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									Welcome
BPCA President’s Meeting

  2006 Survey Presentation
        Greenbrier
         9/14/2006
                   Agenda
• Review 2006 Financial survey results.
• Present new Industry Benchmarks.
• Present 2007 Financial Survey Template, which
  focuses on Imaging, Solutions, and IT
  Infrastructure.
• “If I was You”

• Questions & Answers
           Executive Overview
• Twenty-one dealers submitted financial surveys.
• Five dealers on the BPCA roster did not
  participate.
• Total revenue of the 2006 participating dealers
  was $340 million.
• 15 of 21 dealers did not submit data on their base
  of B&W, color, business color, fax, printers and
  duplicators. The industry is changing very
  rapidly, and we need to monitor changes in
  volume and pricing.
                Business Color
•   B2C is the most exciting segment of our business.
•   33% of all copies were color. Excellent!
•   B2C - B&W revenue per copy was $.0138.
•   B2C - Color revenue per copy was $.080
                Business Color
• Monochrome B&W revenue per copy was $.0130
  vs. $.0138 for B2C B&W.
• The cost of a B2C B&W copy is much higher than
  the monochrome B&W copy, but the revenue
  reported for the monochrome B&W copy includes
  several annual double-digit increases.
• Color on the B2C has a 6:1 revenue advantage
  over the B&W.
• Declines in the revenue per copy of color should
  be offset by an increase in the % of color copies.
          Cost of Business Color
• Cost of initial set-up supplies, or no / low
  minimums on the B2C units is impacting supply
  gross margins. This will continue as the number of
  B2C machines in your base continues to grow.
• One solution to the set-up cost issue is to add this
  cost to the sales rep’s “Out cost”.
• Service costs on some B2C machines is very high.
  It appears that the “sweet spot” of volume on these
  machines is more important than on monochrome.
  Low volumes are causing high service costs.
         Impact of Business Color
• We believe that Business Color is one of the main
  reasons that dealers reported a 2% increase in
  supply revenue and a 10% increase in service
  revenue.
• The last issue on Business Color is the potential
  impact of the fill or coverage rate. Dealers may
  have to develop systems to monitor this.
          Blended Printer Model
• Business Color was the “Star” for the last two
  years.
• The Blended Printer Model should be just as
  significant for the next two – five years.
• The revenue and profit opportunity is huge if you
  are able to write CPC contracts on a combination
  of copiers and printers. Margins are above Retail
  in some transactions
           Blended Printer Model
• There is an extreme urgency to capture as much of
  your client’s total copy / click output as possible.
• Printer resellers are coming into this space very
  aggressively.
• They have a better relationship with IT, and copier
  dealers have the better relationship with purchasing.
  IT will be a huge factor in the decision.
• The key is owning the relationship with the CFO.
          Blended Printer Model
• The copier model calls for operating income of
  14%, with sales expense of 25% of equip revenue,
  and admin expense of 18% of total revenue.
• Printer resellers have a model of 2.5% operating
  income, with sales expense of 8%, and very low
  admin costs.
• Winning will establish stronger relationship with
  IT, and assist in the introduction of solutions.
          Manufacturer’s Threat
• 50% of a manufacturer’s distribution will be
  coming through their direct operations.
• The equipment and aftermarket pricing that many
  of these direct operations are using in the
  marketplace is extremely low, and very difficult to
  compete with.
• Blended Printer Model and Solutions are the best
  strategies to compete with the manufacturers.
     2006 Results – Growth – 1 YR
• 80% of BPCA dealers increased revenue this year, with
  the median increase 7.1%.
• The average increase over the last three years was 7.9%
• Performance of companies varied widely.
   – 13% had total increases between 10 – 20%, 20% > 20%.
   – Total revenue for 4 dealers declined, but none more than 10%.
• 27% of the BPCA dealers had increased equipment
  revenue > 20%.
• This is excellent.
       2006 Results – Profitability
• The median Gross Profit Percent decreased 3.2% to 30.1%
• This was more than offset by a 2.9% reduction in sales
  expense as a % of equipment revenue, and a .7% reduction
  in admin expense.
• Operating income increased to 5.8% from 4.9% in 2005.
• Median revenue increased to $11 million, from $10.3
  million in 2005.
• One company lost money.
                           Operating Income

14.0%
          14.0%
12.0%
10.0%
8.0%
                    7.6%



6.0%




                                                          6.0%
                              5.8%




                                            5.8%



                                                   4.9%
4.0%
                                     3.5%
2.0%
0.0%
        Model      < 8 8 - 17 > 17 2006 2005 2004
                  Million Million Million Median Median Median
                                                Profit Trends

        14.0%
                14.0%
                        14.0%
14.0%
12.0%
10.0%
8.0%                              7.6%




                                                                     6.9%
6.0%




                                                                                                                  6.0%
                                                       5.8%




                                                                                                    5.8%
                                                5.6%




                                                                                     5.6%
                                                                                            5.2%




                                                                                                           4.9%
                                                              4.4%
4.0%
                                         3.8%




                                                                              3.5%
2.0%
0.0%
        Model                   < 8 Million            8 - 17               > 17 Million           Medians

                                  2006                 2005                  2004
     2006 – Aftermarket Profitability
• The weighted avg gross profit for service &
  supplies was 45.3%. This is about the same
  weighted average as the 45.5% in 2005.
• There are still a very large number of dealers that
  do not submit data on their base for B&W, Color,
  Fax, Printers, and Duplicators. The pricing and
  volume of the aftermarket continues to change.
  Dealers need to be able to compare their pricing.
                     Service Gross Profit


          50.0%
50.0%



                       49.0%
49.0%
48.0%
47.0%




                                                 46.9%




                                                             46.4%
46.0%
                                   45.6%
45.0%
44.0%
43.0%
        Model     < 8 Million   8 - 17     > 17 Million   Median
          Balance Sheet Benchmarks
                         Model Typical

DSO    (days)            35.0     38.2

% of A/R > 60 days       10%      10.0%

Inventory Turnover:
   Equipment           4.0-5.0    4.4
   Supplies            7.0-8.0    5.4
   Parts                  2.5 +   2.2

There continues to be an opportunity to generate cash
by reducing inventories.
                            Key Benchmarks
                                Model     Typical Dealer
Sales Per Employee              150,000       162,528
Serv Rev / Serv Empl             95,000       129,443
Serv Sales / Unit / Mo.         75 – 95          61.5
Equip Sales / Total Sales         40%          47.0%
Supply Gross Profit               40%          43.3%
Weighted Gross Margin             42%          35.6%
Sales Exp / Equip Sales           25%           27.6%
Admin Exp. / Total Sales          18%           18.5%
Operating Income                  14%            5.8%
                                          Admin Expenses

60.0%




                                                 53.0%
50.0%




                                                                                                                        49.3%
                                                                        48.1%




                                                                                                 46.9%
                        42.9%


40.0%

30.0%

20.0%
                                         20.1%




                                                                                                                18.5%
                                                                18.5%
                18.0%




                                                                                         17.4%
10.0%   14.0%
                                  7.6%
                                                         5.8%                                            5.8%
                                                                                  3.5%
0.0%
         Model                  < 8 Million              8 - 17                 > 17 Million             Median

         Operating Income % Admin % Revenue Admin % GP
     Median Administrative Benchmarks
                Model   Typical
Adm Salaries     7.0%     6.4%
Payroll taxes    2.1%     2.0%
Benefits         2.0%     1.9%
Occupancy        2.7%     2.8%
Travel/enter      .3%      .3%
Recruiting          -      .3%
Advertising       .8%      .2%
Other            3.1%     4.6%
Total Admin     18.0%   18.5%
             Other Benchmarks
                          Typical   Benchmark
GP $ per employee         57,860      63,000
Admin exp / GP            49.3%        42.9%
Sales exp / Equip GP      91.8%        71.0%
   (Equip GP %)            30.1%       35.0%
Benefit cost only/empl.     3,088
                Statistics on Base
• The following statistics by type of equipment detail the
  % on contract, the median volume, the median revenue
  per click, and comparisons to the 2005 survey.
• Keep in mind that only six of twenty-one dealers
  provided this information in their survey.
• These statistics may not reflect the performance of
  BPCA.
• There is a different mix of dealers participating in 2006.
      Service Benchmarks – B&W
                        Typical
B&W Copiers
- Maintenance %          91.7%
- Mo Copies on Maint.   23,028,340
- Revenue per Copy        .0130

2005 Survey results     29,509,706
- Revenue per Copy        .0120
      Serv Benchmarks – Fax / Dupl
Fax Machines             Typical
- Maintenance %           61.0%
Duplicators
- Maintenance %            87.2%
- Mo. Copies on Maint.   5,846,400
- Revenue per Copy         .0072

2005 survey results      9,500,000
                          .0068
                 Business Color
Business Color - B&W     Typical   2005 Survey
- Maintenance %           97.0%        97.5%
- Mo Copies on Maint.    610,330     687,078
- Revenue per Copy         .0138       .0153
Business Color - Color
- Maintenance %           96.2%       97.5%
- Mo. Copies on Maint.   296,980     233,000
- Revenue per Copy         .0800       .0900
Copier / Printer Model
  The Blended Printer Model is rapidly
           becoming reality.
               Copier Dealers
• More copier dealers are combining printers with
  copiers on a single CPC.
• Print Specialists are being added to collect the data
  on where the volume is coming from at a client.
• Many of these Specialists are paid a salary, with a
  quarterly bonus of total activity.
• Some companies are adding the cost of the
  Specialist to the out-price of the equipment to the
  sales rep. Rep gets the commission.
            Printer Resellers
• Printer resellers have the better relationship
  with IT.
• Their cost structure is much lower than the
  copier dealers.
• They are combining the new low-priced
  products from HP with a copier line.
• Most printer resellers and making the
  transition to the blended printer model much
  faster than copier dealers.
              The Convergence
• The successful dealership is going to be the one
  that controls the relationship with the CFO / CEO.
• They are going to have the capability to capture the
  click / print volume electronically.
• They will be very successful with bundled leases.
• Their sales reps will be willing to do the work to
  capture the clicks / prints.
• Their organizations will be lean and very cost
  effective.
                     Conclusions
• The median profitability of BPCA dealers increased to 5.8%
  this year from 4.9% last year.
• 80% of BPCA dealers increased total revenue in this year
  compared to 92% in the 2005 survey.
• 27% of the dealers increased equipment revenue > 20%.
• 20% of the dealers reported a decline in revenue this year.
• These are indications that there are major changes in the
  industry.
         Conclusions - continued
• There are challenges in our industry. The
  manufacturers are continuing to expand their
  direct operations to compete with us.
• Printer resellers are actively moving into the
  blended printer space, with comparable equipment
  and a much lower priced business model.
• Acquisitions are occurring at a very rapid pace.
• The opportunity for growth and profitability is
  great for the dealers that can adapt to the changes.
                   Challenge
• Business Color and the Blended Printer Model are
  the greatest opportunities this year.
• As we control more of our client’s output, and
  expand our relationship with their IT, we should be
  able to significantly expand our Solutions and IT
  Infrastructure opportunities.
• This is the business model for the future.
• Dealers that cannot or will not embrace the new
  opportunities are going to struggle as the copier /
  printer industries come together!
         Agenda Continued
• Present new Industry Benchmarks.
• Present 2007 Financial Survey Template,
  which focuses on Imaging, Solutions, and
  IT Infrastructure.

• Questions & Answers
        BPCA

2006 Survey Presentation
      Greenbrier
       9/14/2006
                 If I Were You
• No discounting of the aftermarket until all of the
  profit is out of the box.
• Drive all of the service benchmarks to the model.
  –   Parts @ 17% of annual service revenue.
  –   Labor @ 27.5% of annual service revenue.
  –   Auto @ 4% of annual service revenue.
  –   Training / other @ 1.5% of annual service revenue.
• Dramatically improve inventory and purchasing
  processes.
               Next Steps
• Ensure that we do annual increases to our CPC
  aftermarket contracts of at least 10%.
• Utilize 3rd party parts and supplies whenever
  possible.
• Do not chase manufacturer’s rebates by
  purchasing excessive inventory.
• Use this cash to invest in a blended printer
  organization, with print specialists.
                        And ….
• Become a HP VIP Elite dealer to have access to the new
  products, and pricing, which will be coming soon.
• Focus on adding clicks under contract, even if we do not
  replace client equipment at this time.
• Determine our solution for getting meter reads
  electronically.
• Develop a partnership with a quality cartridge re-
  manufacturer.
• Ensure the CRM system is the best, and our organization is
  utilizing it to the fullest.
                  And Then..
• Career adjust the employees that cannot or will not
  embrace the new vision for the company.
• We need a very high sense of Urgency.
• Significantly reduce admin costs in order to create
  a profit model that can compete with printer
  resellers, even though it will be more expensive.
• Partner with an ethical leasing company that has
  the computer systems to enable us to manage a
  rapidly growing bundled lease portfolio.
                       Focus
• Our focus is fanatical client relationships.
• Business color, high volume, blended printer, are the
  products we need to focus on.
• Only sell Segment 1 as part of bids.
• Bundled leases is the way we do business (90+ %).
• We cannot have our primary focus to satisfy the
  manufacturers.
• This is our company, our client relationships, and
  our future.
   Case Study


Success in Progress
              Success Story
• In October 2005 a $14 million dealership doing
  2% operating income asked me to begin
  working with them.
• Their goal was to continue growing revenue
  while improving their operating income to
  double digits in 2006.
• I explained that their goals were too aggressive.
• They demanded that I drive them to this
  outcome.
               Current Status
• We have implemented many of the strategies from
  “If I were You”.
• Their operating income in June was 13.2% and
  15.6% in July. We are on track to end 2006 in
  excess of 9.5%, and very possibly > 10%.
• Their revenues will also be in the $20 million
  range.
• This is focus, hard work, and success!
        BPCA

2006 Survey Presentation
      Greenbrier
       9/14/2006

								
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