CFC s Financial Webinar Series The CFC KRTA: Putting it to Work for Your Co-op!

Transcription

1 CFC s Financial Webinar Series The CFC KRTA: Putting it to Work for Your Co-op!

2 How to Submit Your Question Step 1: Type in your question here. Step 2: Click on the Send button.

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4 CFC s Financial Webinar Series The CFC KRTA: Putting it to Work for Your Co-op!

5 Today s speakers include: Terry Mallard, CFC Burns Mercer, Meade County REC Bettina Kimmel, CFC

6 CPE Guidelines Attend the webinar for the full session. Submit at least one question during the webinar s Q&A section. Complete the evaluation at the end of the session.

7 Learning objectives for the CFC KRTA Webinar: As a result of this session you will be able to: List the features of the KRTA. Describe how these features can be used at an electric cooperative. Describe how to access their personal KRTA List sources where they can gain additional information about using the KRTA.

8 What was the total number of service interruption minutes attributed to major storms in 2010? A. 1,850 minutes B. 75,000 minutes C. 188,000 minutes D. 248,000 minutes E. 425,000 minutes Polling Question

9 Terry Mallard, Regional Vice President, CFC

10 Today s Goals Introduce the Key Ratio Trend Analysis (KRTA) How Is It structured? How to Interpret the Results Uses of the Analysis Other Tools

11 XYZ Rural Electric Cooperative (XXX) Financial Webinar Series

12 Key Ratio Trend Analysis: An Introduction Produced Annually Created From Year End Financial Statements Submitted by Cooperatives (815 in 2010) Generally Available in July

13 Key Ratio Trend Analysis: An Introduction Mailed To Cooperative s CEO On CFC s Extranet website CFC Independent Borrowers Report Also Available

14 XYZ Rural Electric Cooperative (XXX) Financial Webinar Series The KRTA Format 145 Ratios 5 Year History Includes Ranking By Comparison Group

15 Power of the KRTA Peer Groups 1. Nation 2. State 3. Similar Size 4. Same G&T 5. Similar growth Categories 1. Base Group 2. Financial Ratios 3. Revenue & Margins Ratios 4. Sales Ratios 5. Controllable Expense Ratios 6. Fixed Expense Ratios 7. Total Expense Ratios 8. Employee Ratios 9. Growth Ratios 10. Plant Ratios 145 in total

16 XYZ Rural Electric Cooperative (XXX) Financial Webinar Series How The KRTA Works Compares System Value to Medians of Five Comparison Groups by Year

17 KRTA Shows Data Using Medians Average Example ,000 Total/5 Average = 1,626 Median Example ,000 Median = 43

18 Comparisons XYZ Rural Electric Cooperative (XXX) Financial Webinar Series

19 Ranking XYZ Rural Electric Cooperative (XXX) Financial Webinar Series

20 Ranking Ratios are calculated and ranked from high to low TIER Coop A Coop B Coop C Coop D Coop E Rank

21 Trends XYZ Rural Electric Cooperative (XXX) Financial Webinar Series

22 What The KRTA DOES Assists in Analyzing System Operations Highlight Areas of Strengths and Weaknesses Indicator of Future Performance Provides Positive and Negative Trending

23 What The KRTA DOES A High Level Look at Comparisons to Peers Must be Looked At as a Whole Requires Interpretation by Knowledgeable Staff Viewed in Context of the Year s Unusual Events

24 What The KRTA DOES In Short... It Provides a Good Place to Begin Asking Questions

25 The KRTA DOES NOT Answer Why a Cooperative is High or Low in a Specific Ratio or Ratios Provide Interpretation of Financial goals Geographic, socioeconomic & demographic trends Peculiar operating characteristics

26 The KRTA DOES NOT View Ratios in Context of the Year s Unusual Events Paint an Entire Picture

27 The KRTA DOES NOT In Short... Provide Enough Data to Draw Conclusions Without Interpretation

28 How Do I Use It? The Right Ratios Should be Determined by Your Cooperative s Goals Each Ratio Should be Viewed as a Piece of the Overall Business Puzzle

29 How to Interpret the Analysis Look for the Unexpected Look for Trends Over Several Years Look for Ratios with Large Variances A Large Variance on the Low Side of an Expense Item May be as Bad as Being on the High Side Variances Should Evoke Questions

30 Cautions Differences exist in: System characteristics Density Terrain Member mix Sales mix Accounting practices RUS vs. independent borrowers Differing opinions

31 Cautions Differences exist in: Weather Strategic initiatives Reporting errors In short how are you different from the average cooperative

32 Example Your cooperative s Investment per Mile of Line (Ratio 124) is higher than peer group Before assuming inefficient operations, ask questions and investigate Are line extension policies similar? Is there a difference in terrain (rocky vs. sandy)? Has the coop made recent plant investments due to member growth?

33 Example (continued) Additional questions: Was your cooperative behind on replacing old plant and have strategically increased ordinary replacements? If the variance cannot be explained then one has to ask: Is the coop investing more than they should and corrective actions needed?

34 Burns Mercer, Meade County REC

35 Uses of Report Overview of System Operations Strategic Planning Integral part of the environmental scan Incentive Compensation Plans Balanced Scorecard

36 Other Tools Financial Webinar Series

37 Summary The KRTA is a Tool Designed to Help Begin Asking Questions Look for Both Positive & Negative Trends Each Ratio Must be Analyzed Relative to Other Ratios and the Unique Characteristics of the System The KRTA Should be Reviewed Annually by Management and the Board of Directors

38 Now let s turn it over to our audience!

39 How to Submit Your Question Step 1: Type in your question here. Step 2: Click on the Send button.

40 Please take a minute to complete the NRECA survey. If you are requesting CPE credits, this is a requirement.

41 Events & Training Tab Look for the replay of this program early next week

42 Have an idea for a Web conference? Send it to: Bill.Clayton@NRUCFC.coop

43 Mark Your Calendar For Our Next Event: August 10, 1 p.m. Eastern Time The Topic is FEMA: Working with an Important Government Agency!

44 CFC BudgetPro Series July 18 through July 22 at 1 p.m. Eastern Register at:

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