Intermec Inc. (
Q3 2010 Earnings Conference Call
October 28, 2010 5:00 pm ET
Patrick Byrne - President and CEO
Bob Driessnack - CFO
Chuck Murphy - Sidoti and Company
Andrew Abrams - Avian Securities
Matt McKee - Morgan Keegan
Ajit Pai - Stifel Nicolaus
Richard Davis - Richard Davis & Company
Eli Lustgarten - Longbow
Previous Statements by IN
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Welcome and thank you for standing by. At this time all participants are in a listen-only mode until the question-and-answer session of today’s conference. (Operator Instructions).
I will now introduce Mr. Kevin McCarty, Vice President of Corporate Development. You may begin sir.
Great, thanks, Lorrie. Good afternoon everyone and welcome to Intermec’s Third Quarter Fiscal Year 2010 Earnings Release Conference Call. With me on the call this afternoon are Intermec’s President and Chief Executive Officer, Patrick Byrne, and our Chief Financial Officer, Bob Driessnack.
In just a moment, Pat will discuss our quarterly overview and then Bob will provide a summary of our operating performance and discuss fourth quarter guidance. Subsequent to those discussions, we will begin our question and answer period.
Today’s discussions will include predictions, estimates and other information that might be considered forward-looking statement under the Private Securities Litigation Reform Act of 1995. Some of the statements we make today may be considered forward-looking, including but not limited to Intermec’s expected financial performance as well as Intermec’s strategic and operational plans, along with additional examples that were set forth in today’s earnings release.
These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements only reflect our opinions as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.
In addition, we will describe certain non-GAAP financial measures which we also refer to as adjusted items. These items should be considered in addition to and not in lieu of comparable GAAP financial measures. Please refer to today’s earnings release which contains and illustrates our reconciliation from GAAP to non-GAAP items.
If warranted a more detailed description of the risk factors could impact our actual results, can be achieved by reviewing our filings with the Securities and Exchange Commission. These filings include our annual report on Form 10-K and our quarterly reports on Form 10-Q. To obtain copies of these reports please visit our Investor Relations section of our corporate website.
Now transitioning to the next portion of our call, I’d like to turn the call over to Pat.
Thanks, Kevin and good afternoon. Intermec had third quarter 2010 revenues of $169 million and adjusted earnings before taxes a $4.1 million meeting our expectation. Tax provisions were $9.2 million this quarter, which is in excess of earnings. Bob will discuss this primarily non-cash expense in his remarks.
In North America, the US government business continued to flow in the quarter but did show progress in bookings, which we anticipate converting to revenue in Q4. North America revenue was down 6% compared to Q3 of last year, but was up 4% excluding US government business. Bookings were stronger in the quarter for North America overall and we expect sequential growth in the fourth quarter.
International sales results were strong with 21% growth compared to Q3 of last year. These results continue a trend we have seen all year in the international markets. In addition, we saw continue to strength new product sales as well strong results from our global channel.
Total gross margins and product margins increased both sequentially year-over-year. Service margins improved sequentially as we expected. In the quarter introduced innovative new products and services which I will outline in my later remarks. We also considered the acquisition of a software company for our solution business. I am now going to turn it over to Bob and then I would return to discuss our results in more detail as well as our priorities and outlook for Q4.
Thank you, Pat. Intermec’s third quarter revenue of $169 million represented a 6% increase from the prior year third quarter and was up 5% sequentially. On constant currency basis, year-over-year revenues were up 9% and on a constant currency basis with sequential increase was 4%.
On a GAAP basis our third quarter earnings before tax were $2.3 million. The company recorded a $9.2 million primarily non-cash tax expense in the quarter to align its year-to-date provision with updated fiscal year 2010 revenue and income estimates. This true up resulted in a net loss of $6.9 million or a loss of $0.11 per share, which compares to a break even earnings per share in the third quarter of 2009. Our GAAP results included the impact of restructuring charges of approximately $1.8 million which equates to $0.02 per share.
The company’s tax provision for Q3 of $9.2 million primarily reflects three items. First, we reversed tax benefits recorded in Q1 and Q2 that were based on our then current forecast of full year income. Combined with a non-cash tax provision for our earnings in Q3, this year-to-date true up is a total non-cash expense of approximately $6.2 million.
Second, we recorded a charge from steps we took to establish in international headquarters for our supply chain and international sales of approximately $2 million for the quarter which is also non-cash. Third, profits in certain foreign sales offices will be taxed in those countries and we will owe cash tax of approximately $1 million which we recorded in the quarter. These three items drove the requirements for a tax provision of about $9.2 million in the quarter, but as noted only $1 million of this amount represents cash tax expense.