June 26, 2007

REL/CFO Magazine Survey Shows Working Capital Improvement Stalled for the First Time in a Decade, Driven by Slowing Sales Growth And Increases in Overseas Manufacturing

Top 1000 Publicly-Traded U.S. Companies Could Now Recoup $764 Billion By Improving How They Collect Bills, Pay Suppliers, and Manage Inventory

ATLANTA, June 26, 2007 - After nearly a decade of annual reductions in working capital, overall the 1000 largest U.S. companies (excluding automakers and financial institutions) showed no improvement in 2006 in large part due to increased inventory as a result of both slowing sales growth rate and increased use of overseas manufacturing facilities, according to results of the Tenth Annual Working Capital Survey conducted jointly by REL and CFO Magazine.

REL, an Answerthink company (NASDAQ: ANSR) is a world leading consulting firm dedicated to delivering sustainable cash flow improvement across business operations.

The U.S. survey, which will be featured in the July issue of CFO Magazine, found that the top 1000 largest publicly-traded U.S. companies (by sales) are carrying as much as $764 billion in excess working capital because of inefficiencies in the way in they collect bills from customers, pay suppliers, and manage inventory. Typical companies in the REL/CFO survey would need to reduce their overall working capital by 48% to achieve the levels seen by top performers.

A parallel survey of total working capital performance at Europe's 1000 largest publicly-traded companies (excluding automakers and financial institutions) found a 6.6% improvement over last year, liberating €46 billion ($62 billion USD). But overall total working capital performance by the European companies was still 18% worse than that of their U.S. peers.

Typical companies in the REL/CFO survey saw Days Working Capital (DWC) of 38.8 in 2006, with no change over 2005. There were movements in each of the components of working capital, but overall DWC stalled. This included: Days Sales Outstanding (DSO) of 39.5, representing a 1.2% improvement over 2005; Days Payables Outstanding (DPO) of 31.9, a .3% improvement over 2005; and Days Inventory Outstanding (DIO) of 31.2, a 2.1% deterioration over 2005.

All data presented here excludes automotive manufacturers, which can sometimes skew results because of their large financing arms. Financial institutions, including banks and insurance companies, are also excluded from the survey due to their limited working capital needs.

The number of industries where companies reduced their overall working capital in 2006 was down by nearly 50% compared to 2005. Industries where companies showed the greatest DWC improvement included: Hotels; Restaurants & Leisure; Independent Power Producers & Energy Traders; Construction & Engineering; and Multiline Retail. Industries where DWC performance degraded the most included: Gas Utilities; Oil, Gas & Consumable Fuels; and Diversified Consumer Services.

"It's difficult to understand why companies are not taking advantage of the opportunity to drive improvements in working capital, as this results in increased levels of cash flow which should be of significant strategic importance. This is the cheapest source of cash which can be used to enhance shareholder returns or be dedicated to funding strategic initiatives such as paying down debt, building new or additional capacity in low cost regions or repurchasing shares," said REL President Stephen Payne.

According to REL Senior Director Daniel Windaus, "We see two primary factors in this year's poor working capital performance by U.S. companies. First, while sales continued to grow in 2006, the growth rate was down by nearly 25% year over year. As a result, companies housed more inventory due to the lag in supply matching the slow down in demand.

"Secondly, we believe this year's poor U.S. performance is tied to a hidden downside of offshore manufacturing," said Mr. Windaus. "As companies source materials or manufacture goods in low cost countries the increase in lead times associated with shipping parts of finished products to the U.S. contributes to rising inventory levels. This also hinders the speed with which companies can respond to demand changes, causing levels of obsolete inventory to rise. To address this problem, companies will have to find the right balance of taking advantage of cheaper product while creating flexibility in their supply chains to respond better to demand changes, both up and down."

"Working capital in 2006 was a 'Tale of Two Cities,'" said CFO Magazine Editor-in-Chief Julia Homer. "Those leaders who drove improvements reduced working capital by an average of 11%. But the vast majority of CFOs saw their company's performance either stall or degrade."

About REL

REL is a world leading consulting firm dedicated to delivering sustainable cash flow improvement across business operations. REL's tailored solutions balance client trade-offs between working capital, operating costs and service performance. REL's expertise has helped clients free up billions of dollars/euros/pounds in cash, creating the financial freedom to fund acquisitions, pension liabilities, product development, debt reduction and share buy-back programs. In-depth process expertise, analytical rigor, and collaborative client relationships enable REL to deliver an exceptional return on investment in a short timeframe. REL has delivered work in over 60 countries for the Fortune 500.

More information on REL is available: by phone at (770) 225-7300; by e-mail at info@relconsultancy.com; or on the Web at www.relconsultancy.com.

About CFO Publishing

CFO magazine and CFO.com are owned by CFO Publishing, an Economist Group business. With a rate base of 450,000, CFO is the leading business publication for C-level and senior financial executives. It reaches an international audience of corporate leaders with its global group of magazines, including CFO Europe, CFO Asia, and CFO China. For more information, visit www.cfo.com.

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