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Transcript of Spirit AeroSystems Facilitated by Mark Wood [email protected] Acumen Learning Building...
Spirit Spirit AeroSystemsAeroSystems
Facilitated by Mark WoodFacilitated by Mark [email protected] LearningAcumen Learning
Building Business Building Business AcumenAcumen®®
~Wayne Gretzky~
When asked by a reporter,
“What makes you so great?”
“I skate to where the puck… is going to be.”
Wayne responded by saying; “I don’t skate to where the puck is.”
“The Great One”
Acumen Defined: (Page 3)
• Quickness of perception• Keen insight• Mental acuteness
For fiscal year: 2010
Its OK to guess!
POP QUIZ!(Write your answers on Page 35)
Please use these customized questions
1. How much cash was on hand? _______
2. How much cash was generated from operating activities? _______
3. What were net revenues? _______
4. What was the net income? _______
5. What was the gross margin %? _______
6. What was SG&A as a % of revenues? _______
7. What was operating income as a % of Revenue? _______
8. What was the inventory turnover? _______
9. What was your return on assets (ROA)? _______
10. What was the % change in revenues year over year? _______
11. What was the % change in net income year over year? _______
12. What was the % change in diluted EPS year over year? _______
Today's Learning Objectives:
Know and understand what measures are important to Jeff Turner and the Executive Team.
Understand the five business drivers all successful businesses must focus on.
Have a better understanding of Spirit’s financial statements.
Become a better communicator of company strategy and performance.
Have an action plan on how you will positively impact company results.
(Page 4)
“When it comes to running a business successfully, the street vendor and the CEOs of some of the
world’s largest and most successful companies talk and think very much alike.”
Ram Charan Believes:
5-Step Approach per Driver:
Case Study
1. Define the driver.
2. Know how we measure it.
3. Know why it is important.
4. Discover our numbers (& comp).
5. Create an Action Plan.
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 6
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrengthUtilization
AssetsStrengthUtilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Five Business Drivers
1. Define the driver.2. Know how to measure
driver.3. Why is it important?4. Know the numbers (&
Competitor’s)5. Impact by creating an
Action Plan.
Definition:Cash: “Cash is the bills and coins in the register, petty cash, and cash in the bank. It also includes cash equivalents, like Certificates of Deposits (CD’) and other highly liquid investments (i.e. easily converted into cash within 90 days).”
Also see: Appendix: Cash, Page 58)
Cash Flow:
The cash generation from “core operating activities” • The difference between the cash that flows into and out of the business • In a given period of time, such as a quarter or a year.
Cash out-flows: result from: Cash in-flows: arise from: 1) expenses 1) operating activities
2) investments 2) investing activities 3) financing activities
Cash & Cash Flow (Page 8)
Cash: (Savings Account)
Cash Flow:(Checking Account)
$25,000 On hand
$80,000 Salary- $70,000 Expenses $10,000 ???
Pay off loans
Buy furniture
Put in savings
Cash is King!
“Cash is more important than your mother.“ -Al Shugart Former Seagate CEO
“Cash Flow is more important than profit.”
-Peter Drucker
“Cash is a company’s oxygen supply.” (It gives you the ability to stay in business) -Ram Charan
Fred Smith - FedEx
(Comes from core business, or core operating activities)
Why is CASH so important to a business?
(Page 8)
Can a company be profitable and go out of business?
Cash balance ended at $482 million, up from $66 million at the end of Q3.
Capital Expenditures Projecting $325 Million but spent $288. Free cash flow was -$163 million.
Cash
Adequate Funding. $650 Million LOC entirely available. Liquidity in excess of $1.1 Billion.
Cash Flow for 2010 was positive $125 million. Forecast for full-year 2010 projected at $75 million positive.
2007 2008 2009 2010
Total Revenue $3,861 $3,772 $4,079 $4,172
Net Income $297 $265 $192 $217
Driver: Cash
Cash $133 $217 $369 $482
Cash From Ops. $180 $205 -$14 $125
Cash Spirit AeroSystems
(Take notes on Page 9)
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 10
Spirit Aero Boeing United
TechnologiesGoodrich
Element 2007 2008 2009 2010 2010 2010 2010
Total Revenue $3,861 $3,772 $4,079 $4,172 $64,306 $54,326 $6,967
Net Income $297 $265 $192 $219 $3,307 $4,711 $579
Cash
Cash $133 $217 $369 $482 $10,517 $4,083 $799
Cash From Ops. $180 $205 -$14 $125 $2,952 $5,906 $514
Spirit’s Free Cash Flow: 2009 2010 CFOA -$14 $125 Cap Expen. -$228 -$288Free Cash Flow -$242 -$163
Spirit’s Performance on Cash
3.4% 5.8% 9.0% 11.6% 16.4% 8.4% 12.2%
Spirit’s 2010 Use of Cash:• $300 M in Inventory Build• $ 42 M in A/R Build• $288 M in Capital Expenses
CASH: Pay slower Collect faster… with the same sales revenues and costs.
CASH or CASH FLOW: Increase revenues/sales Reduce/costs
12
How can you personally impact CASH and CASH FLOW:(Personal action plan - page 9)
• Better training / faster ramp up
• Decrease or better manage inventory• Vendor Owned/Managed Inventory• Control expenses• Don’t hoard (tools, parts, people)• Reduce/conserve utilities• Reduce conflicts (systems, people,
processes, IT technologies)
• Reduce Waste
• Reduce re-work
• Control rivet usage/waste
• Manage/Reduce OT
• Increase sales/revenues
• Maintain schedule/ship dates
• Increase operational efficiencies
• Compress A/R – Extend A/P
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 13
Five Business Drivers
“No margin, no mission.”
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrengthUtilization
AssetsStrengthUtilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Profit is what is left over after you have paid your expenses. It can be expressed in dollars ($) or as a percent (%).
How do you increase Gross Margin?
The types of expenses you deduct determine which margin you are calculating. Most common margin calculations are:
Gross Margin: deducts Cost of Goods Sold (COGS)
Operating Margin: deducts Operating expenses (Overhead)
Net Profit Margin: deducts all expenses
Definition: PROFITS(Page 10)
#1- Increase price
#2- Lower costs
#3- Or Both!#3- Or Both!
= Gross Profit $ 565 13.5%
Revenues $4,172 - Costs of Revenue (COGS) - $3,608
2010(in Millions)
= Net Profit Margin $ 219 5.2%
Also called: “Net Income” and “Net Earnings”
- Interest & Other - $ 59
- Income Taxes - $ 78
Margins: Gross, Operating & Net
= Operating Margin $ 357 8.6%
- Operating Expenses - $ 156
- Research & Development - $ 52
High Margin
High Margin = Unique product and/or higher demand than supply.2010 S&P 500 Average Net Profit Margin = 11%
32%
28%
27%
Talent Management – AcumenLearning,LLC. All Rights Reserved. Use, disclosure, or distribution of this material is not permitted to any unauthorized persons or third parties except by written permission.
Differentiation
Patent
Mkt Share
Brand
Low Margin
High Margin = Unique product and/or higher demand than supply.2010 S&P 500 Average Net Profit Margin = 11%
1.4%
3.6%
1.7%
Talent Management – AcumenLearning,LLC. All Rights Reserved. Use, disclosure, or distribution of this material is not permitted to any unauthorized persons or third parties except by written permission.
Commodity
Manyalternative
Sells Volume
Membership“Price Club”
18
SPIRIT PROPRIETARY
Strong Core Business…Multiple New Business Wins
Core Business
New Business
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Production
ProductionLow Rate ProductionDevelopment
Sole-source, Life-of-Program Contracts… 737,777,787,747,767
A320, A330, A380
850XP
P-8A
G250
G650
CH-53K
A350 XWB
MRJ
Long-Term Growth Strategy
Test Units
CSeries
MIX
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 19
Spirit Aero Boeing United
TechnologiesGoodrich
Element 2007 2008 2009 2010 2010 2010 2010
Total Revenue $3,861 $3,772 $4,079 $4,172 $64,306 $54,326 $6,967
Net Income $297 $265 $192 $219 $3,307 $4,711 $579
Cash
Gross Margin 17.2% 16.0% 12.2% 13.5% 19.4% 27.4% 30.5%
Operating Margin 10.9% 10.8% 7.4% 8.6% 7.7% 13.2% 11.6%
Net Income Margin 7.1% 7.0% 4.7% 5.2% 5.1% 8.7% 8.3%
Segment (3 qtrs 2010)
Segment Revenue
Operating Income %
% of Company
Profits
Fuselage $2,035 14.4% 55%
Propulsion $1,062 12.9% 26%
Wing $1,067 9.5% 19%
Spirit’s Performance on Profit
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 20
• Sell more• Improve Quality Strengthen Pricing• Understand Product Mix (sell more of
the higher margin products)• Improve execution and up-selling• Make prudent investments in growth
• Sell more• Improve Quality Strengthen Pricing• Understand Product Mix (sell more of
the higher margin products)• Improve execution and up-selling• Make prudent investments in growth
Increase sales
• Negotiate materials costs• Reduce inventories• Decrease employee turnover• Scrutinize spend on R&D• Reduce/conserve Operating costs• Improve Project Planning
• Negotiate materials costs• Reduce inventories• Decrease employee turnover• Scrutinize spend on R&D• Reduce/conserve Operating costs• Improve Project PlanningReduce Costs
Profit is the difference between. . .
Revenue
Costs
Pro
fit
Increase sales
Reduce Costs
What area can YOU impact?
“if you are not talking about costs on a
weekly basis, challenge your boss”
-- Bob Skinner
Profits go to the Profit-
minded
Write down your Action
Item
Ways to Increase Profits
PROFIT: Increase price or decrease costs. Product Margin: Increase Price and/or Decrease costs or both Company Margin: increase Sales and/or decrease expenses or both Expressed in dollars ($) or as a percent (%).
21
How can you personally impact PROFIT:
(Personal action plan - page 11)
• Improve operational efficiencies• Better education on costs• Change requests go through proper
channels• Increase Revenue - Collect on work
that’s been done• Increase Revenue – Get quality right• Faster on-boarding • Reduce employee turnover• Improve accountability• Improve communication• Effective training
• Manage “Mix” (dev vs. prod programs)
• Decrease Re-Work ($225 per day) Decrease/Eliminate waste (840
lbs. of fasteners thrown out wkly)
• Reduce $109M Overtime by 50%
• Decrease utilities
• Reduce $50 Waste expenses
• Reduce shortages
• Reduce “rush” charges
• Timely and accurate data (visibility)
• Create accurate schedules
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 22
Five Business Drivers
Anything you own or control…which has value.
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrengthUtilization
AssetsStrengthUtilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Asset
12
Definition – What we have and how well we use what we have.
Equity Ratio – The ratio of shareholder equity to total assets.
Measures
Inventory Turnover – The number of times total inventory is sold or needs to be replenished. Example: 12 turns = once a month.
Return on Assets – The percent value of sales or revenues to total assets.
Asset Strength – the ability to remain viable during ups and downs in the marketplace.Asset Utilization – the ability to efficiently and effectively use assets to generate profits.
Talent Management – AcumenLearning,LLC. All Rights Reserved. Use, disclosure, or distribution of this material is not permitted to any unauthorized persons or third parties except by written permission.
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 24
Balance…
Asset Strength
Asset Utilization
Cash • Inventory • Credit Rating
Definition: Definition: AssetsAssets
Assets in Action
13
“In 1912, the Model T for the first time cost less than the prevailing average annual wage in the United States.”“Ignoring conventional wisdom, Henry Ford continually sacrificed margins to increase sales. In fact, profits per car did fall as he slashed prices from $220 in 1909 to $99 in 1914.”
“But Sales Exploded!”“Ford demonstrated that a
strategic, systematic lowering of prices could boost profits, as net income rose from…$3 million in 1909 to $25 million in 1914.”
~Daniel Gross, Forbes Greatest Business Stories
Talent Management – AcumenLearning,LLC. All Rights Reserved. Use, disclosure, or distribution of this material is not permitted to any unauthorized persons or third parties except by written permission.
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 26
Spirit Aero Boeing United
TechnologiesGoodrich
Element 2007 2008 2009 2010 2010 2010 2010
Total Revenue $3,861 $3,772 $4,079 $4,172 $64,306 $54,326 $6,967
Net Income $297 $265 $192 $219 $3,307 $4,711 $579
Driver: Assets
Inventory Turnover 2.4 1.7 1.6 1.4 2.4 4.6 2.0
Return on Assets 8.9% 7.1% 4.3% 4.3% 5.1% 7.0% 6.2%
Spirit’s Performance on Assets
ASSET EXECUTION = Efficiencies, productivity, speed,
making assets work harder Note: Profit x Asset = Return/Margin multiplier!
27
How can you personally impact ASSETS:
(Personal action plan - page 13)
• Better communication with other groups
• Decrease redundancies
• Use resources better within the company
• Share tools where appropriate
• Schedule more efficiently
• Encourage web meetings
• Don’t over build
• Cross train employees
• Alternative work arrangements
• Improve work flow / planning
• Improve understanding of priority
• Communicate performance
• Increase efficiencies (employee/company)
• Increase employee productivity
• Increase performance
• Increase process efficiencies
• Consistent QMR process
• Share best-practices
• Forecast more accurately
• Execute plans with more discipline
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 28
Five Business Drivers
Why is GROWTH so important to business?
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrengthUtilization
AssetsStrengthUtilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Definition:
Business growth is most commonly measured by:
1) Top-line (sales)2) Bottom-line (profit)3) Earnings per share growth (public company)
There are two types of growth:1) Organic growth: comes from a company’s existing
business2) Inorganic growth: comes from merger and
acquisition.
Definition: Definition: GrowthGrowth(Page 14)
In today’s business world, no growth means lagging behind in a world that
grows every day…
Investors expect it, employees are more energized by it, customers are
generally attracted to it and executives are measured by it.
Definition: Definition: GrowthGrowth
The Role of Growth
• Best & brightest leave first.• Productivity goes down.• Morale goes down.• costs are cut, which limits ability to grow, company becomes less profitable.
Business in Rapid
Decline
Business in Growth Mode
• Attracts/Retains the best & brightest!• Productivity goes up = more profit = more cash = more ability to grow!• Morale is typically higher.• You have the ability to grow in your career!
Growth is critical because of its impact on Employees & Customers.
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 32
Spirit Aero Boeing United
TechnologiesGoodrich
Element 2007 2008 2009 2010 2010 2010 2010
Total Revenue $3,861 $3,772 $4,079 $4,172 $64,306 $54,326 $6,967
Net Income $297 $265 $192 $219 $3,307 $4,711 $579
Cash
Revenue Growth 20.6% -2.3% 8.1% 2.3% -2.1% 1.3% 4.7%
Net Income Growth Up -10.6% -27.5% 14.0% -3.0% 10.9% -5.2%
Spirit’s Performance on Growth
Segment (3 qtrs 2010)
Segment Revenue
Revenue Growth
Op Inc. Growth
Fuselage $2,035 1.6% 1.6%
Propulsion $1,062 3.1% 12.2%
Wing $1,067 4.2% 388%
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 33
Guidance:200920102011Revenue $4,079$4,172 $4.5 – $4.7 B
Net Income $ 192 $ 219 $240 – $265 M
Cash Flow $ -14 $ 125 $ 75
CapEx $ 228$ 288 $ 325
Spirit’s Outlook
Analyst Recommendations and Revisions As of: 02/15/11
1-5 Linear Scale Current1 Month 3 Month 6 Month
Ago Ago Ago(1) BUY 6 7 7 6
(2) OUTPERFORM 3 4 4 5
(3) HOLD 10 7 5 4
(4) UNDERPERFORM 1 2 2 2
(5) SELL 0 0 0 1
No Opinion 0 0 0 0
Mean Rating 2.30 2.20 2.11 2.28
GROWTH = Increase: -top-line (sales), and/or
-bottom-line (profits), and/or
-earnings per share (EPS) for public companies. Quarter over quarter, or year over year increases Organic growth: comes from a company’s existing business Inorganic growth: comes from merger and acquisitions.
• Play a part in culture shaping and
acquisition integration• Hire talent that is strong and adaptable• Develop great leaders• Anticipate employee needs that will
support a growth strategy• Promote products to everyone!• Create quality and value• Create customer loyalty
34
How can you personally impact GROWTH:
• Increase global services• Provide exceptional service (Int’l & Ext’l)• Invest in employees• Share institutional memory/knowledge• Save cash to put into new programs• Help transition programs to Production• Get costs down to strengthen Spirit bids•
(Personal action plan - page 15)
© 2010 Acumen Learning. All rights reserved. Do not copy. 801-224-5444 | www.acumenlearning.com 35
Five Business Drivers
Customers and employees are the key to driving profitable & sustainable growth.
PeopleCustomersEmployees
PeopleCustomersEmployees
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrengthUtilization
AssetsStrengthUtilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Customers
17
What is more important than meeting customer expectations?
Exceeding?Anticipating Customer Needs &
Expectations!“If I would have asked my customer what they wanted, they would have said a faster horse!”
~Henry Ford
Talent Management – AcumenLearning,LLC. All Rights Reserved. Use, disclosure, or distribution of this material is not permitted to any unauthorized persons or third parties except by written permission.
“I skate to where the puckis going to be!”
~Wayne Gretzky
What companies have failed to anticipate customer expectations? What were the results?
Blockbuster AAA Kodak Sony
What limits companies from anticipating their customers’ wants and needs?
Failing to Anticipate customer needs/expectations!(Take notes on Page 17)
Ter
rible
Bel
ow a
vera
ge
Ave
rage
Above
ave
rage
Exc
elle
nt
0%
25%
0%
38%38%
Mean = 3.125
1. Terrible
2. Below average
3. Average
4. Above average
5. Excellent
How would Spirit’s customers rate the service they receive from Spirit?
QUIZ: 1 of 3
Ter
rible
Bel
ow a
vera
ge
Ave
rage
Above
ave
rage
Exc
elle
nt
9%
48%
0%
13%
30%
Mean = 2.4783
1. Terrible
2. Below average
3. Average
4. Above average
5. Excellent
How would you rate the service you receive from other internal people or departments?
QUIZ: 2 of 3
Ter
rible
Bel
ow a
vera
ge
Ave
rage
Above
ave
rage
Exc
elle
nt
4% 4%
16%
40%36%
Mean = 3.6
1. Terrible
2. Below average
3. Average
4. Above average
5. Excellent
How would your internal customersrate the service they receive from you?
QUIZ: 3 of 3
Customers: Both Internal & External
INTERNAL:
• Exceed deadlines• Be positive• Always follow through• Increase vision• Anticipate needs and expectations• Increase quality staffing• Increase employee education• Retain employees• HR: Hire the best!
41
How can you personally impact CUSTOMERS?
EXTERNAL:
•Listen with empathy to resolve unhappy customers•Qualify each customer•Better educate customers•Increase customer demos•Set up customer phones•Ensure equipment functionality before customer takes it home•Possess good product knowledge when selling •Increase customer negotiations•Increase customer awareness•Accurately set customer expectations
(Take notes on Page 17)
1. What is the basic equation for each statement?
2. What is the purpose of the statement?
3. What are the key numbers and how are they trending?
4. How can you impact each statement?
Income Statement Balance Sheet
Statement of Cash Flows
Proprietary & Confidential! (Take lots of notes!)
VZW Financial Statements
Spirit AeroSystemsHoldings, Inc.
Consolidated Statement of Operations
2010 2009 2008 ($ in millions, except per share data)
Net revenues $ 4,172.40 $ 4,078.50 $ 3,771.80 Operating costs and expenses
Cost of sales 3,607.90 3,581.40 3,163.20
Selling, general and administrative 156.00 137.1 154.5
Research and development 51.50 56.7 48.4
Total operating costs and expenses 3,815.40 3,775.20 3,366.10
Operating income 357.00 303.3 405.7
Interest exp. & fincing fee amortization (59.10) (43.6) (39.2)
Interest income 0.30 7 18.6
Other income (expense), net (0.40) 6.1 (1.2)Income before income taxes and equity in net loss of affiliates 297.8 272.8 383.9
Income tax provision -78.2 -80.9 -118.5
Income before loss of affiliates 219.6 191.9 265.4 Equity in net loss of affiliates -0.7 -0.2 —
Net income $ 218.90 $ 191.70 $ 265.40 Earnings per share
Basic 1.56 1.39 1.93 Diluted 1.55 1.37 1.91
17%17%
Pg. 28
Gross Margin – 13.5%
Revenues – Expenses = Net Income
Top Line
IncomIncom
ee
• Income Statement • P&L
RevenuRevenu
eses
ExpensExpens
eses
ProfitabilityThese are the critical few components to look for
Bottom Line
= Net Income / # of Shares
0.7%14%
(9%)1.1%
17%
2.3%
Revenues – Expenses = Net Income
Profitability
Top Line
Bottom Line
Gross Margin – 13.5%
= Net Income / # of Shares
106%
14%
3.6%3.6%
8.2%8.2%
5.2%5.2%
36%
7.4%7.4%
7.0%7.0%
11.9%11.9%
7.7%7.7%
16%16%
Profit discussion (Page 11 actions)
Growth discussion (Page 15 actions)
Look for Growth:• Top Line• Bottom Line
Then for Margins:• Gross Margin• Operating Margin• Net Margin
PerformVariance Anal.
Review
1. What is the report’s basic structure (equation)?
2. What are key measures and how are they trending?
3. What actions can I take to impact this report?
4. What is the reports overall purpose?
2010 2009 Current assets Cash and cash equivalents $ 481.6 $ 369.0 Accounts receivable, net 200.2 160.4 Inventory, net 2,507.9 2,206.90 Prepaids 9.9 14.2 Income tax receivable 45.9 45.5 Deferred tax asset-current 47.6 55.8 Total current assets 3,294.7 2,852.90
Property, plant and equipment, net 1,470.0 1,279.30 Pension assets 172.4 171.2 Deferred tax asset non-current, net 55.0 95.8 Other assets 109.9 74.6 Total assets $ 5,102.0 $ 4,473.8
Current liabilities Accounts payable 443.5 441.3 Accrued expenses 190.7 161.9 Profit sharing/deferred compensation 29.6 3.6 Current portion of long-term debt 9.5 9.1 Advance payments, short-term 169.4 237.4 Deferred revenue, short-term 302.6 107.1 Deferred grant income liability — current 5.1 — Income tax payable 3.1 3.5 Other current liabilities 11.3 18.3 Total current liabilities 1,164.8 982.2
Long-term debt 1,187.3 884.7 Advance payments, long-term 655.2 727.5 Pension/OPEB obligation 72.5 62.6 Deferred grant income liability — non-current 128.4 129.3 Deferred revenue and other deferred credits 29.0 46.0 Deferred tax liability — non-current 8.1 15.6 Other liabilities 45.8 52.1 Equity Common stock Common stock, Class B 150,000,000 shares Additional paid-in capital 983.6 949.8 Accumulated other comprehensive loss (75.3) (59.7) Retained earnings 900.7 681.8 Total shareholders' equity 1,810.4 1,573.3 Total equity 1,810.9 1,573.8 Total liabilities and equity $ 5,102.0 $ 4,473.8
BBBBBBBB
B
Most Liquid Pg. 27
AssetsAssets
Liabilitie
Liabilitie
ss
EquityEquity
“If we sell our Assets & pay our Liabilities, how much do we have left?”
These are the These are the critical critical numbers to numbers to look forlook for
Least Liquid
Due First
Due Last
Assets = Liabilities + EquityFinancial Strength
14%
15%
Review1. What is the report’s basic
structure (equation)?
2. What are key measures and how are they trending?
3. What actions can I take to impact this report?
4. What is the reports overall purpose?
Asset Discussion (Page 13 actions)
Cash Discussion (Page 9 actions)
Assets = Liabilities + EquityFinancial Strength
14%
15%
31%
Current Assets: Liquid < 1 Year
Current Ratio: Current Assets = 2.8Current Liabilities
Current Ratio: Current Assets = 2.8Current Liabilities
Equity Ratio: 35%Equity Ratio: 35%
Current Liabilities: Due < 1 Year
EquationCash: Operating Activities +/- Investing Activities +/- Financing Activities = Total Cash
IndicatesCash Management
Review1. What is the report’s basic
structure (equation)?
2. What are key measures and how are they trending?
3. What actions can I take to impact this report?
4. What is the reports overall purpose?
Cash Discussion (Pg 9)
Profit Discussion (Pg 11)
Asset Discussion (Pg 13)
Growth Discussion (Pg 15)
People Discussion (Pg 17)
EquationCash: Operating Activities +/- Investing Activities +/- Financing Activities = Total Cash
CashManagementWhere did the $$$ come from Where did the $$$ go toSame # at bottom of P&L
Same # at top of Balance Sheet
Cash +/-
Cash +/-
OpsOps
Cash +/-
Cash +/-
Investing
Investing
Cash +/-
Cash +/-
FinanceFinance
5-Business Drivers
30
Statement of Cash Flow
Statement of Income (P&L)
Balance Sheet
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Pop Quiz:Pop Quiz: (page 35)(page 35) For fiscal year: 2010
• How much cash was on hand? __$ 482 M_
• How much cash was generated from operating activities? __$ 125
M_
• What were net revenues? _$4,172
M_
• What was the net income? __$ 219
M_
• What was the gross margin %? __13.5 %__
• What was SG&A as a % of revenues? ___ 3.7%__
• What was operating income as a % of Revenue? ___
8.6%__
• What was the inventory turnover? ___ 1.4
X__
• What was your return on assets (ROA)? ___4.3 %__
• What was the % change in revenues year over year? ___2.3 %__
• What was the % change in net income year over year? ___14 %_
• What was the % change in diluted EPS year over year? ___14 %_
6-minute Tracker6-minute Tracker
445566 1122335 minutes left5 minutes leftIncome Statement CompletedIncome Statement Completed3 minutes left 3 minutes left Balance Sheet Completed - 2 minutes left Balance Sheet Completed - 2 minutes left ONE MINUTE LEFTONE MINUTE LEFTL e t ‘ s D i s c u s s . . .L e t ‘ s D i s c u s s . . .
1) In groups of 3, assign a report to each person:
Statement of Income (P&L , Statement of Earnings)
Balance Sheet
Statement of Cash Flows2) Take 2 minutes each, to teach your group:
1. How this report is organized.
2. What are key measures to look for. How are they trending? How can you impact this?
3. What is the overall purpose of that report?
3) Ask 1 or 2 questions.
T-3: Review & Teaching
Retaining Content over Time
(Page 52)
Time
ReviewApplyTeach
15%
Web Sites:
• www.nasdaq.com
• www.reuters.com
• www.yahoo.com
Where to Find Information
(Page 55)
• www.finance.google.com
• www.hoovers.com
• www.smartmoney.com
One final thought…
“People will work
hard for a paycheck,
harder for a person, and
hardest for a Purpose.”
~Thomas Monson
Post Course Action Items:1. 7-days: Teach one of the principals learned in class, to someone
in your department.
2. 7 days: Discuss your action items with your manager in the next.
3. 30 days: Read the first 90 pages of: “What The CEO Wants You to Know“
3. 90 days: Get with your class coach and give an accounting of your progress on the action items.
Start now:
Build and practice your new business acumen skills.
When making decisions, determine how the outcome will impact Cash, Margin, Velocity, Growth, Customers…
HINT: Tear out page 47 and use it at your desk!