I spent last week in the California sun. I started in the Burbank/Hollywood area with NBCUniversal and went from there to the San Francisco Bay area to work with EA. It was a great week. Hollywood was great. I had my wife with me on this trip and Hertz was late getting us a car so they upgraded us to a red convertible Camaro SS. It was a fun car great for the California vibe. Between sessions NCBU had an event in their Hollywood park. They had vampires out, we rode the new Despicable Me 2 ride, and had a great dinner. Then the CFO from Universal Studios Hollywood spoke to us. It was a great evening and it was nice to get on that ride. It turns out that the manufacturing company I own with several partners made the motion bases for that ride. It was great to check out the end results of our project.
Oh, did I forget to mention between the fun times I did 2 finance sessions for NBCU? That went well too. NBCU has a training program branded Talent Lab and the training area is one of the best I have seen. There is a great view of the studio lot and really great technology in the training room. I always enjoy the NBCU groups. One of the key numbers management focuses on is OCF with is an acronym for Operating Cash Flow. I have mentioned in several previous posts that cash flow is king with most public companies lately. So the focus on OCF for NBCU is no surprise. What was interesting is as I was teaching the class one of the students used the financials to calculate EBITDA for 2012 and 2013. Turned out that the EBITDA number was exactly the same as the reported OCF number NBCU reported to management. (By the way this is a great example of sharp students applying what is taught in class as we were working with NBCU specific numbers…Kudos to the group that figured that out).
This discovery led to a great discussion on the difference between EBITDA from the income statement and actual operating cash flow that is found on the cash flow statement. Many companies consider EBITDA a proxy for operating cash flow, obviously NBCU does. The problem is they are not the same and some years they can be dramatically different depending on how the business manages its working capital. So while the focus on EBITDA is important, one must also consider working capital items like accounts receivable, inventory, and accounts payable. The way NBCU looks at OCF, they don’t look at the balance sheet based accounts.