Right Tool … for the Right Job! How to Evolve Long-Term Planning, Analyzing the Pros and Cons of Hyperion Strategic Finance
October 15, 2012 Ellen Scipta CHS Inc. Finance & Business Planning
Ryan Meester Edgewater Ranzal Strategic Planning Practice
Introductions
Long-Term Planning Overview
CHS Study
High Level Demonstration
Q & A
Agenda
How Confident are You in Developing the Corporate Strategy?
CFO
Treasury Corporate Finance M&A
• Corporate Cost Cutting • Strengthen Balance Sheet • Easing of Credit Markets • Economic Stimulus
2008
• Credit Crunch • Housing Bubble • Global Recession • Stock Market Crash • Bankruptcies
2007
• Global Growth • High Leverage • Commodity Prices Skyrocket • Stock Market Boom
Best Use of Capital
Survival
2009 - ?
High Growth?
Slow Growth?
Deeper Recession?
Planning for Any Economic Environment
Complex spreadsheet models
No consolidated or consistent view
Lack of integrated models make scenario analysis cumbersome
Limited history or documentation
Version control and security
Duplicative efforts Treasury
Board of Directors Senior Management
Banks Investors Acquisitions Divestitures
Long-Term Planning
Corporate Development
Traditional Long-Range Planning Challenges
Align the Planning Process
Update Targets with Latest Forecast
Corporate Development
Value Management
Long-Term Financial Planning
Treasury Strategies
Predictive Modeling & Simulation
Long-Term (3-5 Year) Full Financial Statement Projections Key Performance Metrics
New Product Offerings Acquisitions / Divestitures
Discounted Cash Flow Economic Value Added
Liquidation Value
Capital Requirements
Reserve Ratios Debt Issuances/Payments
What-if Analysis
Economic Shifts
Commodity Pricing Product Pricing
Growth Initiatives
Cost Cutting
Capacity Planning
Hyperion Strategic Planning Overview
CHS Inc. The nation’s leading
cooperative, owned by farmers, ranchers and co-ops across the United States
A diversified energy, grains and foods business committed to providing the essential resources that enrich lives around the world
Business Divisions CHS Grains, Crop Nutrients
and Retail CHS Energy CHS Foods and Processing CHS Business Solutions
10,000 preferred stockholders (CHSCP on
NASDAQ Exchange)
Non-voting owners
62,000 individual producers (through
company-owned facilities)
Voting Equity 30%
CHS Ownership
1,100 locally owned cooperatives serving about
300,000 producers
Voting Equity 70%
2012 Fortune #78 Fiscal 2011 Net Income $961.4 Million Fiscal 2011 Net Revenues $36.9 Billion Fiscal 2012 Q3 YTD Net Income $899.7 Million
Earnings History
$ in millions
CHS Recent Highlights
Creating Value for Owners – Cash Returns
$ in millions
New Leadership and Vision
New CEO & Key Leadership Retirements/Changes, Jan 2011
Updated Guiding Principles • Not a holding company • Not a speculative buyer and seller of businesses • Leveraging the diverse CHS enterprise to enhance
producers’ profitability
Focused on Growth • Strategic expansion • Balanced business portfolio • Aspirations
CHS Finance Department Created, February 2011
CHS Finance Team Challenge
Quarterly forecasts Create Proactive Forecast Deliverables & Process Reduce Annual Budgeting Efforts through ongoing Forecast and Strategy
discussions Drive Consistency: Apples to Apples Comparison Across All Businesses Units
Annual and long range planning Vary drivers/growth rates by line of business Analyze and set top down’s annual budget targets by line of business Assess patron equity options and allocations Drive Consistency: Apples to Apples Comparison Across All Businesses Units
Optimize current portfolio and playbook over next 5 years Scenario Analysis: Include/Exclude Aspirations based on Objective Scores Value acquisitions/divestitures independently and integrated within portfolio Model Range of Risk/Uncertainty
Analyze funding scenarios and capital needs by year
Connect treasury / corporate development with corporate FP&A functions Funding routine to define cash balancing process Model debt issuances, share buybacks, credit ratings & debt covenants
15
Aspirations
CHS ASPIRATIONS
STRATEGIC IMPERATIVES
STRATEGIC OBJECTIVES
FINANCIAL MERITS &
CHS 5-YEAR
GROWTH PLAN
Aspirations: From Concept To Tactical Plans To Strategic Financial Models
• Business Units Defined Actions Required to Remain Relevant And Grow Organically In Current Space
• Aggregated Customer, Operational, Regional, and Enterprise Leader POVs on Future Incremental Opportunities
• Outcome: Tactical Playbook for Next 5 Years By Business
• Producer – Focused
• Global Commodities
• Energy • Food and Food
Ingredients • Enhance/
Leverage Enterprise Value The result of our work was a Strategic Growth Plan that carves the
path of CHS for the next 5 years This is a key component of our planning process going forward as it
defines where our growth will come from
• Unbiased Validation of Plays aka “The Aspirations”
• First Pass Financials: EBITDA, CAPITAL, Time to Scale
• Objective Scoring: Prioritizing A Playbook
• Score each Play Based on: Relevance to the
Aspirations Risk in Execution Reward Potential
A Unique and All Encompassing Solution: Hyperion Strategic Finance (HSF)
Independent of ERP system Data can be imported via Excel, Essbase / Planning, HFM, FDM Can leverage the strengths of other Hyperion products (i.e. Essbase for
reporting)
Speed of Implementation Fully Integrated Financial Statements Customized Drivers and Metrics for Individual Business Units Requires Minimal business resources and reasonable consultant hours
Ease of Use Time spent on analysis and recommendations not development Ability to solve or allocate targets Scenarios in a cinch, base case simplified Reduces hours spent budgeting annually
Spend the Time on Model Design Business team awareness, partnership, and buy-in Capture the “right” details, build ‘placeholders’ as needed Don’t doubt the capability of the HSF tool Know the constraints of the tool and your IT systems up front Don’t underestimate the effort to gather / validate data
Keep it Simple and Strategic
Business Units own and manage the operational plans outside of HSF Focus on primary business drivers, manage # of inputs Use historic trend as available, play via scenarios Spend the time: Run the data to find the Optimal solutions
Train the Team on the Functionality of the Tool
Get your hands dirty on reporting, scenarios, updates, formula changes etc. Manage access effectively Document religiously Continuous improvement
HSF Implementation Lessons Learned
Demo Screen Shots
• Pre-built, fully integrated financial statement foundation
• Pre-built forecast methods and formula functions
• What-if Analysis toolkit
Pre-Built Accounting Integrity
Powerful Scenario Capabilities
Mix and Match Scenarios
Capital Projects included
Acquisition excluded
Easily Analyze Various Combinations
World Class Treasury Analysis
• Calculates net cash surplus or deficit from multiple models and scenarios
• Funding Options tool to re-allocate surpluses and fund deficits
• Debt scheduler
• User-defined reports to monitor covenants, credit ratings, and earnings per share
Acquisition / Divestiture Modeling
Set Strategic Targets in HSF
Seed Budgets With Strategic Targets
From Strategic Plan
Tweak Budget with Targets In Mind
Update Targets with Latest Forecast