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WELCOME National Instruments Building Business Acumen. Acumen Learning, LLC www.acumenlearning.com 877-224-5444. Business Acumen - Defined. The ability to make effective business decisions in a timely manner with an understanding of the impact of the decision to the business.

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Welcome national instruments building business acumen

WELCOMENational Instruments Building Business Acumen

Acumen Learning, LLC

www.acumenlearning.com

877-224-5444


Welcome national instruments building business acumen

Business Acumen - Defined

  • The ability to make effective business decisions in a timely manner with an understanding of the impact of the decision to the business.

    • Quickness of perception

    • Keen insight

    • Mental acuteness


Welcome national instruments building business acumen

Key Success Measures

How much do you know about National Instruments’ Key Success Measures?

Let’s find out!


Welcome national instruments building business acumen

Instructions:Information is based on the annual reported numbers FY2010 or thru 3Q of 2011. Every question requires an answer, and yes guessing is ok. Write answers on page 35.

Pop Quiz

1 – How much Cash was on hand?

2 – How much Cash was generated by Operating Activities?

3 – What was the Gross Margin (%)?

4 – What was the Operating Margin (%)?

5 – What was the Net Profit Margin (%)?

6 – What was the Diluted Earnings Per Share ($)?

7 – What were the Net Sales ($)?

8 – What was the Inventory Turnover?

9 – What was the % change in Net Sales year over year (%)?

10 – What was the % change in Operating Earnings year over year (%)?

11 – What was the % change in EPS year over year (%)?

12 – What was the R&D spend as % of Sales (%)?


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5-Business Drivers

Cash

On Hand

Generation

The 5-Business Drivers all companies must do well at in order to succeed..

Growth

Top Line

Bottom Line

People

Employees

Customers

Profit

Revenues

Expenses

  • Define the driver.

  • Know how to measure driver.

  • Why is it important?

  • Know the numbers (& Competitor’s)

  • Impact by creating an Action Plan.

Assets

Strength

Utilization


Welcome national instruments building business acumen

Cash Driver

Cash

On Hand

Generation

Growth

Top Line

Bottom Line

People

Employees

Customers

Profit

Revenues

Expenses

  • Define the driver.

  • Know how to measure driver.

  • Why is it important?

  • Know the numbers (& Competitor’s)

  • Impact by creating an Action Plan.

Assets

Strength

Utilization


Welcome national instruments building business acumen

Cash Importance

Cash is King!

“Cash is the company’s oxygen supply.”

~ Ram Charan

It gives you the ability to stay in business.

“Cash is more important than your mother.”

~ Al Shugart

Former CEO of Seagate.


Welcome national instruments building business acumen

Cash

Definition – What is required to grow and maintain the business.

Measures

Cash – is the bills and coins in the register, petty cash, and cash in the bank. Also includes cash equivalents, like CD’s and other highly liquid investments, that easily convert into cash within 90 days.

Cash Flow – The cash generation from core business activities calculated from the difference between the cash that flows into and out of the business in a given period of time (month, quarter, annual)


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Performance

“As of September 30, 2011, NI had $336 million in cash and short-term investments. The National Instruments Board of Directors approved a quarterly dividend of $0.10 per share on the company's common stock payable on November 28 to stockholders of record on November 7.” (Q3FY11 Press Release)

Primary uses: Dividends, Acquisitions, R&D Investment, Product Launches, and Capital Expenditures.


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Benchmark

“To maximize cash: Get the costs right, Get the quality right, and Launch products on time.”

Ram Charan


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Action Plan

Write down one action item You are committed to take to positively impact National Instruments focusing on Cash and/or Cash Flow.

Possibilities

  • Reduce/conserve operating costs

  • Delay purchases

  • Improve Project Planning

  • Improve Data Input

  • Better Manage Account Payables

  • Increase Sales

  • Reduce Costs

  • Improve new plan designs

  • Better manage Account Receivables


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Profit Driver

“Every business must earn a return that is greater than the cost of using other people’s money.”Ram Charan

Cash

On Hand

Generation

Growth

Top Line

Bottom Line

People

Employees

Customers

Profit

Revenues

Expenses

Assets

Strength

Utilization

“No margin, no mission.”


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Profit Calculations

Sales (Revenues)$100100%

- Costs of Goods Sold$ 23

= Gross Margin$ 77 77%

- Op Expenses $ 62.3

= Op ProfitMargin$ 14.7 15%

- Interest and Taxes$ 2.2

=Net Profit Margin$ 12.512.5%


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High Margin

High Margin = Unique product and/or higher demand than supply.

2010 S&P 500 Average Net Profit Margin = 11%

32%

28%

27%


Welcome national instruments building business acumen

Low Margin

High Margin = Unique product and/or higher demand than supply.

8.0%

2010 S&P 500 Average Net Profit Margin = 11%

3.6%

1.7%


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Profits in Action

  • General Mills: Hot’n Spicy Chex Mix:

  • “We had 14 different pretzel shapes. By getting rid

  • of some of them, we save $1 million a year.”

  • Yoplait:Ditched multicolored lids saving $2 million a year


Welcome national instruments building business acumen

Performance

“Our ability to significantly increase our gross margin sequentially and year-over-year is attributed to the success we had in driving down component costs, improving manufacturing efficiency, and to the high value that customers see in our products”

Q4FY10 Analyst Call


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Key Profit Drivers for National Instruments

  • Premium pricing on new products,

  • Expense discipline (“Operating Leverage”),

  • Leveraging Software core,

  • Manufacturing Efficiencies (plant in Hungary),

  • Online Sales,

  • Target of Expense Growth at 70% of Revenue Growth

  • Analysts feel that 18% Operating Margin (non-GAAP) can be achieved with 10%+ Sales Growth


Welcome national instruments building business acumen

Key Profit Drivers for National Instruments


Welcome national instruments building business acumen

Benchmark

“Given that we are closing out our 2011 investment plan, we expect to see a very modest increase in operating expenses in Q4.  Looking out to 2012, our objective will be to grow revenues faster than expenses and we believe we will be able to achieve this goal if we are able to deliver year-over-year revenue growth in the high single digit range or better.”

Alex Davern, Q3 FY11 Analyst Call


Welcome national instruments building business acumen

Asset Driver

Anything you own or control…which has value.

Cash

On Hand

Generation

Growth

Top Line

Bottom Line

People

Employees

Customers

Profit

Revenues

Expenses

Assets

Strength

Utilization


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Balancing

Asset

Utilization

Asset

Strength


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Assets in Action

United Parcel Services (UPS) – Avoiding left-hand turns

  • 92,000 trucks worldwide

  • Saved over 28,541,472 miles

  • Saved 3 million gallons of fuel

  • Reduced insurance premiums

  • Reduced maintenance frequency

  • and costs


Welcome national instruments building business acumen

Performance

"Over the last few years we have invested significantly in building out our capabilities to serve our larger customers, which enabled the significant progress we saw in Q3. This ability to grow our larger orders will be key to achieving our goal of $2 billion in revenue by 2016."  

Dr. T, Q3FY11 Analyst Call


Welcome national instruments building business acumen

Benchmark


Welcome national instruments building business acumen

Growth Driver

Cash

On Hand

Generation

Why is GROWTH so important to business?

Growth

Top Line

Bottom Line

People

Employees

Customers

Profit

Revenues

Expenses

Assets

Strength

Utilization


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Rapid Decline

  • Best and Brightest leave first.

  • Productivity decreases.

  • Morale goes down.

  • Costs are cut, limiting growth and impacting quality, resulting in decreasing profits.

* Studies have shown that it takes 4-5 years for a company to recover from a significant down-turn in profits, assuming they recover.


Welcome national instruments building business acumen

Rapid Growth

  • Attracts/Retains the best and the brightest employees.

  • Productivity increases = more profits = more cash = more growth!

  • Morale is high.

  • Employees have greater potential for career and personal growth.

* Growth gets more time and attention than any of the 5 Drivers in a public company.


Welcome national instruments building business acumen

Performance

"We have exercised good discipline this year in matching expense growth to revenue growth, with non-GAAP revenue up 22% and non-GAAP operating expenses up by 23%, year to date…while we are cautious about the direction of the industrial economy over the coming quarters, we are confident our investments will significantly advance our long-term position in the industries we serve.“

Alex Davern, Q3FY11 Analyst Call


Welcome national instruments building business acumen

Growth

15


Welcome national instruments building business acumen

Benchmark

In FY10, large system orders contributed to yearly growth:

Average order ~ $4,470, Orders over $20K ~ up 41% (higher than 2009 levels)


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People Driver

Cash

On Hand

Generation

Members, Customers, and employees are the key to driving profitable & sustainable growth.

Growth

Top Line

Bottom Line

People

Customers

Employees

Profit

Revenues

Expenses

Assets

Strength

Utilization


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Customers

What is more important than meeting customer expectations?

Exceeding?

Anticipating Customer Needs & Expectations!

“If I would have asked my customer what they wanted, they would have said a faster horse!”

~Henry Ford

“Culture eats strategy for breakfast!”

~Peter Drucker


Welcome national instruments building business acumen

5-Business Drivers

How will we remember the 5 Drivers?

Can you ignore any of these over time and still be successful?


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2010 Annual Report Activity

Pg. 48

1) What are the key messages?2) What are the top 2 Elements getting focus from Dr. T and team?3) What are the key strategies the Executive Team is focusing on?4) Did we have a good year or bad year and how can you tell?


Welcome national instruments building business acumen

Statements

  • The Annually Reported Financial Statements

    • Balance Sheet

    • Statement of Income (P&L)

    • Statement of Cash Flows

  • What is the basic equation for each statement?

  • What is the purpose of the statement?

  • What are the key numbers and how are they trending?

  • How can you impact each statement?


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Pg. 24-25

(P&L)

Profitability

Revenues

  • Equation

  • Sales

  • Expenses

  • = Profit

Top-Line

29%

18%

Expenses

77.1% Gross Margin

33%

19%

19%

16%

14.7% Operating Margin

175%

Income

(Profit)

Bottom-Line

538%

Net Income / Shares

527%


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Increase Sales by $100K

+$100K

-23K

+ 77K

Gross Margin 77%

-37K

+ 40K

+ 40K

Tax rate = 15% - $6K

+ 34K


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Decrease Cost of Sales by $100K

-100K

+ 100K

+ 100K

Tax rate = 15% -$15K

+ 85K


Welcome national instruments building business acumen

Page 26-27

=

+

Financial Strength

Most Liquid

Assets

22%

Equation

Assets =

Liabilities

+

Equity

36%

22%

Becomes Cash < 1 year

Least Liquid

18%

Due First

Liabilities

Due in < 1 year

Due Last

36%

Equity

14%


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5-Business Drivers

Statement of Cash Flow

Statement of Income (P&L)

Balance Sheet


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219

145

77.1

14.7

12.5

1.38

873

1.7

29

176

527

18.1


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Total the Financials

  • SCORING:

  • Right answer = 1 point

  • Somewhat close = ½ point (within: $50M, $2, 2%)

  • Missed it by a ways = 0 point


Welcome national instruments building business acumen

Finding Financials

  • Web Sites:

  • www.nasdaq.com

  • www.reuters.com

  • www.yahoo.com

  • www.finance.google.com

  • www.hoovers.com

  • www.smartmoney.com


Welcome national instruments building business acumen

Final Thought

“People will work…

hard for a paycheck,

harder for a person, and

hardest for a reason.”


Thank you national instruments building business acumen

Thank YouNational InstrumentsBuilding Business Acumen

Acumen Learning, LLC

www.acumenlearning.com

877-224-5444


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