Weathering the Storm

The events of the last few weeks have certainly shaken every one’s faith and perceptions of the U.S. economy and its credit markets.  Iconic financial institutions employing minds graduated from some of the finest business schools in the country find themselves on the verge of bankruptcy or requiring merger partners because the increased debt, which they introduced on their books, became pools of quicksand. Financial institutions eschewed loan to value ratios (equity) in the pursuit of bigger books of business.  This system only works as long as the trends continue in a positive direction.  It would seem that good old fashioned common sense and fiscal prudence took a back seat to book smarts and quantitative analysis.

The management at Checon has not abandoned common sense and fiscal prudence in the pursuit of more business.  We still look at things like cash flow and we submit every initiative to quantitative analysis as well as a “smell test”.  Checon Corporation has embraced a lean manufacturing program, which has yielded significant inventory reductions in a relatively short period of time.  Lean principles that have also been applied to the purchasing of expense type items have resulted in improved profitability.  While financial institutions were increasing their debt load, Checon has been having considerable success in reducing the amount of debt on its books.

During 1994, Checon Corporation established a silver leasing arrangement with its financial institution, which replaced a silver hedging program that had existed for several years.  The silver leasing program smoothed out cash flow by eliminating cash “shocks” arising from margin calls in a volatile metals market.

While we all would much prefer those long stable periods of positive economic growth, the management of Checon has implemented an operational and financial strategy, which has the company weathering difficult economic times and thriving when times are good.