Joseph A. Ripp, the CFO of one of the world’s largest media and entertainment companies possesses a great sense of timing.
The executive vice president and CFO of Time Warner Inc. made a major career move in 1985 when he left public accounting and joined Time Inc. — just as it was strengthening its finance operation in order to maintain its independence in a merger-and-acquisition rich environment. After serving as Time Inc.’s CFO — a period when shareholder value tripled in six years — Ripp was plucked to lead the finance operation of the parent company, Time Warner.
Ripp’s business career didn’t begin immediately after he graduated from Manhattan College because, he says, he "didn’t feel very employable" with his psychology degree. So, Ripp enrolled in the MBA program at Bernard Baruch College. While studying for his MBA, he took a job at Arthur Young in the accounting department and two years later, moved to Ernst & Whinney.
Three months short of becoming an Ernst partner in 1985, however, Ripp moved to Time Inc., his first client. "In public accounting," he says, "you stand outside and come up with the solution to a problem. But the right answer is only half the solution. The other half is getting people to implement it. I was always intrigued by that."
Ripp joined Time Inc. as assistant controller, one of the first positions the company created specifically for finance professionals. "Until then," he says, "finance was filled with smart operations people just passing through." During that era of takeovers, however, Time needed the expertise of a finance professional to help improve its information systems, reduce costs and build profitability. Perceiving that the company needed to focus on cash flow and margins, Ripp produced monthly reports to inform senior management of the company’s performance in those areas. He also discovered that Time’s balance sheet and the P&L statement were not dependent on each other. "You had to be careful the entries balanced. You could debit revenue, but you didn’t need to credit anything." He laughs, "It was an unusual system."
Ripp became vice president and director of finance of Time in 1987, when the shadow of a takeover loomed over the organization. He plunged into treasury, tax issues and controller functions. "We spent all our time figuring how to extract value from operations in the way a takeover artist would, so we could deliver value ourselves to shareholders," he says.
When Time and Warner merged in 1989, Ripp made many bank presentations to secure the required financing. "The result," he says, "was that we had to figure how to grow our business without a lot of cash because the cash flow we generated had to be used to pay down the debt. It was pretty tough."
In 1993, just as an advertising slump hit the magazine business, Ripp became senior vice president, CFO and treasurer of the company. He admits it was a challenging time, but looks back at those difficulties as an opportunity. "Some of the things we did then at Time Inc. is the reason I’m here at Time Warner today," he says. For example, Ripp worked closely with new Time Inc. CEO Don Logan to decentralize 28 different operations, giving each operation a finance target and a cost program. "I used the world ‘value,’ " says Ripp. "We didn’t sell it as a cost program. We said we’re going to extract value from the assets we’re deploying. When you’re dealing with creative people in a media company, they’re going to reject what they regard as a ‘silly management process.’ I was able to bridge the gap between ‘church and state,’ between editorial and business at Time Inc., by showing how we would generate value to grow each operation. And they liked that. We weren’t just slashing budgets. We were in a conversation about long-term, sustainable growth." That first cost effort extracted about $200 million.
Ripp says his relationship with Logan also helped. "The chemistry between the CEO and CFO must work," he asserts. "You have to understand each other and trust each other. The CFO must be the honest broker in the organization, the one asking the questions that others are reluctant to ask. He must be the one others regard as the person without an agenda."
Ripp became executive vice president and CFO at Time Inc. in 1994 as the capital deployed by the company was being reduced dramatically. "We focused on the balance sheet, on inventory, on deposits and on stretching payables," he notes. "We did everything to drive growth. In ’93, the analysts valued Time Inc. at about $3 billion. By 1999, shareholder value was in the $10 billion range, and we did it without any money. We did it by fueling internal growth."
After moving to Time Warner as executive vice president and CFO last year, Ripp continues to focus on extracting value. The firm annually spends about $475 million on commercial printing services, uses 500 to 600 vendors, and 125 people buy those services. "We brought the 125 together," Ripp says, "and said, ‘We’re going to get the vendors down to 50 and take $50 million out of the equation. We’ll use the same buy