Collective Bargaining Training

Webinars, February 25 and 28, 2011

The Economic Context

An Overview Ken Peres, CWA Research Economist

Company Financial Statements

An Overview Irvin Stout, CWA Research Economist

What are Financial Statements?

Financial statements are formal records of the financial activities incurred by a business during a given period.

Financial statements provide detailed information about the financial position, financial performance and changes in financial position of an enterprise over time.

Financial statements are used by a wide range of individuals making economic decisions.

3 Major Financial Statements

Balance Sheet Income Statement Cash Flow Statement

The Balance Sheet

The Balance Sheet reports the financial position of a company at a specific point in time, usually at the end of a month or year.

The Balance Sheet is broken out into 3 sections: Assets, Liabilities and Shareholders Equity.

Assets: Economic resources that are expected to produce future benefits.

Liabilities: Financial obligations (debt) that a company owes to its creditors.

Shareholders Equity: Stockholders ownership claim or rights to a company’s assets.

The Balance Sheet Con’t Assets (What the Company has)

Current Assets: Cash or can be converted into cash within one year. Long-term Assets: Have a value or life of more than one year. Total Assets: Current Assets plus Long-term Assets.

Liabilities (What the Company owes) Current Liabilities: Obligations that must be paid within one year. Long-term Liabilities: Obligations that mature in more than one year. Total Liabilities: Current Liabilities plus Long-term Liabilities.

Shareholders Equity (What the Stockholders own) Represents the Shareholders’ stake/ownership in the business. Total Assets minus Total Liabilities equal Shareholders Equity. Also known as Net Worth.

The Income Statement

The Income Statement (also called the profit & loss statement) reports revenues earned and expenses incurred by a business over a period of time.

Operating Revenues or Sales The amounts earned from selling products; services.

Operating Expenses Costs incurred in operating a business. Includes costs for employee salaries and benefits, supplies, lease/mortgage payments,

utilities, advertising, administrative, depreciation, etc. Operating Income/Profit

The amount of income generated by business operations. Key measure of profitability Operating Revenues minus Operating Expenses equal Operating Income.

Non-Operating Expenses/Income Expenses and/or income that are not directly associated with core business operations. Includes interest payments made on debt, interest income earned on investments.

Net Income/Profit The amount left over after all expenses have been deducted.

The Cash Flow Statement

The Cash Flow Statement reports the sources (inflows) and uses (outflows) of cash over a period of time.

The Cash Flow Statement is divided into 4 main sections:

1. Cash provided by operating activities The amount of cash that was generated by company operations.

2. Cash used in/provided by investing activities The amount of cash utilized for investment purposes (e.g. capital

expenditures, disposition of assets.)

3. Cash used in/provided by financing activities The amount of cash utilized for financing purposes (e.g. borrowing and

repaying loans, withdrawals from/to shareholders)

4. Cash at end of year The amount of cash that was left over at the end of the year.

Additional Financial Information Management’s Discussion and Analysis

Section of a Company’s Annual Report that provides an in-depth review and analysis of the past year’s financial and operating results and offers a comparison of these results over prior periods.

Notes/Footnotes to the Financials A detailed set of notes immediately following the financial statements in an annual

report that explain and expand on the information in the financial statements. The Notes also provide additional information that is not directly found in the

financial statements such as the accounting methodologies used for recording and reporting transactions, segment data, pension plan details, debt maturity schedules, etc.

Comparative Trend Analysis

A comparative analysis of a Company’s financial information over common periods.

Changes in financial statement line items are analyzed to detect trends.

Basic financial trend analysis involves comparing dollar and percentage changes over set periods.

Calculating Dollar and Percentage Changes

1. Subtract the old value from the new value. This will give you the dollar or amount change.

2. Divide the dollar or amount change by the old value and multiply by 100 and add a % sign. This will give you the percentage change.

Line Item Year 2010 Year 2009

Sales $200 (New Value) $150 (Old Value)

$200 minus $150 = $50: This is the Dollar or Amount Change.

$50 divided by $150= 0.33.3 multiplied by 100 = 33.3%: This is the Percentage Change.

Example

Where to Find Financial Information Company Websites

Investor Relations Page

SEC Edgar Database SEC Filings (10-K,10-Q)

Financial News/Research Websites Yahoo Finance, Reuters

Other Hoovers, Dun & Bradstreet

Wage Negotiations and Compensation Designs

An Introduction

Bob Patrician, CWA Research Economist

Principles of a Fair Compensation System A fair day’s pay for a fair day’s work

An equitable share of the revenue and profits the employer receives

Quality benefits including medical and retirement benefits

Opportunity to move into higher skill jobs at higher pay, with experience.

Human Resources View

Compensation systems further the goals of the employer: Recruit and retain employees Increase or maintain morale Reward or encourage peak performance Reduce turnover and encourage loyalty

Compensation will be perceived as fair if its components are developed to maintain internal and external equity.

Types of Pay Systems

Hourly Pay

Variable Pay Plans

Commission Plans

Merit Pay/Pay for Performance

Merit Pay/Pay for Performance Rationale:

pay should be based on performance better performance should get higher pay

Reward good work and motivate more Periodic appraisals done by supervisors Morale, productivity, retain valued ‘ees Arguments against

Poor design can backfire, reward wrong behavior Bias and favoritism. Fear and distrust

Commission Sales Plans

Sales Retail stores, Customer service jobs Plans change regularly Employer controls plans and targets

Good service drives profit and growth Worker earnings flow directly from service Arguments against

Is the “earnings opportunity” real? How to insure pay for time not worked Union needs to understand and police the rules Probably cannot negotiate what the rules will be

More detail on some of these issues . . .

Variable Pay

Incentive Plans Individual bonus Engineered rates

Group Plans Group Incentives Gainsharing

Team Awards Tied to overall corporate performance

Dealing with Variable Pay

Union Goals Fair targets Fairly applied Changes regulated

Contract language to govern plan Union Oversight

Time Study Steward Gainsharing committee Access to company financial information

Which Graph Fits Our Goals?

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$10 $12 $14 $16 $18 $20Wages

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$10 $12 $14 $16 $18 $20Wages

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Hourly Pay, Progression Schedules Driven by seniority Predictable and Dependable Options as to how to spread money over the

schedule An exponentialized Schedules has equal

percentages between steps Calculator on the Intranet

In a later webinar we’ll discuss costing, slotting, red circling and lump sums

Background for the Homework Exercise The Gotham Company is a business services

outsourcer. CWA Local A represents 250 workers at the Company. The Union is currently negotiating a new 3 year contract with the Company.

There are three job titles: 30 Clerks who make between $8.25 and $15.35 per

hour. 200 Customer Service Reps who make between

$10.00 and $17.35 per hour. 20 Technical Service Reps who make between $15.00

and $22.35 per hour.

Wages for the Homework Exercise In our earlier contract, we

achieved wage progressions but they have the same increases between the steps for each of the jobs and the greatest money at the highest steps. They are also 7 year schedules. These are the current schedules:

Step Service Clerk CSR TSR

Start 0 8.00 10.00 15.00

1 6 8.20 10.20 15.20

2 12 8.45 10.45 15.45

3 18 8.75 10.75 15.75

4 24 9.10 11.10 16.10

5 30 9.50 11.50 16.50

6 36 9.95 11.95 16.95

7 42 10.45 12.45 17.45

8 48 11.00 13.00 18.00

9 54 11.60 13.60 18.60

10 60 12.25 14.25 19.25

11 66 12.95 14.95 19.95

12 72 13.70 15.70 20.70

13 78 14.50 16.50 21.50

14 84 15.35 17.35 22.35

Further Information for the Homework Exercise The members are looking for annual wage increases of 4.0% in

each of the next 3 years. In our last contract, they received annual wage increases of

3.0% in each year. They also want to reduce the wage schedules to 5 years (10

steps, 60 months). At the time of the last contract three years ago, there were 350

CWA represented employees at the company.

Management’s position: The Company cannot afford to give the proposed wage increase.

Union’s position: The Company can afford to give the proposed wage increase.

Everything you need for the homework exercise is available on this webpage:

http://cwa-union.org/cbtraining

Contact Information: Ken Peres, 202/434-1185, kperes@cwa-union.org Irvin Stout, 202/434-1197, istout@cwa-union.org Bob Patrician, 202/434-1183,

rpatrician@cwa-union.org