漢威聯合 (HON) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen.

Thank you for standing by.

Welcome to the Intermec's Q4 2011 Financial Results Conference Call.

During today's presentation all parties will be in a listen-only mode.

Following the presentation, the conference will be open for questions.

(Operator Instructions) This conference is being recorded today, Thursday, February 2, 2012.

I would now like to turn the conference over to Senior Director of Investor Relations Dan Evans.

Please go ahead.

Thank you, Christina.

Good afternoon, everyone and welcome to Intermec's Fourth Quarter and Full Year 2011 Earnings Conference Call.

With me on the call this afternoon are Intermec's President and Chief Executive Officer, Pat Byrne; Chief Financial Officer, Bob Dreissnack -- and Jim McDonnell, our Senior Vice President of Global Sales, will be available during Q & A.

Following our prepared remarks we'll begin a question-and-answer session.

Today's call will include forward-looking statements.

These statements will include, for example, statements about Intermec's expected financial performance, as well as its strategic and operating plans.

A number of risks and uncertainties could cause Intermec's actual results to differ materially from those expressed in, or implied by, our forward-looking statements.

We include a more complete description of what we consider to be forward-looking statements in our Forms 10-K and 10-Q filed with the SEC.

Any forward-looking statements made today reflect our opinion as of February 2, 2012 and we undertake no obligation to revise or update them.

In addition, in today's call we will describe certain non-GAAP financial measures or adjusted items.

These items should be considered in addition to, and not in lieu of, GAAP financial measures.

Please refer to our reconciliation form from GAAP to non-GAAP items included in today's earnings release and our Form 8-K.

And with that I'd like to turn the call over to Pat.

Thank you, Dan.

In Q4, Intermec delivered revenue of $237 million, an increase of 18% compared to the same quarter last year.

Adjusted operating income, excluding infrequent non-cash charges and items related to our recent acquisitions, was $16.8 million or 7.1% of revenue and represents a 76% increase compared to Q4 of last year.

Adjusted EBITDA was $24.5 million for the quarter compared to $14.5 million last year.

Adjusted earnings of $0.13 per share was affected primarily by a higher effective tax rate which Bob will cover in his remarks.

To round out the key financial metrics, operating cash flow for Q4 was $20 million.

For clarity, for the remainder of this call I will refer to adjusted or non-GAAP financial results unless otherwise noted.

Before we delve into the quarter in detail, I'd like to highlight the progress we've made in five key areas that are transforming our business into one focused on providing solutions to customers around the world.

In each of these five areas, Intermec made significant progress in 2011.

We believe these results put us in a great position for 2012 with strong business momentum to build upon.

First, our global presence is expanding.

Our international sales were strong all year with revenue up 30% for 2011 compared to 2010.

Latin America and Asia Pacific delivered record years in sales and EMEA, or Europe Middle East and Africa, grew 29% and 12% organically.

In fact, 2011 set a record for combined sales results in international markets for the Company.

We believe the international markets have high long-term growth rates and the significant momentum we have developed with customers and partners globally positions us for continued growth.

We expect this international momentum will also help the Vocollect business, which has less international business as a percentage of the total compared to the core at Intermec.

Second, we're growing our channels.

Q4 in 2011 were records for the core Intermec business through the channel on a global basis.

We've been investing in the channel for several years, especially over the last two years with the introduction of PartnerNet, our award-winning channel program.

We believe we have built strong and sustainable momentum in the channel going into 2012.

Third, our product offerings have never been stronger.

Our largest business, Rugged Mobile Computers, was up nearly 14% for the full year with growth in every region.

This growth rate and the strength of our broad product portfolio demonstrates and positions us for strong market acceptance in our core business.

Unit sales for computers were also at record levels in 2011.

Fourth, acquisitions are accelerating our transformation.

Vocollect and Enterprise Mobile both had record quarters and generated strong interest from partners and customers.

The Voice Solutions business had the strongest quarter in its history, up 11% compared to the same quarter in 2010.

This caps a record year for the Voice Solutions business.

We are delighted with the Vocollect business and believe that the results the business demonstrated in 2011 will make an even larger contribution to the Company in 2012.

Enterprise Mobile, which provides mobility outsourcing services to clients in North America, also performed well in the quarter, with growth of 65% compared to the same quarter in 2010 and also completed a record year in 2011, doubling sales of lifecycle services compared to 2010.

And finally, we are growing our margins.

Gross margins have exceeded 43% for three quarters in a row and these higher gross margins levels form the basis for a more profitable business model for the Company.

Gross margins for the quarter were 43.6% compared to 39.2% in Q4 of 2010.

While most of this increase was driven by the addition of the Voice Solutions business, Intermec's core business also delivered improved gross margins for the year.

Before I turn it over to Bob to go through the results in detail, let me provide some high-level remarks on the quarter.

Our computer business, the largest business within the Systems and Solutions segment, remained very strong in Q4 with solid sales from our new products including the new 70 Series.

As I noted earlier, our computer business grew 14% for the full year, with excellent growth in all of the international markets and solid growth in North America, including key wins in transportational logistics, parcel delivery and direct store delivery applications.

We saw stronger Enterprise sale in the quarter, winning 35 Enterprise deals worth nearly $50 million in revenue, up strongly compared to recent quarters.

For the full year, the core Intermec business grew 8% with double-digit growth in Systems and Solutions including strong results in the international markets.

As I mentioned earlier, areas like Latin America grew significantly, more than 20% in Q4, but North America declined 6% compared to Q4 of 2010.

Even considering that Q4 of last year included a boost in sales due to a planned distribution transition, we need to improve North America's sales results, particularly in printer media and services.

And we have plans to do this.

In the printer media business, we have a renewed focus on channel sales.

New channel programs are in place and we're expanding our product portfolio.

And we're also leveraging our overall sales momentum with our mobile printers which sell with our -- which sell with our mobile computers.

We believe these initiatives will improve our results in North America.

In the service business, we've seen an improvement in the attach rate of service agreements through the channel where multi-year contracts drive revenue growth over time.

In addition we expect the lifecycle services available through Enterprise Mobile will enhance our North America service portfolio.

Even with the challenging economic climate, Europe Middle East and Africa, or EMEA, sales grew organically 12% in 2011 and we believe the region will perform well in 2012.

One of the highlights for EMEA was growth in the Middle East which grew over 30% for the year.

Turning now to voice solutions.

One of the highlights of the quarter is the number of new logos or businesses that have purchased voice for the first time.

We track new logos to see if we're making progress in driving adoption of voice.

During the quarter, we added 62 new logos, up from 40 in Q3.

We're also adding voice to some of our computer product lines to create new warehouse solutions.

Our two new vehicle-mount computers, the CV41 and CV61, come equipped with our voice solutions software, a key differentiator for Intermec.

For 2012, we anticipate continued growth of the voice business, enabled by an expanded sales and marketing footprint and cross-selling initiatives with Intermec.

Enterprise Mobile also had a strong quarter with growing adoption of lifecycle services in the rugged computer space and field mobility applications where small phones or tablets are also used.

Enterprise mobile provides outsourcing services for US-based customers using mobile technologies that want lifecycle supports in hardware, software, repair depot and in 24 by 7 call center support.

In Q4 we saw a significant increase in customer wins and a nearly fivefold increase in total contract value as a result.

As these lifecycle services are spread over a three to five year period, the increase will be recognized over the coming quarters.

Finally, we reported two unusual items as part of our Q4 results.

I will mention these briefly and Bob will elaborate on both items during his remarks.

First, the Company recorded a non-cash deferred tax valuation allowance.

Second, the Company expensed $5.6 million of a previously capitalized legal cost.

Both items are significant non-cash items that we feel are non-operating and unusual.

I'd like to now turn it over to Bob for a more detailed financial discussion.

Then I will return to discuss our operational highlights in more detail and summarize the year's results.

Thank you, Pat.

As Pat mentioned Intermec's fourth quarter revenue of $237 million represented an 18% increase from the same quarter of 2010.

On a constant currency basis, the overall growth rate was 20%.

Our reported revenue includes approximately $38 million in net revenue from Vocollect and Enterprise Mobile.

Excluding the impact of acquisitions, revenue was down 1% from the year ago quarter due to North America.

On a regional basis for the fourth quarter, our North America business grew 15% driven by our voice solutions.

Excluding voice, North America was down 6%.

EMEA increased 21%, including about 18% from Voice Solutions, and was up more than 15% sequentially from the third quarter.

Latin America had a record quarter, growing 26% and 22% organically.

Asia also grew 17% year-over-year and 6% organically.

Quickly recapping the full year, Intermec revenue totaled $848 million, an increase of approximately 25% compared to 2010.

Our 2011 revenue includes approximately $116 million from our acquired businesses.

Excluding the acquisitions, revenue increased approximately 8%.

Pat highlighted some of the regional performance, but let me quickly mention the full-year growth rates.

North America grew 19%, up slightly excluding Voice.

EMEA grew 29% in total, and 12% excluding Voice.

On a constant currency basis, EMEA grew 25%.

Latin America and Asia closed out record years each growing 35% in total.

Their growth was 29% and 23%, respectively, versus 2010 on an organic basis.

I'll come back to gross margins and expenses, but moving to earnings per share, on a GAAP basis our fourth-quarter net loss was $21.6 million or $0.36 per share.

This compares to fourth-quarter 2010 net earnings of $7.9 million or $0.13 per share.

Our non-GAAP, or adjusted, earnings per share were positive $0.13 for the quarter.

This excludes $5.9 million of items related to acquisition and restructuring costs.

We also incurred several non-cash items, including an impairment charge of $900,000 on vacant land available for sale, and $5.6 million to write off previously capitalized legal costs.

In addition, the Company evaluated our deferred tax assets as of the year-end and recorded a valuation allowance of $21.4 million.

Excluding these items, our non-GAAP adjusted net earnings were $7.5 million or, as noted, $0.13 per share, flat with the prior year quarter.

Let me cover the legal and deferred tax valuation items in additional detail.

On January 18, 2012, the United States Court of Appeals for the Federal Circuit issued a ruling in the case Intermec Technologies Corporation versus Palm, affirming a US District Court decision, which upheld the ability of certain of the Company's patents but which found no infringement by Palm.

Based on applicable accounting requirements, the Company is determined that all of the previously capitalized fees related to the case would be reflected as expense in the fourth quarter of 2011.

The patents at issue in the Palm case did not relate to the company's RFID or radio frequency identification patent portfolio.

With respect to deferred taxes; our analysis of earnings for the most recent three-year period, which is an important baseline for evaluating deferred tax assets was heavily impacted by the recession in 2009 and by acquisition-related costs and the legal fees write off in 2011.

Under the rules of ASC 740, formerly FAS 109, we had to restrict our forward projections due to this historical pattern.

Management believes that execution of our business plans going forward, along with tax planning options that are available to the Company, would utilize these credits in NOLs.

And if successful with our business plans, we would reduce or remove the need for the valuation allowances in the future.

Returning to the income statement.

Our gross margins as recorded were 41.9% versus 39.2% from the prior year.

Excluding the impact of $4.6 million in acquisition-related adjustments, our adjusted non-GAAP gross margins were 43.6%.

The higher gross margins are primarily due to the favorable impact of acquired product and service revenues.

For the year, gross margins improved across the board.

Total adjusted gross margins were 42.5%, up from 37.9% in 2010.

Moving to expenses.

Our combined R&D and SG&A expenses for the quarter totaled $88.1 million, which includes ongoing operating expenses for Vocollect and Enterprise Mobile of $18.2 million, and acquisition-related costs that were recorded in SG&A of $1 million.

Setting these items aside, the core Intermec operating expense totaled $68.7 million.

This was essentially flat compared to prior year R&D and SG&A which totaled $69.1 million.

I discussed the deferred tax valuation charge earlier, so let me focus for a minute on our operational tax rate in the quarter.

While our adjusted operating income was within the range expected in our guidance, due to the mix of the source of the income, essentially we generated more income in international countries where we are a net taxpayer and less in the US, our expected rate of about 41% rose to 53%.

This difference impacted our operational tax expense by about $1.9 million and our earnings per share by $0.03 versus our guidance.

I'll cover our expected 2012 rates in a few minutes with our guidance.

Moving to the balance sheet.

Inventories increased in the quarter by approximately $5 million versus our expectation of a small decline.

We made good progress with operational performance and the earlier system transition in Europe, but we carried some incremental inventory to ensure timely customer shipments which we will reduce going forward.

We are also adjusting the levels carried for select new products as our delivery timing has been strong and buffer stocks are no longer necessary.

Accounts receivable increased from the third quarter due to the seasonally higher revenue.

Our number of days in receivables, or DSO, was below 60 days at the end of the quarter, slightly below the third quarter.

Intermec generated $20 million in cash from operations this quarter, primarily due to non-cash adjustments, higher accounts payable and expense accruals, which more than offset the higher inventory and receivable levels.

Our cash, cash equivalents and short-term investments totaled $95 million at the end of the quarter.

The increase from the prior quarter was driven by our operating cash flow, net of capital spending for normal operations and an additional $8 million outstanding on our credit facility as of year end.

With a net cash position and $63 million available under our credit agreement, we remain in a solid financial position.

As we look to 2012, we expect total revenues for the full year to increase by 8% to 10%.

This includes the benefit of two months revenue, all in the first quarter, from the acquisitions completed last March.

Full-year adjusted earnings per share are expected to be in the range of $0.55 to $0.60.

This excludes the full-year estimate for amortization of intangibles and transition-related costs totaling about $19 million, which would equate to about $0.20 per share.

First-quarter revenues are expected to be within a range of $200 million to $210 million.

This estimate includes approximately $20 million for the first two months of the year from acquisitions and reflects our slightly cautious view of continued economic uncertainty, particularly in the EMEA region.

First quarter earnings per share on a GAAP basis are expected to be minus $0.05 to break even.

First-quarter earnings per share on an adjusted basis are expected to be within the range of break even to positive $0.05 on a per share basis, excluding the impact of approximately $5 million of acquisition-related intangible amortization and transition costs.

Our earnings per share guidance for the quarter and the full year assume an annualized effective tax rate of approximately 40% and a diluted share count of approximately 60 million shares.

That completes our financial comments and I'll turn the call back to Pat.

Thanks, Bob.

Before we move to Q & A, let me cover a few operational highlights.

During Q4, we had record sales through the channel which caps a record year.

Momentum in the channel takes time to develop and requires a combination of excellent products, robust programs, active engagements and execution.

We believe this momentum in the channel on a global basis is one of the most important accomplishments of the Company's transformation over the last several years and positions us well for continued growth in 2012.

We doubled the number of partners in our program during the last year to over 6,000, with significant increases in each region.

We are especially pleased with our progress in the international markets and with our recent SmartStart program, which we expect will help our printer business going forward.

We recently held our Partner Conference for the Americas which attracted record attendance and we'll also hold similar events in other regions over the next few weeks.

At this event we introduced new channel programs for cross-selling voice solutions through the Intermec channel which were well received and we expect will lead to increased sales of Voice Solutions in 2012.

Lastly, as I noted earlier, our product portfolio is very healthy.

We recently announced new capabilities in the 70 Series, including a software defined radio option utilizing Gobi 3000 technology from Qualcomm, enabling industry-leading multi-carrier solutions.

Intermec was the first to innovate with this capability in the CN50 in 2009, and this introduction of Gobi technology in the 70 Series reinforces our market-leading position.

With this and other upgrades to the 70 Series we believe is the highest-performance rugged computer in the market.

Yesterday we announced new vehicle-mount computers with two new models.

The CV41 and CV61.

This represents both a major technology refresh of our product line, as well as the creation of new market opportunities focused on warehouse applications.

Both of these products are voice-enabled; a unique advantage for Intermec with the integration of the voice technology from the Vocollect acquisition.

These new products reinforce our position and, together with our double-digit computer growth in 2011, represent substantial momentum in our largest business.

To recap 2011, our adjusted operating income for the full year increased to $32 million from $6 million in 2010.

EBITDA doubled year over year to $60 million for the full fiscal year of 2011.

We believe the significant progress shown in the improved operating profitability of the Company puts us in a strong position to deliver shareholder value in 2012.

Our focus in 2012 is to invest in sales and marketing, to continue to grow the business on a global basis, while maintaining tight control on all other expenses.

As the hardware businesses continue to grow in sales and unit volumes, the service opportunities represent strong recurring revenue for the Company that will expand and stabilize margins.

We have active initiatives underway to increase the service component of the business and to increase attachment of those services on new hardware sales.

And we plan to continue to drive synergies with our Vocollect and Enterprise Mobile businesses.

We believe these actions will enable us to continue to improve profitability in 2012.

In summary, we believe we have excellent momentum in the business going into 2012 driven by global expansion, channel coverage improvements, new additions to the portfolio and growing margins.

Now we'll open up for the question-and-answer session of the call.

Thanks Pat.

Christina if you could just take a moment and remind our participants how to ask a question, that would be great.

(Operator Instructions) Andrew Abrams with Avian Securities

Hello guys.

Two questions.

First, if you could kind of walk us through a little bit on the fourth quarter and first quarter look at EMEA and North America.

I mean I guess you were a little more cautious it seems in first quarter on EMEA.

And North America was probably a little less so in fourth quarter than you had expected.

If that perspective is right can you kind of walk us through kind of where that's going and where you came up short in North America?

Was it on the Enterprise side or -- at least it didn't seem that way or was it on the [Varr] side?

Yes.

I'm happy to do that and I'll ask Jim McDonald who is on the call as well, he's the head of our Global Sales Organization to comment.

So here's the way I would picture it.

The shortfall in North America was mainly in the printer media and service business as I outlined.

The Enterprise sales were strong as I said $50 million on 35 deals.

And we have good momentum in looking forward at the Enterprise deals in 2012 in North America.

So that's what I would say is that we've -- have a specific issue in printer media.

Overall the printer business grew double digits in 2011.

And printer media combined grew 7%.

So overall we're happy with that business but it's underperforming in North America.

That really the key issue there.

In Europe I think we're just seeing just the uncertainties associated with the marketplace due to the economic climate.

We believe we're in a strong position, 12% growth.

But in terms of the -- it's sort of a slower start to the year.

I guess I would say.

Due to some of the these uncertainties.

Jim can you add to that?

Yes the only thing I would add is, is for America and the printer performance and going forward into Q1, we have a lot of attention focused on it.

And particularly on the channel expansion Pat talked earlier about the additional partners that we've signed up this last year.

And that should help us turn this around in the North America region.

Okay.

And just on the Enterprise side, I know the general characterization that you guys have been using for the Enterprise side is the big deals are very, very hard to come by and I think ScanSource said similar things.

That they haven't seen anything really changed there.

Is your better Enterprise side an indication that maybe things are changing there or was this just a larger number of you know the kind of smaller deals that we've been seeing for the last couple of quarters?

What I would say there is that it's both.

The number of deals, 35 deals adding up to $50 million, we are seeing an expansion of them but also we're seeing the composition of them picking up in total size.

And in fact there's a number of deals in the funnel and some that we've closed, some that we've already completed that are sizable.

Very sizable deals.

So I think it's building.

But it's not sort of turning around instantly.

But there's momentum.

In the Enterprise business.

Do you want to add to that, Jim?

Yes.

I agree with Pat.

Completely.

And we are seeing some additional activity.

And hopefully it will continue to be a trend.

But we're definitely seeing more activity than we saw earlier in the year.

Great.

And just last.

Have you guys seen any change in the government business?

I mean I know it's been horrendous not only from your perspective but from a lot of people's perspective.

Has there been any movement there at all?

No we -- I'll answer that.

This is Pat.

The way I'd answer that is that we really haven't seen a pickup in that business in 2011.

It's lumpy so there's some quarters a little better than others.

But if I integrated there's still really not a catalyst for significant growth.

We do think that there are distinct opportunities for Voice Solutions in the federal business.

Again, when we speak about government we're talking about the federal business.

We believe that it's really the overall lack of finalized federal budgets that continue to restrict spending.

So we're focused on a few key opportunities but we really haven't seen a catalyst for sustained recovery.

Got it thanks very much.

Tavis McCourt with Morgan Keegan & Co., Inc.

Hello guys.

Thanks for taking my question.

I missed some of the call so you may have answered this.

But in terms of the gross margin on products.

How should we think about that trending going forward?

I know you've had a lot of initiatives over the last several years to get those to a new higher level and none seem to have made that much traction at least in the results.

Is this kind of the level we can expect at this level revenues or is there anything to improve those?

The gross margins,\ have increased 400 basis points roughly.

Since we made our acquisition.

Acquisitions.

So we're now in this 43% plus range.

As a result in the last several quarters.

So we believe we'll be in this 43% plus range going forward.

Bob, do you want to add to that?

I think Tavis, what I would add is that the level that you've seen in I'll say the third and fourth quarter and in particular, would be roughly the level to look at and project going forward.

We always have costs down, cost improvement initiatives underway.

At the same time there's a normal sort of competitive dynamic that might serve to keep it more neutral than increasing.

But a constant area of focus for us throughout our business on the operations as well as the sales side.

The other I think opportunity for us would be continued mix and expansion.

So as Vocollect and the Voice Solutions continues to grow that carries a little bit higher margin and could bump that up a little bit.

You know the other thing to sort of factor in and I think Andy's question asked this and Jim addressed it which is we haven't seen a lot of large mega deals.

And if a mega deal does come in while it may be a great deal, it could put a little downward pressure on it.

So The short answer to your question is I think the current level is a reasonable proxy.

And should represent what we've demonstrated two or three quarters in a row now that we can achieve.

And then we'll keep working to improve it and hopefully volumes will help.

But we're going to do what we need to do to win business as well.

So Tavis, you may have missed it but we're -- as I said in my prepared comments, this is the third quarter in a row where the gross margin -- adjusted gross margin has been above 43%.

It was 43.6% in both Q3 and Q4.

Right.

And then similar commentary on the services revenue streams would be helpful.

Obviously it was down $2 million in Q4.

I don't know if that's -- I think seasonally it's normally up a little bit.

Was there something unique to that or is that normal?

Yes.

What I would say there is that first of all we're adding service revenue with the Enterprise Mobile business.

But as I had mentioned, what we are seeing now, is as unit volumes on the computers declined during the recession, we attached services to those computer sales.

Now that we've had a number of quarters of adding unit volumes, we're starting to see a recovery and a growth of the deferred revenue that we're planning to see in the future.

So we believe we will see growth in the service business -- the core Intermec service business in addition to seeing-- in addition to seeing the Enterprise Mobile add to that.

Thanks.

And then last question is really just on contingency planning.

Obviously this is a difficult economy to predict.

But in terms of how you would run the business if all of a sudden it looked like 8% to 10% growth was not a realistic outcome for 2012?

Because of some economic dislocation.

Is this a year that you're willing to invest through or is this a year you're focused on profitability growth even at a lower revenue number?

What I would say is that we are confident.

I mentioned the momentum that we've got.

My view is we have substantial momentum in the channel and the products that we've got and our acquisitions.

I also believe these products are core to the productivity of mobile work forces and those work forces are an expanding business opportunity.

I believe we're in a strong position in terms of our competitive market share.

14% growth in our largest business is really substantial momentum.

So I would say that rather than second-guessing that we would plan to execute our business plan.

You know we would always -- if we were to hit some sort of air pocket in economics we would always try to take the actions to be prudent in managing the business but we believe this has -- business has really strong growth prospects.

In fact we delivered 8% this last year and we think 8% to 10% is good for -- on the organic side and 25% overall.

And we think as we guided 8% to 10% this next year.

Bob do you want to add to that?

I think that's -- I think that's right on.

Okay good thanks.

And I guess, on balance sheet management.

You're obviously are running a cash position and a little bit of line of credit line.

How should we think about the cash uses this year?

Would you still be willing to make tuck in acquisitions?

Or is paying down debt interesting to you?

And is there any inhibitors on using that cash in terms of having it overseas or anything like that?

Yes.

And Tavis we typically don't comment on any specific use of the cash.

I think what you would thin of -- so let me give you a data point that might fit in there which is you should think of our capital expenditures not being greater than this past year.

It could be down just slightly from that.

I think as far as the use of cash goes.

All other items whether it's potential opportunities for investments, through acquisition, or any other uses of cash we evaluate and we would report on those as appropriate.

Great thanks a lot.

Keith Housum with Northcoast Research

Great.

Thanks for taking my call guys.

Can you guys a little bit to what you saw in the pricing environment during the quarter?

Were there any large deals that perhaps you chose to walk away from?

Because the margin simply wasn't there?

I guess what's the pricing trend?

I would say the price -- this is Pat.

The pricing trend I would say is stable.

You know the larger deals are obviously more competitive as Bob outlined.

We have a growing business in the channel which is a good mix of midsize deals.

And so, that is the way I would characterize this.

The pricing environment is stable.

We're obviously in -- trying to command price premiums where we're appropriate with our new products because the technology we believe that we can lead with that.

We have good product mix now.

We are able to compete at a number of different price points.

Jim, do you want to comment on the pricing environment?

Again and I believe it was -- it was pretty stable.

It was actually pretty stable throughout most of the year.

And to Pat's point it's really just every once in a while there's some huge deal we all compete against.

Where it gets -- the margins become under greater pressure.

But generally, pretty stable.

Great.

If I could ask a follow-up question here to the North American business.

And it sounds like you're [fixes].

Could you spend perhaps just a moment or two and describe a little bit more about how you're going to go about and address that.

In the printer area is a just a matter of adding new varrs or is it perhaps lacking the products you have in the printer market right now?

Yes.

Three things that I outlined.

In the North American improvement plan.

The first one is making sure -- you know a lot of these projects do sell through the channel.

And so it's -- we've made progress there.

We're continuing to focus on expanding the channel and as I outlined with the SmartStart program we believe we've made progress.

Now it's about activating and building those channels.

Because they don't turn on overnight but they do -- they do make progress as demonstrated by our significant channel results this year.

So that's one.

The second one is expanding the product portfolio.

The number of products that are available to sell.

We've introduced a number of new printer products and we're continuing to expand the offering of our portfolio which allows our resellers to reach more different applications as well as be able to sell a broader product range of Intermec branded printers.

And the third one is that we've seen really good growth in our mobile computers and we're seeing an improvement in the attach of mobile printers to mobile computers.

And in fact mobile printers had a very strong year in 2011.

We attached a lot of printers to computers and both international and domestic we're seeing good results there and that's an important portion of that printer business.

So in summary the mobile printers, the channel expansion and the portfolio expansion are all levers to improve especially the North American business results.

Overall of course the printer business as I said grew I think it was 11% for the year it was certainly double-digit and so we think we're good position on the printer business on a global basis.

We just have some particular issues we need to address in the region.

Okay thank you.

(Operator Instructions) Chris Quilty with Raymond James.

Thanks, good evening gentlemen.

If I can just focus a moment on the Vocollect business.

I think at the time you acquired Vocollect you talked about picking up $10 million of incremental revenues and if I ran my numbers right you fell a little bit short of that.

Can you talk about what were the factors if any that slowed you down either macro or internal in hitting those targets?

And where you think you stand, and this is the second part of the question.

In terms of integration.

Both the Vocollect sales force and the core Intermec.

And likewise on the product of putting those two product lines together fully.

Yes.

Sure Chris.

What we outlined when we acquired the business is we would have $8 million $10 million of revenue synergy in the first year.

We're short of that but we believe that's still -- that we're on track to deliver that in the first year.

Again the first year ends in -- essentially March 1.

So we're not far behind that in fact we expect to close that to be able to report that by that time frame.

And so I think the traction is very good.

The sales cycle for Voice Solutions is a longer sales cycle.

It's more transformative for a lot of warehouses to adopt the technology.

Requires integration into warehouse management systems and BRP software systems.

And so -- but the engagement is very good between the two sales teams and there's good incentives in place for cross-selling initiatives.

Jim maybe you could speak to this since you've worked quite a bit and have led this sales force integration and cross-selling initiatives.

Sure hello Chris.

So we've spent a lot of time, particularly the last six months in working with the Vocollect sales team and the Intermec sales team to really have a concerted effort to go after the distribution center and warehouse marketplaces.

And including compensation programs for both sales teams.

Lead passing, lead registrations and lots of training has gone on.

And we're seeing a lot of pipeline activity.

We tracked the pipelines of the joint deals and opportunities.

And again we're looking forward leverage both ways.

We're looking for leverage to find new opportunities for Voice, but we're also looking for opportunities to leverage the current Vocollect installed base.

To be able to sell the broader Intermec portfolio.

So lots of work that's going on there Chris and I really expect to see a strong return on that.

Throughout 2012 and beyond.

Are you halfway there?

80%?

I would say as far as sales integration and sales interaction, I would say we're half the way there.

And -- but the hard work has been done.

Now it's the payoff period of the other half which I see in 2012.

Okay.

And on the product side?

On the product side we've already demonstrated some of the key integration.

The CV41 and CV61 brand-new vehicle-mount computers are the only voice-enabled products in the marketplace on these VMUs and we had that integration or delivered that functionality at introduction.

We also have the 70 series and the CK-3 are voice-enabled.

And we're continuing to look for technology opportunities.

So lots of good ideas there.

And then also on the product side, positioning these products together with common messages and value propositions and integrated selling strategies using the complete portfolio.

All that work has been done and as Jim said, that positioning work is out in the sales organizations now.

So I'd say that we're in the early stages of technology and product integration.

With really two good engineering teams between the companies and we're -- we've already found some opportunities and we've brought some to market but we see more opportunities in the future.

Because voice technology is a major technology platform which we believe will apply not only in the warehouse but also in other deployment environments that Intermec serves.

Okay.

And just a clarification.

I know you can basically bolt voice unto any hand held.

But Vocollect does actually secret sauce in the circuitry and whatnot.

So apparently when you talk about integration on a CV series you actually went in on the board level or chip level and integrated those changes?

Yes that's right.

It's a deeper integration than would by available on a standard computer.

Got you.

If I can just real quickly, switching gears.

For Bob on SG&A, you guys have done a real good job keeping the core SG&A pretty steady.

What should we expect looking out into 2012?

Yes, Chris, the level that we saw in the fourth quarter was kind of a little bit up because of the seasonally higher revenues.

So I think the way you could think about it would be our total SG&A for the year, if you add in just two more months for the acquired businesses and you kind of look at that as a normalized amount for 2011.

Basically, given the 8% to 10% growth projection with some caution on our part to make sure we do not anticipate we would grow that.

So I think for the core Intermec business you would see it being roughly flat for the full year.

We're still going to look to invest some money in sales and marketing initiatives to continue to drive that growth.

Trying to control and reduce the G&A spending wherever possible.

And I think we expect the R&D to be flat to down slightly.

So that's probably a little bit of color in there.

But basically the total Company all in trying to hold expenses flat after you consider the two months of acquisitions.

And looking for every opportunity to free up money, to continue to drive growth initiatives.

And is the R&D down on an absolute basis or is that, plus the two months of acquisition revenues down from that implied level?

Yes, I think if you add in the two months of the acquisition revenue it would be roughly flat.

But I think for the core business what that would mean is it that it would be down slightly on the traditional Intermec.

But that team has done an tremendous job of driving productivity and efficiency and figuring out how to launch more products for the money that they spend then had traditionally banned the pattern of the Company.

And for Vocollect, keeping the spend focus on the Voice, there's a high value there.

Making sure we probably won't spend much more.

But the blend of those would probably be roughly flat.

Okay, and I don't know that you've ever really quantified new products.

But can you give us a sense new products in the last 12 to 18 months as a percent of sales what they are today as opposed to a year or two years ago?

I think it's -- we look at -- and traditionally we define products as within the first couple of years of their life cycle.

So when it's launched kind of looking out.

We have not provided that metric previously.

I think as we go forward, we're going to look at a couple of things such as the Enterprise deals, the synergy revenue and as we look more and more at the solution deployment environments, breaking some of that out Chris.

But I don't have that number here today.

Okay thank you.

Thank you.

And I'm showing no further questions at this time.

I'll now turn the call back over to management for any closing remarks you may have.

Thanks Christina and we appreciate everyone's investment of time today and we look forward to talking to you very soon.

Ladies and gentlemen that does conclude our conference call for today.

If you would like to listen to a replay of today's conference, please dial 1-800-406-7325 using the access code 4507003.

We'd like to thank all of you for your participation and you may now disconnect.