BroadPeak Executive Forum

Weak Outlook for Durable Goods Companies

They have weathered the credit crunch so far, but if consumer spending continue to slide, these companies' debt ratings could follow suit.

Stephen Taub
CFO.com | US

January 24, 2008

A continued drop in consumer spending could cause especially weak financial performance for most companies in the consumer-durables sector, Moody’s Investors Service warned. That could mean there will be more negative debt ratings than positive one for such companies over the next year.

On the brighter side, Moody's said that while a few speculative-grade companies are particularly vulnerable to covenant violations, most companies could see a 5 percent to 10 percent decrease in profitability and still comply with covenants.

"Consumer-durables companies have withstood the subprime-driven credit crunch, so far," Moody’s said in a new report. "But the first quarter of 2008 will be an important test for the sector, especially if discretionary consumer spending continues to soften."

Moody’s said a review of 38 rated consumer-durables companies shows that five have debt maturities through 2009. Three of those — Brunswick, Whirlpool, and Dixie Group — have more cash available from revolving credit facilities than the amounts due. But two others, Human Touch and Waterford Wedgwood, both rated Caa1, could be vulnerable.

Human Touch has a 2008 maturity that is close to double the current amount available under its revolver, and the same is true for Waterford Wedgwood in, Moody’s noted.

Among the remaining 33 companies, most appear to have enough cash on their balance sheets or availability under their credit facilities to meet maturities, working-capital needs, and capital expenditures over the next couple of years, provided that current projections of cash flow from operations hold up, the rating company said.

But it added, "That said, we are concerned about how long the credit tightness will last and about its effect on speculative-grade consumer-durables companies, which face the highest liquidity risk."

Consumer-durables issuers with minimal covenant cushions that may require amendments to their facilities include Gibson, Hillman, and Directed Electronics.

"If credit facilities need to be renegotiated, we believe that banks would be less forgiving than they have been in the recent past, especially if a company has breached loan covenants," Moody’s said.

Moody’s ranked consumer-durables industries from least vulnerable to a consumer spending slowdown — mattress companies — to the to most vulnerable — recreational-product companies.

What You Don't Know about Headhunters: 10 Tips

Understanding what makes recruiters tick is a vital but often overlooked component of the job hunt. With a recession looming, it may be more crucial than ever.

David McCann
CFO.com | US

January 21, 2008

At long last, you have made the tough decision: it's time for a new job. Or maybe someone else decided that for you. Whatever the motivation — new owner, new boss, company going bankrupt, getting fired after a restatement — the first thing to do is find some executive recruiters. Right?

At this point, you might as well. But it would have been smarter to forge relationships with recruiters when you weren't in such a hurry to move — that way, a recruiter could have contacted you as positions became available. Not only is that how they prefer to work, it's a far surer path to making a change than pushing the panic button and expecting something to happen overnight.

Understanding what makes recruiters tick is a vital but often overlooked component of the job hunt. Here's what you need to know:

   • The right recruiter. There are two kinds of recruiting firms: contingency and retained. The contingency firms get paid only when a candidate they found gets hired by a client. "There are some good ones, but many of them just throw a lot of spaghetti at the wall to see what sticks," says Lorraine Hack, a partner in the financial-officer practice at Heidrick & Struggles, a retained firm. "If you don't want your résumé to be all over the place like the daily news, you might not want to go that route." Companies hire firms like Hack's on retainer to identify candidates, thoroughly learn about them, and present a short list to be interviewed. But the lower the salary allocated for a slot, the less likely retained recruiters are to take on that search, so recruiters paid via contingency fees are frequently used to fill lower-level positions.

   • E-greetings. To make initial contact with a recruiter, send an E-mail. "Some candidates think paper résumés stand out, but E-mail is interactive — I can just hit 'reply' to get back to you," says Hack. And her opinion about cold calls: "Very poor." Some recruiters, like Chuck Eldridge, managing director of the financial-officers practice at Korn/Ferry International, don't mind a phone call or even a brief visit to get acquainted — to a point. "I can't do that with every finance person in the country," he says. Which brings us to the next point.

   • It's a rat race. Working on about 10 searches at a time, a recruiter might make five calls to prospective candidates per week on each search, according to Hack. That's 50 calls. Each client wants weekly telephone updates on the search progress, which eats up several hours. Candidates who pass initial muster must be interviewed, followed by a written report to the client; this process takes a couple of hours a pop, and sometimes a whole day, if the recruiter must travel to do the interview. That's not to mention their own intracompany meetings or the small matter of finding new business.

Why should you care? "If you call a recruiter and they don't call back, it isn't necessarily because they have a bad feeling about you — it's that they're overwhelmed," says I.H. "Chip" Clothier, managing partner of HFC Executive Search. "There's an assumption that if you call someone they're going to call you back, but it physically can't work that way." Also note that while you may be out of a job, calling recruiters every week for an update is not productive and likely will just annoy them.

   • Poor returns. On the other hand, recruiters take a dim view of you not returning their calls. Aside from providing all information about your accomplishments and employment history, the single most important thing to do when making a career change is to return phone calls, according to Eldridge. "It's simple, but the number of people who don't return calls is unfortunately very high," he says.

   • It's a cold world. Cold-calling not only can be an annoyance to recruiters, as indicated previously, it's also not likely to land you a job in the short term because headhunters generally do very specific searches. The vast majority of positions they fill are the result of their own proactive searches. Even if you get through to the recruiter and ask what searches are in progress, finding a match is a longshot. "Our clients usually have precise requirements for what they want," says Eldridge. "A lot of times people will try to 'bend' their résumé to fit the situation, but I have to tell them I can't — the client was very clear."

   • Heavy hitters. Don't make the mistake of assuming that a recruiter is a lightweight go-between that you cursorily pass by on your way to the real interview. Retained recruiting firms play an enormous role in helping determine who gets hired. If you don't ace your interview with the recruiter, you will never get to see the actual employer. And do not assume you can b.s. the recruiter because he or she knows little about finance. Hack, for instance, is a former CFO, and Eldridge had a long career at a Big Four accounting firm.

   • Back-scratching. Among the best ways to build a relationship with recruiters is to help them succeed. If one calls you about a job that is not right for you, make every effort to refer him or her to someone else who might be more appropriate. "I don't forget that, and I try to pay those little dividends back," says Clothier.

   • A wide net. Don't limit your efforts to network with recruiters to E-mails and phone calls. "Getting to know recruiters through other means is smart," says Clothier. There are professional conferences, finance-industry events, and networking organizations such as the Financial Executives Networking Group, where you can rub elbows with recruiters. "Those are great opportunities for getting to know somebody face-to-face in a 10-minute conversation that can be followed up on later," he adds.

   • On the record. Most major recruiting firms offer Websites where you can enter your profile and a résumé into a database that all of the firm's search professionals can tap. The information can be updated at any time; if you are moving to Denver, say, make a note of it in your online profile, which typically will trigger E-mail alerts to the firm's finance recruiters.

   • The ship is already sinking. And, yes, do not wait until you are in trouble or transition to start calling recruiters. "It is extremely unfortunate that so many people don't network or do it too late," says Eldridge.

January 17, 2008 BroadPeak CFO Forum - A Huge Success

On Thursday January 17 BroadPeak was proud to host its second annual beginning of the year kick-off CFO Forum at the Federal Reserve Bank of Chicago. 35 attendees enjoyed comments on the 7th District economy from Federal Reserve Economist Bill Strauss.  Following Bill's dynamic speech attendees were given a tour of the Fed by Jerry Nelson, the Chicago Fed's popular docent.  The event was well received and was frankly a lot of fun.  Thank you to all who attended!

Audit Firm Bigs Cite Lust for Global Standards

The CEOs of the Big Four plus two say that melding global financial-reporting standards is the top accounting priority among a range of stakeholders.

Marie Leone
CFO.com | US

January 16, 2008

The push for a single set of global accounting standards has reached fever pitch. At least that's what the heads of major accounting firms are claiming. After two years of convening roundtables in such financial centers as Cape Town, Tokyo, New York, Santiago, and Paris, a group of jet-setting chief executives from the world's six largest accounting firms concluded that CFOs, investors, and regulators show "near-universal" support for moving toward a single set of global accounting standards.

The findings were released at the Global Public Policy Symposium, held in New York this week, and echoed the same call for a single set of standards that the accounting firm CEOs laid out in their own position paper on principles-based accounting, also released at the conclave.

While convergence was foremost on the mind of stakeholders, they also show support for common auditing standards and consistent regulatory oversight, according to the report. Prevention and detection of fraud and the future of business reporting came in third and fourth, respectively, on the list of accounting concerns.

The report, "A Global Dialogue with Capital Markets Stakeholders," was authored by Samuel Di Piazza of PricewaterhouseCoopers; Timothy Flynn, KPMG International; David McDonnell, Grant Thornton International; James Quigley, Deloitte Touche Tohmatsu; Frans Samyn, BDO International; and James Turley, Ernst and Young.

While "virtually all stakeholders" backed the idea of one set of principles-based standards, they worry about countries that rely on "overly prescriptive rules-based" standards — including the United States, according to the report. Specifically, the stakeholders felt that current legal and regulatory environments contribute to unnecessarily rigid rules. What's more, they identified a lack of education and training in applying and interpreting International Financial Reporting Standards, the current global accounting rules.

The stakeholders also expressed concern about the ability of smaller businesses to shift to IFRS. In fact, some stakeholders wondered whether IFRS was the right set standards for small and medium businesses, according the audit chieftains' report.

As expected, the stakeholders were keen on audit quality, emphasizing that auditors should be accountable to shareholders rather than management to assure that quality isn't compromised. They also touted the Sarbanes-Oxley Act as being the force behind changing the relationship between auditors and management, requiring that outside auditors are hired by and report to audit committees rather than management.

The stakeholders wanted to see a single set of auditing standards as well as a universal set of "auditor independence" rules to wipe out complications associated with multiple definitions of the term.

The constituents generally agreed that regulatory oversight has steadily improved and cited steps taken by the European Union to bring more consistency to its decisions as a big factor in the improvement. They also cited efforts by the International Forum of Independent Audit Regulators to improve cross-border communication as another successful step toward a common audit approach.

They also believe that an ounce of prevention is worth a pound of cure when it comes to fraud, and want to attack financial misdeeds through prevention as well as detection. Nevertheless, the stakeholders admitted that everyone — auditors, investors, management, and regulators — must do their parts to thwart fraud.

The report also looked to the future of business reporting. One regulator said, according to the report, that while financial reporting may meet requirements set out in the rules, it sometimes doesn't provide the actual information needed to understand what's happening within a company. The suggested cure: customizing data for different end-users, an endorsement for adopting the data-tagging computer language called XBRL (extendable business reporting language) for filing financial results.

Stakeholders also broadly agreed that non-financial information is increasingly important in assessing company performance. But they could not agree on what disclosures would strike the right balance between transparency and releasing sensitive information.

Timeliness in reporting was championed, but "real time" reporting was nixed. The reason: It would lead to market inefficiencies because analysts would spend too much time updating models and ultimately lose sight of long-term analysis.

Deloitte Dumped for 43% Discount

A micro-cap company decides its Big Four auditor is too expensive.

Sarah Johnson
CFO.com | US

January 9, 2008

When Catapult Communications Corp. made the uncommon decision to drop a Big Four accounting firm in favor of a local, smaller auditor, it also took the unusual step of announcing its reason for the switch: Deloitte & Touche, Catapult's auditor of the past two years, was simply not offering the right price.

By hiring Los Angeles-based Stonefield Josephson, Catapult estimates it will save 43 to 49 percent in accounting expenses this year, off the $985,000 the Mountain View, California-based company would have paid Deloitte for fiscal 2008.

Catapult claims the change in audit firms will create "significant savings ... without negatively affecting the quality of the audit and related services." Considering its relatively small size — $102 million in market capitalization — saving nearly half a million dollars was significant, Catapult's investor relations representative, Leigh Salvo, told CFO.com.

Catapult, which supplies telecom test systems to service providers like Alcatel-Lucent and Motorola, also was attracted by Stonefield's team, service offerings, and background, Salvo said. Practical Accountant ranked Stonefield 67th among accounting firms in revenue last year, with $40 million. The firm has four California offices, one Hong Kong location, and more than 100 employees.

It's not a surprise Catapult was looking for ways to cut expenses. The $39.3 million company reported a 17 percent drop in its revenue for fiscal-year 2007, which it blamed on the consolidation of its customers and increased global competition.

To be sure, Jeff Garrison, Stonefield's president, says cost savings isn't his firm's main selling point. Like most auditors, Stonefield touts its high-quality work. However, he told CFO.com the firm was able to offer a lower rate than Deloitte in part because its partners don't have to deal with as much bureaucracy and can make decisions sooner without having to check in with headquarters.

At the same time, Garrison acknowledges that a regional firm like his does not fit every company's needs. In general, large-cap companies prefer using a Big Four firm, and Stonefield may not have the technical, industry-specific expertise to handle the review of some companies' financials without relying heavily on affiliated firms.

In announcing the change in auditors, Catapult said it has had no unresolved disagreements with Deloitte during its two-year partnership — a fact the accounting firm agreed with in a letter accompanying Catapult's latest 8-K filing. Deloitte did not respond to CFO.com's request for comment by press time.

However, the relationship ended soon after Catapult addressed a material weakness in its internal controls. In its financials for the quarter ended September 30, 2007, Catapult announced it had resolved the outstanding weakness, which resulted in properly classifying variable rate demand notes during the previous year.

 

How Do You Know When to Quit Your Job?

Last night, I was talking to my friend Whitney about her frustrations with her job. Whitney works for a small privately owned company where she is the top-ranking finance person. I think her title is CFO but I am not certain. She started at the company a couple of years ago when she had just graduated from college and because she is extremely competent and hardworking she has assumed progressively more responsibility the longer she has been employed by the company. She is one of those people (every company has one) who is the go-to person for everything. She "gets it" and never lets the ball drop no matter what she has to do to fix the problem. She knows how everything works and she always thinks about the big picture even when she is working on the most mundane of details.

The problem is that Whitney works too hard in relation to her compensation and rewards program. She worked all day on new years eve and half a day on new years day just to get caught up because they are understaffed. And she is grossly underpaid for what she does. If your employer doesn't value your contributions enough to staff properly or pay you fairly then why kill yourself for the job? I told her that she is just too young to be this stressed out over a job. She seems to like the job when the owner is pleasant to her but he isn't always easy to get along with and at those times it just isn't worth the effort to her. Should she quit?

Here are my thoughts on how to tell when its time to cut your losses and get out of a  difficult job:

1. If you are young, have few financial commitments, and you are underpaid and overworked you should think about looking for another job. You can get some great experience at a small company but if you aren't paid fairly for the work you do (Whitney needs a new car but can't afford one on her salary) and if there is no possibility for advancement you should start looking for new jobs. Consider larger companies where you can earn more money and learn new skills that you can leverage later on.

2. If you are being sexually harassed or if you work for an abusive boss you should look for a new job. If you don't find another job before the environment becomes more than you can handle, hire a good attorney to help you negotiate your exit. I would add that if you work for a manager who is abusive to you (not necessarily textbook "harassing")on a regular basis you should look for another job. I have read management books that preach flexibility and honing your ability to adapt to any manager and, on some level I agree. But there are some mean people in the world and if you work for one you should get out before it affects your self esteem, your health, or your advancement options.

3. If you work for a company or in an industry that is in decline it's probably time to find a new job. You don't want to be the last man/woman standing when they start laying off because you won't have the the same appeal to a new employer at that point. Pay attention to the writing on the wall and if it looks like layoffs or office closings are going to happen you should get out before the sh-t hits the fan.

4. If you are approached by a recruiter about a great job with another company it's time to go on an interview. Forget loyalty, look out for your own career and meet with the recruiter about the job. For one thing, you can't turn down a job you haven't been offered. So at the very least find out more information about the potential job. I have talked to a lot of folks over the years who say things like, "I can't leave my job because my boss has been so good to me and they really need me." Really? It's great to be loyal but understand that these days any employer will lay off any employee if business needs change. Look out for yourself because when push comes to shove your employer will most certainly put its needs before yours.

5. If your employer doesn't share your values or offer benefits that you desire you should seek an employer that does. Tuition reimbursement is a great example of this. Some employers don't offer any tuition reimbursement (perhaps a sign that they don't value higher education) while others have very generous programs. Many people (myself included) have sought out employers who are willing to pay for all or a large part of a graduate degree. For most people past the age of 25, going to graduate school full time means taking a hit in pay that you may or may not recoup later. Any assistance you can get from your employer that allows you to attend graduate school part time is a very valuable benefit.

6. If your office is a hostile or negative work environment you should get out for your own good. I worked for a company once where everyone was tense all the time because of the high pressure and culture of distrust and disrespect. I lasted a year and it took a toll on my health. You have to live with the body you were born with for your entire life so I don't think it makes a lot of sense to let a job affect your health.

7. If you want to change careers or jobs and you can't do that at your current employer you should find a new job. Are you working for a bank but you really want to join the Peace Corps? Then apply for a job with the Peace Corps...don't stick around a job you don't like. Don't be afraid to change careers or try for your dream job.

Lots of people take whatever job they can find right out of college. Then they get promoted, then they move to another department and do a great job so they are recruited by a competitor. They make more money along the way and then they wake up at age 45 and say, "How did I get here? This isn't the life I envisioned." Be strategic about your career and at least once a year take some time to evaluate the career path you are on. Don't be afraid to change directions if you aren't headed in the right direction for you.

A job isn't a marriage - you can leave whenever you want. Don't be afraid to look for a new job if your current one isn't working out for you for whatever reason. A great time to start to look for a job is at the first of the year because many employers are hiring at that time (now). So what are you waiting for? Update your resume, call BroadPeak, and start that job search!

Originally posted at http://ultimate-resumes.blogspot.com/

A Silver Lining amid the Credit Crunch

The market for asset-backed commercial paper suddenly surges. Is it a fluke or the beginning of a trend?

Stephen Taub
CFO.com | US

January 4, 2008

Amid the angry clouds over the credit markets, there is this silver lining: The market for asset-backed commercial paper grew for the first time since August during the week ended January 2, Bloomberg reported. And the cost for borrowing in that market fell to the lowest level in 22 months.

Asset-backed commercial paper is debt backed by mortgages, credit-card loans, and other assets that matures in 270 days or less.

The total amount of this paper rose $26.3 billion to a seasonally adjusted $773.8 billion for the week, according to Bloomberg, citing Federal Reserve data. The 3.5 percent increase was the largest in at least seven years, it was noted.

That gain, however, came after 20 straight weekly declines thanks to losses from subprime mortgages, which scared away investors from most debt markets.

According to analysts, data from the Federal Reserve in the coming weeks will tell whether the sudden growth spurt in the asset-backed market was a fluke linked to "extraordinary" efforts by central banks to keep the market liquid, the Associated Press reported.

Regarding the falling cost of capital in this market, Bloomberg noted that the yield on paper due in 30 days posted its biggest weekly decline in at least a decade — down 116 basis points, to 4.63 percent. That works out to nine basis points more than the one-month London interbank offered rate (LIBOR), according to Bloomberg.

In the first half of 2007, the yield on asset-backed commercial paper was on average 5.5 basis points less than LIBOR, according to the wire service.

Happy New Year

Happy New Year to all of our wonderful clients, friends, colleagues, and families.  We are honored to interact with all of you and without you, we wouldn't be the "BroadPeak" you know today.  We wish you a happy, healthy, and prosperous 2008 and we look forward to seeing you in the very near future!

Cheers!

Tony, Tom, Liz, and the entire BroadPeak Team