LSI Industries Inc (LYTS) 2006 Q4 法說會逐字稿

Good afternoon. Welcome to the LSI Industries fourth quarter and year end conference call. Today's host will be Mr. Bob Ready, CEO and President of LSI Industries. [OPERATOR INSTRUCTIONS] As a reminder this conference is being recorded and without further delay I would turn the call over to Mr. Ready.

Thank you. Good afternoon, everybody. I would like to first start off by introducing Steve Brunker our CIO who will make a few comments about what's going on as far as this evening is concerned on our front page, and then Steve will bring it back to me and I will introduce the other participants from or three business segments and Ron Stowell our CFO. Steve.

Good afternoon, everyone. I just wanted to remind you that as with our previous investor conference calls today's conference is being supported with a visual that you can look at online as the conference is going on, and you can see these by visiting our web page, the Company web page is www.lsi-industries.com and click on the Investor Relations button.

That will lead you to a link that will allow you to see today's slide presentation that is synchronized with the conference. If for whatever reason you're not within convenience access of a computer right now, you can see the visuals later this evening. They will be archived on the web page and along with a recording of today's conference.

Thank you, Steve. Joining us today is Ron Stowell our Chief Financial Officer; Scott Ready, the President of our LSI Lighting Group; David McCauley, President of Graphics Group; Fred Jalbout, President of our technology group; and with him is Jonathan Lebay. And these four guys or five guys will be participating with me and presenting our fourth quarter and our year end results.

I want to start off by thanking everybody taking the time and listening to our program today. It is a full one. We have a lot to talk about, a lot to present, but I want to start off with one just kind of an emotional note for me personally. As I was sitting thinking about our presentation yesterday, I remember that it was thirty years ago tomorrow night that LSI actually became the starting -- actually started in business.

It was the seed that was planted in developing our first four reps in primarily in the Midwest for lighting, so it is a thirty-year direction. I don't know where the time has gone, but what's really emotionally part of my direction today is that thirty years ago tomorrow night we started this company.

Today we're sitting here, and we are so excited about all of the hard work, all of the things that we've done over the past especially the past few years are going to develop what we believe to be a record year, record future, both in the revenue side as well as the earnings side. The reason I am going to -- I say that is because each of our presenters in their business segments are going to share a little bit about why we feel so confident and really what's going on.

We came off 2006 as most of you are aware. It was a challenging year for us. We had a very strong 2005 with basically three major roll out programs that we just from a timing standpoint couldn't fill in in 2006, and, however, we did have a lot of things going, and I am really happy to report that those things are now in place and moving forward we feel very, very confident about our future.

With that, I am going to turn it over to Ron. Ron is going to go over some of the financials. Obviously most of this is available to you in other forms, but there are certain areas that are highlighted in Ron's presentation. With that, Ron, please.

I will start with our Safe Harbor statement. Today I will refer you to our Safe Harbor statements in our filings in the 10-Qs and 10-K, and I think importantly today we do not have any material non-public information to discuss. First slide is net sales for the fourth quarter, and you'll see a new column in there for the technology segment, and that has 1,247,000 of sales.

That represents the sales that LSI SACO had in the five days that we owned SACO. June 26, through June 30. We get to the total of 71.7 million. It is essentially level, just about level with last year, 0.3% below, and as with our earlier quarters, we're up in lighting 12.5% in this quarter, and graphics with the comparables from fiscal '05 five that were so good as Bob discussed, or was off as they've been in the last several quarters.

For the year we have essentially the same presentation. We've got 280.470 million for the total net tales, and it is again just slightly below, and we feel -- last year, and we feel very good about making up all that headway and the progress that we did as we came through the fourth quarter. And graphically there is a presentation of sales by quarter. As Bob said, I will just highlight a few things and make a few comments. This will be available for your reference if you need specific numbers.

The single largest market that we serve, the petroleum convenience store market, we are about 25% of sales in the fourth quarter and the full year. We've had growth in the fourth quarter over the prior year, and what I would point out is that at 25% this year we can fully expect that that's likely to reduce next year as a percentage of the total.

We have SACO coming on board and currently they don't make sales into that convenience store petroleum market and with our other internal growth of sales in other markets, we expect this percentage to be reduced, the dominance to be reduced, but we will maintain as we're fully prepared to maintain the market share in that market.

Gross margins again hovering around 26%, a little higher than that in the fourth quarter, so for the year we're at $71.413 million. Operating income for the fourth quarter, again, this was published in our press release, but the technology segment is coming in at actually at a negative number, essentially breakeven.

Due to the purchase accounting requirements, the work in process, and they had some larger jobs in process as we acquired them on June 26, LSI is not entitled to that profit as that sale rolls out, so that's the primary reason that we saw 1.2 million of sales, but no operating income.

In total for the quarter we had 6.143 million of operating income, and 21.5 million for the year. Again, you see very nice growth in the lighting segment. Operating income, I think Scott has got a slide on that as we've been doing throughout the year quarter to quarter. The graphical presentation on a quarter to quarter comparison.

Stock option expense, I don't anticipate putting this slide in next year. It is here this year simply to indicate that we are recording that expense on the books this year, 428,000 for the year, and we did not last year because we had not adopted FAS 123R last year. It was effective this year. Our income tax rate came out for the year at 34.3%. That's lower than we had foreseen and been using during the course of the year.

As a result of some higher than expected tax credits and some roll out of some deferred taxes and so on, so and it produced a really low rate in the fourth quarter. If only that would continue, but it won't. We will expect probably at least 36%, maybe a little north of that in fiscal '07, and we'll see that when we get to the point of giving some guidance to the market.

Net income is for the quarter $4.5 million, $0.22 a share on a diluted and 14.4. Again, that's very, very equivalent to last year, and we feel very pleased to have that level of net income this year. Then there is the shares for the diluted computation. I will point out that in fiscal 2007, next year, I would expect approximately 21.900 million shares for this calculation due to the shares that were issued for the acquisition of LSI SACO.

Balance sheet remains and continues to be very strong. We've got cash. We've got -- of $3.3 million, and our DSO's and the receivables are, I believe, about 54 days. I am not showing up on here in this asset section our goodwill and intangible assets. We brought a lot of that on to the balance sheet with the acquisition of SACO. Our valuation study by a third party firm is not complete. When it is, then we'll be able to break that out between how much is intangible assets, intellectual property, and goodwill.

We do now have some debt as a result of the acquisition, but still a very, very low debt to equity ratio, and we're just not levered very much at all, 224 million of assets on the books. We came in just under 3.8 million of capital expenditures this year, just barely over last year's level, and the depreciation and amortization 6.773 million this year. There again, when we do get the valuation of SACO's intangible assets, intellectual property, and understand how that will be amortized to our expense, this number will certainly go up in fiscal '07.

I am waiting for the next slide, I think is on cash dividends. You saw this in our press release. I will just emphasize that we now have an indicated annual rate of $0.13 per share, $0.52 on the year, and it is an 8.3% increase over last year. Graphically you see the progress of increases over the last three or four years on the next graph.

As we indicated in the press release, we do expect to have a record year in fiscal 2007 coming from internal growth. The image conversion programs that are under way and that we foresee as we go forward, and of course as a result of LSI SACO and their impact coming into LSI for a full fiscal year rather than just five days, and what we expect to do is give the market some guidance, probably as we make our first quarter press release for fiscal '07, and that way we'll be able to know more about the amortization expense I talked about of the intangibles and be able to bring SACO's forecast into play. With that I will turn it back over to Bob.

Thanks, Ron. I am going to turn the meeting over to Scott Ready who is the President of the Lighting Group, and Scott will share with you what we believe to be a real great opportunity for the future based on how the lighting operations have now been pulled together. Scott. Thank you. I am very happy to report that once again the Lighting Group has contributed significantly to the company's results in the final quarter of 2006 fiscal year.

On a year to year comparison, we can see how solid that performance has been and how, frankly, the commitment and it's a disciplined commitment to our core strategies coupled with a great deal of work on their internal operations continue to produce a positive trend in terms of both revenue and income, and you can also see in this chart the leveling effect, frankly, that our product mix and our market mix is beginning to have on our performance. The cyclical nature although the third quarter and weather is still a factor, the cyclical nature of some of our niche markets that greatly affected results in the past is somewhat balanced against what we're seeing in our growth in our commercial industrial marketplace.

We have shown how consistently also strong Lighting Group performance in our day-to-day business over the last four quarters has gone a long way towards maintaining a healthy foundation from which the overall company is positioned to spring board into higher record results as we move into 2007. The markets are strengthening. Our core niche markets, and long awaited programs in terms of roll out programs are now active as we enter 2007 and look forward to 2008.

Our fourth quarter sales set new record highs for the Lighting Group, and we entered 2007 with a strong backlog of business in all markets, and that's the significant element that we're able to talk about is that this is not coming from one portion of our market or another. It is really all the markets that we serve, our traditional core niche markets as well as the commercial, industrial, lighting penetration that we've had in the last four quarters, and the backlog is now the strongest we've seen in some time. This is a theme that I think you're going to hear from Fred and David as well as we look at our overall business.

With an increase of 28% in the quarter, and 50% over the last year in income, I think we're making a strong statement about our ability to continue to improve margins even in an atmosphere of difficult cost pressures on materials, transportation, energy and employee benefits. As a percentage of sales we've picked up nearly 2 points over the last year in operating income. What's significant about this is the ability to do this at the same time that we are gaining greater and greater contribution of our overall business from the commercial industrial marketplace.

It is with this strong confidence that a favorable backlog combined with an improved price increased traction. Price increases have been instituted throughout the 2006 fiscal year but most recently July 1, of 2006. This price increased traction in improved product mix picture given some shifts in some of our national account business as we look forward and our traditional ability to leverage margin with better volume will continue this positive trend.

LSI really retains its unique ability to benefit from this mix of core markets while growing our penetration in the larger commercial industrial marketplace. Our results show that as we expect we've been able to improve these results at the same time we reorganized and recalibrated the Company to compete in the tougher C&I markets. It is important to note that the success in C&I volume has not prevented us from growth in margin and growth in income.

As we look forward again we can expect to be able to layer on top of this C&I growth some long awaited program roll outs in the petroleum markets that are now active. We've spent some time in the past conferences talking about programs that we expect to have great impact in the future. It is with great pleasure that we look at 2007 and great confidence because these programs now are in an active phase.

Once again, the automotive business has yielded a very, very strong contribution to our market niche business, and it is with that automotive contribution specifically coming from a lot of our new product development, in the past you've heard us talk about the introduction of our art or our advanced reflector technology.

That's a system that has been very well received in the marketplace and has translated directly into some of this positive business. The type of traditional product expansion that we're talking about and have talked about in the past will continue even as we progress towards future technology driven product innovation.

The improved customer service aspect, the improved operational effectiveness of not only the coordination of our organizations but the implementation of the system, our final operation went online at the end of fiscal 2006, and we look forward to 2007 in a very consistent operational status with a well-positioned manufacturing capacities to take advantage of the volume opportunities that we see.

There are two economic metrics that are very important for us to watch as we look forward to 2007. The construction activity, specifically in the nonresidential area, is forecast to remain very strong through 2007 and 2008.

In addition, the energy trends will remain a prime influencer in market activity, especially in the large national account arena where the focus on energy reduction, the focus on energy conservation is driving a great deal of opportunity for LSI in those areas.

Our product innovation as we look forward to what I will call our nontraditional product development, that encompassing the new solid state lighting opportunities that we have is going to remain a strong factor in both the opportunities that are presented to us and our ability to turn those opportunities into good margin results for the Company.

To kind of summarize, the growth drivers in this outlook are very, very positive. Overall our outlook is positive. The acquisition of SACO is really the next transforming event for the Company as a whole and certainly the Lighting Group. It will not only broaden our perspective on new product development and R&D application to these new products, but it will create many new opportunities to enter new markets with our proven niche strategy that we currently apply, we see nothing but success on the horizon.

The integration of technology that SACO brings to the Company provides us with the opportunity to gain much greater control not only the fixture development, but more importantly the control over the light source, the transformers, the control element of the product design that we, like most of our competitors currently must rely on outside vendors to develop. I know that as we get into the conversation later with Fred and Jonathan, they will touch on that, but the idea that we have not only the hardware but the software to integrate real lighting, innovative lighting solutions is a prime foundation of our strategy looking forward.

One of the interesting things about the SACO acquisition is that we've had almost a year under our belt prior to the formal acquisition. We have been working together on a number of projects, and it is always a lot of fun to share with our audience areas that demonstrate the LSI capacity and capability in terms of innovation. In the past I have mentioned specific presentations that show the lighting that we've used in front of the national -- the stock exchange buildings out front.

I know Jonathan will mention a little bit about what we've done for the NASDAQ building in times square, and most recently we're going to bring to your attention a particular project, and Jonathan will get into it in more detail right there in New York City again that really takes the application of what we have been developing together, the two organizations, prior to the acquisition and how much progress we've made in developing the new technology.

I think really in the last 24 months the lighting group has been a story of balance. We've balanced our reorganizational efforts with improvements in our processes and systems. We've balanced our volume in softer markets with growth in newer markets. What really sets aside the outlook for the future is a shift now away from balance into more additive approach. The next 24 months really should be a story of addition. For the first time in a long time we see the potential for all markets to strengthen together.

We see improvements in all operations that we put in place over the last eighteen months to develop stronger leverage against this volume growth, and we see the addition of the next generation of lighting technology, the solid state lighting that SACO brings beginning to add new products and more importantly new market opportunities for the Lighting Group. We're very, very pleased with what we've done in 2006, and we're very, very excited about the promise that 2007 and beyond holds for us at this point. Thank you. Thank you, Scott.

And as a person that's been in the lighting industry for 44 years, I, too, am very, very happy with the way the Companies have come together and the direction that has been put in place for the future of our Lighting business and certainly the addition of SACO is the beginning of the new LSI as it relates to lighting. I have a tremendous feeling that the SACO investment for our company is going to bring us tremendous results in both the revenue side as well as the earnings side.

With that I would like to now take the next direction and turn it over to David McCauley because this is their year. They've got an awful lot going, and David will share that with you today. David.

Thank you, Bob. As Bob says, this is our year. These last three calls have been pretty tough on the Graphics Group, but we're geared and ready to move into '07 now. The first slide that I bring upon the screen today here, in hindsight I wish I had put all of the last six years. I put four years. There is a nice steady climb as you can see except for fiscal '05. and we're not apologizing for that rather large comfortable bump there, but as Bob explained earlier, we had three major rollout programs, and they ended at the end much fiscal '05 and we started '06 off nice and comfortable. Towards the late fall, December area, we had delays in program, and it caused a tough finish to our '06.

If we could draw '07 in there, we would see that those three major rollout programs that were concluded in '05 has now moved to currently we have four major rollouts and as mentioned in our release this morning, we have another one to announce later on this quarter. So we'll have five programs, five major rollouts, and I am happy to say that four of those five will continue on into fiscal '08. Only one of them will end at the end of fiscal '07.

As we said before, our systems are in place. The Graphics Group shows no returns. Our problem was volume, but we anticipate quite the load coming up here in '07, '08, and beyond, and therefore the formula will work. On your screen now are the results of '05 and '06, fiscal '05, '06, the most encouraging thing about this slide is you can see a rather large drop in the fourth quarter in the volume, yet our margins were able to stay at or slightly increase. Along with again the volumes and systems in place we expect that we'll return to the numbers or beyond posted in the previous years.

Let's move onto some new technologies. On the screen for those of you that are viewing, we show a piece of equipment that we announced in April of this year. It has gone into service. That machine is a flat-bed digital press. Rather than get into the details of it, I would rather expand upon the press has been busy 24/7.

It solved a lot of our capacity problems building on the major programs that we have going forward that are starting to roll out this quarter. Yesterday excuse me, today in our announcement we have added another press that you see in the screen. This is a larger format, not a flatbed but a roll to roll press, eight-color, 3-meter wide, highly accurate in efficient piece of equipment. Again, to serve our current capacity and our future capacity.

The trigger point to the ordering of this machine came upon a nice order obtained from a petroleum vendor who has been a long, long lifetime lighting customer and who we have finally grabbed a good share of their graphics in a major program, and along with that, those two pieces of equipment we add this additional die cutting, vinyl cutting, routing piece of equipment, again, to handle the capacity, increase our margins and improve our throughput. These machines once put in service will be extremely busy.

Let me go to the growth drivers as we see them from the graphics side of the business. The customer delayed programs that we experienced in the second half of '06 that were starting to roll out in our fourth quarter are now accelerating at a much faster pace. In fact, they're almost up to full speed. The new programs for '07 are on our door step, and our backlog is at or near an all-time high. We don't expect this to end in '07. Like I said, four of those five major programs go well beyond '07.

The combination as Scott has mentioned and as Fred and Jonathan and Bob, all of us are very enthusiastic about our most recent combination addition of SACO providing both lighting, graphics, and technologies to complete our total image package. That therefore makes my outlook very positive beyond what we could see last quarter and well beyond '07. I tended to want to talk about a lot of product offerings that SACO and the lighting and graphics group talk about together. I will limit it though to one today.

We take our standard menu board business now which we feel is very strong. We feel a lot of the restaurants, the fast food industry is very tired. They've built a lot of sites. They're ready for remodeling, and one of the areas that gets hit hard is the menu boards of the future. We think with our abilities, personnel, technologies combined, that we'll create in the lower portion of the picture the menu board of the future which will have our LED products.

There will be a lighter weight menu board, a low maintenance type board that can be day parted, have a nice thin profile, be able to change on the fly and easily installed, take a lot less space, and be serviceable through wireless technology. Those are the type of things that we look forward to, inventing in the future and leading in the industry.

My last slide shows another encouraging group of numbers. These numbers were placed in the USA Today derived from the USA Today earlier this week. It is one that we look at as one of our key drivers in the graphics end of the business. As you can see, the climbing merger and acquisition markets, they help feed our remodeling business, and we currently, even though we had that bump last year, we feel that pent-up demand that some of those people did not roll those programs out is -- are going to create a beautiful '07 for us.

That driver along with two other ones that we watch real close is the AG markets that I mentioned and the shorter trends, and we love the shorter trends because that means change. Logos wear out. The mergers, the CEOs, that change, the decisions that are made are coming faster and more furious every day and that plays right into our hands.

Then the closing slide shows an increased expansion of some of the Company's that we keep business with. I took the liberty today of adding some of the entertainment and professional sports and college sports teams that SACO brings to the party, and with that I will turn it back over to you, Bob.

Thank you, David. As a follow-up to David's comments, I would like to remind our audience that one of the things that really are important to the opportunities of the growth that we're talking about and the very high confidence level that we have is our ability because of our financial position to invest in high technology as it relates to the printing world. What David is showing you and as -- in his description was and is, is that we have positioned ourselves to really take a hard, hard direction as it relates to a competitive involvement in rollout programs giving us capacity and volume capability that I don't believe anybody else has.

Again, it is positioning ourselves in the things we've been doing for the last 24 to 48 months, not only in lighting but certainly in graphics and positioning ourselves and looking into the future and what's going to be coming into the economy, and we are truly a one-stop shop. We really have a capability not only for production but also installation in both the areas of the graphics side and now we are adding and we will talk now with Fred and Jonathan's input on the technology using LED and software that will not only enhance our lighting business but definitely will find its place in enhancing our graphics business. With that I would like to turn it over to Fred. Fred, if you would, please, it is your floor.

Thank you, Bob. Hello, everyone. Over the past year we had the opportunity to work with LSI on several exciting projects involving the innovative use of LED technology in the lighting and graphics industry. During this time we developed an excellent working relationship with LSI and we got to know the management style, vision, and operation of LSI. Not only were we impressed with their capability, but also there was a feeling of complete synergy between both companies.

That position of SACO by LSI is the right fit. Both culturally and strategically. As a result of the transaction, [Asanj] Jalbout and I become important shareholder of the Company. Since the purchase price included a large number of shares, we performed a very rigorous due diligence on LSI and needless to say, we were extremely impressed with the results.

The future brings amount opportunity for the growth of the Company as we bring to the table new technology that far exceeds our customer expectations. Always in a state of constant technological evolution, our combined effort allow us to have the capability to meet the rapidly changing demand of our industry. The traditional use of lighting technique from a designer's standpoint is being completely revamped by the product that we were able to offer them. As we prepared by capitalizing on each other's strengths, our expertise in developing state of the art technology and LSI top industry position, we are poised to capture a major presence in the market that we serve.

A long time staple of LSI vision has been the strategy of lighting plus graphics plus technology into a complete image solution. LSI SACO technology being a pioneer and worldwide leader in the design and manufacture of high performance light engine on large format video screen using LED technology brings a new dimension to the technology segment of the equation. Now, not only there the power of image but equally the power of technology. As the President of LSI Technologies Solutions Plus business segment, I look forward to the challenge that the year ahead brings. I would like to share a few of the very important strategies that we have in place.

Further enhance and broaden the broad spectrum of LSI Lighting and Graphics business segment, LSI already bring the plan of choice in many specialized niche markets, new product line offering was the creative application of LED technology will give our supply the option currently available to our customer and create an even wider customer base. With our rapid innovation cycle we're able to offer our customer and match his speed in initial concept design to market today's product.

Capitalize on our commitment to research and development in emerging LED technology with over 17 years of experience we have a great team of R&D professionals permanently on site to double the new innovation and high performance next generation products. Our system are flexible and upgradable. Our R&D effort permits customer to have a product that have adaptability factor.

Any instance we have accomplished industry first. For example, the band, the rock band U2 pop [Inaudible] was the first time that LED was utilized to provide full motion video on large format video display, and this initial success that LED were then viewed as a valuable alternative, not only for entertainment venues, but also for sports facilities. This opens up new market to us. Another first, when we unveiled the largest LED video screen in the world, it was that market side tower in New York City. I am confident that we will continue our tradition of innovation within the years to come.

Offered the most cost effective solution for the most value, many factors contribute to our success in offering the highest quality product on the market for the most value, efficient and reliable product with unsurpassed quality being one of them. Increases value for customer by having the lowest maintenance possible as well the [Inaudible] of LED is increasing while cost is reducing.

Our extra rated development process combined with the increasing acceptance in the marketplace for replacement of a traditional lighting system with LED lighting solutions position LSI industry for stronger growth potential. From our technological innovation to our manufacturing facility, state of the art equipment we try to effectively manage all of our resources.

Now I would like to introduce to you our Vice President of Business Development, Mr. Jonathan Lebay.

Thank you, Fred, and hello everybody. Some of the strategies described by Fred have already allowed us to performance supply, high performance solid tate solutions to some really exciting projects. Currently you can see some of the LSI SACO accomplishments on display with Tim McGraw and Faith Hill, Madonna, and Bon Jovi. These latest projects were done through our partners over at Vidacon Nocturne. They're a top player in the live entertainment production.

We have also seen some good movement on the sports market with our partner A&C Sports. They're one of the top in the professional sports market. In 2006 A&C has installed the SmartVision screens in many of the arenas and stadiums throughout the U.S. and Canada. The Arco Towers project is a great indication of the success of our architectural lighting line that we manufacture for Luminaires and currently we have a lot of business ahead of us and 2007 as looking to be a record year for the technology division.

The area I want to spend some time on that has seen a lot of progress is in digital signage. Not only is LSI SACO supplying some of the major billboard companies with LED video technology, but in order to satisfy a gap in the marketplace, we have developed our own content management and delivery software. This software is very powerful and allows our customers to control their entire network from a single location and is specifically tailored to meet their needs.

Unlike most of our competitors, our software is 100% developed in-house and gives the Company a strong edge as the demand grows for full turnkey solutions. Both the software that we have developed and our LED video screens used for additional signage tie right in with the LSI Graphics divisions efforts. By combining our technology with our management services and digital signage platform, LSI customers now have access to the very best in indoor and outdoor media technologies.

We've discussed a lot of stuff through this presentation, but let me give you an example of how we've been able to bring all of this together. Scott referred to this a little earlier. If you were to drive through the Holland tunnel between New York City and New Jersey, you will see a 100-foot prototype of new high performance LED Luminaires manufactured by LSI, and it is using our own LED light engine.

This was done over the course of a year, and by combining our LED technology along with our fixture design capabilities, we've been able to create and develop this next generation linear tunnel lighting system. These are the kind of innovations that you can expect from LSI industries. Bob, I will turn this back over to you.

Thank you, everybody. Specifically, Jonathan and your presentation of informing the group that's watching this presentation today a little bit about the technology. Let me take a step back in time if I may and looking back over the career of the Corporation and how we've developed this image business. It certainly has been a very, very challenging time, especially with what 9/11 brought to us with our oil business being the way it was, and offering the petroleum industry the kind of products that we have been.

I want to emphasize the fact that we are going to maintain our market share, but what's important to me as the CEO of this company is showing the diversification that we've established especially over the last three years, the recognition that we are a very strong niche market oriented company, but we had a much greater potential, and we have put that together, the unification of our lighting group, certainly the development of the ability from our graphics standpoint, and now the obvious acquisition of SACO that brings to us a whole new dimension for our future. It truly is a different company today.

I believe in looking forward that we have a tremendously strong confidence in our future because we are so much more diverse, and we have a whole opportunity that we haven't had for years. I have a tremendous confidence in the future. We have a solid and growing business foundation. Lighting, graphics, and technology for the large national retail segment of our economy and the niche markets that we serve is really a very, very good foundation for the future. We have had now a successful integration, reorganization of our lighting, our graphics, and our technology segments. In the way we've approached it and the way we developed a new culture for our future.

Our core strategy of lighting, graphics and technology that equals the complete image solution is now working well and is going to give us much, much more opportunity than it offered us in the past. Our production and capacity is as good as its ever been. The investments that we've made in equipment, certainly in the ability to improve our efficiencies from a production standpoint, and our ability with our new computer system in place is really bringing our companies together. We have probably the opportunity to build a much higher margin due to more favorable mix and the addition of SACO.

We all know what kind of business the lighting business is as an industry, but with our graphics opportunity, the investment in the equipment that David shared with you, and certainly the opportunities that SACO bring to us on and R&D I really believe are in a par that nobody else has. Our niche markets are stronger than we've experienced in the last two or three years.

So sitting here as the CEO of your company, I am very, very confident in where we're going. We put a lot of opportunities in place. It is now up to us to execute, and I can promise you this, that the team of people that we have developed and put in place are ready to develop that execution.

With that I think that this kind of winds up the day's presentation, and I want to thank the team of our people here that have worked very, very hard over the last year in bringing this company into its new direction. As I said in my opening remarks, tomorrow night will be 30 years that this company actually started, and we had thirty years ago an idea, a vision of building a company that had a real different unique approach to the marketplace, and I think we've accomplished that, and today is the beginning of that new step.

With that, I want to thank you for your time, and we look forward to the 2007 and 2008 years as we put all of these programs into a strong direction. With that this concludes our presentation. Thanks, everybody, for your time.

That concludes the presentation. You may now disconnect your phone lines.