Investor Presentation
FY2010
Third Quarter
FY2010
Third Quarter
Safe Harbor Statement
In addition to statements of fact, this presentation contains forward-
looking within the meaning of the Private Securities Litigation Reform
Act of 1995 and is intended to enjoy the protection of that Act. These
forward looking statements reflect the company’s expectations or
beliefs concerning future events. The company cautions that these and
similar statements involve risk and uncertainties which could cause
actual results to differ materially from its expectations, including, but
not limited to, including changes in economic and market conditions,
management of growth, timing and magnitude of future contracts, and
other risks noted in the company’s SEC filings including its Annual
Report on Form 10-K for its 2009 fiscal year and its Quarterly Reports
on Form 10-Q for the each of the first three quarters of fiscal 2010.
Forward-looking statements are made in the context of information
available as of the date stated. The company undertakes no obligation
to update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
looking within the meaning of the Private Securities Litigation Reform
Act of 1995 and is intended to enjoy the protection of that Act. These
forward looking statements reflect the company’s expectations or
beliefs concerning future events. The company cautions that these and
similar statements involve risk and uncertainties which could cause
actual results to differ materially from its expectations, including, but
not limited to, including changes in economic and market conditions,
management of growth, timing and magnitude of future contracts, and
other risks noted in the company’s SEC filings including its Annual
Report on Form 10-K for its 2009 fiscal year and its Quarterly Reports
on Form 10-Q for the each of the first three quarters of fiscal 2010.
Forward-looking statements are made in the context of information
available as of the date stated. The company undertakes no obligation
to update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
Why we are No. 1 in our industry -
Executing against our mission to be the world
leader at informing people through large
dynamic audio-visual communications systems
Executing against our mission to be the world
leader at informing people through large
dynamic audio-visual communications systems
• Over 40 years of proven track record in the industry
• Unparalleled sales and service coverage
• Depth and breadth of product offering
• Complete integrated solution including software
• Engineering capabilities
• Capacity to deliver: 5 plants in the United States
• Financial strength to overcome economic conditions
FINANCIAL SUMMARY
Financial History
117% Revenue growth over the past 3 years
(Dollars in thousands except per share data) | FY2005 | FY2006 | FY2007 | FY2008 | FY2009 | 5-Yr CAGR | |
Sales | $230,346 | $309,370 | $433,201 | $499,677 | $581,931 | ||
Operating Income | $19,436 | $31,815 | $36,915 | $38,243 | $42,617 | 9.1% | |
Earnings Per Share | $0.39 | $0.52 | $0.59 | $0.63 | $0.64 | ||
Dividend Per Share | - | 0.05 | 0.06 | 0.07 | 0.09 |
(Dollars in thousands except per share data) | FY2005 | FY2006 | FY2007 | FY2008 | FY2009 | ||
Cash from Operations | $22,377 | $31,917 | $14,606 | $59,833 | $48,730 | 18.3% | |
Capital Expenditures, net | (12,981) | (18,588) | (58,528) | (33,393) | (18,221) | 7.0% | |
Free Cash Flow | $9,396 | $13,329 | $(43,922) | $26,440 | $30,509 | 20.4% |
FY 2010 Third Quarter YTD Results*
*($ in thousands, except per share data)
Historical Perspective FY2005 through
FY2008
FY2008
During this timeframe:
• Revenue more than doubled- 30% CAGR
• Capacity was the primary constraint
• Added two manufacturing plants, Sioux Falls, and
Redwood Falls and reorganized existing plants to a
product focus
Redwood Falls and reorganized existing plants to a
product focus
• Initiated major “lean manufacturing” initiative which has
transformed our manufacturing processes
transformed our manufacturing processes
Overview FY09 through Q3 of FY10
Revenues
• First half of FY09 revenues were $330 million, a $660
million run rate (10.5% operating margin)
million run rate (10.5% operating margin)
• Second half of FY09 revenues were $250 million, or a
$500 million run rate (3.2% operating margin)
$500 million run rate (3.2% operating margin)
• Billboard business declined from a $100 million to less
than $20 million annual run rate in Q3 of FY09
than $20 million annual run rate in Q3 of FY09
• Significant revenue decline in Live Events in Q3 of FY10
• Extremely aggressive pricing by competitors in all
business units
business units
Overview FY09 through Q3 of FY10 (cont.)
Costs
• Significant excess capacity in FY10
• Decreased operating expenses by more than 19% from
Q1 of FY09
Q1 of FY09
• Decreased manufacturing conversion costs by more than
28% from Q1 of FY09
28% from Q1 of FY09
Cash
• Increased cash from $6 million in Q1 of FY09 to $58
million in Q3 of FY10
million in Q3 of FY10
Business is Organized in 5 Business Units (“BU”)
• Domestic (includes Canada)
• Commercial
• Live Events
• Schools and Theaters
• Transportation
• International
• BUs provide focus, but key strategy is to
leverage resources across the company
leverage resources across the company
Commercial Business Unit
Commercial Overview
• Long-term Growth Drivers
• Greater acceptance & increasing use
• Effective advertising medium
• Competitors
• Resellers, National accounts - Optec
Watchfire, EDS
• Digital Billboards - Yesco, Optotec,
Watchfire
Current Outlook for Commercial
• Some indications of upward trend in billboard
orders for Q1 and Q2 of FY10
orders for Q1 and Q2 of FY10
• Increasing interest from outdoor companies
• Recent public announcements regarding
positive performance of digital, intent to buy
positive performance of digital, intent to buy
• Introducing enhanced billboard product in Q1of
FY11 - reduced cost, increased reliability
FY11 - reduced cost, increased reliability
• Adversely impacted by
• Credit availability for smaller potential buyers
• Increased price pressure and competition
Live Events Overview
• Large sports venues
• Professional sports facilities
• College and university facilities
• Mobile and modular:
• Rental and staging
• Touring companies
• Pari-mutuel
• 46% of net sales in FY09
• FY09 net sales up 60% over FY08
• FY10 net sales down 39% YTD through Q3
Live Events Long-term Growth Drivers
• Fan experience must
exceed living room
experience
exceed living room
experience
• High definition (HD)
• Competition between
venues
venues
• Improving price/
performance of LED
technology
performance of LED
technology
• Revenue generation
Schools & Theatres
Business Unit
Business Unit
Schools & Theatres Overview
• Customers
• Elementary and high schools, junior colleges
• Park and recreation departments
• Theatres
• Main Products
• Scoring Systems
• Galaxy® displays
• Vortek® hoist systems
• Sound systems (Sportsound®)
• 11% of net sales in FY09
• Primary funding is through local sponsors and advertising
• FY2010 net sales down 5% YTD through Q3
International Business Unit
• Sales and service offices in Canada,
Europe, China, Middle East, and
Australia
Europe, China, Middle East, and
Australia
• Limited manufacturing in China
• 10% of net sales in FY09
• Large project driven - -commercial
and sports
and sports
• Expecting lower sales in FY10 due
to economic and competitive factors
to economic and competitive factors
• FY10 net sales down 46% YTD
through Q3
through Q3
• Improving pipeline, increased
competition and pricing pressure
competition and pricing pressure
Transportation Business Unit
Transportation Overview
• Three main areas
• Intelligent transportation systems (ITS)
• Aviation, including airports and airlines
• Mass Transit
• 6% of FY09 net sales
• Strong backlog going into FY2010
• FY10 net sales up 34% YTD through Q3
• Competitors
•Skyline, Ledstar, others
Transportation Overview
• Long-term Growth Drivers
• Government spending
• Capacity constraints on
highways, public transit,
airports and parking systems
highways, public transit,
airports and parking systems
• Limited ability to build and
expand new roads
expand new roads
• Recent developments
• $25 million NJ Turnpike order
• Departure of disruptive
competitor
competitor
• New Vanguard product
shipping Q4 -reduced costs,
improved performance
shipping Q4 -reduced costs,
improved performance
LOOKING AHEAD
Revenue Outlook
• Lighter ($100 million) backlog going into Q4
• Competitive price pressure in all markets
• Orders continue to be relatively slow -difficult to
project orders in today’s environment
project orders in today’s environment
• Slower order flow for Q4 of FY10 limiting
revenue opportunities for Q4, may impact Q1
revenue opportunities for Q4, may impact Q1
• Will know more about fall sports by end of Q4
• Some encouraging signs in Billboard market
Returning to Long-Term Profitable Growth
• Focus on orders, cost reduction, customer service, quality
and reliability.
and reliability.
• Ongoing product development - historically 4% of net
sales (higher in FY2010)
sales (higher in FY2010)
• Enhance existing products while reducing costs
• New DVX video display product began shipping in Q4-
reduced cost and enhanced reliability improving
competitive position
reduced cost and enhanced reliability improving
competitive position
• Used in video displays and billboards
• Ongoing rollout plan for multiple pixel pitches
• New Vanguard product in transportation business
Cost Reduction Is Ongoing Process
• Continued emphasis on reducing costs and
improving quality through lean initiatives
improving quality through lean initiatives
• Improve asset turns (inventory alignment, process
improvement)
improvement)
• Focus on operating margin and free cash flow
• Leverage service (process improvement)
• More aggressive cost reduction going forward-
payroll, infrastructure (reducing remote offices)
payroll, infrastructure (reducing remote offices)
• Have reduced non-manufacturing staff by almost
5% in Q4 of FY10, 12% in FY10 YTD
5% in Q4 of FY10, 12% in FY10 YTD
• Short term focus to get through downturn, emphasis
on preserving cash
on preserving cash
QUESTIONS