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1、Kater Inc.Transparent Financial Reporting Analysis ManualTransparent Financ ial Reporting Analys is Manual A.doc,9/8/2006, 11:23 AMSEC / Legal EntitySEC / Legal Entity / GAAPBusinessUnitsAccountableEnterpriseProductProfitabilityFocusContentsChapter 1 Introduction .1. Kater Methodologies .2. Aggregat
2、ion Methodologies.3. Rate/Volume Concept .4. Commentary .5. Roles & Responsibilities. Chapter 2 Form M Summary . Chapter 3 Foreign Currency Reconciliation .Chapter 4 Sales Reconciliation .1. Overview2. Price Realization . a. Foreign Currencyb. Published Price . c. Sales Discount . d. Warrantye. Tran
3、sfer Yield . f.Physical Sales Volume.3. Base Period Variable Margin Percentage .4. Volume Impact on Margin .Chapter 5 Mix .1. Overview2. Geographic Mix.3. Country/Region Mix .4. Geographic Mix on Transfers .5. Product Mix Impact on Sales6. Product Mix between Product Lines.7. Product Mix within Prod
4、uct Lines . a. Revenue Salesb. Non-revenue Sales and TransfersChapter 6 Variable Cost .1. Overview.2. Cost of Sales.3. Transfer In/Inter-company Purchases.4. Inventory Adjustments / RSSMs.5. Other Variable Cost.Chapter 7 Period Cost of Sales .1. Overview.2. Period Costs Incurred .3. Period Costs Inv
5、entory Effect.4. Variable Margin Percentage.1Transparent Financ ial Reporting Analys is Manual A.doc,9/8/2006, 11:23 AMChapter 8 Parts. Chapter 9Period SG&A / R&D . Chapter 10Other Income and Expense . Chapter 11The Chunk Chart. Chapter 12Contact Details . Chapter 13Glossary (Analysis) .Chapter 14Gl
6、ossary (TFR).2Transparent Financial Reporting Analysis ManualIntroduction: Kater MethodologiesIn order to fully leverage the benefits of Transparent Financial Reporting, a comprehensive process for financial analysis was developed. The principles of this new process are:One tool for all analysis nee
7、ds All business unit, product line and consolidated analysis will be performed using this processHighly mechanical Utilizing pre-populated templates and pre-defined calculations, manual input into the model has been minimizedMandatory and consistent methodologies The prescribed methodologies for cal
8、culations and aggregation must be followed or the mechanical process will not provide accurate and consistent financial analysisKater utilizes the Form M as the model to explain changes in results between comparison periods. The Form M explains changes in sales and changes in profit. Major drivers o
9、f both of these changes are illustrated in the overall structure of the Form M depicted below.Form M StructureChange in Corporate ProfitSales changesCost changesDue toCurrency impactsPrice realization:1) Published price2) Sales discount3) Warranty4) Transfer yieldPhysical sales volumeDue toCurrency
10、impactsVariable costsMixPhysical sales volumePeriod costsOther income/expenseThe primary focus of financial analysis at Kater is to explain actual results both year over year and vs. plan, as well as RBM (Rolling Business Management) forecasts. Below is a summary of relevant comparison periods.YTD v
11、s. YTDYTD vs. PlanMonth vs. PlanQtr vs. QtrRBM Analysis (current vs. prior year, current vs. future year, current vs. plan)This is not an all-inclusiv e list of analysis requirements. For instance to prove that current month results do not contain significant errors it is necessary to compare curren
12、t month to previous month actual results.Transparent Financ ial Reporting Analys is Manual A.doc,9/8/2006, 11:23 AM 3The final output of the Form M is a graphical depiction of changes in results for both sales and corporate profit. These charts, commonly referred to as chunk charts, are automaticall
13、y created and are graphical models inherent in the Form M.9Sales & Revenues Operating Profit Accountable Profit Corporate Profit Current Period 1,130,675 198,714 196,017 169,842Base Period 1,006,675 174,962 172,512 146,337Change 124,000 23,752 23,505 23,50530025086.60.1(4.3)3.0(11.3)(49.9)200150146.
14、318.7(5.0)(12.4)(3.8)2.0(0.0)(0.2)169.8-10050-Base Period Vol/Mix Price Real Trans Yld Warr CCY Matl CostVar CostPCOSSG&AR&DParts (McFee) Other Oper All Other Corp Burden Current PeriodProfit ChunkSales & Revenues Operating Profit Accountable Profit Corporate Profit Current Period 1,130,675 198,714
15、196,017 169,842Base Period 1,006,675 174,962 172,512 146,337 Change 124,000 23,752 23,505 23,505 1,2001,0001,007 3287(4)50-51,131800600400200-Base Period NS&T Volume Price Realization WarrantyCurrencyTransfer YieldGeographic Mix - TransfersParts (McFee Related) Current Period NS&TSales ChunkThe Kate
16、r financial analysis process flow is summarized in the following paragraphs and the attached flowchart.Essbase: The backbone of the analysis tool is Essbase. Essbase is a series of data cubes that allow for manipulation of significant amounts of data. Essbase collects data from multiple sources and
17、pre-populates the analysis templates with data necessary to complete the Form M. After the monthly closing process is complete, actual data is loaded from the Accountable Data Cubes within the General Ledger System (GLS). Prior year actual data, business plan and RBM forecast data are loaded via RBM
18、 templates. The front end user-interface to Essbase is referred to as “Catalyst”. Catalyst is an Excel add-in that allows users to send and retrieve data to the Essbase data cubes.Business Unit Analysis: This analysis is completed by the relevant Business Manager, utilizing the pre-populated templat
19、es and supplemental calculations as required. Business Unit Form Ms are always subdivided by Product Line (effectively all Business Units will have a Form M for each Product Line they support as well as a Consolidated Business Unit Form M). Commentary to support the Business Unit analysis is require
20、d as well. Once completed Business Unit analysis is submitted into Essbase to facilitate the creation of Product Line Form Ms.Product Line Analysis: After all Business Unit (as well as by Product Line within Business Unit) analysis is complete, Essbase creates the Product Line Form Ms. The Business
21、Unit that houses the Global Product Manager will provide commentary to support the Product Line analysis. Once completed this analysis is submitted into Essbase to facilitate the creation of the remaining steps of the Product Line Cascade.Product Category and Sub-Line of Business Analysis: After the
22、 Product Line analysis is finalized the Product Category and Sub-Line of Business analysis will be mechanically generated.Principal Line of Business: At the Principal Line of Business level several Corporate variances that are not assigned at a lower level are added to the analysis; actual foreign e
23、xchange gains/losses, actuarial gains/losses on pension assets and LIFO variances, etc. These variances flow through to Consolidated analysis as well. On a forecast basis these items will be assigned by CAS.Overview of the Transparent Financial Reporting Analysis processAccountableGLS Data CubesBusi
24、ness Unit Comparison Period DataActual Data Replicated to EssbaseEssbase DataCubeComparison period data pre-populated (ABP, Prior year actual or RBM)Loaded via RBMtemplateBusiness Unit (By Product Line) Form Ms with CommentaryEssbase DataCubeProduct Line Form Ms with CommentaryProductCategoryForm Ms
25、Sub -Line ofBusinessForm MsPrincipal Line ofBusinessForm MsConsolidatedForm MTransparent Financial Reporting Analysis ManualIntroduction: Rate/Volume ConceptAGGREGATION Business Unit Form MThe calculations for the Business Unit Form M can be divided into three categories:1. Additive Items;2. Busines
26、s Unit Calculations; and3. Recalculated Items.Grouping calculations into these three categories facilitates achieving transparency between Business Unit analysis and Product Line analysis. These aggregation methodologies are predefined and cannot be deviated from.Additive Items: These items (see fig
27、ure below) for the Business Unit Form M are add-ups of Product Line calculations. Calculations will be completed at the Product Line within Business Unit level and added together to arrive at the Business Unit total.Business Unit Calculations: These items (see figure below) for the Business Unit For
28、m M are to be calculated at an overall Business Unit Level. The total Business Unit Form M variance will then be split by the Business Unit between the Product Lines within the Business Unit.Recalculated Items: The sum of total margin impact of physical sales volume and mix for total Business Unit a
29、nd total Product Lines within a Business Unit are equal. However, as you aggregate from Product Lines within a Business Unit to total Business Unit, volume and mix must be recalculated. The form M calculates volume and mix by Product Line within Business Unit. It then recalculates volume at a Busine
30、ss Unit level. The difference between the additive volumes of the Product Line calculations and the Business Unit calculation is defined as mix between Product LinesBusiness Unit Form M (e.g. TTT)Business Unit Form M (e.g. TTT)Business Unit Form M (e.g. TTT)Price Realizatio nPub lishe d Price Chan g
31、eSale s Varia nce Rat e Cha ngePro duct Mix Imp act on Sales Mix b y Model WarrantyIn vento ry Ad ju stments/RSSMsPe riod Cost sPa rts Pro fit (McFee ) Othe r Op erating In c/Exp Othe r I nco me & Exp ense Corporat e Burden ItemsTran sfe r Yie ld Curre ncy MaterialTran sfe rs InVa riable L abo r/Bur
32、denRecalculationRecalculationOthe r Varia ble CostsVolu meMix be twee n Pro duct LinesAdditiveItemsBU Calcs.RecalculationProduct Line Form M w/in Business Unit (e.g. Pipelayer w/in TTT)Product Line Form M w/in Business Unit (e.g. Pipelayer w/in TTT)Product Line Form M w/in Business Unit (e.g. Pipela
33、yer w/in TTT)Product Line Form M w/in Business Unit (e.g. MTT w/in TTT)Product Line Form M w/in Business Unit (e.g. MTT w/in TTT)Product Line Form M w/in Business Unit (e.g. MTT w/in TTT)Product Line Form M w/in Business Unit (e.g. MTT w/in TTT)Product Line Form M w/in Business Unit (e.g. LTT w/in T
34、TT)Product Line Form M w/in Business Unit (e.g. LTT w/in TTT)Product Line Form M w/in Business Unit (e.g. LTT w/in TTT)Product Line Form M w/in Business Unit (e.g. LTT w/in TTT)Price Re aliza tio nPublishe d Price Chan ge Sale s Varia nce Rate Cha nge Pro duct Mix I mpa ct on SalesGe ograph ic MixC ount ry/Region MixOth er Sales
