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Jay Potter

Finance Team Meeting Middlefield, OH March 11 - 12. Jay Potter. Special Recognition. Way to go Bruno leading the standard cost project and startup!!!!. Agenda. Thursday, March 11 th 7:30-8:00 - Breakfast at Middlefield Training Facility All 8:00 – 9:00 Jay Potter

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Jay Potter

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  1. Finance Team Meeting Middlefield, OH March 11 - 12 Jay Potter

  2. Special Recognition Way to go Bruno leading the standard cost project and startup!!!!

  3. Agenda Thursday, March 11th • 7:30-8:00 - Breakfast at Middlefield Training Facility All • 8:00 – 9:00 Jay Potter • Goals for the Meeting • Vision for Finance and • Functional Charter • 9:00 - 11:45 – Individual Presentations (Outline Attached) All • 12:00 1:30 - Potluck Lunch at Corporate Office • 1:45 – 3:30 – Individual Presentations (Outline Attached) • 3:30 – 5:30 Team Breakout Sessions: These sessions will pair up the common functions to accomplish the following: • Critical Day One Operating Model / Approach • Identify specific opportunities for best practicing • Understand the systems barriers to an integrated Finance team • Recommend Next Steps • 6:30 Dinner at Flemings

  4. Agenda Friday, March 12th • 7:30-8:00 - Breakfast at Middlefield Training Facility All • 8:00 – 11:00 Report Outs - Each team to present to the team their summary of: • Best practice opportunities • Review of the barriers • Key issues of concern • Recommended next steps • 11:00 – 12:00 – Oracle Update Doug Bennett

  5. Finance & Accounting

  6. Opening Comments / Goals of Our Meeting • MC Financial Results and Expectations • MC Strategic Direction • Strategic Themes for Finance • Compelling Reasons for Change • Finance Vision (Core Themes) • Finance Functional Charter Jay’s Topics

  7. Get to know one another • Gain a shared understanding of how things get done • Review Masco Cabinetry Strategic Themes • Develop outlines of key MC projects to be worked by the team based on breakout sessions • Have some fun!! Goals of Meeting

  8. Masco Cabinetry Financials

  9. Masco Cabinetry Revenue

  10. Quarterly Revenue Forecast ADS % Qtr. To Qtr. Chg. $4.846 $5.273 +8.8% $5.156 -2.2% $5.364 +4.0%

  11. Masco Cabinetry Operating Profit * 2009 normalized for one-times ** 2010 excludes integration costs ($1M)

  12. Working Capital Days Goals

  13. Total Cost Comparison * 2009 adjusted for reserves and significant one-times. 2010 excludes integration cost.

  14. Masco Cabinetry Strategy and Linkage to Goals

  15. Masco Cabinetry - Strategic Intent Our brands in 1 out of every 2 homes. Vision We inspire and create kitchen and bath solutions with meaningful innovation and consumer-preferred brands. Mission Execute seamless business integration Launch winning brand portfolio Accelerate dealer channel growth Leadership AgendaItems • Understand consumer segments and purchase drivers • Determine brand positioning, align product road; determine service model • Develop and execute new programs, promotions and advertising to support positioning • Determine brand/channel strategy • Determine product pricing strategies • MC organizational design execution • Internal/external comm.planning • Key initiative tracking/value capture • Maintain progress on critical existing initiatives (eg. bt2, QBAC, product launches) • Footprint optimization • Grow dealer base in under-penetrated areas; Grow BOS with existing dealers • Develop program and selling strategy for 3-brand, go-to-market initiative (including DeNova) • Lead in the LBM segment Develop home improvement retailer strategy Reinvent the category with innovative kitchen & bath solutions Establish countertops as a growth engine for the business • Opportunities for category leadership/management • New/unique in-store support • offering • Focus opportunities in kitchen & bath • Drive differentiated product and service innovation • Create organization to drive type “A” products • Integrated development process • Simplify purchase process for consumers • ProCision acceleration • Establish nat’l. DCF and DFI network • Develop countertop/vanity & kitchen category at home centers • Innovate supply chain to drive cost leadership position Ease of Doing Business Technology Attract, develop, and retain the best talent People

  16. Masco Cabinetry Strategy Map Vision: Our brands in 1 out of every 2 homes. Mission: We inspire and create kitchen and bath solutions through thoughtful innovation and trusted brands through thoughtful innovation and trusted brands. • Financial Perspective: • What do shareholders expect from the Masco Cabinetry? Grow Revenue Attain $1417.0 million in Revenue Integration Synergies Attain Savings of $5.0 million Grow Countertop Revenue Attain $75.0 million in Revenue Achieve Premier Profitability excl Integration Costs $40.0 million Working Capital Attain 32 net days Cash Flow Attain ______% • Our Target Customers/Their Value Drivers: • Who are our target customers? What do they value from the Masco Cabinet Group? • What is our competitive advantage? Consumers Home Improvement Retailer Builders Dealers Execute seamless business integration Accelerate dealer channel growth Launch winning brand portfolio strategy for consumers and trade • Strategic Focus Areas/Leadership Agenda Items (2010-2012): • What must we collectively focus on and prioritize to drive our financial results and long-term success? • What initiatives will support each focus area? • How will we define/measure success in each focus area? • Note: Supporting Initiatives will be combination of short-term (2010) & long-term (2010+) • MC organizational design execution • Internal/external comm.planning • Key initiative tracking/value capture • Maintain progress on critical existing initiatives (eg. bt2, QBAC, product launches) • Footprint optimization • Simplify purchase process • Determine role of channel brands • Grow dealer base in under-penetrated markets • Own the LBM segment • Understand consumer segments and purchase drivers • Determine brand positioning and align product road • Develop and execute new programming and advertising to support positioning • Determine brand/channel strategy Develop new home improvement retailer strategy Reinvent the category with innovative kitchen & bath solutions Establish countertops as a major growth engine for the business • Opportunities for category leadership/management • New/unique in-store support • offering • Focus opportunities in kitchen & bath • Drive differentiated product and service innovation • Create organization to drive type “A” products • Integrated development process • ProCision acceleration • Develop countertop/vanity category at home centers • Integrated cabinet/top special order program for dealers • Organizational Capability (People & Operations): • What must we do internally to deliver value to our customers? • What must we do to enhance our people and organizational capability? i.e. Process & Operational Excellence Develop & Grow Our People Build a Vibrant Culture

  17. Masco Cabinetry 2010 Strategy Map Metrics

  18. Masco Cabinetry 2010 Strategy Map Metrics

  19. How Does This Apply to Finance?

  20. Integration • Shared Services, Outsourcing • Decision Support for Masco Cabinetry • Driving World Class Financial Performance • Building and Maintaining a World Class Finance Team (Career Development & Succession Planning) • Common Ledger and Payroll (Oracle / PeopleSoft) • One Set of Shared Financials to Masco for Q2 2010 • Utilize Lean Tools to Improve (i.e. kaizen, six sigma, value stream mapping, etc.) Strategic Themes for Finance

  21. Transaction Processing Decision Support • Transactional Efficiency (i.e. 1 invoice, 1 payment) • Process Effectiveness (Standardization) • Improve Service Levels • Increase Decision Support Focus • Cost Reduction / Cost Competitiveness • Build Scalable Financial Processes to Support a Growing $1.2+ Billion Business Compelling Reason for Change

  22. Finance Vision Core Functional Themes Transaction Processing Decision Support Day 1 (Early to Mid May) End State (2011 – 2012) Day 100 (September) • Business process • Implementation plan complete for financial processes. • Oracle implementation in process • bt2 support in place • Org • N-2, N-3, N-4 and N-5 offers made and accepted • Key transitional resources identified and locked down with agreements • Systems and Platforms • Oracle implementation in process • Target close RCG in Oracle for May • JDE at RCG still providing interfaces to Oracle • Business process • All financial processes consolidated • Delivering highly effective and customer centric customer setup process • Single invoice for all Masco Cabinetry products • New controls framework in place and functioning • Masco Cabinetry PeopleSoft payroll process • Org • Well qualified Finance team in place driving world class levels of decision support, efficiency and effectiveness in support of Masco Cabinetry vision and in one facility • Business process • Payables centralized • bt2 implementation of Oracle wrapping up • Org • Legal entity for Masco Cabinetry work plan at 20% complete with a go-live of 1/1/2011 • DBAs in place • New organization is aligned and functioning • Systems and Platforms • Single close in Oracle • JDE disabled at RCG • Fixed assets complete in Oracle

  23. Finance: Transition Phases for Functional Org Design # Positions • Please include: • Additional Teams/Resources to be Added • 3 • April-October 2010 • Dedicated Finance resources will be required, primarily from the Middlefield staff, to work on the Oracle implementation team. • Adding a Payroll Manager position to handle the larger size of the payroll • Currently estimate that there are 12 total payroll people in the RCG. The Finance phase one state shows only BCG payroll and the end state goes to 6 for Masco Cabinetry Net reduction to Masco Cabinetry of 10 FTE New Resources -24% End of 2010 End-State 2011/2012 Phase 1 94 + 29 + 18 = 141 P/R-4; Pricing-2; Cust Setup-2; Review Ctr-10 94 + 20 + 26 = 140 P/R-6; Pricing-5; Cust Setup-3; Review Ctr-12 94 + 26 = 120 P/R-6; Pricing-5; Cust Setup-3; Review Ctr-12 # positions Interim redesign Rationale for each interim team required 4-A/P; 7-A/R; 1-PMO; 6-Cost; 2-FP&A; 3-GL; 3-SOX; 3-bt2 4-A/P; 7-A/R; 1-PMO; 3-Cost; 1-FP&A; 2-GL; 2-SOX Most of Finance will be functioning on existing systems and in separate locations until the Oracle Implementation is complete Financials will be implemented on Oracle for Masco Cabinetry by Oct. Employees should also be relocated to the new HQ for MC. With these two actions, Finance will be able to start the reduction of staff.

  24. Masco Corporate Finance (Key Points from GMM)

  25. Masco Corporate 2010 Goals & Objectives • Implement MBS • Innovation • Price / Commodity Relationship • Strategic Growth • Cash Generation • Talent / Diversity / Employee Engagement Deliver on Our Commitments!!!

  26. Masco Corporate 2010 Value Creation Goals • Grow $4.7 billion at 30% Incremental Margin • ROS 13 – 15% • ROIC > 15% • Cash on Hand of $ 2.5 Billion • EPS $2.50 - $2.60 • Stock @ P/E of 14X = $30 - $40 Deliver on Our Commitments!!!

  27. Masco Corporate Finance 2010 Goals & Objectives • Drive exceptional performance to achieve Masco’s value creation goals • Align finance around MBS • Focus on talent • Embrace process improvement • Rigorous commitment to: • Expense control • Cash generation section (key profit improvement / lean – goals)

  28. Questions ?

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