“we are all very confident about ... - tell me why i'm wrong€¦ · we made in the first...
TRANSCRIPT
First Fiscal Quarter 2018 October 1 – December 31, 2017
Corporate Officers (Pictured left to right)
Bob Frizzle, CFO
Randy Karnes, CEO
Geoff Johnson, COO
On the Back A Message from the CEO (con’t)
Board of Directors
Press Play
Inside Income Statement
Balance Sheet
Numbers Snapshot
Key Dates
I’m sure my board would simply write the facts and only the facts, understanding that all of you are used to working through the ups and downs of your income statements over the course of a year. I’m a bit more dramatic. For some reason, I got stuck on a spaghetti western theme: the good, the bad, and the ugly.
• The great: Patronage dividend accruals for 1Q2018 were $500K, 133% greater than what we accrued last year, which was a record year for owner returns.
• The ugly: Accrued tax expenses for 1Q2018 were 17% less than our budget projections. Which is good, but taxes are always ugly.
As you can probably see, I’m being a little tongue-in-cheek here. If you’re interested, please reach out to me or Bob Frizzle and you can review our variance report for this first quarter. The Board did look at this very carefully as we analyzed the adjustments for the next three quarters and what our first quarter’s performance might mean to our ongoing success. Our conclusion? Besides feeling a little bruised about our ability to project this first quarter’s performance, we are all very confident about the 2018 business year and excited about what we’ll see over the next three quarters. I anticipate we will work very hard to erase the current variance in our YTD income statement with positive results beyond our budget, and be back on track with the mid-year budget recast for April through September. Oh, by the way, we never have been very good at fortune-telling when it comes to budgets. It’s just that we’re used to being on the positive side when we’re wrong. Take care.
Here are the factors that make up the majority of the variance: (1) Accounting for the new EFT price changes and Resource Allocation Fee change goes awry. Gross sales off by 1.55% for the quarter.
• The good: Over the next three years, CU*Answers is cutting EFT/Resource Allocation Fees.
• The bad: CU*Answers budget planners incorrectly budgeted the timing of these changes, one month early.
• The ugly: Nothing. December 31, 2017 is still the second-best start to any fiscal year yet, and the budget error can be adjusted at the mid-year recast.
(2) Employee expenses exceed budget by 2.77% in the first quarter.
• The good: Credit unions are responding to marketing activities and CU*Answers has one of its best-ever sales quarters going into a new calendar year.
• The bad: CU*Answers bonus and commission programs accrue big expenses based on projects booked for 2018 and 2019.
• The ugly: Nothing. More credit unions than anticipated will be joining our community and contributing to our cooperative’s success going forward, and the budgets for future years just got a lot better.
(3) The rest of the story: What we do with taxes and dividends to get to our net income.
• The good: Net income after dividends and taxes is $680K, nearly two and a half times what we made in the first quarter of 2014, just four years ago.
“We are all very confident about the 2018 business year and excited about
what we’ll see over the next three quarters.”
Randy Karnes, CEO
Board of Directors
Chair Scott McFarland Honor Credit Union St. Joseph, Michigan
Vice Chair Vickie Schmitzer Frankenmuth Credit Union Frankenmuth, Michigan
Secretary/Treasurer Donald Mills Alpena Alcona Area Credit Union Alpena, Michigan
Board Members
Linda Bodie Element Federal Credit Union Charleston, West Virginia
Tom Gryp Notre Dame Federal Credit Union Notre Dame, Indiana
Jeff Jorgensen Sioux Empire Federal Credit Union Sioux Falls, South Dakota
Dean Wilson FOCUS Credit Union Wauwatosa, Wisconsin
Financial Review
6000 28th St. SE Grand Rapids, MI 49546
www.cuanswers.com 800.327.3478
Press Play Check out our latest video at ondemand.cuanswers.com/enrolling-in-estatements
A Message from the CEO
A Message from the CEO Con’t from cover
What did you think when you saw this headline, especially after you realized it wasn’t a joke, but really reflects this quarter’s numbers? I can assure you that at the January Board meeting, no one thought it was a joke. We spent a lot of time going over the numbers and predicting what all of you would think when we went public with this report.
Con’t on back
0
1
2
2013 2014 2015 2016 2017
Current Month
Dec. 2017
Assets Total Cash/On-Demand Deposits 11,174,103
Total Investments 1,001,871
Total Accounts Receivable 1,045,143
Total Pre-Paid Assets 4,113,233
Total Fixed Assets 9,268,584
Total Other Assets 4,873,020
Total Assets 31,475,955 Liabilities & Equity Total Short-Term Liabilities 3,938,199
Total Long-Term Liabilities 10,329,599
Total Liabilities 14,267,798 Total Equity 17,208,157
Total Liabilities & Equity 31,475,955
YTD Budget
Dec. 2017 YTD
Income/Revenue Total CU*BASE Revenue 10,656,165 10,861,951
Total CNS/iSeries Revenue 1,884,416 1,935,960
Total External Business Revenue 849,909 803,922
Total Sales 13,390,491 13,601,833 Total Cost of Goods Sold 3,422,614 3,525,138
Gross Margin/Income 9,967,876 10,076,695
Expenses Total Employee Expenses 5,976,729 5,815,496 Total Non-Employee Expenses 2,357,667 2,354,382
Total Operating Expenses 8,334,397 8,169,878 Total Other Expenses (2,751) 0
Gross Expenses 8,331,646 8,169,878
Net Income (before taxes and dividends) 1,636,231 1,906,817
Stock Value
The book value of Class A ownership shares as of 9/30/17 is $124,282. Ownership shares sell at $290,000 or 2.33 times the book value.
Numbers Snapshot (Numbers in millions)
Balance Sheet Income Statement
Key Dates
Net Income (Before taxes and dividends)
$0
$1
$2
$3
$4
$5
$6
2013 2014 2015 2016 2017
Members Served Dividends Paid
$0
$1
$2
$3
$4
$5
$6
$7
2013 2014 2015 2016 2017
February 23 Next Suggested
Product
March 14 Mid-Year
CEO School
March 21 CFO
Strategies cuanswers.com/resources/ edu/syllabi/?course=4.95C
cuanswers.com/resources/ edu/syllabi/?course=SE.2
cuanswers.com/resources/ edu/syllabi/?course=SE.18.1
0
1
2
2013 2014 2015 2016 2017
Current Month
Dec. 2017
Assets Total Cash/On-Demand Deposits 11,174,103
Total Investments 1,001,871
Total Accounts Receivable 1,045,143
Total Pre-Paid Assets 4,113,233
Total Fixed Assets 9,268,584
Total Other Assets 4,873,020
Total Assets 31,475,955 Liabilities & Equity Total Short-Term Liabilities 3,938,199
Total Long-Term Liabilities 10,329,599
Total Liabilities 14,267,798 Total Equity 17,208,157
Total Liabilities & Equity 31,475,955
YTD Budget
Dec. 2017 YTD
Income/Revenue Total CU*BASE Revenue 10,656,165 10,861,951
Total CNS/iSeries Revenue 1,884,416 1,935,960
Total External Business Revenue 849,909 803,922
Total Sales 13,390,491 13,601,833 Total Cost of Goods Sold 3,422,614 3,525,138
Gross Margin/Income 9,967,876 10,076,695
Expenses Total Employee Expenses 5,976,729 5,815,496 Total Non-Employee Expenses 2,357,667 2,354,382
Total Operating Expenses 8,334,397 8,169,878 Total Other Expenses (2,751) 0
Gross Expenses 8,331,646 8,169,878
Net Income (before taxes and dividends) 1,636,231 1,906,817
Stock Value
The book value of Class A ownership shares as of 9/30/17 is $124,282. Ownership shares sell at $290,000 or 2.33 times the book value.
Numbers Snapshot (Numbers in millions)
Balance Sheet Income Statement
Key Dates
Net Income (Before taxes and dividends)
$0
$1
$2
$3
$4
$5
$6
2013 2014 2015 2016 2017
Members Served Dividends Paid
$0
$1
$2
$3
$4
$5
$6
$7
2013 2014 2015 2016 2017
February 23 Next Suggested
Product
March 14 Mid-Year
CEO School
March 21 CFO
Strategies cuanswers.com/resources/ edu/syllabi/?course=4.95C
cuanswers.com/resources/ edu/syllabi/?course=SE.2
cuanswers.com/resources/ edu/syllabi/?course=SE.18.1
First Fiscal Quarter 2018 October 1 – December 31, 2017
Corporate Officers (Pictured left to right)
Bob Frizzle, CFO
Randy Karnes, CEO
Geoff Johnson, COO
On the Back A Message from the CEO (con’t)
Board of Directors
Press Play
Inside Income Statement
Balance Sheet
Numbers Snapshot
Key Dates
I’m sure my board would simply write the facts and only the facts, understanding that all of you are used to working through the ups and downs of your income statements over the course of a year. I’m a bit more dramatic. For some reason, I got stuck on a spaghetti western theme: the good, the bad, and the ugly.
• The great: Patronage dividend accruals for 1Q2018 were $500K, 133% greater than what we accrued last year, which was a record year for owner returns.
• The ugly: Accrued tax expenses for 1Q2018 were 17% less than our budget projections. Which is good, but taxes are always ugly.
As you can probably see, I’m being a little tongue-in-cheek here. If you’re interested, please reach out to me or Bob Frizzle and you can review our variance report for this first quarter. The Board did look at this very carefully as we analyzed the adjustments for the next three quarters and what our first quarter’s performance might mean to our ongoing success. Our conclusion? Besides feeling a little bruised about our ability to project this first quarter’s performance, we are all very confident about the 2018 business year and excited about what we’ll see over the next three quarters. I anticipate we will work very hard to erase the current variance in our YTD income statement with positive results beyond our budget, and be back on track with the mid-year budget recast for April through September. Oh, by the way, we never have been very good at fortune-telling when it comes to budgets. It’s just that we’re used to being on the positive side when we’re wrong. Take care.
Here are the factors that make up the majority of the variance: (1) Accounting for the new EFT price changes and Resource Allocation Fee change goes awry. Gross sales off by 1.55% for the quarter.
• The good: Over the next three years, CU*Answers is cutting EFT/Resource Allocation Fees.
• The bad: CU*Answers budget planners incorrectly budgeted the timing of these changes, one month early.
• The ugly: Nothing. December 31, 2017 is still the second-best start to any fiscal year yet, and the budget error can be adjusted at the mid-year recast.
(2) Employee expenses exceed budget by 2.77% in the first quarter.
• The good: Credit unions are responding to marketing activities and CU*Answers has one of its best-ever sales quarters going into a new calendar year.
• The bad: CU*Answers bonus and commission programs accrue big expenses based on projects booked for 2018 and 2019.
• The ugly: Nothing. More credit unions than anticipated will be joining our community and contributing to our cooperative’s success going forward, and the budgets for future years just got a lot better.
(3) The rest of the story: What we do with taxes and dividends to get to our net income.
• The good: Net income after dividends and taxes is $680K, nearly two and a half times what we made in the first quarter of 2014, just four years ago.
“We are all very confident about the 2018 business year and excited about
what we’ll see over the next three quarters.”
Randy Karnes, CEO
Board of Directors
Chair Scott McFarland Honor Credit Union St. Joseph, Michigan
Vice Chair Vickie Schmitzer Frankenmuth Credit Union Frankenmuth, Michigan
Secretary/Treasurer Donald Mills Alpena Alcona Area Credit Union Alpena, Michigan
Board Members
Linda Bodie Element Federal Credit Union Charleston, West Virginia
Tom Gryp Notre Dame Federal Credit Union Notre Dame, Indiana
Jeff Jorgensen Sioux Empire Federal Credit Union Sioux Falls, South Dakota
Dean Wilson FOCUS Credit Union Wauwatosa, Wisconsin
Financial Review
6000 28th St. SE Grand Rapids, MI 49546
www.cuanswers.com 800.327.3478
Press Play Check out our latest video at ondemand.cuanswers.com/enrolling-in-estatements
A Message from the CEO
A Message from the CEO Con’t from cover
What did you think when you saw this headline, especially after you realized it wasn’t a joke, but really reflects this quarter’s numbers? I can assure you that at the January Board meeting, no one thought it was a joke. We spent a lot of time going over the numbers and predicting what all of you would think when we went public with this report.
Con’t on back