Do the Math: Upgrading to LED Lighting Can Save on Energy and Maintenance Costs

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CFO Studio Magazine, 1st Quarter 2012
By Michael Schratz, Director of Marketing, and John Krauter, Vice President, Finance

Switching to LED lighting can result in a payback of two years or less.

INSTALLING ENERGY-EFFICIENT LIGHTING is one of the most effective and efficient upgrades a facility can implement to save time, money and energy as well as improve overall productivity, sustainability, safety and security. As the most efficient lighting solution available, light-emitting diode

(LED) lighting technology produces immediate and quantifiable results from day one.

While some may question whether such a technology investment will provide real savings and a quick ROI, the fact is that switching to LED lighting can result in a payback of two years or less. With technology that is typically warranted for five years, and most often lasts 10 or more, it is no surprise that making the switch to LED can deliver fast and significant ROI.

Qualities of LED Lighting Technology

  • Long-life, energy-efficient lighting technology
  • Significantly reduces maintenance
  • Operates efficiently in extreme temperatures
  • Clean technology that reduces carbon emissions
  • No mercury or hazardous material
Superior Power Efficiency = Lower Energy Costs

LED lighting consumes much less power than traditional incandescent, metal halide or mercury vapor lights, with superior energy efficiency that can slash energy consumption by as much as 50% in virtually any application. In states where the energy rate is quite high, such as in New Jersey, New York and other areas, this energy savings can have a dramatic impact on bottom-line performance.

For example, at Arkansas Rockline Industries, a major supplier of private label wet wipe products to Walmart, a one-to-one replacement of metal halide fixtures with LED high bay lighting cut the operational and energy costs of the lights by some $75,000 per year to just $25,000. And, because LED lights produce much less heat, the facility also noted a 20-ton reduction in its air-conditioning demand, further reducing energy costs.

A correctional facility in the state of Oregon reported a significant drop in its energy consumption — to the tune of $140,000 in annual savings — by converting to high-efficiency LED lighting.

Meanwhile, a building products provider in Connecticut shaved more than $5,500 a year from its energy bill, thanks to LED lighting.

Longer Life Reduces Maintenance Costs

While often considered an unavoidable expenditure, the actual dollars spent maintaining traditional lighting can be substantial, whether using a maintenance department or an outside electrical firm. Simple bulb changes often demand the use of a scissor lift, a halt in production and other costly inefficiencies. Equipment costs alone can easily double a maintenance bill. In some applications, reaching the fixtures to replace a lamp may be a significant hazard and require massive effort.

LED fixtures eliminate these headaches and can bring the cost of lighting maintenance down to virtually zero. With their exceptionally long-life performance, the best LED systems today can provide at least a decade of worry-free, high-quality lighting that delivers significant savings.

Since switching to LED fixtures, a natural gas transmission and treatment operator in Colorado has saved $4,800 a year in bulb expenses alone, plus another $57,500 in labor, for a grand total of more than $60,000 in annual direct maintenance savings. At Rockline’s facility, the elimination of bulb changes has saved the company at least $5,000 a year, not including the cost of lift rental to reach the fixture mounting height.

The savings are also significant at power generation and other facilities with towers or stacks, like the Mount Bethel PPL generation facility in Bangor, PA. Here, the company saved about $12,000 in maintenance costs by converting its six Xenon stack beacon lights to LED beacons. And, because the LED products will last much longer, the company also reduced its risk of costly FAA fines levied as a result of burned-out bulbs.

Rebates and Incentives

In addition to the inherent energy and maintenance costs realized by switching to LED, the U.S. Department of Energy (DOE) has implemented various rebate and incentive programs to significantly reduce the upfront cost of upgrades and shorten payback periods. The amount of funding available has increased in the last year, leaving facility managers with great opportunities to move forward on projects, even when little capital is available. LED lighting often falls under a custom rebate program dependent on kWh saved annually, and ranges from 30%-100% of investment cost provided back to the customer.

The building products manufacturer in Connecticut took advantage of a $30,000 rebate from Connecticut Light & Power that, combined with energy and maintenance savings, generated a 1.5 year payback on its LED conversion. And, Rockline garnered a $48,000 rebate from its power supplier, American Electric Power’s Southwestern Electric Power Company.

The Bottom Line

For its energy efficiency, maintenance savings and overall lower total cost of ownership — not to mention attractive rebates and incentives — LED technology has already been recognized by the industrial lighting world as the undisputed successor to antiquated conventional lighting systems. With numerous products for a wide range of applications now commercially available from a number of reputable manufacturers, many companies worldwide have already started to realize the benefits of LED technology and have become more proactive in its adoption.

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Strategic Thinking Helps Avis Budget Group Weather Financial Storms

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CFO Studio Magazine, 1st Quarter 2012

Teams that identify problems early and can act quickly to develop alternative responses deliver effective management – and success.

Act, don’t react.

At Avis Budget Group, that statement is far more than hopeful advice for the company’s millions of business and leisure customers.  Indeed, it’s a guiding principle for David B. Wyshner, senior executive vice president and global chief financial officer, who believes proper planning, especially in the face of adversity, is the key to long-term success.

“There will always be difficult choices to make,” says Wyshner. “Knowing when it’s time to make them can position a company to weather a storm — and position it to do well and succeed over a long period of time.”

“Being proactive is the only way to be,” he adds, noting that a team that identifies a problem, works together to develop alternative responses and acts quickly is the very definition of effective management.  It’s the strategy he has employed and has instilled in every member of the Avis Budget financial team since he joined the firm – then Cendant – in 1999. Wyshner, 44, has been holding the financial reins at Avis Budget since August of 2006; prior to that, he served as the company’s treasurer.

When Wyshner, the board of directors and shareholders at Avis Budget – even the global marketplace – reflect on 2011, they will collectively view it as a year of strategic action.

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Separate Private vs. Public Company GAAP: Are We at a Tipping Point?

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CFO Studio Magazine, 1st Quarter 2012
By Tim Anglim, CPA, CMA, CEO of YesCFO

YesCFO – a provider of part-time and interim CFO services for organizations experiencing rapid change or an unstable environment – whether due to a financial crisis, paradigm shift or growth opportunity.

IN JANUARY 2011, the Blue-Ribbon Panel on Standard Setting for Private Companies issued its long-awaited report. The panel’s key recommendation — to establish a separate private company standards board alongside the existing Financial Accounting Standards Board, which would be tasked with providing “appropriate and sufficient exceptions and modifications”1 to existing GAAP for private companies — is just one more dynamic that today’s private company CFO needs to comprehend.

As background, in December 2009, the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Foundation (FAF) and the National Association of State Boards of Accountancy (NASBA) established a “blue-ribbon” panel to address how accounting standards can best meet the needs of users of U.S. private company financial statements.  The panel was charged with providing recommendations on the future of standard setting for private companies to the FAF Board of

Trustees, the parent organization of the Financial Accounting Standards Board (FASB). Its January report is the result of that work.

Much has been written and discussed concerning the lack of relevance of a growing list of GAAP pronouncements as promulgated by the FASB from the private company perspective.

The FASB’s almost exclusively public company focus has led many in the profession, and in business, to clamor for some much needed relief. Even smaller public companies have strained under the onslaught of ever-increasing complex accounting rules. Consider also that there are approximately 14,000 public companies that have SEC reporting requirements while there are approximately 28 million private companies in the United States, many of which require audited, reviewed or compiled financial statements to satisfy their lenders, investors or other stakeholders, but not to the investing public or the SEC.

The apparent public company tilt to much of the FASB’s work has increased costs to all issuers of GAAP-based financial statements, public or private. With regard to private company issuers, the report noted that this “has led to more users of financial statements to accept qualified opinions – a development that calls into question whether those aspects of GAAP are truly ‘generally accepted.’”

Although the panel recommended that a new private company standards board be established, it did not recommend moving towards establishing completely separate GAAP for private companies, opting instead to recommend that exceptions and modifications be made to U.S. GAAP for private companies under the guidance of this separate board.

Also a factor in the panel’s recommendations was recognition of the proposed coming convergence between international and U.S. accounting standards (IFRS vs. GAAP). The panel felt that the FASB will be unduly distracted by its competing standard-setting pressures related to public companies and the push to adopt International Financial Reporting Standards as promulgated by the IASB, the FASB’s international counterpart, and will not prioritize private company needs.

Ultimately, the FAF rejected the panel’s recommendation concerning establishing a separate private company board, despite growing support for such a move, as evidenced by official statements by the AICPA4 and many state CPA societies that endorsed the panel’s key recommendations. The FAF has opted, instead, to form a Private Company Standards Improvement Council, to the disappointment of many in the profession. In fact, the AICPA went so far in its subsequent press release protesting the FAF’s lack of action to threaten that if the FAF does not move to adopt the panel’s recommendations for a separate board, the AICPA “will consider other options,” which “could include creating a separate standard setting body” to do the same.

Déjà vu all over again? Sorry Yogi, but we may be coming full circle on this one, circa 1973, when the FASB first began issuing pronouncements, placing the AICPA in a subordinate role ever since. Can the AICPA now reverse those positions as they relate to future private company GAAP? Time will tell, but this train may have left the station. “All aboard, anyone?”

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