斑馬技術公司 (ZBRA) 2012 Q4 法說會逐字稿

Good morning and welcome to the Zebra Technologies 2012 fourth-quarter earnings release conference call. Joining us from Zebra Technologies are Anders Gustafsson; CEO, Mike Smiley, CFO; Mike Terzich, Senior Vice President, Global Sales and Marketing; and Doug Fox, Vice President, Investor Relations. All lines will be in a listen-only mode until after today's presentation. Instructions will be given at that time in order to ask a question. At the request of Zebra Technologies, this conference call is being recorded. Should anyone have the objections please disconnect at this time. At this time, I would like to introduce Mr. Doug Fox of Zebra Technologies. Sir, you may begin.

Thank you. Good morning, thank you for joining us today. Certain statements made on this call will relate to future events or circumstances and therefore will be forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Words such as expect, believe and anticipate are a few examples of words identifying a forward-looking statements. Forward-looking information is subject to various risks and uncertainties which could significantly affect expected results. Risk factors were noted in the news release issued this morning and are also described in Zebra's 10-K for the year ended December 31, 2011, which is on file with the SEC. Now let me turn the call over to Anders Gustafsson for some brief opening remarks.

Thank you, Doug, and good morning everyone. Today Zebra reported solid results for the fourth quarter of 2012 and the full year. For the quarter, GAAP earnings from continuing operations totaled $0.68 per share, including acquisition and restructuring charges that reduced earnings by $0.03 per share. Quarterly sales of $253 million were the second highest in Company history. We achieved a record sales in Latin America, along with a pickup business in EMEA and continued strength in North America. The quarter was characterized by a consistent run rate business. Modest large steel activity was related to the ongoing challenges in Europe and Asia.

We had record sales of desktop printers as well as of supplies and services. Sustained high profitability drove strong free cash flow of $43 million for the quarter. We returned $15 million to shareholders for the period, with a repurchase of 400,000 shares. Highlights for the 2012 full year include record sales on four consecutive quarters of sequential sales growth. GAAP earnings from continuing operations of $2.35 per share included acquisition and restructuring costs and an impairment charge which reduced EPS by $0.23. For the year, free cash flow totaled $188 million with $54 million returned to shareholders in the form of stock buybacks. We also deployed $73 million for two acquisitions and other investments to enhance shareholder value.

These investments supported the meaningful progress made throughout the year in advancing the following goals-- extend Zebra's leadership in our core business; develop new sources of high growth revenue; and take advantage of emerging technology trends as our customers strive to achieve greater visibility into their value chains. Results for the quarter and full year can be attributed to clearly defined and well-executed strategies. We enhanced Zebra's relevance to customers by meeting more of their extended supply chain visibility needs. The high cadence of new product introductions led to a stronger complement of innovative products and solutions. In addition, more effective sales and marketing programs enabled deeper engagements with customers in targeted industries such as Manufacturing, Healthcare and Retail.

Zebra's performance also continues to highlight the value of our diversity across geographies, products and industries. It demonstrates our increasing success to become a stronger strategic partner with our customers and an even more formidable force against our competitors. Over the last 12 months we have discussed how Zebra, together with our partners, is working to create a smarter more connected global business community. We are pursuing this vision through five strategic pillars. First, intensify innovation; second, expand into new markets; third, maximize operational effectiveness; fourth, penetrate existing markets further; and lastly, inspire our people and culture.

Supported by a proven business strategy, our drive for innovation and products and across the organization is pushing Zebra further ahead of competition. Together with our increasing number of technology partners, our product development activities are delivering a richer range of products and solutions. This enhanced portfolio is meeting more of our customers' value-chain visibility needs. The adoption of Internet of Things solutions and other emerging technology trends are further enhancing Zebra's opportunity for new revenue streams.

Let me now discuss some areas of notable progress. First, innovation and product development remained high throughout 2012. During the year, we introduced 14 new printer products, including three in the fourth quarter. These products include our latest generation of print engine which enables us to expand into new markets. Designed for reliable operations in the mission-critical applications, the ZE500 is particularly well-suited for use in the food and beverage industries and other environments where dust and moisture can create printing challenges.

Second, during the quarter we extended our offering in the emerging area of Mobile Point of Sale or POS, to build on our leadership and mobility. Mobile POS untethers the checkout and payment systems from fixed terminals and cash registers. Showcased at the National Retail Federation show in January, Zebra's Mobile POS offering provides retail customers a compelling integrated solution, regardless of the retailer's size or complexity. Mobile POS is one of several areas in which retailers are making technology investments to enhance the in-store shopping experience and compete more effectively against online retailing. For Zebra the mobile trend opens exciting opportunities. While we have a limited presence in fixed POS, mobile is an area where we have a strong right to play with our robust family of mobility solutions. In addition to mobile POS, Zebra and its partners offer a wide range of retail solutions, such as price management, consumer loyalty, RFID inventory accuracy, back of store receiving and inventory, and self service kiosks.

Third, our regional performance also highlights the success of our strategies. In North America, we had a consistent run rate business throughout the quarter. We shipped a broad range of printers to meet needs of customers in small package delivery, retail and healthcare. Supplies were strong in the quarter with high demand for labels, wristbands and ribbons. This strength reflects our sharper focus on growing our annuity revenue streams and expanding into new markets such as Hospitality and Entertainment.

During the quarter, the success of our take share activities, strategic account focus and superior product line was evident. A large global athletic shoe and sportswear company chose to standardize on Zebra across its organization, with applications including the implementation of the Mobile POS Solution. In EMEA, a strong finish for the quarter led to a $7.7 million sequential sales increase. A pick up in business in Italy complemented continued favorable trends in Turkey, Russia and the Middle East, all areas where we invested to expand Zebra's presence. In addition, our e-mail supplies business performed well. We experienced notable printer shipments in the postal, car rental and retail applications, some of which included competitor product displacements.

Going into 2013, we remain cautious on the near term outlook for the EMEA region even though our results for the fourth quarter were quite encouraging. In Asia-Pacific the ongoing softness in manufacturing contributed to the region's modest sales decline. However, even in this environment we had notable wins in several areas, including mobile printers to customers in Malaysia and desktop printers to financial institutions in China. We also experienced an improving business trend in Vietnam, the Philippines and Thailand, where lower wages are attracting a new round of investment in manufacturing capacity. We were pleased with the sales performance of our line of printers specifically designed for emerging market needs.

In Latin America we achieved record sales on the strength of business in Mexico and parts of South America. Initial shipments of desktop printers for the Brazilian Ministry of Health award, the largest ever for the region, also contributed to the quarterly record. Our investments in more robust sales coverage also led to orders for a national ID project in Ecuador, mobile printers to several retail customers for shelf labeling and other applications, and shipments of tabletop printers to a leading auto manufacturer supporting a plant expansion. Overall fourth quarter results capped the year of material progress. This progress positions Zebra for accelerating growth and higher returns. The value of our business diversity combined with our culture of innovation, sound investments and outstanding execution, continue to be a cornerstone to our long-term success. Now I will ask our CFO, Mike Smiley to provide a detailed review of fourth-quarter results and guidance for the first quarter of 2013. After Mike's remarks, I will return for some brief closing comments.

Thank you, Anders. Let me highlight some of the key components of Zebra's results for the fourth quarter. My comments will principally focus on year-over-year changes in the performances of Zebra's operations. First, continued strong sales in North America and record sales in Latin America offset declines in Europe and Asia-Pacific and currency headwinds. Second, gross margin was within our expected range and comparable with a year ago. Third, operating expenses were up largely at higher amortization, acquisition costs and a charge for exit restructuring.

Let's review sales. For the quarter, sales increased 2.4% from $247.3 million last year to $253.1 million this year. Impact of foreign exchange net of hedges, reduced sales by $1.9 million or $0.03 per share. On a constant currency basis sales were up 3% year-over-year. Sales for North America, up 7% increased $7 million. The region's performance is characterized by ongoing strength in our run rate business. Supply sales had a record quarter in the region, boosted by wristband sales as well as steady improvement in other product lines.

In EMEA, sales declined 6%. Year over year, we experienced strong growth in Turkey, Russia and the Middle East, as well as Italy. This improvement partially offset declines in Spain and other regions. On a constant currency basis, EMEA sales declined 4%. Sequentially EMEA sales were up 10% on improvements in nearly all sub-regions. In Asia-Pacific, sales were down $800,000 or 2.5% from a year ago, primarily related to the ongoing softness in manufacturing in China and South Korea. Latin American sales were up 22% to a new record, benefited from improved representation in South America and Mexico. The improved coverage drove sales in Ecuador, Venezuela and Chile, among other countries.

Looking at our product categories, a 3% decline in hardware sales is partially offset by a 25% increase in supply sales. On a year-over-year basis, average unit printer prices declined from $506 to $477, principally because of mix. Gross margin for the fourth quarter of 49.2% was up slightly from the 49.1% a year ago. Lower freight charges and overhead costs offset unfavorable movements in mix and foreign exchange. Operating expenses increased only $945,000 from a year ago, including $2.6 million in higher amortization and acquisition costs and exit restructuring charges. The core operating expenses of Selling and Marketing, R&D and G&A declined $1.6 million year over year. Exit restructuring costs of a $960,000 led to actions taken to streamline our Location Solutions Organization to improve efficiency and sales execution.

For the operating income of $44 million, plus depreciation and amortization of $7.3 million, totaled $51 million of cash earnings or $1 per share, $1 of cash EPS. Effective income tax rate for the fourth quarter was 21% which brought the full year tax rate to 25.8%. Earnings from continuing operations totaled $0.68 per share, including a reduction of $0.03 per share for the acquisition and exit and restructuring cost on 51.3 million average shares outstanding. At the end of the fourth quarter we had 50.9 million shares outstanding. In the fourth quarter we returned $15 million to shareholders with the purchase of 400,000 shares in Zebra stock.

The weighted average price of the purchases was $36.69 per share. For the full year we returned $54 million to shareholders with the buyback of 1.5 million shares of Zebra stock. The days sales outstanding increased slightly from 49 days to 50 days. Inventories increased a slight $400,000 from third quarter. Free cash flow for the fourth quarter totaled $43 million. We ended the quarter with $394 million in cash and investments.

Now let's look at the first quarter forecast. We are forecasting 2013 first quarter sales of $240 million to $252 million. The forecast reflects seasonality, in addition to the ongoing outlook for Europe. Earnings are expected at $0.55 to $0.65 per share. Our forecast assumes a consolidated gross margin in the range of 48.5% to 49.5%. Operating expenses are forecast between $80.5 million and $82.5 million. This range incorporates expected increases in employee-related expenses which have a greater impact on the first half of the year. We estimate the effective income tax rate to be 21.5%, which reflects a continuing benefit of last year's restructuring of our Foreign Operations and expect a greater portion of Zebra's income being generated in jurisdictions with lower effective tax rates. That concludes my formal remarks. Thank you for your attention. Now here's Anders for some concluding comments.

Thank you, Mike. Zebra's fourth quarter results demonstrate the value of strong execution, financial strength and innovation. While economic challenges have restricted near-term performance in some regions, our well-placed investments to extend the industry leadership and generate higher returns, give us increased confidence in our business and Zebra's future. We continue to pursue our growth goals, while at the same time we are exercising effective control over operating expenses to maintain profitability in light of current global business conditions. We will take advantage of our financial resources to invest in organic initiatives that will deliver the highest risk-adjusted returns, in addition to making opportunistic stock buy-backs and acquisitions for the long-term benefit of our shareholders.

With multiple competitive advantages, including the industry's broadest product line in thermal printing, and strongest global Go-to-Market channels, we are well-positioned to capture opportunities in our core business. Our customers continue their drive for grading operating efficiency and [acid] visibility. A growing middle class in China, Brazil, and other developing countries, are supporting attractive long-term growth. At the same time, we are encouraged by the emerging opportunities of new revenue streams. Investments in R&D with a greater focus on software, combined with acquisitions and partnerships, are resulting in incremental areas of growth, which will develop in 2013. These areas build on our core strength and mobility in RFID and demonstrate Zebra's relevance to important technology trends and attractive vertical markets. Mobile POS, which I highlighted earlier, represents one of those key opportunities.

Active RFID is another growth area. Zebra's ultra-wide-band RFID is attracting new attention with its unique capabilities for high-precision location tracking. We are engaging with ISVs and system integrators to embed this technology in new innovative solutions. Cloud-based connectivity is a third area of opportunity. This emerging technology trend is well supported by Zebra's Link-OS, an ecosystem enabled by Zebra's printer architecture that we began building in to new products last year. Link-OS makes Zebra printers significantly easier to integrate, manage and use in a Company's operations, with greater capabilities for customization with the development of specialized apps.

We look forward to providing you further details of our progress as 2013 unfolds. Clearly, we are excited about Zebra's future and opportunities for growth. Our investments in technologies, products and innovation are allowing Zebra to penetrate existing markets more deeply. We are expanding our presence in new, exciting areas of growth, while positioning ourselves to benefit from important new trends. The tangible results of these developments is that Zebra will be able to serve more of our customers' needs while building increasing value for our shareholders. This concludes our prepared remarks and I thank you for your attention this morning. I would now like to turn the call back to Doug for Q and A.

Thank you, Anders. Before we open the call to your questions, let me ask that you limit yourself to one question and one follow-up. In addition, Mike and I will be available after the call for any further discussions. All right, let's begin the Q&A.

(Operator Instructions)

Michael Kim, Imperial Capital.

Can you first talk a little about the growth for Location Solutions? How did that compare the corporate average and if the margin profile was accretive or there is still a significant amount of near-term investment in that business?

The trend line for our Location Solutions business, I think is quite attractive. We have a number of new areas where we see the technology being used but first, of course, our core markets are still doing very well in automotive and industrial manufacturing. We are seeing the technology getting embedded now in other third-party solutions. We also saw experimentation and new traditional ways of really using the technology. So we are seeing it in sports, in tracking cows, you know, agriculture, in retail. It is getting a much broader use than what it had before. It is still a small part of our business and we have pulled back on some of the investments, but we do believe that it has attractive opportunities for us this year.

Following specifically on the retail opportunity, are you seeing an increase in deployments of item level tagging? Are additional retailers following the lead of some of the larger players?

Yes, passive RFID is primarily seeing growth in retail, with other industries following, but retail is the big story for passive RFID. If you went to NRF this year, you would have seen a lot of different solutions, including RFID. I would say the big shift from a year ago there, would be that passive RFID was originally incorporated into retail solutions, more to drive operational efficiencies. But now, more and more retailers are starting to use RFID and other technologies to really enhance the customer shopping experience, as they have to compete against online retailers.

Tony Kure, KeyBanc Capital Markets.

Just wanted to talk about the new product introductions. You mentioned the 14 new printer products in 2012. Can you put that in the context of, how that is related to prior years?

Yes, 14 new printer products this year was a record. I think we did 12 new printer products in 2011. Before then I would say, there was roughly half of that. I think our run rate prior to 2011 was, I would say, five, six, seven products per year. By really making our changes to our development processes and more platforming, we have been able to really amp up our cadence of new product introductions, without increasing the actual R&D investments.

When you think about coming out with new products, are they targeted at geographies? You mentioned the one specific for Asia in your prepared remarks. Are they usually targeted at geographies or do you think about it in terms of industry application?

They're mostly targeted for virtual markets, but we have introduced in the last three years a number of products that were specifically aimed at emerging markets. We felt that there was a different needs and requirements that our other portfolio didn't really serve as well. And those products that have been aimed at the emerging market side have performed very well, but the other products we mentioned was the ZE500 print engine. That is not really an emerging market product that is much more for beverage and food industries to do labeling of assembly line type of packages.

Just want to sneak one more in, the yen has been weakening pretty substantially here. Just wondering if you are seeing any, or do you expect to see any, increased competition from some Japanese competitors exporting out of Japan?

No, not really. Japan has actually been a good market for us this year. It has been up quite a bit, but it is still a modest-sized market for us. I think our Japanese competitors, they have a lot of operations outside of Japan already, and I wouldn't expect that the yen will have a meaningful impact on their positions.

Stephen Stone, Sidoti and Company.

Question on Lat-Am, how much of the growth down there is due to the two large projects you guys announced in the third quarter conference call? And also how long are we going to see this impact in the revenue?

The growth in Latin America is very broad-based. It really goes across pretty much the entire geography, and there was lots of different types of projects. The transportation logistics is certainly one of the main factors in Latin America, but we also had great wins in retail and in manufacturing. It is really a much broader story with a strong run rate business but maybe Mike Terzich can also give some further details.

Stephen, to Anders point, I think the diversity of our business in Latin America is really strong right now, so we tend to break it up into three sub-regions. We have Mexico, we have Brazil and then we have affectionately, all the other geographies. When you look at, and you tease about the business, we have strength in all of those. Mexico is predominantly feeding a lot of manufacturing opportunities for us. And the North and the South of South America is a pretty diverse mix of retail. It is also quite a bit of opportunity in the identification side of our business, with the rising middle-class phenomena going on. There's a lot more push towards improvement in retail loyalty cards, drivers licenses, voter cards, et cetera. It goes well beyond the large health opportunity that Anders highlighted, that came out of Brazil.

One other question on the average selling price here. You guys at spoken in the past that the high-end desktop printers have a lot of cyclicality in their sales there. They have been depressed in the past. With record desktop printers that you sold here, are people trading down or is this just average selling price getting moved down more because of the mobile printers?

First, as we've said in previous calls, the price within the product families tend to remain very steady. When we see unit pricing come down, it tends to be driven by the mix shift or FX, a weaker euro. I think that was true this quarter also, that within each product family the product pricing was very consistent. We had, obviously, a very strong performance in our desktop portfolio and Mike Smiley might have some further details.

Actually, interestingly enough, even though the desktop printers sell for a lower price, we actually have very attractive margins for the desktop printers. Even though we have that mix, it is not always intuitive exactly how that affects our margins.

Paul Coster, JPMorgan.

Supplies revenues have grown quite significantly the last couple of quarters, obviously significantly outpacing the Hardware sales. What does this mean? Does it mean that utilization rates going up? Is it a lead indicator for a pending upgrade or refresh cycle on the hardware side?

First I would say it is really as a result of a well-defined strategy on our part to really grow our Supplies business. We see that we have had much lower attach rates outside of the US and we focus hard on growing the attach rate in the US but also outside of the US. We have been able to see great return on those investments. We had our traditional Zebra Supplies business grow double-digits in Q4 and that was augmented by the LaserBand acquisition that we did in Q3, which further accentuated that growth. We have been very pleased with our strategy of focusing on driving a greater annuity attach rates in Supplies, and focusing on the high end of that market with better margin structures.

Paul, let me add a little color to that as well. From our perspective, our strategy has been really two-fold. What we see is, even in times of perhaps softer hardware demand, I think in our prepared remarks you saw that our hardware sales were down a bit, manufacturers still need to label. As Anders pointed out, we focus on specialty label, which is the higher-value label we stay away from the commodity paper business. And Zebra, by nature, has amassed a position in the marketplace. We're actually one of the larger global label-converting companies around. We have that first line of opportunity with a lot of our end-user customers who are specifically looking for specialty label. Our strategy has been to increase our focus, and then also increase our global presence by having more on-the-ground locations from which we can serve that customer base. And that is really what you are seeing from a traction standpoint.

My follow up question is, as we start to see mobile point of sales introduced, it's yielding an opportunity for new companies to enter that space, not necessarily in the printer space, but in the payment-capture, for instance. It seems like the channel is getting churned up a bit, and people are looking at new ways of getting to that end-market, especially SMB businesses. Can you describe what it is that Zebra might be doing differently to capitalize on the mobile POS opportunity?

Yes, first were very excited about the overall opportunity that we see in the Mobile Point of Sale. There's very attractive growth trends, I think, and I think you were at the NRF and you saw probably lots of different solutions, and that was one of the big take-aways from the show this year. Mobile POS is a small part of our business today, but as I said, it provides a great growth opportunity. And based on our internal research, we expect just the Mobile POS Hardware side to have a growth CAGR of about 20% and the growth CAGR for Mobile POS transaction is probably more in the 60% range. We clearly believe this is an attractive area for us to invest in. We're getting a lot of interest from our customer base in retail, about what it is we can do.

We also mentioned one large new customer, athletic shoe and sportswear company, that invested in our technology too, for a Mobile POS solution. We are having, like you said, three different areas of our solution. One is the traditional mobile printer that is required to print out the receipt, but then we made a small acquisition of StepOne earlier in December, which really is focused on the interaction between the in-store sales person and the shopper. To be able to provide much more detailed information about the basket, so it can be looking at having good understanding of what the inventory position is in that store, or across the entire chain for something they are looking at. It can be comparable, price comparison activities. It can be suggested up-sell opportunities. It really provides a much broader, softer application that is more solutions-oriented. And now we have a relationship with Hybrid Paytech for the payment transaction processing, which we also think is going to be a very attractive market for us to position us in. And all of this together really creates a much broader, much more of a complete solution, which I think is one of the areas in which we are differentiating ourselves now.

(Operator Instructions)

Keith Housum, Northcoast Research.

Anders, can you remind me how much LaserBand provided for the quarter?

We don't break out LaserBand as an individual product line. We have not done that since we acquired them. To go back to what we said in July, when we announced this, I think we said the revenues in 2011, so basically two years back, was $24 million for it. LaserBand has since developed as per our expectation and is delivering what we expect.

I think the other piece to know is that the organic business is growing very strongly even without LaserBand.

Yes.

Anders, I think in your prepared remarks, you mentioned two acquisition and obviously LaserBand being one of them, and forgive me if I've forgotten the second one. Can you describe what the second one was?

The second one was this company, StepOne, that I mentioned in Mobile POS. This is the company that, it really focused on the software solution and that application around the basket in retail. Enabling the interaction between the in-store salesperson and the customer.

Did you have that on display at the NRF?

Yes we did, that was part of our booth.

That's where I saw it. Okay, thank you.

Andrew Spinola, Wells Fargo.

I have a general question on your operating leverage in the model. Some of your expense lines were moving in opposite directions. R&D down on an absolute basis and G&A up 100 BPS year-over-year as a percent of revenue. Over the mid-term, as I'm thinking about your model, and the opportunity there, are there any potential areas of leverage or expense savings that we might be able to model?

There's a couple of things, first of all, from quarter to quarter we have -- I know you are doing a probably year-over-year look, but from quarter to quarter we have a little bit of lumpiness, more specially in the engineering side as we have project expenses that come up, as we wrap up certain projects. So as we have more projects concluding, we will have more expense. Sometimes that goes up and goes down. I would say in our G&A, a couple of things for us, one is we have made some meaningful investments in our ERP system, which comes through as additional depreciation there. As you asked about the ability to find operating leverage, I think one of the reasons we made that investment is so that as the business grows, we can scale up without having to scale up our spend in the G&A side.

I do expect that our G&A will be a little bit, the growth rate in that will be probably half the growth rate of the rest of G&A. The other thing I'd also say is, when we spend on our, for our ERP and other IT-related expenses, that the basically was retained in our G&A line. We don't allocate that. Some companies do one way, some do it the other. We keep that all in G&A so we can keep an eye on that. As we invest to increase efficiencies, maybe in Sales and Marketing or Engineering, that cost will stay in G&A and hopefully the benefit we see in Engineering and Selling and Marketing.

Just a follow-up on the tax rate, I don't know what restructuring you're talking about that was hitting Q1, but you think you can see a lower tax rate for the year, or is 25% still roughly the target?

The target that we announced for the quarter is the target you should expect for the full year, pretty much. What happened was, at the end of the third quarter last year we did a restructuring of our legal entities overseas that allows us to more efficiently capture working capital and such, and be able to move it to where it is needed so we can use it overseas where very need to. And I think that's ended up benefiting our tax rate. Along with that, the profitability in the lower tax rate jurisdictions is increasing relative to North America. When you look at it, we're looking at a 21.5%, 22% tax rate for the full year.

Tavis McCourt, Raymond James.

First question is in relation to the Honeywell purchase of Intermec, I was wondering if you could give us some thoughts on how you think that may impact the market. Honeywell's intention, in terms of what they may do or not do with that business? Secondly, a quick one for Mike on the cash, how much of that is domestic?

I will take the first part, here. I don't think that the Intermec-Honeywell combination is going to have a material impact on the industry. We have competed against Intermec for many, many years now and we know them well. We have plenty of other competitors that are strong. So from that perspective I don't that the competitiveness of the Intermec portfolio will change materially as it becomes part of Honeywell. I believe, this is an expectation of mine at least, that Honeywell really bought Intermec for the hand-held mobility solutions, and I suspect that they will put most of their effort into integrating those product lines and making those as competitive as possible. We feel as good as we have ever been about our overall competitive position and how we can compete in the market irrespective of individual competitors.

On your question about cash, a little less than half of our cash is overseas. I will tell you though, we have some interesting opportunities, and we think we will deploy that overseas, for building some of the business and investing in some opportunities there.

Brian Drab, William Blair.

I know that FX can have a significant effect on your top line and also bottom line. Can you talk a little bit about what the impact would be if the euro does stay around this $1.34 range, compared with the $1.30 average in the fourth quarter, what that could do sequentially to, specifically earnings, really, in the first quarter relative to fourth, in terms of how many cents of EPS?

When you compare, as we mentioned in the earnings call, our growth rate was 2.4% roughly before FX and was 3% again of revenue when you use a constant currency. When you are looking at our forecast for the first quarter, generally we're basically reflecting a current spot rate in that. However, if you look at the impact of the change in the FX rate, you can see that we are, for about $0.04 in the euro on the fourth quarter, that translated to about roughly about $8 million of revenue and $6 million of operating income impact. You can do the math of $8 million to $0.04 is sort of the math you can do, depending on where the rate changes hit. I will tell you, though, there's also some off-setting things on hedges that we have, which would mute some of that impact, so it's not quite dollar for dollar.

And the spot rate that you are incorporating into the guidance is?

Is roughly current market conditions.

The $0.55 to $0.65 outlook includes, or does not include, any acquisition and restructuring charges?

It does not.

Are you anticipating any? Sorry if I missed this, are you anticipating any acquisition-related or restructuring charges in the first quarter?

We will probably have some, but we are still working through those plans in the first quarter.

Michael Kim, Imperial Capital.

A quick follow up, can you comment on the contribution, or overall contribution from emerging markets, either for the quarter or for the year? Culling out any tailwinds or headwinds, it looks like Latin America, obviously strong, with maybe a poor mixed in Asia Pacific.

You get the percentages?

I will start just giving you a sense of the performance across geographies in emerging markets. We had a still nice growth overall in emerging markets, but not as good as there have been in 2011 and 2010 and 2011. We saw definitely a slowdown in some of the larger markets that are particularly dependent upon exports, manufacturing exports, like Korea and China. That also drove some softness in some of the markets that are particularly strong exporters to those markets like Brazil, Australia.

We did also see some continued nice growth in markets like Turkey, Brazil, Middle East. Very nice growth in those areas. Mexico was another one. I think Turkey was well over 20% growth, Russia was double-digit growth, Middle East also. Overall, I think we feel very good about the investments we made in putting more sales resources into emerging markets to really drive those markets and we believe we are well-positioned to continue to expand our share in that position in those markets.

Would you anticipate continuing to expand the sales resources at the pace that you saw in 2012?

No, the biggest increases we did in resources in to emerging markets, were early 2010 and '11 and some into 2012. I think we would consider this year to be a more normal year from that perspective.

Mike, this is Mike Terzich. We are doing a little fine tuning of our expansion plans, so what we have settled on now is some areas within those geographies where we can do a little incremental investment to kind of fill in some gaps in some other areas that are looming in the not too distant future, as areas of some upside for us.

Jason Rodgers, Great Lakes Review.

Looking at new products, do you have a target in mind for the number of new products planned for 2013 and the areas that you are focused on there?

We have a target, I guess we have a road map. You can expect it to be similar to what we did in 2012, but we are also shifting some of our investments to more software-oriented products. We've talked a little bit about Link OS as the new operating system for our printer products, that will make them easier to connect into applications. We've also made substantial investments into our Card portfolio, which we feel now is very competitive. We believe it is very competitive to the rest of the market, and that portfolio is now, we think, quite complete. We should see good returns on that now, we can pull back a little bit of that investment on the Card side and move it over to some other products.

Would you be able to list your largest three customers as a percent of sales for 2012 and then your Cap Ex estimate 2013? Thanks.

This is Mike Smiley. For 2012, our largest customer was just over 20% of revenue, our second customer was about 11% and our third customer was just over 10%. Those are all basically distributors. They represent a lot of end customers that are pulling through for there. The other question was?

CapEx.

CapEx. CapEx will probably be down a little bit from last year, so I expect it to be -- We did $26 million this year, it will probably be closer to $20 million, $22 million, something like that for next year. Or 2013.

Keith Housum, Northcoast Research.

Mike, as I look at the guidance going into 2013, the low end of the guidance, it tells me that you could perhaps -- you're looking for a decrease in the business of 3% to 4% when I take out what I assume will be LaserBand. Can you talk about which you see on the horizon that gives you guys a more conservative guidance?

I'll tell you what, we'll probably all speak up. First of all, I just want to let you know, seasonally the first quarter is always a little bit challenged. As you know in Asia we have -- we have -- there exists the Chinese New Year. And the other thing that happens, it happens our business, which is, you get your budgets finalized and halfway through the quarter you have your game plan. We see that in the run rate business where people don't really start picking up until midway through February. Those are just natural things. And then I think we would talk about the fact that Europe is also, we see that economy as being challenged. I think in the past couple of quarters we saw Asia-Pac being also affected because of Europe. I think we're seeing that maybe being a little bit better just normalized. Again, we still have Chinese New Year in Asia-Pac. I don't know. Anders --

I think overall, I would say we're very happy with our strategy and how we are executing today. We feel we are doing quite well in the market and continue to extend our leadership position in the market. The geographic inverted of that diversification we have, has served us very well in these uncertain times. I think it is fair to say also, the environment continues to be somewhat difficult to forecast, more so than it was a few years back. That is probably a ways into our forecast a bit also. We're very confident in our ability to outperform the market and grow faster than the overall market trends.

For Q1, our guidance certainly includes some seasonality. You see that in particularly Latin America and Asia, but also figures in North America and Europe. As we look into the rest of the year though, I've got to say, our pipeline looks quite good. We expect the year to strengthen as we go forward. We see good opportunity in manufacturing and retail and in transportational logistics.

And if I could just follow up to that, as you looked at yourself exiting the quarter, in terms of the environment and large deals and deferring them versus going ahead [ex-Q1], has there been any change in last quarter versus negative previous two quarters? We were seeing that some the large deals are being deferred especially some of the larger distributors saying that?

Keith, this is Mike Terzich. I will take that. I think the large-deal pattern, as we exited the year, remain pretty consistent to what we had articulated in the prior quarters, which was effectively deal sizes were more moderate, volume was more moderated and what we were seeing, particularly in some of our core markets in manufacturing, was a more tempered approach to those deals. Our largest end-user accounts with certain level of uncertainty and some of the export manufacturing market, we're basically saying we're going to deploy, we're going to deploy in smaller lots and we're going to see how the year unfolds. I don't think the story was any different in Q4. I think in this quarter, I think somewhat consistent, although I will say, based on our recent showing at the NRF, the retail outlook coming out of the holiday season, globally, was actually pretty strong. The level of optimism in retail was perhaps a little higher than most people expected and the feedback we got from the show was, I think we will see an increase in those deal opportunities centered on retail, both across the supply chain of retail, as well as enhancing that customer experience. We expect that those deal sizes will increase as the year progresses.

(Operator Instructions)

Greg Halter, Great Lakes Review.

Congrats on good results. Wondering if you could provide, and maybe did, but I may have missed it, the yield on your cash investments in the quarter on annualized basis or however you may calculate it?

As you can imagine, our priorities for our investments are security and stability, so they're typically corporate, high-rated corporates, governments, communities, those kinds of things. You can guess that the yield is pretty low. I don't have that available, I don't have it offhand right now. It is fairly small.

Applaud the buy-back and what you've been doing in that regard, but despite the buy-back, your cash is still up $25 million sequentially in the quarter. Your stock is at the highest level since I think early 2006. I just wondered, does that give you any pause on the buyback and whether or not, given the low rates, you've considered accelerating the buyback or paying a dividend and raising it annually or some kind of program like that as well?

Our philosophy is the same as it has been before. We're looking to deploy our capital into those opportunities that offer the highest risk-adjusted returns. We are exploring all of those options. The highest on the list, I would say, is funding growth, organic and inorganic. We think that we have good opportunities to continue to drive the business and make sure we can generate good attractive long-term growth rates and nice margin expansion for that. We still believe that buy-back is the best vehicle to return capital to shareholders. It's the most flexible for us. We can step it up when we feel there is opportunity, and be optimistic like we've said we would be all along, or take a little small, cautious approach if the share price goes higher. We don't want to chase it up. Our assessment is that most of our shareholders have been quite satisfied with that approach, and that is the path we're staying on.

Just to get back to the exact number, it is 0.7% is the annualized rate of return for the year.

Thank you. Ladies and Gentlemen. There are no further questions in queue so I will turn the call back over to Mr. Fox for closing remarks.

Thank you everybody for joining us today. Just as a reminder, Mike Smiley and I will be available after the call for any further discussions. Have a good day.

Thank you, Ladies and Gentlemen. This concludes today's webcast.