ADDING VALUE IN THIS REGULATED ENVIRONMENT

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ADDING VALUE IN THIS REGULATED ENVIRONMENT

• ERIC BALZER
• CFO - RAMTRON INTERNATIOINAL

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Bottom Line

• A Good Business
• Robust Financial Systems
• Robust Business Processes
• Management Team that Pays Attention
• Regulation Adds Another Layer
• Extra Effort Required
• Costs for Review
• Can Serve to Enhance Business

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My Perspective

• Life Experiences Gave Me Perspective
• Submarine Sailor
• Built Refineries and Chemical Plants
• Accounting Manager for Shell Oil
• Three Successful Start-up Companies

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Life Experience (cont)

• Submarine Sailor
• Steam is more than just hot water
• Understand problem and rethink!

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Life Experience (cont)

• Built Refineries and Chemical Plants
• The efficiency equation
• Make decisions with the RIGHT values!

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Life Experience (cont)

• Accounting for Shell Oil
• How much does steam really cost?
• Make decisions with the RIGHT numbers!

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Life Experience (cont)

• Start-up Assembly Company
• Know every aspect of the business
• Do not run out of cash!

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Life Experience (cont)

• Plant Controller for IBM
• Attack Waste
• Waste is Bad for Business!

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Life Experience (cont)

• Another Start-Up
• Brutal Business Environment. Arent They All!
• Reduce Costs While Meeting Customer Needs!

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Meanwhile . . . China

• Changing the Competitive Map
• Cheap labor costs
• US companies moving job to stay competitive

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What I Learned

• Big decisions Will Be Made
• Big Money Can Be Saved

When financial reports are Timely, Understandable
and USED by top management!
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Language of Business

• Financial Statements are the Language of Business
  
• Information must be Useful
• In a Format Management Likes
• Output must be Embraced by Management
• Information must be Timely
• Fast Close
• Information must be Credible
• Accurate
• Reflect Organizations Structure
• Managers must have a Cost Statement

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Language of Business (cont)

• Information Must Be Useful
• Revenue
• Price Variance
• Mix Variance
• Cost of Goods Sold
• Raw Material PPV
• Scrap
• Yield Loss
• Appropriate Allocation

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Language of Business (cont)

• Information Must Be Useful (cont)
• Below-the-line-Spending
• Roll Up Organization Spending by Manager
• The Roll Up Should Reflect the Organization
• Each Manager Should Have a Cost Report
• By Region
• By Operating Plant

Do not Include 123R Spending!!
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Language of Business (cont)

• Get Right Information to the Right Person
• Data Integrity Must be a Given
• Good Information
• Responsibility of each Organization

Remember Garbage In Garbage Out!
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How Do We Do This?

• Circuit Board Example

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How Do We Do This?

• Have a Defined Process
• Must be Documented
• Must be Followed Consistently
• Must have an Owner
• Who, What, Where, When and Why
• Flow Charts

Continuous Improvement is Impossible without
Processes!
Remember ISO9001!
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Defined Process
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Flow Chart
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Meanwhile . . . Scandals!!

• HealthSouth
• WorldCom
• Enron
• Qwest

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The Aftermath . . .

• Investors Expected More Accountability
• Increased Regulated Environment
• Sarbanes Oxley Requirements

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Regulated Environment

• Regulators and Investors Want
• Professional Run Business
• High Ethics
• Reliance on Financial Statements
• Complete Disclosure

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Regulated Environment

• Accept the regulatory environment and use it to
  your advantage!
• Enhance Operations through Compliance
• Opportunity to Analyze your Business
• Improve Processes
• Improve Integrity of Business Data
• Increase Accuracy of Financial Reporting
• Improve Disclosure

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Sarbanes Oxley Requirements

• Identify for Financial Statements
• Process Objectives
• Risks
• Control Activities
• Adequate Segregation of Duties
• Overall Company Controls
• Tone at the Top

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High Cost of Regulation Compliance

• How do We Stay Competitive with Compliance Costs
  Rising?
• Increase in Personnel
• Increase in Legal Fees
• Increase in Auditing Fees
• Increase in Consulting Fees

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SOX Implementation Cost Savings

• Supplement your Existing Procedures
• Document
• Process Objectives
• Risks
• Control Activities
• Use COSO Guidelines

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Defined ProcessPostSOX
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Flow Chart Post SOX
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Segregation of Duties
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SOX Implementation Cost Savings

• Develop Internal Testing
• Quality Data Collection Worksheet
• Software Tools
• Personnel Training

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Quality Data Collection Worksheet
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Tone at the Top

• Integrity and Ethical Values
• Communicate Moral Guidance
• Strategic Planning
• Commitment to Competence
• Organizational Structure
• Assignment of Responsibility

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Regulations are Here to Stay

• We may not Enjoy being Regulated, but it is a
  Fact of Life.
• We cant Fight it, so Deal with it and Use it to
  your Advantage.
• Relief may be in Sight, but dont Hold your
  Breath.