TOM DUGGAN: Our sponsor this year for Working Capital Management is Ariba and I'm pleased to introduce Peter Lugli, who will present the awards today. Peter is senior director of working capital management and business development at Ariba. In this role he is responsible for the company's strategies in marketing regarding working capital management solutions offered to Global 2000 companies and their suppliers.

Prior to joining Ariba, Peter served as vice president of marketing and global program management for a global supply chain finance technology solutions provider based in Atlanta. He pioneered supply chain finance enablement methodologies for companies such as Volvo, Lowes, Kohl's and others. An interesting fact about Peter, he also served as chief of staff to Canada's Minister of International Trade, and senior special advisor to Canada's Minister of Justice and Attorney General of Canada. Peter received his law degree from the University of Windsor and a Bachelor of Social Sciences from the University of Ottawa in Canada. So now I'd like to turn it over to Peter.

PETER LUGLI: Thank you, Tom, and thank you, Donna, as well for the warm reception you've shown Ariba at this event. This is our first time here as sponsor. We're typically perceived more as a supply chain solutions provider, but given economic conditions of late, what happens in the supply chain is resonating very strongly with folks in this room.

Just one slide on Ariba. We're a global software and services provider. Many of you are actually customers of ours. You may not know it, or you may know it. We provide solutions to 300,000 companies worldwide who use our solutions to better buy, sell or manage cash. We deliver technologies and services that help our customers with what we call collaborative business commerce, and that's everything from the initial sourcing of a good or service that you're looking to acquire, and any of the downstream procurement activities related to that with respect to electronic purchase order generation; and most importantly, over the last several years, e-invoicing, payment and working capital solutions.

We are very honored to be sponsors of the AHA awards. And I just wanted to set the stage for the working capital discussion with some of the things that we see, and we know that you've seen happening out there, and how that resonates in the supply chain, and in particular within the CFO and treasury function.

I think Donna referred to topsy-turvy; you'll see both the topsy and the turvy, and theoretically the topsy again in the chart on the right, which is from the Netherlands bureau for economic policy analysis, or the CPB. It effectively indicates how industrial production had peaked in January of 2008, vis-à-vis 2000, where 100 is the index. It went right down below 120, and then back up to 135, in what was a very dramatic whipsaw of demand in the economy. You'll see Ed Rapp, who's CFO of Caterpillar, remark about how this has impacted their ability to meet market demand with respect to their suppliers, and he's indicated that they've seen their facilities go from zero, up to production demands up 50%, 60%, 70% in the year, with a supply chain that had zero notice. And he went on to say that we've had to digest all of this as the supply chain ramps up from a dead stop in the last part of '09.

Now on the face of it, this is very much a supply chain issue. However, when you dig deeper, it touches on the CFO and treasury role very significantly, and we're going to hear some of that in our stories today from our award recipients. Gone are the days where you can, to a large extent, look to the supplier to manage their liquidity in today's environment. In effect, with $1.8 trillion on U.S. corporate balance sheets, you start to see that there's an element emerging of the big investment-grade corporate becoming their brother's keeper, and in the case of Caterpillar, they've deployed programs to help suppliers access liquidity to be better able to ramp up vis-à-vis monetizing their receivables. And so we start to see how working capital very much becomes part of the story in meeting the challenges of the current economic environment.

Similarly, this was not just Cat; we have General Electric, who's alluded to this as well with respect to trouble in the supply chain. This is from a story in the Wall Street Journal in July and straight out of Mr. Sherin's comments to investors, and his analysts call most recently. And in a rather muted but significant way, the CFO of Ericsson indicating that the cash flow miss in their last quarter was in no small part due to the supply chain challenges that they were facing and indicating that the miss of $360 million on the cash flow was a number that they were not happy with.

So as practitioners, we're seeing how these external environmental forces are increasing the effort to look beyond the four walls. And I think what's fascinating about our award recipients is that they have each levered or used working capital solutions to address many of the challenges that they're facing internally and externally.

With respect to Cisco — and I want to preface that this is in no particular order — with Cisco, they've taken working capital as a competitive solution to meet the challenges faced by the economic environment, by growing sales and helping cash-constrained channel partners, and we'll hear from Maryann about how they very effectively did that. Ford — and its great story of how they've used working capital as a driver for renewal by improving agency ratings and delivering tangible liquidity options. And as well, from Kimberly-Clark, whose working capital objectives and challenges met the objectives and imperatives of creating new shareholder value in what is a tremendous story as well.

On behalf of Ariba, we're very honored to share the stage with these award finalists, and what we view as great innovations and accomplishments in the working capital realm. So, I will introduce our Bronze recipient, Maryann Von Seggern, who's director of Cisco Systems. Maryann?

MARYANN VON SEGGERN: Thank you, Peter. Thank you, everyone. Thank you, Treasury & Risk. I'm thrilled to be recognized on behalf of Cisco with the Bronze for the Working Capital Solution. Ten minutes is going to be incredibly hard to take you through what is truly some secret sauce here at Cisco, but to have everyone here who gets what working capital is, and gets the importance of a balance sheet, I'm absolutely thrilled.

Channel financing at Cisco is broad-based and it's foundational, and it's part of the channel incentive programs that Cisco offers. And you might say, 'Well, why is that so important?' but Cisco sells 85% of its product through its channel partners, and if it doesn't have a healthy channel, Cisco is not going to grow and Cisco's not going to be able to deliver that shareholder value. So it's incredibly important, the health of our channel partners, and our incentives that we provide to them are both income statement-based for the channel partner, right through types of rewards and rebates that we give them, but they're also balance sheet focused, and making sure that our channel partners have the working capital that they need to be able to continue to place the orders and grow their business. So very unique in the industry. Most companies focus only on income statement type of rewards and rebates — Cisco does both. And I'm going to take you through a story of what we did over the past two years and share with you some of the incredible results that were obtained when we made some changes in Europe.

So with that, we'll get started. If we go back, 2009 is a year that I think all of you would very much like to forget, I know I would. We were basically in a situation where we had contracting credit markets; the banks were repricing loans and pulling commitments; we had a tremendous amount of uncertainty. Our channel partners were experiencing significant payment delays with their customers. There was enormous pressure on profits and there were delays in customer spending. A really, really difficult year. And as part of a leadership team at Cisco (and I sit on the channels board for Cisco), we were trying to figure out what can and what should we do to make sure that our channel partners would survive this economic storm that we found ourselves in. And what we did was, we came up with a program that was called Navigate to Accelerate. The concept was to focus on how were our channel partners — and there's 40,000 of them — going to navigate through these economic times to then be able to accelerate when we got to the upturn. The top of the compass was finance, and we did an awful lot of training with the channel partners around their financials and things they needed to do operationally to make sure they were tight and in control. But we're going to talk about something that we did with channel financing, particularly in Europe right now, and give you a sense for what the impact was to Cisco.

So the objectives from the focus on finance: There were four key objectives, and the first was to figure out how to make sure that our channel partners were going to survive this terrible storm that we found ourselves in. We had to ensure that we avoided material increase in credit risk; protect the Cisco sales volume; and also increase our partner loyalty.

The IT space is more and more competitive by the day, and making sure that your channel partners, which for Cisco are the extended sales team for us, making sure that they stayed loyal and stayed with us and actually that we gain share through them through these times was what was top of mind for us. So what we did specific to Europe was, for about 40 of the top channel partners, we provided 90-day payment terms to them and we leveraged off what we've been doing now for over 10 years.

This program is tremendous. It's offered in 146 countries now. About 2 million invoices a year are going through it. It's automated and we actually use five banks. So the banks actually take assignment of the receivable, Cisco gets paid on day 30, and then the banks collect from the resellers. But the results were that we added $700 million of credit lines to the channel financing program with no risk to Cisco, $15 million of risk to Cisco. So we transferred all of those credit lines off of open accounts to our bank partners. We had a significant improvement in the Cisco DSO for these 40 channel partners, and these were the big guns in Europe. They were paying us on about day 55. So we went from day 55 to day 30, which was significant. And this is the blockbuster one, everybody: Their sales growth was up 23% versus the European theater average. So make no bones or mistake about it, the working capital element of the Cisco incentive program actually drove this. Partners, all of them, shared with us that they would not have been able to place these orders without having this type of program from us.

So what were we able to do? We were able to optimize the working capital across the entire supply chain, both for Cisco — we went from day 55 to day 30 — and for our channel partners. By stretching out when they had to pay their Cisco invoices, they were actually able to order more and take any working capital they had in their business and reinvest it for Cisco. We added new bank capacity at a time when that certainly wasn't easy. We now have about $8 billion of credit lines running through this program. We improved our partner profitability, we accelerated their customer spending, and we truly increased our partner loyalty and provided a real competitive edge for Cisco.

So as a finance person working for the premier IT company in the world, I'm so proud of this, and I knew everybody here in the room would be as well because we're all balance sheet people. This is a balance sheet program that drove significant sales, and it's an absolutely core and foundational part of how Cisco goes to market with its channel partners. So that's the presentation, thank you.

LUGLI: Thank you, Maryann. I'd like now to turn to Jun Wang from Kimberly-Clark, our Silver Award recipient.

JUN WANG: Thank you, and on behalf of Kimberly-Clark team (it's a very cross-functional team), I'm very honored to accept the Silver Award. And thank you very much to the panel of judges of Treasury & Risk, and again, I'm very honored to be here with all of you that have great innovative ideas that help to drive business growth.

I'll explain a little bit about who we are and our business case, and who are the stakeholders, and how we organize for success and what are the drivers, and finally I'll share with you some of the results.

Many of you, or your families, probably are using our products on a daily basis. We are a health and hygiene products company that touches people's lives every day. We serve about 1.3 billion people every day around the world. We operate in 35 countries, and about 150 countries that have our sales force.

Why is it important that we focus on working capital improvements? I think we've heard many people talk about the 2008, 2009 credit experience, financial crisis was an eye-opener for us. We are a $20 billion sales company and we are single-A credit rating. Nonetheless, we felt that same crunch in the marketplace and that same patterning of all the liquidities. And also back in 2008, our balance sheet was not very healthy, and we were under the gun of Moody's basically saying, 'You have to improve, otherwise you're going to be put on the negative watch.' And we also looked at peer benchmarking. The seed started many years ago; back in 2003 we started our global business plan, and through that experience, we looked at how our peers are performing, what is our competitiveness, are there opportunities for us to improve our cash flow, to generate cash at hand, fund innovations, product development, and expansion?

And so that was the external environment we were operating in. And with respect to the internal environment, in early 2008 we got our first quarter of negative free cash flow in many, many years of KC history, and part of that was a big inventory build, and working capital drag was a major component on our RIC underperformance. (RIC is a major financial metric that we use to measure our success and our healthiness.)

We realized through the peer benchmarking that we have outdated terms and we have a lot of opportunities to improve.

The stakeholders in this were senior management. Senior management team agreement is really very important for us because it is very hard to pool a cross-functional team and to generate activities that actually starting from the operational level. We realize that all the mills, the operators of the mills, and the planners of the mills and all of them have a very important role in playing, especially in the inventory production and that type of thing, and our accounts payable team and procurement team; they all need to go out to talk to our suppliers to make sure that we get the competitive terms and make sure that we also pay them in time.

And the other part we want to protect is our key suppliers' financial health. We want to make sure that we don't drive them out of business. It's a win-win solution for both parties, and on the other end, make sure our customers gets their supplies. If Wal-Mart wants to order something, a certain package, a certain specs of Huggies products, we want to make sure we have that product for them. So a lot of things, and a lot of other departments, including legal, accounting. Being a treasury person, you will probably notice a meaningful department is missing from this one — it's tax. It's not that I left them out on purpose, but actually tax is very helpful in this case. I think they're just not objecting to a lot of our initiatives.

And so how do we organize for success? Senior management, again, came out in beginning of 2009 to say cash generation is the key and it's built in all our senior leaders compensation profile, and it is everybody's objective of 2009, 2010, and ongoing. It is a nonstop effort. I think we generated a lot of cash flows through working capital in the last year, and the next few years is going to be protecting those and continuing to improve. And, again, like anything, if you look at it, there are a lot of opportunities, and how do we plan for it and what are the low-hanging fruits and prioritization of inventory management and accounts payable terms. Those are important things for us in determining the winning strategy that helps the customers, Kimberly-Clark suppliers, and all have a healthy product cycle. Having coordinated efforts and select the right partner, I think it's very important here that we get a team effort, and then we have our external partners help us.

We have our banks coming in to tell us what are the creative solutions, and treasury is kind of the front end of this and helping to channel all of those innovative ideas to the relative departments and help to put together the teamwork. Our partners give us a lot of ideas and help us to implement — they're absolutely important in the success of the whole program. And execution is key.

So the drivers, there's the inventories, payables and receivables, and we take production curtailment, just make sure that we do not produce things that are not needed. We only want to produce when it is needed and what is needed. And inventory reduction; now add to that also rationalization. And together with all of these efforts, we're able to take about 10 days off our inventory days and related, we were able to exit all our 23 overflowing warehouses. So all of those storage costs, transportation costs, and then damage insurance and all of that is gone.

And for payables, to extend our terms to match market standard and to improve our competitiveness and get additional funding and utilize the electronic invoicing and supply chain financing and other tools to help our key suppliers. We partnered with Citi on both of the fronts.

Receivables is the smaller part of all three for us in 2009, because we have a pretty efficient receivables team, but nonetheless, we're not as efficient as we wanted in Europe, so we put some of our smartest people on the team to collect the past dues, and realize the significant benefit as well.

So, what's our result? We came out with a goal of 2-3 days of improvement on working capital. At the end of the day, we got 15 days out of working capital, and that equates to us over $900 million of cash flow. And all of these helped us to form our single-A credit rating. We contributed to over $500 million on the debt reduction and funded $800 million of pension, that is above the line for the cash from ops. So we generated over 38% of cash flow growth, outside of the pension contribution. And RIC improvement, over 160 basis points, and we funded modern acquisitions that help our organic growth. That's all, thank you.

LUGLI: Thank you, Jun, that was a great story. I'm very proud to announce our Gold Award recipient, Michael Seneski of Ford.

MICHAEL SENESKI: Thank you on behalf of Ford. This is, honestly, a great award; it's something we've been working for, for a long time. What I'm going to try and do is talk a little bit about the 'how' of our capital strategy. [Ford CFO] Lewis [Booth] yesterday talked a little bit about the 'what,' and I want to try and peel that back a little bit and tell you how we went about it.

I'll start off by showing a couple of slides Lewis had yesterday. We're not going to rehash them, but just to remind everyone.

One of the key points that was facing us as we got into 2008 and 2009 was couple-fold. One, we knew we had to continue to fund the business during this time, but, two, as Lewis said yesterday, the most important thing is you got to have a strategy when you come out of it, because we knew it wasn't going to go back to where it was in the beginning, so you needed a new way of looking at the business going forward.

The good part, as Lewis said yesterday, we already had a plan. This was part and parcel of what [CEO] Alan [Mulally] had brought in to Ford Motor Co. One of his key tenets: Finance the plan and improve the balance sheet. So what did we do?

This is a little bit different way of looking at some of the actions that we took in the business. Now yesterday, Lewis focused a lot on what we did in the debt and equity area. I want to mention a couple of the ones at the top, because they're just as important to what we undertook as a company. One, we started to divest basically all of our non-Ford brands because we needed the management attention and management focus on Ford, and so between 2006 and '10 you can see what we took out of the business. The other one, which is a story in and of itself, we have a captive financing company, Ford Credit. It's the largest automotive captive finance company in the world, and we needed to fund that throughout this entire time. And that, truthfully, is a story that we could go into all by itself. The net result of these actions is that we are able to get ourselves through, but as we said yesterday, it left us with an uncompetitive balance sheet.

So Lewis built this yesterday, and I won't really go into it, but at the bottom was our journey and our strategy. And I think the key that I'm going to focus on is right about down where the $1.87 was, is how we started to undertake our debt strategy and our operations strategy combined into a capital strategy to move us forward. I will say that I think the market has responded. You can see from the $1.87 up to 14 bucks, put another way, our market cap has gone from $2 billion to almost $50 billion in a couple of years.

All right, so what did we do? Unfortunately, I can't promise that there's any special sauce here. In fact, it was really simple. The process we used is the same process you'd use in any other part of the business. You start off and you say, well, what's the target? What are the metrics I'm going to use? What plan do you have and how am I going to measure myself against it? Pretty simple, right?

So we started off and we said, well what is the target for us as a company, as it relates to our capital strategy? Well, for us it was investment grade. Now why? We had two key issues. One, as I mentioned, was Ford Credit. We believe Ford Credit is an absolute strategic asset to us as a company. It finances virtually all of our dealers and the vast majority of our customers, and if we can't get them competitive funding so that they can provide competitive external pricing, then this strategic asset would have been at risk.

Secondly, internally, our cost of capital needed to be at the same level as our key competitors, because even if you've got better products, if you're starting off handicapped by a higher cost of capital, you're not going to be able to compete in the long run. So investment grade was the target.

Now what's the metric? One of the other key things that Alan Mulally has brought to Ford is that you don't get to define your own success. I think this is really important. How many of you are measured by budget performance or efficiency levels? He doesn't care about any of that. The only people that determine your success are external. It's your customers, it's your suppliers, it's your shareholders, it's your stakeholders, and those are the only metrics he wants to look at.

So when you stand back, and investment grade is the target, we got to go talk to the rating agencies. And so we worked in depth with the rating agencies to identify for the auto sector what are the qualitative and quantitative things we need to do and we need to deliver, to deliver investment-grade ratings.

From there we worked really closely with our banking partners and our advisers to say, based on that type of stuff, what plan are we going to put together related to our debt and other actions to be able to deliver those metrics, and then we measure ourselves every quarter on it, and I'll show you that in a few minutes.

So what were some of the key tenets of the plan that we put in place to improve our capital strategy? First, I'm going to talk about cash. This is going to sound like Business 101, but when you're a multinational company that's 105 years old on all six continents — well six out of the seven — and in hundreds of countries, you can imagine how we've grown up. So the key question for all of you is, Do you know where your cash is exactly, daily? Not only do you know where it is exactly and daily, can you get to it and move it whenever and wherever you want? I'll tell you, we couldn't say yes to any of those a couple of years ago. Today, we can do all of that.

And that leads right into the next key part of cash, which is operating minimums. If you know exactly where your cash is, you know where it is daily, and you know you can move every penny of it whenever you want like that, think what you can do to your operating minimums. But it wasn't just that type of thing that we looked at. Obviously we looked at the same things that Jun talked about, inventory, payables, receivables, but it went so much further than that. And I can't tell you the reduction that we got in our operating minimum, but I'll guarantee you, think of the biggest number you can possibly think of in your head and quadruple it; it's that big. And the types of things that we did beyond inventory, payables and receivables, staggered plants shutdowns, smooth supplier payments, bank account reductions, legal entity reductions, complete restructuring of national sales companies. We basically reinvented the business and fundamentally changed what cash it took to run the company.

The next step was obviously liquidity. And we talked a little bit about this yesterday, but we now on a quarterly basis have models where we run probabilistic shock scenarios on what level of liquidity we need through our business plan period, and we update that on a quarterly basis because it's not just the minimums that you need to worry about, it's the liquidity you can't plan for. But if you don't have a continual process to understand what the extent of that shock could be, how will you know that you have the cash that you need before you need it, that was one of the key things from yesterday.

Operating targets. The rating agencies told us the metrics. We worked with our advisers so they helped us identify the debt vs. equity level, so if you know your debt and you know your metrics, PBT is just math, right? We're all finance people, we can do that. So when you stand there in front of your operating guys and you walk them through, this is why we need to be an investment grade and here it is, and now your PBT target has to go up by 20%, 30%, 40%. Lewis yesterday made it sound like altruism, and these guys were just going to come along for the ride. We kind of knew that wasn't going to work, and so we took a little different approach. And instead, again this is just basic finance, you take the plan, you take your cash flows and you use basic multiples and you show what could or should happen to your stock price with the delivery of the key investment-grade metrics. And I'll tell you, every one of Alan's direct reports, and Alan's eyes got really wide when they saw what could or should happen to our stock price. I'll tell you the commitment that that gave to, “Yes, I can get this 40% improvement or 30% improvement in my operating underlines” was probably the most fundamental thing we did to get operating buy-in.

As it relates to debt, debt was really simple. We had a list of every single one of our debt items and we had to prioritize how we were going to get rid of it. So we looked at the key attributes — interest costs, collateral, maturity profile, equity linkage — and we set a priority and every quarter based on our excess liquidity, we determined which one's next in line and we knock it off. This is just a simple chart. Just to let you know, I took off the data to protect the innocent. But this is the type of stuff, these are investment-grade metrics. We review it every quarter. We do a business plan update, the entire business plan gets updated every quarter at Ford Motor Co., and we show this and we share it with Alan's team along with the plan of what are we going to do to achieve those metrics. It's very powerful in what we do in moving forward.

And then finally, what's been the results? This is S&P's view of issuer ratings for us and, obviously, we made it down to double-C in the depths of 2008. Since then I'm happy to say we're up six notches to B+. We're only four notches away from investment grade; however, Moody's only has us two notches away and based on our earnings announcement the other day, I got a phone call to make, but we're very close. We're not where we want to be, but we know where we're going. We have a very robust plan all based on external metrics and we have the complete buy-in of the operating team to deliver the operating metrics necessary for us to deliver this plan. That's it, thanks.

LUGLI: Thank you, Michael. Gosh, what a great story. I think Ford's stock price has gone up 5% after that presentation. Sorry about that.

I'm going to ask the floor for questions. We have people with microphones. I'm going to kick it off with one, and it actually is to Michael, once you have a chance to catch your breath there, and it relates to the credit rating agencies. And, gosh, these have been times of woe and intrigue over the last two years for that group in particular as well, and for many of us, and part of the drive for renewal involved the significant engagement with the agencies. What did you do with the credit rating agencies to get them to move to the next level and are there stories that you can share with the audience here who are looking at that kind of dialogue as well? Insights or even surprises?

SENESKI: Yeah, I would actually say, as you can guess, through this period the rating agencies have been pretty embattled, wouldn't you say? Because of that there is a significant effort on most of their parts to become significantly more transparent in their rating methodologies. And I will say, you know, a number of them are very forthcoming in sharing exactly how they measure you and how they're measuring you to a benchmark. And some of them even go so far as to say, here is the metrics for your industry or other industries for each of the credit ratings. So it really requires in-depth discussions with them. Now recognize that ratings are not just quantitative, they're qualitative as well, so you need to understand; for example, consistency of earnings, consistency of cash flow confidence and products, consumer sentiment, things like that, overall economic factors. At the end of the day we all recognize that the rating agencies aren't going to, just because we hit the metrics, make the numbers; however, the market will. And I'll tell you we're already trading at investment-grade spreads. So we know where it is that we need to get to. Every quarter we do a deep dive review with every single one of the rating agencies so they understand not only our actuals, but our forecast. We talked about it yesterday; I'll say it again. Complete transparency of your physicals and your financials, both actuals and your plan, is critical to getting their buy-in.

LUGLI: Great, thank you. Any questions from the floor? Way at the back.

Q: Hi, this question is for the Kimberly-Clark presentation. Could you just break down for us the improvement of $900 million in working capital between reduction in inventories, collecting more quickly from customers, and stretching payables? Where was the biggest part of the opportunity for you?

WANG: Sure. Inventory is our biggest opportunity that we materialized last year. This year we started to see the benefits of accounts payable showing up on term extension, because when you think about product and production curtailment and inventory reduction, we produce less, we're buying less. So last year is kind of combined, but we can single out inventory as the big one. And this year, I think, the term extensions and supply term financing and all of those benefits start to show.

LUGLI: Question up in the front here.

Q: Hi, quick question for Michael. I like what you said about do you know where your cash is exactly, daily, and can you move it; how did you get to that consolidated view?

SENESKI: I'd love to be able to say that we have one global integrated system. We do use SWIFT SCORE and I would say we've moved over 90% of our banks onto that, and those that aren't, we get daily electronic feeds for the other ones that automatically, through spreadsheet-type systems (unfortunately at this stage), consolidate up. And in regards to mobilization, our work with the tax office, we became absolute partners and understood — and I'm telling you, we had to fundamentally restructure so many parts of the world in order to be able to access your cash wherever you want it, wherever you need it. And if you think about the way you guys run your multinational businesses, how many of those pockets keep double or triple what they need because they're sitting there thinking, 'Well, what about my liquidity shock?' Well, you get a diversification benefit of liquidity shock, so get everybody down to their operating minimums, hold the rest centrally, you can cut it by 50%, 60%, 70%. This is the most fundamental thing we were able to do.

LUGLI: I've got a question for Jun. One of the things that we've heard over the last day or so is the amount of collaboration, collaboration within the organization and outside to external parties. You listed seven or eight different stakeholders within the Kimberly-Clark initiative, can you explain a bit about what treasury's role was in that process? Was it a leadership role; was it a collaborative role within a broader set; what was the experience from the treasury perspective?

WANG: Sure. The way I think of our role is first we're the front end of hearing new ideas, and we're the front end to channel it to our partners internally and try to form a team to investigate whether it is viable or not. I think that's a strategic partner role. And we also participate in communication. Communication is key for us, and we've heard a lot of people talking about buy-in, and KC being a 140-year-old company, that buy-in is absolutely important.

Treasury translates the financial results or financial expectations to the business actions, and communicating with the partners. And reinforcement — we always have to make sure that treasury has that corporate view.

LUGLI: Thank you. Any more questions from the floor?

Q: Navigate to Accelerate, is that just in Europe or are you including it in other areas as well?

VON SEGGERN: Great question. No, it wasn't just Europe. Navigate to Accelerate was a global initiative that Cisco took on, so the channel partners all around the globe — you know, one of the core incentives is this working capital channel financing product. What we did during the economic storm was, we extended all their payment terms to 90 and we also committed to significant continued build-out in Europe and Asia PAC. So what I took you through was just the initial build-out in Europe, the 40 partners that we put on there. So, like the U.S. partners, the thousand of them that are on channel financing, they typically get 60 days, but when we were back in 2009 and it was really, really difficult, we took them out to 90 and we saw significant uptick in their ability to order, in their ability to invest in Cisco, and then also in their loyalty to the company. But Navigate to Accelerate was global, and what was so cool to me was that it was a finance-led initiative for the company, with really a treasury product. But if the health of your channel is not strong — I mean, we were meeting daily back at the end of '08 and into the early months of '09 watching, and just making sure that these guys were all going to make it because it was really sort of scary, scary, scary times for them. They're so thinly capitalized, our channel partners. But, yeah, it was global. Thank you.

LUGLI: Maybe just another follow on to Maryann. Could you give us some sense of the size of the program, how many countries, how many invoices, banks, et cetera?

VON SEGGERN: So there are five bank partners that we use today, so we don't use Cisco's money. You know, one area that I really didn't touch on is the IT automation here. Here I am sitting here, it's the day before the quarter-end close for Cisco, and my phone is not ringing off the hook. Two million invoices went through this program last year, so the structure is right, but we've also got the automation. Cisco uses an Oracle-based order system that the channel partners order through and the IT that we've been able to implement, with the feeds between Oracle and the five banks, and then the portals that the banks have to work with our partners, has just been incredible. So 146 countries, 2 million invoices, $8 billion of credit lines; over $20 billion of invoices will go through this program this year.

LUGLI: Thank you, Maryann. Any more questions from the floor? I've actually got a follow-on to Mike, if I can, and it actually relates a bit to what Lewis Booth said yesterday around ownership of the balance sheet, which I thought was very telling. He indicated something about the balance sheet not being the purview of finance and treasury, but that the operations organization really needed to understand that. Now that's quite a chasm to cross. Can you give us some idea of some hint of the tactics or specifics that you did to sort of bring the operations team into focus? You talked about share price, were there other motivators?

SENESKI: Well, I think the key when you looked at a base plan that we had, what we had to be able to do — and I don't know how your companies operate, but we talked a little bit about it yesterday. Most people come down to the PBT line and are pretty happy, most of your operating guys, right, that's how their budgets are set. And what we needed to do was fundamentally change that view and start by sharing with them, well, what are competitive capital structures, what does investment grade mean, how much do we have to pay in interest a year — we were paying over $2 billion of interest a year. We showed another chart to the operating guys, $2 billion of interest per year is about three major product programs a year. So if we're going to sit there and just pay $2 billion of interest while maybe other domestic competitors who no longer have much debt don't have to, how long before we can truly still be competitive from a product perspective? That hits home just as hard as your plan isn't aggressive enough. So fundamentally how are we going to generate more cash so we can make this go away? With our announcement of what we paid down with the UAW today, we've reduced $10.8 billion this year alone, over $800 million in interest expense in this year alone. That allows, like Lewis said, a major program. Over a couple of years, it's a huge benefit for us. And at the end of the day, what we do is make product, so when you tell the product guys, I can give you a couple more products if we do this, in addition to your own personal wealth, it's extremely powerful.

LUGLI: Great. Thank you very much. I think we've got time for one last question from the floor if there is one. If not, I'll thank all the award recipients and join me in applauding their efforts.

DUGGAN: Thanks, Peter and thank you to Ariba for sponsoring this session and congratulations again to our winners, Maryann, Michael and Jun.

Instant Insights /

Working Capital Management 2010 Transcript

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