Intermec Inc. (IN)
Q2 2010 Earnings Conference Call
July 29, 2010 5:00 PM ET
Kevin McCarty – Director, IR
Patrick Byrne – President and CEO
Bob Driessnack – SVP and CFO
Reik Read – Robert Baird & Company
Chuck Murphy – Sidoti & Company
Tavis McCourt – Morgan Keegan
Ajit Pai – Stifel Nicolaus
Chris Quilty – Raymond James & Associates
Andrew Abrams – Avian Securities
Chris Marangi – Gabelli & Company
Good afternoon everyone. Thank you all for standing by and welcome to today’s conference call. At this time your lines have been placed on listen-only for today’s conference. (Operator Instructions) This conference is being recorded today, if you have any objections you may disconnect at this time.
I would now turn our call over to Mr. Kevin McCarty, Vice President of Corporate Development and Investor Relations. Mr. McCarty, you may proceed.
Thank you very much (Joel) and good afternoon everyone and welcome to Intermec second quarter fiscal year 2010 earnings release conference call. With me on the call this afternoon is 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 third 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 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 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 while we will also refer to as adjusted items. These items should be considered in addition to and not in a 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 wanted a more detailed description of our risk factors that 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 these copies of those reports please visit our Investor Relations section of our corporate website.
Transitioning now to the next portion of our call, I’d like to turn the call over to Pat.
Thanks, Kevin and good afternoon, everyone. Intermec had second quarter 2010 revenues of $161 million, which resulted in a loss of $0.04 per share. On an adjusted basis the loss was $0.03. These results met our expectations in spite of continued slowness in the US government business and the currency impact from Europe.
North America revenue was down 4% but up 15% outside of US government compared to Q2 of last year. I will comment later on the US government business. International sales increased 10% compared to Q2 of last year and up 13% on a constant currency basis. Printer and media sales were strong in the quarter. The systems and solutions business was flat in the quarter with strong new product sales volumes offset by the decline of the US government business and foreign currency in Europe.
The sales funnel has been growing over the last six months and we believe we are seeing a gradual recovery as overall market confidence is building and capital for larger deployments is beginning to return. The overall channel business continues to turn in strong results in sequential growth. This trend in small and medium businesses we believe indicates that market conditions are improving and Intermec is participating well in the recovery.
Total gross margins as well as product gross margins increased on a year-over-year basis. Service gross margins declined however due to several factors including foreign currency and the decline of the US government business. We believe service margins will recover in the coming quarters. Bob, will discuss the service business more in his comments. I’d now like to turn it over to Bob and I will return to discuss our results in more detail as well as the outlook for Q3.
Thank you Pat. Intermec’s second quarter revenue of $161 million represented a 2% increase from the prior year’s second quarter and was up 8% sequentially. On a constant currency basis, year-over-year revenues were up 3% and on a constant currency basis, this sequential increase was 10.5%. On a GAAP basis our second quarter net loss was $2.7 million or $0.04 loss per share compared to a loss of $0.11 in the second quarter of 2009. This includes the impact of a real estate impairment charge of $600,000 and restructuring charges of approximately $200,000 which collectively equated to $0.01 per share.
On a non-GAAP basis excluding those charges, our adjusted loss per share was $0.03 for the current quarter. Turning to second quarter revenues on a regional basis in comparison to the prior year quarter, North America declined 4% impacted by the continued softness in US government sales, excluding US government sales the remainder of North America grew almost 15%. Europe, Middle East and Africa or EMEA were increased 3%. On a constant currency basis revenues in EMEA were up 10%. Our other international areas also delivered strong results with our Asia Pacific region up 54% while Latin America increased 13%.