Virginia CFOs measure economy’s slow progress to recovery
- July 30, 2012
Michael Barr measures the health of the residential construction industry — the linchpin of his business — by how many portable toilets and dumpsters move out the gate.
“If I don’t see toilets and dumpsters, construction starts are not happening,” says Barr, chief financial officer for S.B. Cox Inc., a 200-employee construction, recycling and salvage company in Richmond.
S.B. Cox supplies those items to construction jobs throughout Central Virginia and elsewhere. “Last year, I felt like we hit rock bottom — revenues were off 30 to 40 percent,” Barr says.
Although the National Bureau of Economic Research says the nation’s latest recession officially ended in June 2009, chief financial officers across the state say they are still recovering from the economy’s downward plunge.
Since 2006, Virginia Business has examined the challenges and accomplishments of chief financial officers in presenting its annual Virginia CFO Awards.
Forty-three CFOs were nominated this year in five categories: small nonprofits/government agencies, large nonprofits/government agencies, small private companies, large private companies and publicly traded companies.
The awards were presented at a June 21 banquet at The Jefferson Hotel in Richmond. The winners are profiled in the following pages.
A rebound in housing?
Virginia Business asked several nominees how their companies are dealing with the slow economic recovery.
Controlling expenses and making do with less is the new reality for many companies. But some sectors seem to be improving.
“We’re absolutely tied to residential construction,” says Barr. So is much of the U.S.
Historically, residential investment has averaged about 5 percent of the Gross Domestic Product (GDP). Housing services have averaged 12 to 13 percent, for a combined 17 to 18 percent of GDP, according to the National Association of Homebuilders.
While 2011 and other years during the depths of the recession were nightmarish for Cox and other companies whose fortunes rise and fall with the construction industry, Barr says 2012 has shown improvement. He’s hopeful that trend will continue into next year.
“We’re seeing student housing going up, and we’ve had a lot of apartment and town home construction,” Barr says.
He added that the decision by online retailer Amazon to invest $135 million in two distribution centers — slated to employ more than 1,300 people — was a boost for the Central Virginia construction industry.
The two centers are being built in Chesterfield and Dinwiddie counties.
While Cox has ordered new trucks and is adding to its fleet, Barr says tight cost controls continue in force.
Cox has a philosophy of maximizing overtime. The CFO says the policy keeps current employees happy, and means the company can keep the reins on its payroll. “We bust at the seams before we take on new employees,” Barr says.
Meanwhile, at Long & Foster Cos., the largest independent real estate brokerage company in the U.S., CFO and Senior Vice President Bruce L. Enger says sales are up 14 to 15 percent over 2011.
Long & Foster is headquartered in Chantilly and its operations cover eight states in the mid-Atlantic.
Enger, a Certified Public Accountant (CPA), says the company hoped that last year would have been the start of a strong recovery, but performance fell off lower than 2010.
During the housing boom years of 2003-2007, Long & Foster was in a rapid growth mode: hiring staff, acquiring other companies and basking in red-hot sales.
“It takes a long time to turn that ship around,” Enger says of the company’s effort to navigate through the recession.
The number of employees dropped from 2,100 during the real estate boom to about 1,700 now. In 2011, Long & Foster had sales of $645 million.
According to Enger, consumer confidence is a strong measure of whether or not people will buy homes.
In May, consumer confidence — as measured by the University of Michigan Consumer Sentiment Index — was at its highest level since 2008.
If confidence stays high — and mortgage rates stay low while homes prices begin to rise — Enger anticipates better times ahead for the real estate industry.
College adjusts to tight times
The nation’s economic doldrums also have rattled the nation’s colleges and universities, where student debt has continued to climb, and job prospects for graduates have shrunk.
Two-thirds of college seniors graduated with loans in 2010, burdening them with an average debt of more than $25,000, according to the Project on Student Debt, and they faced a historically high unemployment rate of 9.1 percent for college graduates aged 20 to 24.
“It’s a tough world they’re facing,” says Cary Sawyer, vice president of finance for Virginia Wesleyan College, a private, four-year institution of 1,400 students whose 300-acre campus is on the border of Virginia Beach and Norfolk.
During the 2008-2010 period, student enrollment declined by 100 students at Virginia Wesleyan, as a sour economy tightened its grip on prospective students and their families.
But Sawyer says that the college last year regained the students it lost, and it anticipates adding an additional 100 this year.
During the past three years, the college’s finance chief says employees have had no pay increases. “But no employees lost jobs, and there were no benefit cuts,” Sawyer noted.
The college has 285 full-time employees and a complement of part-time employees.
One of the uncertainties for the future, Sawyer says, is whether parents will be able to afford a private education, if the economy continues at its sluggish pace.
During the past several years, Virginia Wesleyan has strived to keep annual tuition increases in the 5 percent range, as opposed to 6, 7 or 8 percent in previous years.
In 2012-13, tuition for a full-time student will be $30,348, before discounts, financial aid and other incentives.
“Our biggest challenge ahead is how student debt will be viewed by parents,” Sawyer says, adding that there also has been an ongoing national discussion about the value of a liberal arts education.
Casualty of Congress’ cuts
In Newport News, Helen Myers, director of finance and administration for “An Achievable Dream,” says the nonprofit is struggling to make up a $500,000 hole in its budget of more than $2 million budget. The shortfall was created by an unlikely source, a moratorium on congressional earmarks to help control the nation’s debt.
An Achievable Dream, which has 25 full-time employees and 50 to 75 part-timers, is a year-round, extended-day public school that works in partnership with Newport News Public Schools to raise academic proficiency and social competency among disadvantaged youth. “We provide tutors for our children, and we do everything we can to give them success,” Myers says.
The current fiscal year, which began July 1, will mark the program’s first year without federal funding.
To compensate for the loss of funding, the nonprofit has increased fundraising events. “Congress doesn’t realize that they cut things they think are pork, when they are very beneficial,” Myers says.
Effects of global economy
For some Virginia CFOs, the focus on the future includes their companies’ interests abroad.
George E. Nichols, vice president of finance for VTLS Inc., a library software company in Blacksburg, says that means keeping a watchful eye on his company’s five foreign subsidiaries.
“The fragile nature of the global economy, particularly the European debt crisis and the slowing down of emerging markets, makes everything more of a challenge,” he says.
To save travel costs, Nichols says monthly meetings and most other conferences with foreign subsidiaries are done via Skype, a proprietary service that allows uses to communicate by voice and video over the Internet.
VTLS, which has just fewer than 100 employees, has the distinction of serving what it says is the highest circulation library in the U.S., the Queens Borough Public Library in New York, and the highest circulation library in the world, the Hong Kong Public Library.
Although libraries once had a sameness to them year after year, technology has jolted the industry — from electronic books to the rise of mobile devices.
Nichols, a CPA, said his company has worked hard not only to keep up but also to keep ahead.
For example, VTLS has developed software to search for digital images in a library’s holdings, and only recently it introduced software for libraries to use in mobile applications.
“Technology is changing — we’re changing,” Nichols says.
2012 CFO Award Winners:
Publicly traded companies: James A. Squires, Norfolk Southern Corp., Norfolk
Large private companies: Terry M. Marshall, The Breeden Co., Virginia Beach
Small private companies: Garet Bosiger, Genesis Products Inc., Keysville
Large nonprofits/government agencies: J. Craig Vanderland, Virginia Department of Alcoholic Beverage Control, Richmond
Small nonprofits/government agencies: Sharyn Hunt, CPA, VHQC, Richmond