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AICD 27 th Annual Meeting Orlando, Florida May 21 st , 2012

AICD 27 th Annual Meeting Orlando, Florida May 21 st , 2012. About CMC. Client Base 90%+ Industrial 70% North America (Office in Worcester, MA) 30% International (Office in Brussels, Belgium) Staff North America Europe Partners: 2 1

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AICD 27 th Annual Meeting Orlando, Florida May 21 st , 2012

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  1. AICD27th Annual MeetingOrlando, Florida May 21st, 2012

  2. About CMC Client Base 90%+ Industrial 70% North America (Office in Worcester, MA) 30% International (Office in Brussels, Belgium) Staff North AmericaEurope Partners: 2 1 Consulting Staff: 5 1 Administrative Staff: 3 Experience 30+ years Active Major Corporate Clients ($10B +): 8 Active Medium/Small Clients ($10MM-$1B): 300+ Currie Management Consultants, Inc.

  3. About CMC • Services • Strategic/Tactical Development • Financial Performance Reviews • Acquisitions/Consolidations • Educational/Implementation Programs • Leadership/Management Development • Market Place Performance Reviews • Customer Surveys/Employee Surveys • Pay for Performance Programs • Special Projects Currie Management Consultants, Inc.

  4. Clients Caterpillar Deere & Co. Freightliner/MB Ingersoll-Rand NACCO Kohler Hon Industries Bridgestone Industries Construction Equipment Agricultural Equipment Heavy Trucks Industrial Compressors Industrial Forklifts Generators Office/Hearth Products Commercial Tires Clients and Industries Currie Management Consultants, Inc.

  5. OVERVIEW Currie Management Consultants, Inc.

  6. The Value of Context • Rapidly Changing Business Environment • Constantly Evolving Business Strategies • Prior SWOT Analysis - Emphasis - SW Internal • Current SWOT Analysis - Emphasis - OT External • Constantly Evolving Financial Metrics Supportive of New Strategies Currie Management Consultants, Inc.

  7. Evolving Shareholder Behavior • Employee/Manager • Manager/Shareholder • Owner/Operator • Executive • Investor • Past • Past • Current • Current/Future • Future Currie Management Consultants, Inc.

  8. Major Trends in Distribution • Value Proposition / Process Management • Buyer Evolution • Aftermarket Growth • Consolidation • New Products and Services (Diversification) Currie Management Consultants, Inc.

  9. Evolution of the Market Currie Management Consultants, Inc.

  10. H. Igor Ansoff Model Currie Management Consultants, Inc.

  11. Portfolio Management Currie Management Consultants, Inc.

  12. Supportive Financial Drivers • Investor/Executive Objectives • Debt to Equity • Return on Assets • Operator/Manager Goals • Profitability • Asset Utilization • Absorption Currie Management Consultants, Inc.

  13. Revenue Earnings Return 90% Percentile 21% 26% 24% 80% Percentile 13% 18% 19% 50% Percentile 9% 10% 13% Shareholder Value 1300 Companies, 10 Year Average Annual Performance Lucier, C.E., Moeller, L.H., Held, R., “10X Value: The engine Powering Long-Term Shareholder Returns”, Business & Strategy, 8, pp. 21-28 Currie Management Consultants, Inc.

  14. CriticalElements • Revenue Growth • Through Account Management • Financial Performance and Discipline • Through a Financial Model Currie Management Consultants, Inc.

  15. Value Delivery Vision Market Opportunity Currie Management Consultants, Inc.

  16. Shareholder Value Chain Currie Management Consultants, Inc.

  17. General “Corporate” Expectations • >XX% Annual Increase in Enterprise Value • >XX% Return On Assets • >XX% Annual Compounded Revenue Growth • Demonstrate marketing competence • Achieve dominant unit market share position in target markets • Achieve dominant aftermarket share position through units under contract Currie Management Consultants, Inc.

  18. Benchmark Financial Performance • ROI • ROA – min. 21% • ROE • ROCE • CFROI (EBITDA/CE) • Funds Growth • Cash Flow • Min – 15% Yearly Sales Increase • Administratively Simple Currie Management Consultants, Inc.

  19. FINANCIAL REVIEW Currie Management Consultants, Inc.

  20. Supportive Financial Drivers • Investor/Executive Objectives • Debt to Equity • Return on Assets • Operator/Manager Goals • Profitability • Asset Utilization • Absorption Currie Management Consultants, Inc.

  21. Demonstrating Profitability Return on Assets Measures the overall effectiveness of management in generating profits with its available assets NBT% x Asset Turns Net Before Tax Measures profitability with respect to sales Asset Turnover Measures the efficiency with which management utilizes its assets to generate sales Currie Management Consultants, Inc.

  22. Financial Model %North America * G&A Expenses Are a Percentage of R,P & S Sales Currie Management Consultants, Inc.

  23. Financial Model $ • G&A Expenses Are a Percentage of R,P & S Sales Currie Management Consultants, Inc.

  24. Calculating Absorptionwith theFinancial Modelin Currency * G&A Expenses Are a Percentage of R, P & S Sales Currie Management Consultants, Inc.

  25. Absorption Total Rental, Parts, & Service Gross Profit 225.00 235.00 – 50.00 Total Expenses-Sales Dept. Personnel 122% Absorption at Model 225.00 185.00 Currie Management Consultants, Inc.

  26. Financial Model $ • G&A Expenses Are a Percentage of R,P & S Sales Currie Management Consultants, Inc.

  27. Model Balance Sheet Assumptions-AssetsCurrent Assets • Cash is shown as $0 • Accounts receivable turns are estimated at 8 • Inventory turns • 9 unit turns (financial) • 5 parts turns Currie Management Consultants, Inc.

  28. Model Balance Sheet Assumptions-AssetsFixed (Long Term) Assets • Rental Fleet book value is equal to annualized rental revenue divided by 1.2 • Other Fixed Assets are assumed to be 15% of total assets Currie Management Consultants, Inc.

  29. Model Balance Sheet Assumptions-LiabilitiesCurrent Liabilities Accounts payable Mfg. is assumed to be cost of goods sold for units and parts divided by 12 (assumes payment in 30 days) Equipment Financing is assumed to be the difference between Unit Inventory and the payment for Units shown above as current Accts. Pay. Mfg.(<30 days) Currie Management Consultants, Inc.

  30. Model Balance Sheet Assumptions-LiabilitiesCurrent Liabilities • Accounts payable other is assumed to be annualized operating and occupancy expenses divided by two (assuming one half are purchased on open account) divided by twelve (assume payment in 30 days) • Accounts receivable line of credit is 80% of the “eligible” receivable balance divided by 2 (assuming only 50% of the line of credit is used) Currie Management Consultants, Inc.

  31. Model Balance Sheet Assumptions-LiabilitiesLong Term Debt • Rental fleet financing is equal to rental fleet book value • Other long term debt is equal to other fixed asset net book value Currie Management Consultants, Inc.

  32. Model Balance Sheet Assumptions-Net Worth • Net worth (target equity) is the difference between the assets and the above stated liabilities Currie Management Consultants, Inc.

  33. CMC Financial Template • For this template go to the CMC website Currie Management Consultants, Inc.

  34. Liquidity Analysis • Debt to Equity • Example 2.08:1.0 Target <3:1 • Current Ratio • Example 1.85:1.0 Target >1.5:1 • Accounts Receivable Turns/Aging • 8 Turns of Credit/Open Account Sales is Equal To 45 Days Sales Outstanding or Approx. 65% to 70% Current in Aging Currie Management Consultants, Inc.

  35. Asset Turns and Debt to Equity • Capital Impact - $30.0MM Revenue & $ 3.0MM Equity (10%) Currie Management Consultants, Inc.

  36. Demonstrating Profitability Return on Assets Target 9.0% x 3.4 30.6% >21% NBT x Asset Turns = = Net Before Tax $ 2,700,000 $ 30,000,000 9.0% 7-10% = = Asset Turnover $ 30,000,000 $ 8,827,451 3.4x 3.0x = = Currie Management Consultants, Inc.

  37. END of Part one Currie Management Consultants, Inc.

  38. Sales Management Currie Management Consultants, Inc.

  39. Revenue Earnings Return 90% Percentile 21% 26% 24% 80% Percentile 13% 18% 19% 50% Percentile 9% 10% 13% Shareholder Value *1300 Companies, 10 Year Average Annual Performance Lucier, C.E., Moeller, L.H., Held, R., “10X Value: The engine Powering Long-Term Shareholder Returns”, Business & Strategy, 8, Q3 1997, pp. 21-28 Currie Management Consultants, Inc.

  40. Conclusions • To Drive Earnings • Financial Modeling • To Drive Revenue • Account Management Currie Management Consultants, Inc.

  41. Market Opportunity Currie Management Consultants, Inc.

  42. General “Corporate” Objectives • >XX% Annual Increase in Share Price • >XX% Return On Assets • >XX% Annual Compounded Revenue Growth • Demonstrate marketing competence • Achieve dominant market share position in target markets Currie Management Consultants, Inc.

  43. Evolution of the Market Currie Management Consultants, Inc.

  44. Package of Value Currie Management Consultants, Inc.

  45. Market Pioneer Vision(% of Companies) Competitor Orientation Low High Low High Customer Orientation Currie Management Consultants, Inc.

  46. Market Pioneer Vision(Advantage Position) Competitor Orientation Low High Low High Customer Orientation Currie Management Consultants, Inc.

  47. Target Equity Financial Model Revenue Stream Investment Contract Relationship Market share ROA Account Alliance Account Identification Market Analysis Account Penetration Account Acquisition Quality Factors Entry Strategy Fundamental Business Strategy Currie Management Consultants, Inc.

  48. Distribution Vision Statement “To effectively market and serve a ‘package of value’ to specific end users or group of end users while maintaining or exceeding benchmark financial performance.” Currie Management Consultants, Inc.

  49. Sales Critical Variables • Market Share • Participation X Close = Market Share 60% X 50% = 30% • Financial Contribution • Gross Profit Mix • New Units 15.0% • Used Retail 35.0% • Rental Disposal 50.0% Currie Management Consultants, Inc.

  50. Sales Critical Variables • Financial Contribution (cont.)(expected 20% GP) • Expense Control • Personnel 50.0%* • Operating 20.0%* • Occupancy 10.0%* • Total 80.0%* *Calculated as a percent of sales gross profit Currie Management Consultants, Inc.

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