The Hackett Group

September 5, 2006

Hackett-REL: Top U.S. Companies See $72 Billion In Improved Working Capital; Yet Annual Survey Identifies an Additional $450 Billion in Potential Cash

2005 Working Capital Levels Dropped 5.6% for 1,000 Largest U.S. Companies; European Companies See Progress Stalled After Years of Improvement

ATLANTA, September 5, 2006 - The top 1,000 U.S. companies liberated $72 billion of cash from working capital in 2005 by enhancing the way they collect bills from customers, pay suppliers, and manage inventory, according to results from the 9th Annual Working Capital Survey conducted by Hackett-REL, the Total Working Capital practice of The Hackett Group, an Answerthink company (NASDAQ: ANSR).

Significant opportunity still remains to increase cash flow through the optimization of working capital. U.S. companies still have $450 billion unnecessarily locked up in working capital, based on the gap between typical companies and top-quartile total working capital performers in the Hackett-REL analysis.

The Hackett-REL survey, which was unveiled today in the September issue of CFO Magazine, found that the 1,000 largest U.S. companies reduced total working capital by 5.6% in 2005. Improvement accelerated dramatically year-over-year, with companies generating 55% greater levels of working capital reduction than in 2004.

A complementary study covering Europe, which is being published in the September issue of CFO Europe, reveals that the top 1,000 companies in Europe fell behind their U.S. counterparts in 2005, generating virtually no gains and seeing total working capital performance improve by only 0.5%, less than a quarter of the reduction they saw in 2004 (see separate Research Alert for more details). The European companies had been playing catch-up with the U.S. for several years, and in 2004 generated working capital results virtually on par with U.S. companies.

Excluding the automotive sector, which can sometimes skew results because of the large financing arms of the major manufacturers, the top U.S. companies showed a 4.0% reduction in total working capital in 2005 (up from 2.5% in 2004), while the top 1,000 European companies saw a reduction of only 0.6%, (down from 3.3% in 2004).

"More than ever before, U.S. companies are seeing the value of improving their total working capital performance," explained Hackett-REL President Stephen Payne. "Executives understand that this is an exceptional way to free up cash that can enhance shareholder returns or be dedicated to funding strategic initiatives such as new product development, penetrating emerging markets, paying down debt, or repurchasing shares. But even with the strides companies have made in the past few years, there's still a tremendous amount of money being left on the table here, especially with 43 industry sectors showing improvement while 35 worsened in 2005. These companies still have far to go.

"Several trends played a role in helping U.S. companies generate the results they did in 2005," said Mr. Payne. "It appears that more companies are adding a cash flow performance element to their executive compensation plans, so there are now stronger incentives for business leaders to focus in this area. The greatest improvement this year was in Days Sales Outstanding, in part because accounts receivable is the area of working capital where CFOs have the most influence. Reducing inventory levels, for example, is more of a challenge, as it requires the participation of many other parts of the company and is typically wrapped in far more complex business processes. Finally, many companies are increasing their use of offshore manufacturing, which extends the supply chain and can drive higher inventory levels."

Analyzing the poor European performance, Hackett-REL Europe President Andrew Ashby explained that with corporate liquidity being much improved, management attention seems to have shifted away from working capital towards growing the business and the bottom line. "Over the past few years, European companies have picked the low-hanging fruit in working capital, generating improvements by extending payment terms to suppliers and being more aggressive in collections. But now, with the economy on the rebound, companies seem to have shifted their focus towards growth, and taken their eye off the ball of improving working capital management," said Ashby. "It is interesting that U.S.-based companies are finding a better balance between achieving growth while still driving operational improvements that result in lower levels of working capital - balancing gains in strength between the P&L and the balance sheet, therefore growing while delivering exponential levels of free cash flow versus the European companies."

Hackett-REL found that the top 1,000 U.S. companies achieved Days Working Capital (a measure of total working capital) of 50.4 days. Improvements came in all three areas that make up total working capital, with the greatest progress seen in receivables, as expressed by Days Sales Outstanding, which dropped by 3.9%. Days Inventory Outstanding saw a 2.9% reduction, and Days Payables Outstanding increased by 0.6%. Note: In Days Payable Outstanding, an increase represents improved performance, as companies can decrease their working capital by paying suppliers on more favorable terms.

Of the 82 industry groups examined by Hackett-REL, 12 managed to post a double-digit improvement in working capital. Most improved sectors included cable broadcasters (46% reduction), oil (45% reduction), marine transportation (30% reduction), coal (19% reduction), and toys (19% reduction). The CFO article also features profiles of three companies and their successful DWC reduction efforts: Brightpoint Inc., a $2.1 billion distributor of mobile phones and other wireless products; Nucor Corp., a $12.7 billion steel company; and wireless communications company Qualcomm.

Highlights of The Hackett-REL survey, arefeatured in the September issue of CFO magazine, available online at www.cfo.com/workingcap. More detailed information on this Hackett-REL research is available to members of Hackett's Total Working Capital Executive Advisory Program. More information is also available on The Hackett Group's Web site, at www.thehackettgroup.com/research/twc/.

About Hackett-REL

Hackett-REL, the Total Working Capital practice of The Hackett Group, is the global leader in generating cash flow improvements from working capital and operations. For more than 30 years, Hackett-REL's expertise has helped clients in over 60 countries liberate billions of dollars in working capital ($25 billion in the last ten years alone), creating the financial freedom to fund their strategic objectives including acquisitions, new product development, debt reduction and share buy-back programs. The Hackett Group is an Answerthink company, whose clients include 97% of the Dow Jones Industrials, 77% of the Fortune 100 and 90% of the Dow Jones Global Index.

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause Answerthink's actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Factors that impact such forward-looking statements include, among others, the ability of the products, services, or practices mentioned in this release to deliver the desired effect, our ability to effectively integrate acquisitions into our operations, our ability to attract additional business, our ability to effectively market and sell our product offerings and other services, the timing of projects and the potential for contract cancellations by our customers, changes in expectations regarding the information technology industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, foreign currency fluctuations, changes in general economic conditions and interest rates as well as other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2006 filed with the Securities and Exchange Commission. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.