漢威聯合 (HON) 2012 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen.

Thank you for standing by.

Welcome to the Intermec Q1 2012 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, Tuesday, May 1, 2012.

I would now like to turn the conference over to Dan Evans.

Please go ahead, sir.

Thanks, Joe.

Good afternoon everyone, and welcome to Intermec's first quarter 2012 earnings conference call.

With me on the call this afternoon are Intermec's Chairman and interim Chief Executive Officer, Allen J.

Lauer, and Chief Financial Officer Bob Dreissnack.

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.

I'd like to remind you that 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 and management transitions.

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 and of the risk factors that potentially could affect us in our Forms 10-K,10-Q and 8-K filed with the SEC.

Any forward-looking statements made today reflect our opinion as of May 1, 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 the reconciliation from GAAP to non-GAAP items included in today's earnings release and Form 8-K.

With that, I'd like to turn it over to Al Lauer.

Good afternoon, everybody.

I imagine that all of you are aware of the press release this morning which announced Pat Byrne's departure from Intermec as CEO.

I would like to take this time to thank Pat for his dedication during the past 4.5 years.

He improved the Company in many ways.

Among other things, he guided Intermec through significant changes in our sales channel, supply chain, and led the Company through some significant microeconomic challenges.

We all wish Pat the very best.

As part of this transition, the Board has asked me to serve as interim CEO, and I have agreed to do that.

The Board recognizes that Intermec needs to perform better.

I happen to have significant experience in situations like this, and I am confident that we can improve the value of the Company.

For over 40 years, Intermec has been recognized as an innovative industry leader with products and service offerings that meet and exceed customer's needs around the world.

We have talented, innovative and hard-working employees, true professionals.

Together we all remain focused on moving this Company forward.

In addition to our people, we have some real strengths.

Our financial position is sound, we have very competitive, industry leading products.

We have a leading position in voice technology, and we are rapidly expanding our service and software offerings, particularly in our key deployment environments.

The process to identify the right person to lead Intermec on a permanent basis will take some time, but it is a priority, and we will move forward as quickly as possible.

We will do our best to keep you informed as we move ahead.

We also mentioned in our news release that we would not be providing guidance at this time.

Once I have a chance to settle in and to review our processes, I will be in a better position to speak with you about the future guidance.

I'd like to turn the call over to Bob now for some financial review of Q1.

Thank you, Al.

I'll review the numbers and comment on several specific items.

Our reported revenues of $180 million represent growth of 1% year-over-year.

However, this included two additional months of voice revenues and three months of our enterprise mobile service business, which together totaled just over $20 million.

Excluding those incremental revenues, our organic business was down more than 10%, which fell below our guidance for the quarter.

This shortfall in revenue was most pronounced in our Europe, Middle East and Africa, or EMEA region, which was down 17% as reported and down about 25% organically year-over-year.

Our total North America business was up 17%, but excluding acquisitions was up slightly.

Latin America in total was flat versus a very strong prior-year quarter and following a record Q4 and 2011 year.

Asia declined 5% in total, also versus a strong prior-year.

As a result and largely due to the softness in EMEA, and to a lesser extent Asia, our systems and solutions and printer media businesses were down 10% and 18% respectively.

The decline in revenue was driven by a decrease in enterprise spending globally and a slowing of medium to large sized deals.

There was a distinct lack of large deals in key European markets as customers delayed projects due to the economic uncertainty in that region.

We believe that end customers completed projects in 2011 that they had started during the year, but they've taken a more cautious approach entering 2012.

Within the markets, our warehouse and [inter premise] businesses were strong, however, the deal flow in field mobility markets was weaker than we had expected.

Field mobility is a key deployment environment for us, as many deals include both handheld computers and mobile printers.

Therefore, the weakness on the reduced deal flow impacted results in both of our product business segments.

Turning for a moment to our voice business.

Vocollect delivered strong gross margins and operating results.

Voice solutions revenue was up strongly year-over-year due to the additional two months of revenues this year.

Inside the numbers, we saw a slower start in Europe as well, but delivered solid revenue growth year-over-year in North America.

Turning to gross margins for the Company, our reported gross margins of 36.7% includes the amortization of intangibles from acquisitions of about $3.6 million.

Setting that aside, our adjusted gross margins were 38.7%.

This was down from a comparable 39.8% in the prior year.

Our services margins met our expectations and improved year-over-year.

However, our product margin was pressured in the quarter from several factors.

First was the volume shortfall.

Second was currency pressure, particularly in Europe.

And in the tighter economic conditions, also primarily in Europe, we saw somewhat elevated competitive dynamics.

Total operating expenses for the quarter totaled about $84 million, which includes about $1.2 million for acquisition related expenses for amortization and retention.

The prior-year total of $77 million included about $4.8 million for acquisition related costs that included only one month of Vocollect operating expenses.

The incremental expenses from our acquired entities totaled about $13 million for the period, which means the traditional Intermec portion of the business reduced expenses $1 million to $2 million year-over-year.

These reductions were in the R&D and G&A areas of the business.

Due to the pretax loss and adjusting for some specific items in the quarter, our tax rate was approximately 15%.

I expect a more normal tax rate of 38% to 40% will prevail for the full year, but this will depend on actual results going forward and may vary by quarter.

Our earnings per share was a reported loss of $0.27, or $0.21 loss per share adjusted for certain items as noted in our earnings release.

We have two areas that are still preliminary in the results that we have announced today.

First, due to the stock price and the Company's change in market capitalization, we are completing an analysis of our long lived assets including goodwill and intangibles for potential impairment.

If as a result of this analysis we must record an expense, we will then complete an updated analysis of our deferred tax assets.

Either of these items, if required, would be non-cash and are not expected to impact our non-GAAP or adjusted operating results.

Turning to our balance sheet, our cash and cash equivalents totaled just over $85 million.

Our outstanding debt remained unchanged from year-end at $85 million.

We have more than $60 million available under our credit facility.

We did use cash in our operations of about $12 million in the first quarter.

Since this quarter is seasonally our lowest quarter, we often will use cash in Q1.

The cash usage was consistent with our expectations for this first quarter even considering the profit shortfall.

We did a very good job managing the age and total amount of our receivables.

Inventories increased slightly, but this is in current finished goods and was due to the shortfall in product volumes.

Our capital expenditures of $1.8 million were largely offset by the sale of a patent which was cash received during the quarter.

At this point, I will conclude my comments overall and we will open the call for questions.

Dan will provide the instructions.

Joe, if you could just give everyone instructions, that would be great.

We will now begin the question and answer session.

(Operator Instructions)

Andrew Abrams, Avian Securities.

Hi, guys.

If you could give a little characterization on the large deals.

What was the large deal flow in North America?

Obviously in Europe it was weak.

Were there large deals?

Did that continue from last quarter or did that fall off a little bit also?

I will start real quick here, and then I think Jim may have a comment here.

Andy, as you know, we've kind of characterized some of the large deals in the past.

We haven't broken those out by region, but I think in general the large deal flow was better in North America, but not great.

It was weaker in Europe.

In total we had 22 deals that were greater than $0.5 million, which is what we called enterprise deals.

That compared to about 26 a year ago and 35 in the fourth quarter.

So basically you can see the change in the deal amount was in proportion to the change in revenue.

Okay.

In Europe, were their specific locations that you found real problems, or was this kind of just across the board weakness?

I know some of the others in your space were a little more specific as to where the issues were.

Spain and the obvious ones.

Was that the case with you guys also?

I think -- let me offer a couple of thoughts, and then Jim will want to add some color just briefly here.

In the UK, we did see that the year-over-year results were down, but it was a tough comparable as last year, we had a larger deal with Royal Mail shipped during the quarter.

So the actual deals outside of that were probably more level.

I did see some weakness in central Europe and the France area.

Some of the Eastern countries, but it was limited to significant change in certain areas.

Jim, do you have some additional color you might want to add?

I think you hit it, Bob.

It's mostly Western Europe where the issues -- Less so in the developing parts of Europe.

Got it.

Thanks very much.

Keith Housum, Northcoast Research.

Great, thanks for taking my call, guys.

Question -- this is probably for you, Al.

As you guys evaluate where you guys are (inaudible) right now in this stage of the Company, should we expect you guys to look at additional strategic alternatives or is it really a matter of reassessing where current management is and perhaps making a few more changes if necessary and moving on from there?

I think I got the portions of the question; there was a little break up there.

But I think I will answer it in a very broad based -- give you a broad-based answer.

As far as the strategic alternatives that might involve some kind of a merger or acquisition, we're not going to make any comment on that today.

So I'm very focused on what needs to be done to get this business back on track, and quite frankly I see a lot of opportunities.

And as I mentioned before, I've been through some turnarounds before.

And I see a lot of similarity in general and things we have to do.

Okay.

I appreciate that.

And if you don't mind, a different question here on Vocollect.

Bob, it looks like, and correct me if my numbers are wrong here, but we have some slowing in Vocollect for the quarter.

I guess we were -- at least I was expecting some growth there.

Can you comment specifically on Vocollect and those trends that you are seeing currently?

Yes, with Vocollect, and I've spent a fair amount of time with that business in the first quarter.

What we did see is obviously we had one month last year versus the full three months this year.

If I look at a full comparable three months versus three months, the business was down very slightly.

It was limited to weakness in Europe, which had a slow start to the year, very comparable to what other companies and what we saw in the rest of the business.

We had solid growth in North America.

We're not breaking out the individual numbers or results for that.

But I think the business feels like it has performed well.

The operating results and gross margins have been very solid in that business and have continued.

Okay.

Appreciate it.

Thank you.

(Operator Instructions)

At this time, I'm showing no questions in the queue.

You may continue with any closing remarks.

I just want to thank everyone for your interest and we look forward to speaking with you again when we report Q2 results later this year.

Thank you.

Ladies and gentlemen, this concludes the Intermec Q1 2012 financial results conference call.

If you'd like to listen to a replay of today's conference, please dial 1-800-406-7325 and enter the code of 4533430.

ACT would like to thank you for your participation.

You may now disconnect.