.  My CFO friends are tough-minded business people, but I doubt they would say they “love” layoffs.  I bet if asked they would say that layoffs are an unfortunate part of their job.

            So why would I say that I love layoffs?  If you know me, you know I’m a nice guy.  In fact, while at Price Waterhouse I was given the “Nice Guy” award and I have a plaque on my wall to prove it.  Seriously, layoffs are tough and I wouldn’t wish them on anyone.  Early in my career I was unexpectedly laid off from my job and it was really upsetting. I don’t actually love layoffs of course, but I do genuinely appreciate the networking opportunities they create.  For good networkers, layoffs are the perfect storm of opportunity.  First, if you have a good network and you are laid off, you will secure your next career position with relative ease.  And if you have a good network, you might be able to help your friends who are in a job search.  Remember, most jobs are obtained through personal referrals.  Second, during times of downsizing there is a huge shift of people between organizations.  New jobs eventually open up and are filled which creates opportunities for new connections.  A new company full of future relationships. For example, there may be new people in your department.  For salespeople like me there are new buyers at client companies, and when established clients move to new companies they help open doors that were previously closed.  Finally, once all the transition settles it forces you to stay in touch with old friends and reach out to new co-workers.

So while layoffs are not necessarily something to love in the moment, you gotta love the opportunities & connections created in the process. 

 

Ken Tudhope

Project Pro Search Group

ken@projectprosearch.com

Alright….Maybe It’s Not Always About Finance.

September 18th, 2009 Comments off

            I think you’ve all figured out by now that I love what I do and when it comes to Finance, I absolutely believe “Finance is Fun”. That’s my mantra in the office, and while I may get a bit of grief over it, I enjoy the challenges that it brings every week. But alas, it all can’t be about Finance…or can it? Part of the career development over the last few years has been to develop my professional network. Both from the perspective of how I can continue to develop my own skill set, but how I can find opportunities to work with others and possibly help them with their own projects or professional challenges. I’ve been fortunate to meet some great individuals and I’ve decided, based on some recent discussions, to open up this forum to guest commentary.  One of the individuals I wanted to introduce to this forum is Ken Tudhope, who is the Founder & Principal of Project Pro Search, LLC in Irvine, California.

            I’ve known Ken for about 3-years now and have to say that his enthusiasm is infectious. Ken founded Project Pro Search after leaving a large specialized staffing firm in order to provide excellent long-term service to clients in Southern California.  By using his expansive network of contacts in Orange County and his unique set of talents and industry experiences, he is offering the customized service and value which proved difficult to achieve in a large bureaucracy. While I won’t hold it against him, Ken attended both the University of Washington & the UCLA Anderson School of Business (Fight On! Trojans!!!). Through his firm, Ken also founded the OC|CFO Network, which is a bi-weekly meeting for CFO’s in the Orange County area.

            Ken will be providing guest commentary regarding the Networking and Recruiting Challenges that face today’s Finance executives. Ken is passionate about these topics and I look forward to the insights that he’ll be providing.

Thanks for reading . . . .

Jeffrey Ishmael

Aren’t You Glad Its Over? Or Has It Ended?

September 17th, 2009 Comments off

            If you’re having the same feelings that I am, you must be feeling an incredible sense of relief that the recession is over and we can now move on. I know our international distributors are feeling that same sense of relief.  Can you sense the cynicism in my tone yet? All kidding aside, there is an emerging sense of optimism that is starting to make its way into the market place. It was evident in many of the conversations that I had at the recent ASR show, both at the core dealer and manufacturer level, as well as the international distributors I spoke with. However, it by no way means that I’m not lessening our laser focus on our day-to-day activities and constantly reviewing our data to avoid the risks that still exist.

            We have spent the last year going through an aggressive restructuring that has left not a single part of the organization untouched. We have improved the quality of our headcount, scrutinized every expense, analyzed every element of our product margins, and in fact, have completely shifted to new manufacturing partners. We’ve moved from a history of operating losses to a current state that will have us significantly profitable over prior years. There’s no question that the team has come together to put in the hard work and take us to this level. We’re positioned to take advantage of the growth that will come with 2010. Between a return to profitability and a drastically improved working capital situation, our own efforts will be the only thing that will prevent growth moving forward. If it’s on the table to take, we’re capable.

            Although “Experts” might be calling the recession “over”, we still have a tough road ahead economically and we’re going to continue seeing how the new landscape will evolve. We’re emerging as a stronger and leaner fighter, but now is not the time to sit poolside after the latest winning fight. It’s time to stay in the gym, keep training, and target the next win. Never let the guard down, scrutinize every element, and keep a keen eye on areas of risk.  I like the renewed optimism, but I’m too competitive to start relaxing…..

Thanks for reading . . . .

Jeffrey Ishmael

Goodwill Considerations & Foreign Entities.

September 16th, 2009 Comments off

            Yesterday’s blog post was one that turned out to be a great example of the value of the network I’ve been able to build up, and tap into, when it comes to subjects or situations that are outside of my experience or knowledge range. Yesterday I wrote about the recent 10Q filing for Quiksilver and the fact that they had reported an increase in their stated goodwill value as a result of favorable foreign currency exchange rates. After pulling a Sherlock Holmes and making some calls to accountants and private equity contacts, I was still coming up short. Leave it to Twitter! One of my contacts in Twitter, a CPA up in the Santa Rosa area, researched the subject a bit more and came up with the necessary guidance.

            In addition to SFAS 142, which covers Goodwill & Other Intangible Assets, Joe pointed me in the direction of SFAS 52, which covers the element of Foreign Currency Translation. While I’m familiar with both of these standards, the combination of the two, and a resulting change in goodwill, which was not associated with an acquisition, divestiture, amortization, or general write-down (as we’ve recently seen), was certainly an approach I had not encountered. I should also clarify that while it is certainly common to see companies reporting the foreign currency impact on their operations, particularly within the income statement and management discussion, the application of this standard to the valuation of goodwill was one I had not previously seen.

            While I have always viewed goodwill as a relatively static number, it’s not until you get into paragraph 101 of SFAS 52 that it provides any specific guidance for this area. Keep in mind that SFAS 52 is 54-pages of guidance, but the section on goodwill is a mere 5 sentences. Regardless, in paragraph 101, FASB states “Likewise, after a business combination accounted for by the purchase method, the amount allocated at the date of acquisition to the assets acquitted and the liabilities assumed (including goodwill) should be translated in conformity with the requirements of this statement”. Given that, it would seem that guidance would call for calculating the adjusted value, based on exchange rates, of the goodwill for a foreign subsidiary, well after the actual business combination.

            I’m always pretty intrigued when I find a topic that is so open to interpretation, and one that can have a material effect on income statement or balance sheet accounts. In this case, the adjustment resulted in a 7% increase in reported goodwill. What will be interesting to see is if the same downward adjustments are reflected in future reporting if the exchange rate becomes unfavorable. Thanks again to my Twitter contact up in Santa Rosa!

Thanks for reading . . . .

Jeffrey Ishmael

SFAS 142 & Increasing Goodwill in a Down Climate . . .

September 15th, 2009 Comments off

            One of the aspects I enjoy about my profession is the continual evolvement of standards used for financial reporting. Usually, they are relatively straightforward and don’t take excessive work to understand the mechanics. In other instances, you find an approach taken by a company, on a standard you may have thought you were clear about, and you’re left scratching your head wondering what you missed. Take for instance the recent 10Q filing by Quiksilver, Inc. (ZQK). In the recent 10Q I noticed that their recorded level of goodwill had increased by $22.1 million, or 7.4% over the last 9-months. According to the company filing, “The increase was primarily related to the effect of changes in foreign currency exchange rates”.

            When I read this I was a bit puzzled as I had not previously seen reported figures where goodwill was adjusted due to a foreign exchange impact. Since I don’t profess to being the accounting oracle, I made a number of calls within both the accounting sector, as well as the private equity sector, which I thought the latter would have definitive insights on anything that would impact goodwill. Of those I spoke with, none were familiar with such a situation or precedent. While SFAS 142 has been straightforward, it was clear that I have some additional homework to do. I’m not calling foul on the reported figures, but it’s certainly an application of 142 I have not previously seen and am a bit intrigued.

            The other part about the filing that was interesting to me is that the company is increasing the recorded value of their goodwill in a period when most are restating. Further, Quiksilver has been divesting non-performing entities over the last year, which were the primary contributors in the increase of goodwill going back to 2004. In 2004 the company had a reported goodwill total of $169.8 million. This amount increased to $449.4 million in 2005 with the acquisition of DC Shoes, Rossignol, and Surfection. Of the $317 million increase, $244 million was attributed to Rossignol, which has now been sold. Interestingly, recorded goodwill is 89% higher now than prior to the volume of acquisitions the company undertook starting in 2004. However, it should be noted that goodwill was reduced between the 2006 and 2008 period by $215 million, from the high of $515.7 million. With that said, and with the current state of the Retail and Apparel sectors, I have to wonder if Quiksilver is a prime candidate for further write-downs in this area as the sector continues to struggle.

            Don’t have a conclusion on the topic at this point, but it’s certainly a reporting issue that creates a great topic of conversation and challenges what we know about the reporting standards in place. I definitely want to find other examples of companies that have increased their stated goodwill, or reduced, in the face of currency exchange. I’m also interested to really dig into the mechanics of the goodwill in this situation and get a better understanding of the application of SFAS 142. I’ve got my homework cut out for me…..

Thanks for reading . . . .

Jeffrey Ishmael