Who s Working Capital is It Anyway?

Who s Working Capital is It Anyway? Maria mlogiopoulou Senior ivice President, International Treasury Sales Officer, Bank of America Merrill Lynch Jeremy Carmel Vice President & Treasurer, Corporate Finance Associated Press Randy Rasmussen Global Corporate Controller Kaseya Inc. Marguerite Versacci CTP, Assistant Treasurer TRONOX June 2017

Speaker biographies Name Maria Logiopoulou Senior Vice President, International Treasury Sales Officer Bank of America Merrill Lynch Description/Bios Maria is an International Treasury Sales Officer in the Global Treasury Solutions (GTS) Team for the North East US Region. She specializes in working with Commercial global clients to optimize their cash management structure worldwide. Prior to joining the US team Maria was a Director in the Global Treasury Solutions (GTS) Officers Team in EMEA and was responsible for more than 30 UK headquartered clients with Global GTS relationships. Industries include consumer products, technology and telecoms. Maria joined Bank of America Merrill Lynch in October, 2010 after four years with ABN AMRO and subsequently Royal Bank of Scotland in London where she performed a similar GTS relationship role. Prior to that, she spent eighteen years at Citi in Athens, Greece, specializing in Cash Management and Trade Products. She is a graduate in Statistics and Computer Science, from the University of Athens, (Athens Business School). She has also studied History of French Arts at the University of Paris -Sorbonne. Marguerite Versacci CTP, Assistant Treasurer TRONOX Marguerite Versacci has been working in the treasury field for over 15 years and has broad experience in Treasury Operations. She is currently the Assistant Treasurer at Tronox Limited, a global leader in the mining, production and marketing of inorganic minerals and chemicals. She is responsible for the global treasury activities at its corporate headquarters in Stamford, CT. The company has operations in the United States, Australia, Netherlands, South Africa. She received her Bachelor of Science in Business Administration from Salve Regina University in Rhode Island and her Master of Business Administration from Pace University in New York. She is a board member of the Fairfield County Association for Financial Professionals (FC-AFP) and is also a Certified Treasury Professional (CTP). 3

Speaker biographies Name Description/Bios Jeremy Carmel Vice President & Treasurer, Corporate Finance Associated Press Jeremy leads AP s treasury, global tax, procurement, global real estate and administrative services teams. He also oversees the Company s cross-departmental global compliance activities. He joined the AP in 2008 as Assistant Controller with responsibility for corporate financial reporting and international finance. In that role, he designed and implemented a revised international finance structure delivering both process efficiencies and cost savings to the Company. Prior to joining AP, Jeremy was a senior manager with Ernst & Young, initially in London, England and subsequently in New York and Boston where he gained extensive experience serving clients in the media and entertainment sector. Jeremy holds a BA degree in management studies from Leeds University in the UK and is both a Chartered Accountant (ICAEW) and CPA. Randy Rasmussen Global Corporate Controller Kaseya Inc. Randy is the Global Corporate Controller for Kaseya Inc, a global distributed network monitoring and management software company. His background encompasses accounting, finance, and operations with diverse experience across entrepreneurial ventures of all stages along with publicly traded companies. His specific focus is on helping organizations solve challenges due to performance issues, mergers, acquisitions, exits, rapid growth, infrastructure constraints or leadership skill or capacity gap. Randy completed transactions as both an M&A target and as a private equity/venture capital growth investment. 3

Too Many Cooks in the Kitchen Investing Visibility Unlocking Funds STP Payments Day Payable Outstanding Liquidity Management Business Transaction Processing Efficiency Reconciliation Day Sales Outstanding Days Inventory Outstanding Working Capital Management Risk Management & Compliance Full Visibility & Control Financial Supply Chain Efficiency Risk Mitigation Market Counter Party Operational Processing Financing Establishing Cross-functional Alignment is Essential for Effective Working Capital Management 4

External Factors that impact Working Capital CFO s view Regulation Technology Competition Growth Volatility Cost of Funds Incorporate All Risks into a Corporate Risk Framework Wider than Financial and Market Risks View Holistic Working Capital Cycle Through a Risk Lens Build External Factors into a Model of Cause and Effect to Understand Impacts Create Ability to Identify, Define, Quantify and Respond Appropriately to Risks Proactively Recognize and Manage Event and Non-event Risks Leverage All Risk Tools Operational, Financial and Market Input Prices 5

Common understanding within the organization Working Capital... = Current Assets Current Liabilities Payables or, how much cash is tied up in the operation of an organization. Best-in-class organizations are working to optimize their working capital Liquidity which translates to efficiently and effectively managing payables and receivables Receivables CASH Inventory Effective Working Capital Management Helps Organizations Optimize Working capital by Optimizing Receivables Optimizing days sales outstanding (DSO) Lowered financing costs Reduced transaction and FX risk Streamlined processing Optimizing Payables Optimizing days payable outstanding (DPO) Lowered borrowing costs Reduced transaction and FX risk Streamlined processing Better Managing Liquidity Enhanced cash flow management Optimizing visibility and control Minimized idle cash balances Reduced operating risk 6

Who influences Cash Conversion Cycle more? The CCC Metric is an Accurate Metric for the Real Financial Health of a Company The period of time in which a company is able to convert its resources into cash; or how quickly you convert sales into hard cash CCC = Inventory days (DIO) + Receivables (DSO) Payables (DPO) Easy to calculate Receivables into Cash Resource Procurement Resources into Inventories Advantages Disadvantages Utilize to identify focus areas for to improve bottom line Requires adjustments for particular business nuances Does not account for seasonality, trends in growth or decline in business Sales into Accounts Receivable Inventories into Finished Goods CASH FLOW IMPACT Improvement in CCC = Incremental Cash Flow + Cost Savings 7

Collaboration brings Working Capital Benefits

Spend and Supplier Categorization can Drive Solutions Best-in-class organizations segment their spend to gain visibility into supplier type and amount of spend. A balanced approach of extending terms, maximizing discounts and maximizing rebates helps optimize working capital and improve operational efficiency Multi-tiered Approach to Penetrate All Spend Companies are significantly growing financial returns by combining process automation, discounting and card settlement against AP spend Enabling more efficient payables by processing across a wide spectrum of a client s supply chain activities Recurring Supplier Payment Low-dollar / Non-recurring Payments High- Dollar Supplier Payments Dynamic Discounting Foreign Exchange Wire Supply Chain Finance Virtual Cards ACH Card Check ACH Supplier and Spend Segmentation Strategy Provides a Comprehensive Solution Designed with the Goal of Maximizing Yields & Optimizing Your Working Capital 8

Strategic Supplier Segment Connecting Treasury and Procurement Purpose Allows for extension of payment terms and provide an alternative financing solution to suppliers Increases operational efficiencies Generates additional cash flow Reduces overall cost Creates a value exchange that can improve working capital for both you and your suppliers Pricing Suppliers bear the ongoing program costs, at a cost of funds aligned with the buyer, set as a per annum rate, fixed spread over the relevant LIBOR for the period of the discount Program discount rate charged to vendors incorporates the credit spread, as well as the administrative costs of running the program Cost of program is often lower than cost of funds at many suppliers local banks and usually well below their WACC or IRR A Win-win Situation Increased DPO for the Buyer Accelerated Cash/Better Financing for Suppliers 10

Low Dollar and Recurring Domestic Suppliers Challenge Moving from paperbased payments to electronic transactions Simplify the process and reduce the costs from managing employee T&E expenses Reduce the costs associated with routine employee business purchases Benefits Sought Obtain better control, efficiency and predictability of cash flow Eliminate transaction fees/reduce costs associated with paper checks Enjoy cash incentives based on spend Use existing AP process with minimal added technical resources Improve buying power while giving vendors fast, reliable payments Remit payments and reconcile accounts automatically Streamline the accounts payable process Reduce the paperwork involved Reduce the administrative costs Improve control over unauthorized spending Negotiate discounts with preferred vendors Streamline the accounts payable process Reduce the administrative costs Reduce the costs associated with paper checks Improve control over unauthorized spending Negotiate discounts with preferred vendors 11

Goals Managing the Global Supply Chain as a Strategic Asset Treasury + Procurement strategic alignment Since, on average, roughly 50% of companies working capital is tied up in the supply chain, there are very significant benefits to taking a more holistic view of the supply chain* 70% Higher performance is achieved by companies acknowledging supply chain as a strategic asset Improve working capital Optimize cash flow Increase automation Improve operational efficiency & control costs Strengthen supplier relationships Gain visibility into the payments cycle Improve compliance Enable straight-through processing Payables Healthier balance sheet Increased revenue Lower costs Improved controls Effective supply chain Better supplier relationships & performance Increase / extend DPO *Ernst & Young insight: Getting the most from your supply chain (March 12, 2012) found on http://business.financialpost.com/2012/03/12/getting-the-most-from-your-supply-chain. Sept. 2013 Source: PwC Global Supply Chain Survey 2013, Next-generation supply chains efficient, fast and tailored 11

Soft Goals: Unified Working Capital Strategy 1 Sustainable, balanced working capital strategy 2 Executive support 3 Enterprise cross-functional programme - incl suppliers, customers, vendors; global process ownership Pro-active ongoing critical activity corporate discipline 4 Incremental and transformational action plan embraced by all 5 Manage all levers process, financial and market 6 1

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