Theory And Practice Of Supervision

Theory And Practice Of Supervision Supervision theories and practices began emerging as soon as counsellors started to train other counsellors (Bernard Goodyear, 2009). Several different theoretical models have developed to clarify and support counselling supervision. The focus of early models of supervision had generally been based on counselling theories (such as Cognitive Behavioural Therapy, Adlerian or client-centred), but these orientation-specific models have begun to be challenged as supervision has many characteristics that are different to counselling. Competency as a counsellor does not automatically translate into competency as a supervisor, and when supervisee/supervisor orientations differ, conflicts may arise (Falender Safranske, 2004). More recent models of supervision have integrated theories from psychology and other disciplines, for one-to-one, peer and group supervision. As supervision has become more focused, different types of models emerged, such as developmental models, integrated models, and agency models. As a result, these models have to some extent replaced the original counselling theory models of supervision, and supervisors may utilise several different models to qualify and simplify the complexities of supervision (Powell, 1993). This paper will briefly look at a definition of supervision, and an outline of two different models agency and developmental. What is Supervision? Supervision is the process where by a counsellor can speak to someone who is trained to identify any psychological or behavioural changes in the counsellor that could be due to an inability to cope with issues of one or more clients. A supervisor is also responsible for challenging practices and procedures, developing improved or different techniques, and informing clients of alternative theories and/or new practices, as well as industry changes. The supportive and educative process of supervision is aimed toward assisting supervisees in the application of counselling theory and techniques to client concerns (Bernard Goodyear, 2009). The supervisor is responsible for monitoring the mental health of their supervisee, in turn protecting the public from unhealthy counsellors. Counsellors can face issues such as transference and burn out without any recognition of the symptoms. A supervisor should notice the symptoms before the counsellor (Australian Counsellors Association, 2009). Supervision is a formal arrangement for counsellors to discuss their work regularly with someone who is experienced in counselling and supervision. The task is to work together to ensure and develop the efficiency of the counsellor/client relationship, maintain adequate standards of counselling and a method of consultancy to widen the horizons of an experienced practitioner (ACA, 2009). The supervisors primary role is to ensure that their clients are receiving appropriate therapeutic counselling. By ensuring the counsellor continually develops their professional practice in all areas, the supervisor ensures a counsellor remains psychologically healthy. The supervisor is also responsible for detecting any symptoms of burn out, transference or hidden agendas in the supervisee. The Australian Counsellors Association (2009) recommends that supervisors cover the following as a matter of course: Evaluation Supervisees counselling; Developing process of self-review; Quality assurance; Best practice; Service outcomes of service delivery; Identifying risk for supervisee and clients; Referrals; Follow up on client progress; Helping the counsellor assess strengths and weaknesses. Education Establishing clear goals for further sessions; Providing resources; Modelling; Explaining the rationale behind a suggested intervention and visa versa; Professional development; Interpreting significant events in the therapy session; Convergent and divergent thinking; Use of self; Topping up; Facilitating peer connection; Duty of care; Legal responsibilities. Administration Procedures; Paperwork; Links; Accounting; Case planning; Record keeping; Insurance. Support Advocate; Challenge; Confront; Empower; Affirm; Availability; Empowering; Use of self. A range of different models have evolved to provide a framework for these topics within which supervisors of can organize their approaches to supervision, and act as an aid to understanding reality (Powell, 1993). Agency Model of Supervision Kadushin Kadushin describes a supervisor as someone to whom authority is delegated to direct, coordinate, enhance, and evaluate on-the-job performance of the supervisees for whose work he/she is held accountable. In implementing this responsibility, the supervisor performs administrative, educational, and supportive functions in interaction with the supervisee in the context of a positive relationship (Powell, 1993). In educational supervision the primary issue for Kadushin is the counsellor knowing how to perform their job well and to be accountable for work performed, and developing skills through learning and feedback. The object is to increase understanding and improve skill levels by encouraging reflection on, and exploration of the work (Tsui, 2005). In supportive supervision the primary issue is counsellor morale and job satisfaction, as well as dealing with stress. The stresses and pressures of the coaching role can affect work performance and take its toll psychologically and physically. In extreme and prolonged situations these may ultimately lead to burnout. The supervisors role is to help the counsellor manage that stress more effectively and provide re-assurance and emotional support (Tsui, 2005). The administrative function is the promotion and maintenance of good standards of work and adherence to organisational policies and good practice. This includes reviews and assessments. The interpretation here is that the supervisor inducts the counsellor into the norms, values and best practices. It is the community of practice dimension ensuring that standards are maintained (Tsui, 2005. Not every supervision session will involve all three areas or functions, and at different times there may be more of a focus on one area rather than another. The supervisor cannot avoid the pressure that arises from their responsibility to the workplace, other staff, and to clients. No simple model of supervision is to be expected to be practical in every situation. Supervisors are expected to adapt approaches to the developmental level of supervisees, and both must adapt to the varying demands of any professional situation (Powell, 1993). For this model, the focus of supervision is as a prompt for behavioural change and skill acquisition. The emphasis is on persuading staff to learn how to use oneself in counselling to promote behavioural change in the client (Powell, 1993). The supervisors attention should be on the activities of the supervisee rather than on study of the supervisee themselves. With a focus on the activity, rather than the worker, it allows the supervisee to listen to constructive criticism rather than feeling compelled to defend themselves from a personal attack (Tsui, 2005). This model has several strengths in that it is very flexible, and open to exploration and experimentation. It is also more challenging for both the supervisor and supervisee. This style of supervision can be tailored to meet different needs and variables. This model may prove unsatisfactory when the supervisor has insufficient experience to be able to provide proper direction and support, and where supervisor skills do not allow for appropriate evaluation of the supervisee (Powell, 1993). Developmental Models of Supervision Erskine Underlying developmental models of supervision is the notion that as people and counsellors we are continuously growing and maturing; like all people we develop over time, and this development and is a process with stages or phases that are predictable. In general, developmental models of supervision define progressive stages of supervisee development from novice to expert, each stage consisting of discrete characteristics and skills (Bradley Ladany, 2000). For example, supervisees at the beginning or novice stage would be expected to have limited skills and lack confidence as counsellors, while middle stage supervisees might have more skill and confidence and have conflicting feelings about perceived independence/dependence on the supervisor. A supervisee in a later developmental stage is expected to employ good problem-solving skills and be reflective about the counselling and supervisory process (Haynes, Corey, Moulton, 2003). Erskine (1982) identifies three stages in the development of the skills of a therapist, each of which represents specific characteristics and responds to specific training needs. In the beginning stage of training, therapists have operational needs as they are developing professional skills, a sound theoretical reference system, and intervention techniques. They also have emotional needs: to feel comfortable in their professional role, to be reassured of their ability to do the work, and to feel adequate to act in this new undertaking. This is the stage at which trainees most need positive motivations centred on their skills so that they can know their strengths and on which they can build their skills. Erskine (1982) suggests temporarily ignoring what the trainee does not do well so as to reduce any feelings of inadequacy and to support self esteem, provided this does not cause harm to the trainee or clients. During the intermediate stage of training, Erskine proposes that trainees need to reinforce their personal identity as therapists, learn to define the direction of treatment, and draw up a treatment plan. At the personal level, their goal is to integrate their sense of self and to work on their emotions in order to understand and solve any personal difficulties that might create obstacles to their contact with clients. According to Erskine, in this second phase, trainees personal therapy is of highest importance (Bradley Ladany, 2000). During the advanced stage of training, trainees need to learn various approaches and to integrate theoretical frameworks, to recognise alternative interventions, and to choose among them so as to encourage flexibility. Trainees must also practise self-supervision and learn to differentiate between observations of behaviour, and theorising about observations (Stoltenberg Delworth, 1987). One of the potential drawbacks of developmental models is that not only do people learn in different ways but they also develop at diverse speeds, in varied areas. The development model does not show how the supervisee develops and moves from one stage to the next, and how this progress is connected to the supervision process (Bradley Ladany, 2000). For this model, it is necessary to modify the relationship to meet the supervisees needs based on their current developmental level. Supervisors employing a development approach to supervision need to be able to accurately identify the supervisees current stage of development and provide feedback and support appropriate to that developmental stage, while at the same time assisting the supervisees advancement to the next stage (Stoltenberg Delworth, 1987) Commonalities Regardless of the model used or theoretical background, any model or theory of supervision should cover some common fundamental principles. Supervisors are responsible for the professional developmental of those under supervision. These responsibilities involve issues such as informed consent, confidentiality, and dual relationships (ACA, 2009). Ethical and legal concerns are central to supervision. The balance between a supervisory relationship and a therapeutic one only becomes a problem when the supervisor discovers that personal problems hold back the supervisee. The supervisory relationship becomes a dual relationship if the supervisor tries to become the students therapist. A dual relationship is considered unethical (Powell, 1993). Dual relationships can occur in different ways. A supervisory relationship can develop into a close, emotional relationship between supervisor and supervisee. The supervisory relationship will in this situation be less effective and supervision should not continue. In consensual relationships the emotional relationship can continue; however, the professional relationship has to end. The supervisory relationship needs to be governed by the same ethical principle as is the therapeutic process (Powell, 1993). Different ways of evaluating the supervisory process are important both for the supervisor and the supervisee. Establishing a contract for the supervisory relationship makes evaluation easier. The contract should include the students developmental needs, the supervisors competencies, and supervisory goals and methods (Stoltenberg Delworth, 1987). Throughout the supervision process, the supervisor is responsible for evaluating the quality of the supervisory relationship (Powell, 1993). This responsibility especially comes to bear when a conflict arises or an impasse develops. Investigating problems and challenges often begins with asking questions about various aspects of the supervisory relationship. When asking these questions, it is important to consider not only how the counsellor may be contributing to a problem but also how the supervisor may be contributing. The supervisor has a responsibility to ensure that confidentiality is maintained, and any information obtained in a clinical or consulting relationship is discussed only for professional purposes and only with persons clearly concerned with the case (ACA, 2009). Conclusion Supervision is not a senior counsellor watching over the shoulder of a new or junior counsellor. Nor is it a conversation between two practitioners, or a dialogue of personal matters with a counsellor. It is a distinct intervention, to enhance professional functioning and monitor the quality of counselling services being provided (Bernard Goodyear, 2009). Clinical supervision is a complex activity; it can be education or support, assists with confidence or doubts, it can process through different levels or stages. The competent clinical supervisor must embrace not only the domain of psychological science, but also the domains of client service and trainee development. The competent supervisor must not only comprehend how these various knowledge bases are connected, but also apply them to the individual case (Bradley Ladany, 2000). The purpose is to help identify obstacles that prevent the supervisee from learning, growing and ultimately helping their client. No matter what theoretical framework is used, supervision can be used as a means to develop professionally. Like any other relationship in life it is not perfect, nor is it an answer to every problem. Like any other relationship, it is necessary to be honest, consistent, and dependable, and work hard to build trust. Supervisors and supervisees have to work together to make it successful. Powell (1993) theorised that the emphasis should not be on why a counsellor feels a certain way, but on being able to put a end to behaviours that inhibit change. Powell advises professionals to develop their own model of supervision in order to understand what one is doing and why. Whatever model of supervision if employed, a supervisor should seek to encourage ongoing professional education, challenge the supervisee to improve their skills and techniques A supervisor should intervene where client welfare is at risk, and ensure that ethical guidelines and professional standards are maintained. A supervisee should endeavour to uphold ethical guidelines and professional standards, be open to change and alternative methods of practice, maintain a commitment to continuing education and consult the supervisor in cases of emergency. Supervision, regardless of any model used, should enable counsellors to acquire new professional and personal insights through their own experiences. REFERENCES Australian Counsellors Association (2009). Professional Supervision. Accessed 2nd February 2010. http://www.theaca.net.au/docs/Supervision_Complete.pdf Bernard, J. M., Goodyear, R. K. (2009). Fundamentals of clinical supervision (4th ed.). Needham Heights, MA: Allyn Bacon. Bradley, L.J., Ladany, N. (2000). Counsellor Supervision: Principles, Process and Practice. Philadelphia, PA: Brunner-Routlege. Erskine, R. G. (1982). Supervision for psychotherapy: Models for professional development. Transactional Analysis Journal, 12, 314-321. Falender, C. A., Shafranske, E. P. (2004). Clinical supervision: A competency-based approach. Washington, DC: American Psychological Association. Haynes, R., Corey, G., Moulton, P. (2003). Clinical supervision in the helping professions: A practical guide. Pacific Grove, CA: Brooks/Cole. Powell, D. (1993). A developmental approach to supervision. In Clinical supervision in alcohol and drug abuse counselling. (p. 58-84). New York, NY: Lexington Books. Stoltenberg, C. D., Delworth, U. (1987). Supervising counsellors and therapists. San Francisco, CA: Jossey-Bass. Tsui, Ming-Sum (2005). Social work supervision: contexts and concepts. Thousand Oaks, CA: Sage Publications.

William Shakespeare :: essays research papers

William Shakespeare William Shakespeare was able to, through his writings , lead the readers to examine their own social corlas, judgment, and wisdom. The most remarkable quality of his works is that even when we read them today, we still examine ourselves. He was able to accomplish their task as well as any writer of any era. Shakespeare's writings allow his readers to question the social climate of their day. (Bender 13). William Shakespeare was born in Stratford-on-Avon in Warwickshire located in the heart of England on April 23 or 24, 1564. His mother, Mary Arden grew up in a much more prosperous environment than the Shakespeares. His father John, and Mary Arden were married in 1557. John Shakespeare was a wool dealer and glove maker, who became a prominent citizen and well-respected in the community. Eventually, John held a position in the public office. (Bender 13). Subsequently, John Shakespeare experienced financial problems and lost his wealth and governing positions. This, of course, had a big effect on the whole family. William was the third of eight children. The older siblings were sistets Joan, born in 1558 and Margaret in 1562. Both of William's older sisters died very young. (Bender 14). The other dive children were Gilbert born in 1566, a second Joan 1569, Richard 1573, Edmund 1580, and Anne 1580 who died at age eight. (Bender 14). William Shakespeare was educated at the local school in Stratford. Ironically, William never attended a university although virtually every English speaking universities studies his works. Bioghrapher a man educated in " the university of life." (Bender 14). His plays and other works display Shakespeare's vast knowledge of the entertainment, social mores, and culture of his native Warwickshire. William married Anne Hathaway in 1582. He was 18 and she was 26. They had twin daughters Hamnet and Judith and later their third daughter Susanna. (Bender 15). Shakespeare lived in an England that was overwhelmingly rural and had virtually no mechanized industry. It was a society very different from the one we enjoy in the U.S. today. Death and disease were the common experiences of all families during this era in England. (Andrews 67). This society was one in which a vigorous and youthful population was growing with unusual rapidity. The resulting economic development. (And rews 72). The manner in which the English made their living at that time seemed to be greatly influenced by region. The regional differences can be divided by an imaginary line from Bristol in the southwest to Hull in the northeast.

Bully Prevention Program Essay

This program has become successful at the Midway elementary school in Utah, because it is ran off of four hallmarks which are: Lead to systematic change, garner commitment for all, teach comprehensive strategies and skills and continue year after year. Within the paper, I will discuss my belief of the succession of this type of program in an elementary school setting in inner city Philadelphia schools. Bully Prevention Program In recent years, bullying within schools has become one of the most serious issues we have been faced with. Data shows that children as young as age 11 have committed suicide because they were no longer able to deal with the pressure of being bullied. Because of this and other factors involving school bullying, congress have begun to work on a legislation called the safe school improvement act, which require schools to collect data and establish certain guidelines regarding disciplinary actions and they must also come up with a system to register complaints to combat bullying within their schools. However, since this is not a law that has been enacted, Brent Burnham, a school counselor at Midway Elementary School in Midway, Utah has decided to implement her own school wide bullying prevention program at her school. The bully prevention program at Midway elementary was implemented 7 years ago. Within the program, Burnham has developed four core principles that she believes has made their program successful. The first of the four principles is, lead to systematic change. This principle says that there must be a change within the school at all levels and there must be a change ithin the community as well, because in order for the program to be successful, you must change the culture of the schools environment. The second principle that Burnham implemented was garner commitment for all. This principle says that all of the schools staff, including the school bus driver, should be on board with the implementation of the program for the program to be a success. The third principle in the bully prevention program is, to teach comprehensive strategies and skills. This principle says that effective programs must be comprehensive and there are certain skills that are required by the staff so that they can identify a bullying situation. And the final principle is to continue year after year. In order for the program to be a full success, it must be consistent in what it provides. Often times, schools will start a program but will not follow through with it year after year and the program will then fizzle out. The bully prevention program at Midway elementary also has key components which are implemented sequentially. These components are, administrative support: you must have the support from the staff and the school administration, and a strong support team. Data: proper record keeping must be kept; also the program should be evaluated. Staff training: all staff should be trained on how to recognize and identify bullies and their victims and also be able to determine if a situation is a true violation of the no bullying policy that has been set forth. Student awareness and education: all should be fully aware of the bully policy and clear on the consequences if the policy is violated. There should also be lessons taught to the students about bullying and bully prevention. Critical social skills training to the students: Once the basics have been taught to the students, they will still need additional training on this policy so continuous guidance lesson plans will need to be developed and taught throughout the school. Lastly, targeted intervention for bullies and victims: by keeping proper records of the bullying incident that occur within the school, it will be easy to identify bullies and their targeted victims. Once these children are identified, there will be specific programs for these children. The bullies will express why it is they bully and help will be provided to those students and the victims so they can try to get over the fear they may have. After reading this article, I find that there are some pros and cons to this type program being implemented at inner city schools in Philadelphia. One pro of having this type of program would be to lower the crime rate within the schools. Often times, children bullying other children lead to more violent crimes, for instance, the shooting that happened at Columbine High School in Columbine, Colorado. Two students embarked on a massacre killing 12 of their classmates and one teacher because they were fed up with being bullied. By having this type of program and addressing these issues early, these types of crimes or less serious crimes can be prevented. Another pro to this type of program is that it teaches children social skills and teach them how to manager their anger and behavior. This program can increase the children’s level of awareness on how bullying can extremely affect their victims and themselves. Another pro to the bully prevention program is that it offers training to the staff. This is a great idea so that everyone will be on the same page in the fight to eliminate and prevent bullying. Also, providing intervention to the bullies is great as well. You have to teach children things while they are young. If this type of program is successfully implemented in elementary schools and in middle and high schools, bullying can be virtually eliminated. However, with pros, there are also cons to the program. One con is trying to get everyone on board. Within the city of Philadelphia, it is historically known that many parents do not partake in their child’s education in the manner that they should, this is one reason why the high school dropout rate is so high. So; trying to get parents on board for the no bullying program may be hard. Since this program is set up for all stakeholders to be involved, without parents help, the program may not be as successful. Another con to this program is the term and definition of bullying being misunderstood and misinterpreted by the staff that is to put into action the consequences for this behavior. What you do not want to happen is, children who are simply horse playing or just kidding around with one another being accused of bullying when that was not the case. The training to the staff must be thorough and put into clear plain terms so little is left to be assumed. With bullying becoming an epidemic, I believe this type of program is definitely needed and has the potential to be successful within all levels of schools within the School District of Philadelphia. The program may need to be tweaked for each grade level (elementary, middle and high school) but if it is implemented properly it could be a success. School counselors are in a unique position with having to put in place such a program and to be sure that it work, but this is why they are trained very well to address these types of social emotional behaviors. Although the pros of having such a program out weight the cons, the major problem that could be a potential road block for implementing the program is funding. The School District of Philadelphia has reached a plateau in its budget deficit and recently laid off many of its employees including the superintendent. However, with the right proposal for the program, I can not see this being turned down by the board. I think this is something that is definitely needed so that we as counselors can save our children and our community. References Burnham, Brent. (2011, July 1). School wide bully prevention program. http://schoolcounselor. membershipsoftware. org/article_content. asp? article=1215.

General Dynamics and Lockheed Martin - Free Essay Example

Sample details Pages: 13 Words: 3772 Downloads: 4 Date added: 2017/06/26 Category Statistics Essay Did you like this example? Financial Statement Analysis General Dynamics vs. Lockheed Martin Executive Summary: This analysis provides a comparison of two major companies within the Aerospace and Defense industry, General Dynamics and Lockheed Martin. General Dynamics had an ROE of 25% whereas Lockheed Martin was 49% demonstrating LMT has a higher spread and generated a higher amount of return above its cost of equity capital as compared to GD. Don’t waste time! Our writers will create an original "General Dynamics and Lockheed Martin" essay for you Create order GD generates a higher NOPAT margin over LMT (9.4% and 7.8%, respectively) allowing GD to contribute more to ROE as a result of the decreased effect interest expenses have on net income with respect to total sales revenue. LMT has a considerable advantage for generating increased asset turnover, by generating $1.37 for every dollar as compared to GDs $1.08 for every dollar spent on company assets. General Dynamics stock is extremely undervalued (estimated $77.71 compared to closing price of $57.79) whereas Lockheed Martins stock was slightly overvalued ($85.93 compared to closing price of $84.08). Equity valuation indicates that investors were overly optimistic in LMTs earning potential and pessimistic for GDs earning potential. Despite the valuation, the destiny of this industry remains dependent on governments decisions to decrease military spending, which will have a negative impact on both companies. However, expansion of commercial airlines and partnerships with healthcare indust ries will have a positive effect on these companies and overall this industry will have a neutral outcome for the upcoming year. General Dynamics (NYSE: GD) General Dynamics is the sixth largest defense contractor in the world and the second largest maker of corporate jets. The company maintains four business groups including aerospace, combat systems, marine systems and information systems and technology. Net earnings for the company increased from 2006-2008 ($1.86 to $2.46), a 24% increase over 3 years. Sales for all groups increased from $24.1 to $29.3 billion from 2006-2008, a 17% increase. The company is based in Virginia and gets 67% of its revenue from the Department of Defense. The aerospace group generated $5.5 billion (19%) in sales in 2008, mostly due to Gulfstream business jet, which include long-range and ultra-long-range jets. In response to the downturn in the economy, the production of large-body and medium-size aircraft were reduced from 87 to 73 and 69 to 24, respectively, in 2008. In product development, Gulfstream introduced 2 additions, which are the ultra-large-cabin, ultra-long-range G650 and the super-mid-size G250. Production of both of these aircrafts, which enter into service in 2011 and 2012, are foreseeable income generators based on orders placed in 2008. The combat systems group generated $8.2 billion (28%) in sales in 2008, mostly driven by demand for combat vehicles, specifically Mine-Resistant, Ambush-Protected (MRAP) vehicles. The combat system group makes, repairs and supports wheeled and tracked armored vehicles and munitions. Combat system product lines include combat vehicles, guns and ammunition systems, mobile bridge systems, armor, chemical, biological and explosion detection systems. Future opportunities include delivering hundreds of tanks and armored vehicles to Saudi Arabia between 2010 and 2012. The marine systems group generated $5.6 billion (19%) in sales in 2008, extremely productive as compared to 2007. The group delivers destroyers, submarines, logistic ship and the first commercial product carrier. Upcoming contracts include doubling production to two submarines per year beginning in 2011, which is predicted to increase revenue and earnings over the next three years. The information systems and technology generated $10 billion (34%) of sales in 2008; its biggest achievement developing a battlefield communications network program and Joint Tactical Radio System (JTRS). Customers include federal civilian agencies and commercial customers, which primarily focus on electronics for land, sea and air-based weapons systems. The acquisition of two companies in the tactical communications and healthcare information technology field are indicative of the direction this group will be making in the upcoming years. Information gathered from Morningstar1, SP500 Industry reports2 and www.generaldynamics.com3 Lockheed Martin (NYSE: LMT) Lockheed Martin is the worlds largest military weapons maker, deriving 84% of its net sales from the United States government, including the Department of Defense. The company is comprised of four operating systems including aeronautics, electronic, space and information systems and global services. Net sales increased 7.3% from 2006 to 2008 ($39.6 to $42.7 billion) and earnings increased 21.8% over three years ($2.5 to $3.2 billion). The company operates in Maryland and employs 146,000 people. The aeronautics segment generated 27% of sales ($11.5 billion) in 2008. The segments primary production are the F-35 Lightning II combat aircraft which is projected to be completed in 2010. The aeronautics segment is focused on making fighter jets and military transport planes and on unmanned military aircraft. The segment also operates the Global Sustainment enterprise to ensure success throughout the life cycle of its aircraft. The electronics systems segment also generated 27% of sales in 2008 and primarily makes land, sea and air-based missiles and missile defense systems. Specifically, this segment is focused on maritime systems and sensors, missiles and fire control, and platform, training and energy. This system also manages and operates the Sandia National Laboratories for the US Department of Energy. Current projects include the Terminal Altitude Area Defense System (THAAD), the Ballistic Missile Defense system and the firehead control system for the Apache helicopter. The space systems segment generated 19% of sales ($8.2 billion) in 2008. This segment is comprised of satellites, strategic and defensive missile systems, and space transportation systems. The US government customers accounted for 96% of this segments sales in 2008. An ongoing partner is NASA; the LMT-built Phoenix Lander will continue to rove on Mars. Another venture is with Boeing, the United Launch Alliance, which provides satellite launch services to the US government. Information systems and global services segment account for 27% of sales in 2008. This segment contains mission solutions, information systems and global services. The US government customers accounted for 93% of the segments sales in 2008. Major products/programs include communication systems, mission and combat support solutions, civil agency programs (US Census), the FAA Automated Flight Service Station, the FBIs Sentinel IT program, and various NASA programs. Collaborations and partnerships with companies around the globe enable Lockheed Martin to grow its international business both with government and industry. The establishment of Lockheed Martin Australia in 2009 indicates an international interest to grow and expand. Information gathered from Morningstar1, SP500 Industry reports2 and www.lockheedmartin.com4 Industry Outlook: Aerospace Defense The aerospace and defense industry relies heavily on US government allocation and the upcoming year will likely bring budget cuts to the defense budget in 2010. However, there are predictions that the conventional military equipment is aging and once the Iraq war ends, there will be a need for repair and replacement. Due to the high levels of deficit spending and an increasing trend for social spending, it is likely there will be cuts in defense spending and the outlook for this industry will decline. On the other hand, it is estimated that there will be an increased growth of global passenger air traffic in 2010 as compared to a decline in 2009. This is based on positive air traffic growth since comparison between 2009 and 2010. Aircrafts that are less fuel-efficient in the US will also need to be upgraded and replaced with newer aircraft. The industry predictions are moderate production cuts at Boeing and Airbus, and declines in the business jet markets due to falling corporate profits. The industry outlook is therefore at a neutral rating, due to decreased military budget but increased commercial air traffic for 2010. Competition in the industry (Boeing, Northrop Grumman, Honeywell and Raytheon) will strive for contracts within the industry. Many of these defense contractors will face uncertainty from upcoming government decisions in the next year and hence the neutral outlook for this industry. Information gathered from Morningstar and SP500 Industry Reports Financial Statement Adjustments The following table contains information on the cumulative adjustment to General Dynamics and Lockheed Martins financial Statements. Adjustments General Dynamics Lockheed Martin Income Statement Increase Net Income by $19 million from loss from discontinued operations net of tax Increase Net Income by $196 million from deferred portion of income tax Decrease Net Income by $70 million for gain on sale of LKEI and ILS net of tax Decrease Net Income by $56 million for gain on land sale Increase Net Income by $215 million to reverse impairment charge (215 = 314(1-.316) Increase Net Income by $72 million to unwind deferred taxes Subtract $246 million from Net Income for Pension Income Balance Sheet Increase assets by 75% of PV of capitalized leases ($709 million) Decrease assets by $7 million to unwind taxes (DTA) Adjustments for LIFO reserve not added to Total Assets. Added in denominator of ITR and Current Asset in Current Ratio Added 100% of PV of capitalization of leases to Total Liabilities ($946 million) Subtracted 25% of PV of capitalized leases to SE ($236 million) Decrease SE by $7 million to unwind deferred taxes effect (-DTA; +DTL) Increase assets by 75% of PV of capitalized leases ($699 million) Decrease assets by $5,390 million to unwind deferred taxes (DTA) Increase liabilities by 100% of PV of capitalized leases ($932 million) Decrease SE by 25% of PV of operating leases ($233 million) Decrease SE by $5,390 million to unwind deferred tax (-DTA; +DTL) Caveats Termination of A-12 program in 1991 is an unlikely contingency of $690 and is currently on appeal in the Appeals Court. Cost of Equity Capital Historically, LMT common stock has proven less sensitive to the broad stock market. With a beta of .923 and using the Capital Asset Pricing Model (CAPM), LMT investors require an annual rate of return of 10.2%. Although this is lower than the expected market return of 10.8% (see appendix for calculation and assumptions), it is greater than its industry (Guided Missile Space Vehicles) expected return of 8.7%. However, although LMT may be more volatile as a stock than its competitors, it enjoyed a Return on Equity (ROE) significantly higher than the industry average. In 2008, LMT had an ROE of 49.2% while the industry followed with a 23.4% average ROE. Just as significant and telling is the comparison of LMTs ROE to its own required rate of return. This spread of 39% is an impressive sign as it demonstrates the amount of return LMT generated above its cost of equity capital. This is also impressive to investors at first glance, and will warrant a deeper interest from prospective investors. Much the same can be said for GD when comparing its required rate of return to its ROE. Although the spread was only 12.9%, it is still a good sign that GD generates such a return above its cost of equity. However, unlike LMT GD has a beta greater than 1 and is therefore more sensitive to stock market moves; and has an expected return less than its industry return by approximately 1.25%. NOPAT Margin When we analyze the potential net income in the absence of debt, NOPAT, we observe that General Dynamics (9.4%) generates a higher margin over Lockheed Martin (7.8%), which allows General Dynamics to contribute more to ROE in comparison to Lockheed Martin as a result of the decreased effect interest expenses have on net income with respect to total sales revenue. However, when comparing NOPAT performance to the rest of their industry (Ship Boat Building Repair), General Dynamics comes in slightly below the 9.9% average that was established for 2008, but does not necessarily signify any under-performance in this area since the industry data only takes into account two firms when generating Industry NOPAT margin averages. Lockheed Martin was similarly compared to Industry data, generated by two firms as well, in which NOPAT margins were recorded that were more than double of what was found for similarly classified companies (Guided Missiles Space Vehicles 3.69%). Asset Turnover This portion of the ROE evaluates the efficiency to produce revenue based on the investment in assets made by the company. When we begin to evaluate the simplified Asset TO values provided by the multiplicative decomposition of ROE, we observe a noticeable advantage by Lockheed Martin since they reportedly generate $1.37 for every $1.00 spent on assets. General Dynamics generate slightly lower values at $1.08 for every $1.00 spent on company assets. We then continued to analyze Asset TO, now based on the additive decomposition of ROE to see how other variables affect the turnover rates. When this approach is taken, average assets for both companies in 2008 needed to be adjusted, and was done so by pulling out all non-interest bearing liabilities (NIBL). This is where we noticed that NIBLs for Lockheed Martin ($20,742) were 62.8% higher than those reported by General Dynamics ($12,735). As a result, the Asset TO ratios increased significantly for both companies (LMT 2.05 and GD 4.09 ) with respect to assets dollars invested by each company. As we can observe, unexpected losses in each companys pension fund had led them to classify their losses as liabilities since they will still needed to be accounted for in the near future. The 32% drop in the fair value of the LMT pension fund ($27,259 down to $18,539) in 2008 and the 35% drop in the fair value of the GD pension fund ($7,452 down to $4,823)was felt somewhat more extensively by LMT, since the higher amount lost reflects LMTs larger workforce of 140,000 employees. GD, although enduring a similar percentage drop in fund value, only accommodates a workforce of 91,000, and therefore lost less in overall value amount. Leverage When we analyze leverage, we are analyzing each companys ability and efficiency in using interest bearing debt to generate revenue. The higher the leverage value, the better the ability of a company is at using invested funds (IBLs) to obtain desired revenues. When evaluating LMTs and GDs effect of leverage as a result of their 2008 results, we observe that the numbers generated by LMT (0.17) are over three times higher than those generated by GD (0.05) during the same time period. As we continue to drill down into the effect of leverage, we notice that ROA is also higher for LMT as a result of the large variation in NIBLs between the two companies. Although a higher leverage effect value may indicate that LMT relies more on interest bearing debt to generate more sales revenue, an analysis of interest bearing liabilities for both LMT and GD was performed based on data available at the end of 2007 and 2008. This analysis revealed that LMT had reduced their interest bearing liabilities ($4,407 down to $3,805) while GD, whom recorded a smaller leverage effect, had done the opposite and showed to have increased their interest bearing liabilities ($2,791 increased to $4,024) by the end of 2008. Selected Ratio Comparison: Accounts Receivable Days General Dynamics Industry Lockheed Martin Industry 39.51 32.50 43.62 57.12 From the results presented above, General Dynamics demonstrates that it under-performed the rest of the industry by exceeding the average account receivable days by 7 days. In contrast, Lockheed Martin out-performed the rest of its industry by having recorded an account receivable average of 43.62 days, which means LMT was collecting from customers on an average of 13.5 days ahead of the rest of the industry. Accounts Payable Days General Dynamics Industry Lockheed Martin Industry 33.88 31.50 20.09 19.66 GD is collecting from customers on average over 2 days past the industry average of 31.50 days LMT is collecting just day over the industry average of 19.66 days Inventory Days General Dynamics Industry Lockheed Martin Industry 25.97 56.62 17.35 13.55 GD is turning inventory on average over 30 days under the industry average of 56.62 days LMT is turning inventory on average over 3 days over the industry average of 13.55 days Interest Coverage General Dynamics Industry Lockheed Martin Industry 29.57 30.43 14.49 5.49 GD could cover its yearly interest expenses 29.57 times in 2008, just under its industry average of 30.43 times LMT could cover its yearly interest expenses 29.57 times in 2008, significantly over its industry average of 5.49 times Equity Valuation The equity valuation of General Dynamics for 2008 produced an estimated share price of $77.71. This price is significantly higher than the closing per-share price of $57.59 for 2008 showing the companys stock was extremely undervalued. According to analyst reports5, some concerns about growth for General Dynamics stem from shrinking credit markets, which would impair the ability to finance business jets. Additionally, it is possible that investors were concerned the aerospace and defense industry would decline with a shift from government defense spending to social spending and deficit spending. Abnormal net income was computed as predicted net income less the cost of equity capital. Predicted net income was computed using 2008 pro forma net income of $2,674 and implementing annual growth rates suggested by Goldman Sachs earnings forecasts5. The growth rates from 2009 through 2013 were -2.9%, 7.3%, 5.2%, 7.3% and 7.8% respectively. The same earnings forecasts were used to calculate the predicted dividends. The predicted dividends from 2009 to 2013 are 577, 617, 643, 671 and 700 respectively. The terminal value assumption used in computing abnormal net income was the competitive equilibrium on incremental real sales assumption. This strategy was chosen because the government is one of General Dynamics most significant customers, comprising approximately 67% of the companys revenue. This lead to the assumption that General Dynamics may not need to invest a large amount of resources in developing new customers and that most of their future growth would be lead by existing custo mers. This assumption provided a terminal value of $21,999. The cost of capital for General Dynamics was calculated using a beta of 1.119, a risk free rate of 5% and a market risk premium of 4%. This produced a cost of capital of 9.5%. The present value of abnormal net income was calculated to be $20,265, by dividing abnormal net income by a discounting factor derived using the cost of capital. The present value of abnormal net income was combined with the initial book value of $9,810 to produce an estimated predicted price of $30,075. This price was divided by the number of shares outstanding according to the 2008 annual report to arrive at an estimated share price of $77.71. The equity valuation for Lockheed Martin for 2008 produced an estimated share price of $85.93, which is slightly higher than the actual share price as of the end of 2008 of $84.08. This shows the stock was slightly overvalued. This shows investors may have been overly optimistic in their opinion of Lockheed Martins earnings potential. Abnormal net income was computed just as that of General Dynamics. Using analysts reports6, estimated (negative) growth rates of (6%), (7%), (6.6%), 11% and 8.92% were applied to the 2008 pro forma net income of $3,114. The same terminal value assumption was used for Lockheed Martin as was used for General Dynamics. The US government is a substantial customer of Lockheed Martins, which lead to the assumption that a large portion of future growth could be attributed to existing customers and few resources could be devoted to developing new customers. The terminal value assumption provided a terminal value of $41,132. The cost of equity capital was calculated using a beta of .923, a risk free rate of 4% and a market risk premium of 5%. The 8.7% cost of capital was used to find the present value of abnormal net income of $37.936. This present value was combined with an initial book value of ($2,758) to produce an estimated price of $35,178. The estimated price divided by the number of s hares outstanding per the Lockheed Martin annual report to arrive at a per-share price of $85.93. References: 1www.Morningstar.com 2www.netadvantgage.standardandpoors.com 3www.generaldynamics.com 4www.lockheedmartin.com 5Richard Safran, Noah Poponak, Goldman Sachs, January 26, 2009. Noah Poponak, Chun-Yai Wang, Sai Krishna, Goldman Sachs, January 27, 2010 6Richard Safran, Noah Poponak, Goldman Sachs, January 22, 2009. Noah Poponak, Chun-Yai Wang, Sai Krishna, Goldman Sachs, January 29, 2010 APPENDIX CAPM = Rf Rate + (Beta*Rmrkt) Given Data Risk Free rate = 3.77% (10 Year Treasury as of 2/18/10) Market Premium (Rmrkt) = 7% (given on page 26 of class notes) LMT Beta = 0.923 Industry Beta = 0.697 GD Beta = 1.119 Industry Beta = 1.298 CAPM Calculations LMT = .0377 + .923*.07 LMT = 10.23% Industry = .0377 + .697*.07 Industry = 8.65% GD = .0377 + 1.119*.07 GD = 11.60% Industry = .0377 + 1.298*.07 Industry = 12.86% Financial Statement Analysis GD LMT 2008 2008 Beginning assets 25,733 28,926 Ending assets 28,373 33,439 Beginning equity 11,768 9,805 Ending equity 10,053 2,865 Beginning interest-bearing liabilities 2,791 4,407 Ending interest-bearing liabilities 4,024 3,805 Net income (pro forma) 2,674 3,114 Sales revenue 29,300 42,731 Other revenue 0 0 Research development expense 474 1,220 Selling, general administrative expense 1,700 2,344 Income tax expense 1,126 1,485 Income tax rate 0.31 0.32 Interest expense 133 341 Beginning inventory 1,621 1,718 Ending inventory 2,029 1,902 Cost of goods sold 25,647 38,082 Beginning accounts receivable 2,874 4,925 Ending accounts receivable 3,469 5,296 Beginning accounts payable 2,318 2,163 Ending accounts payable 2,443 2,030 Shares outstanding 386 393 Closing price per share 57.59 84.08 bloomberg.com Average assets 27,053 31,183 Average equity 10,911 6,335 Average interest-bearing liabilities 3,408 4,106 Average non-interest bearing liabilities 12,735 20,742 Average accounts receivable 3,172 5,111 Average inventory 1,825 1,810 Average accounts payable 2,381 2,097 After-tax interest rate 0.03 0.06 Multiplicative Decomposition of ROE ROE 0.25 0.49 Net profit margin 0.09 0.07 Asset turnover 1.08 1.37 Leverage 2.48 4.92 Additive Decomposition of ROE ROE 0.25 0.49 Market-to-book 2.21 11.53 NOPAT Margin 0.09 0.08 Asset turnover 2.05 4.09 ROA 0.19 0.32 Spread 0.17 0.26 Leverage 0.31 0.65 Effect of leverage 0.05 0.17 Gross profit margin 0.12 0.11 RD to revenue 0.02 0.03 SGA to revenue 0.06 0.05 Accounts receivable days 39.51 43.65 Inventory days 25.97 17.35 Operating cycle 65.48 61.00 Accounts payable days 33.88 20.09 Cash-to-cash cycle 31.60 40.91 Interest coverage 29.57 14.49 Debt ratio 0.65 0.91 Appendix C: General Dynamics Lockheed Martin Financial Statement Adjustments Cumulative Financial Statement Adjustments Summary of Income Statement Adjustments Summary of Income Statement Adjustments Net Income as Reported: $ 2,459 Net Income as Reported: $ 3,217 Discontinued operations 19 Loss on sale of property, (126) Unwind tax effects 196 land, equipment Adjusted Net Income $ 2,674 Reverse of Impairment charge 215 Unwind tax effects 72 Pension Income (264) Adjusted Net Income $ 3,114 Summary of Balance Sheet Adjustments Summary of Balance Sheet Adjustments Total Assets as reported $ 28,373 Total Assets as reported $ 33,439 Constructive capitalization of 709 Constructive capitalization 699 operating leases of operating leases Unwind tax effects (DTA) (7) Unwind tax effects (DTA) (5,390) Adjusted Total Assets $ 29,075 Adjusted Total Assets $ 28,748 Total Liabilities as reported $ 18,320 Total Liabilities as reported $ 30,574 Constructive capitalization 946 Constructive capitalization 932 of operating leases of operating leases Adjusted Total Liabilities $ 19,266 Adjusted Total Liabilities $ 31,506 Total SE as reported $ 10,053 Total SE as reported $ 2,865 Constructive capitalization (236) Constructive capitalization of operating leases (233) of operating leases Unwind tax effects (5,390) Unwind tax effects (7) (DTA+DTL) (DTA+DTL) Adjusted Total SE $ (2,758) Adjusted Total SE $ 9,810 Adjusted Total Liabilities + SE $ 29,075 Adjusted Total Liabilities + SE $ 28,748 General Dynamics Pension Income Pro Forma Calculation 1 Net pension cost (benefit) $ 20 Net postretirement plan cost 56 Total cost $ 76 Net earnings $ 2,459 Percentage 3.1% 2008 2007 2 Funded status pensions $ (2,922) $ 383 Funded status other postretirement plans (640) (642) Total funded status (3,562) (259) Difference $ (3,303) 3 Rate of return on U.S. plan assets 8.1% Expected return 593 Implied asset base 7,330 = 592 / .081 Actual return percentage -32.20% = 2360 / 7330 4 Implied asset base $ 7,330 Pro forma expected rate 7.0% Given Pro forma expected return 513 Less: Original expected return (593) Difference (reduction in pension income) (80) 1 Effective tax rate 68.8% =1-.312 Adjustment (reduction) to net income $ (55) OR: [(.081-.070)*7,330] * (1-.312) = $ 55 Adjusted income $ 2,404 = 2,459 55 Lockheed Martin Pension Income Pro Forma Calculation 1 Net pension cost (benefit) $ 462 Net postretirement plan cost 46 Total cost $ 508 Net earnings $ 3,217 Percentage 15.8% 2008 2007 2 Funded status pensions $ (11,882) $ (879) Funded status other postretirement plans 1426 2017 Total funded status (10,456) 1,138 Difference $ (11,594) 3 Rate of return on U.S. plan assets 8.5% Expected return $ 2,184 Implied asset base 25,694 = 2184 / .085 Actual return percentage -28.62% = 7354 / 25694 4 Implied asset base $ 25,694 Pro forma expected rate 7.0% Given Pro forma expected return 1,799 Less: Original expected return (2,184) Difference (reduction in pension income) (385) 1 Effective tax rate 68.4% =1-.316 Adjustment (reduction) to net income $ (264) Adjusted income $ 2,953 = 3,217 264 General Dynamics Capitalization of Operating Leases Enter interest rate below: 0.039 Enter operating lease commitments below (in millions): 2009 205.0 2010 174.0 2011 131.0 2012 97.0 2013 70.0 2014 thereafter 405.0 Solution: Present value of operating lease commitments $ 945.9 Calculation of Present Value of Operating Lease Payments: 0 205.0 1.000 205.0 1 174.0 1.039 167.5 2 131.0 1.080 121.3 3 97.0 1.122 86.5 4 70.0 405.0 1.166 60.1 5 70.0 335.0 1.211 57.8 6 70.0 265.0 1.258 55.6 7 70.0 195.0 1.307 53.5 8 70 125 1.358 52 9 70 55 1.411 50 PV of operating lease commitments 946 Total Assets (increased by.) $ 709.5 Total Shareholders Equity (decreased by.) $ (236.5) Total Liabilities (increased by..) $ 945.9 Lockheed Martin Capitalization of Operating Leases Enter interest rate below: 0.083 Enter operating lease commitments below (in millions): 2009 262.0 2010 223.0 2011 184.0 2012 148.0 2013 114.0 2014 thereafter 165.0 Solution: Present value of operating lease commitments $ 932.2 Calculation of Present Value of Operating Lease Payments: 0 262.0 1.000 262.0 1 223.0 1.083 205.9 2 184.0 1.173 156.9 3 148.0 1.270 116.5 4 114.0 165.0 1.376 82.9 5 114.0 51.0 1.490 76.5 6 51.0 0.0 1.614 31.6 7 0.0 0.0 1.748 0.0 8 0 0 1.893 0 9 0 0 2.050 0 PV of operating lease commitments 932 Total Assets (increased by.) $ 699.2 Total Shareholders Equity (decreased by.) $ (233.1) Total Liabilities (increased by..) $ 932.2 4