Intermec Reports Second Quarter 2010 Results

EVERETT, Wash.--(BUSINESS WIRE)--Intermec, Inc. (NYSE: IN) today announced financial results for its second quarter, which ended June 27, 2010.

“Intermec met its guidance objectives in Q2 as momentum in our international business, new products, and channel continues to build”

Second quarter 2010 revenues were $161.2 million and a net loss of ($2.7) million, or ($0.04) per diluted share, compared to 2009 second quarter revenues of $157.7 million and a net loss of ($6.5) million, or ($0.11) per diluted share.

“Intermec met its guidance objectives in Q2 as momentum in our international business, new products, and channel continues to build,” said Patrick J. Byrne, Intermec President and CEO. “Going forward, we are focused on introducing new products and taking successful enterprise pilots into larger scale mobility deployments.”

The following table presents our GAAP earnings before taxes, net loss, and diluted loss per share as reported for the second quarters of 2010 and 2009, and as adjusted by excluding the impact of an impairment of a facility associated with properties we retained from our former IAS business and restructuring charges.

	Quarter Ended June 27, 2010									Quarter Ended June 28, 2009
($ in millions, except per share amounts)	Loss from operations before taxes			Net loss			Diluted loss per share			Loss from operations before taxes			Net loss			Diluted loss per share

Loss as reported	$	(5.6	)	$	(2.7	)	$	(0.04	)	$	(10.3	)	$	(6.5	)	$	(0.11	)
Impairment of facility	$	0.6		$	0.4		$	0.01		$	-		$	-		$	-
Restructuring charges	$	0.2		$	0.1		$	-		$	7.3		$	4.6		$	0.08

Loss as adjusted	$	(4.8	)	$	(2.2	)	$	(0.03	)	$	(3.0	)	$	(1.9	)	$	(0.03	)

Excluding these charges, the non-GAAP net loss for the second quarter of 2010 was ($2.2) million, or ($0.03) per diluted share, as described in the Reconciliation of GAAP to Non-GAAP net earnings financial measures section of this release.

Second Quarter 2010 Operating Performance

Total revenue of $161.2 million increased 2% from the prior-year quarter, and was up 3% when adjusting for currency translation.
Geographically, compared to the prior-year quarter, revenues in North America declined 4%; excluding our U.S. Government sales the region increased approximately 15%. In Europe, Middle East and Africa (EMEA) revenues increased 3%, up 10% when adjusting for currency translation. The rest of world improved by 28%, led by Asia Pacific up 54% and Latin America’s increase of 13%.
From a product line perspective, compared to the prior-year quarter, Systems and Solutions revenue was flat, Printer and Media revenue increased 14% and Service revenue was down 6%.
Gross profit margins of 36.9% increased 0.7 percentage points compared to the prior-year quarter. Product gross margins of 36.3% increased 1.9 percentage points while service gross margins of 39.0% decreased 3.7 percentage points over the second quarter 2009.
Operating expenses, excluding facility impairment and restructuring charges of $0.6 million and $0.2 million, respectively, were $64.2 million. This includes an additional $3.0 million of R&D expense for planned new product introductions later this year. Due primarily to the R&D investment, this adjusted operating expense was approximately $4.0 million higher compared to the second quarter 2009 expense of $60.1 million, which excludes restructuring charges of $7.3 million. Total operating expenses for these same quarterly periods were $65.0 million and $67.4 million, respectively.
The Company’s effective tax rate for the second quarter of 2010 was 51.3%, this compares to 36.6% in the second quarter 2009 and compares to a U.S. statutory rate of 35.0%. The effective tax rate reflects our estimated annual effective tax rate of approximately 50.8% for the fiscal year 2010, which excludes the impact of discrete items. Our projected 2010 effective tax rate is higher than 2009 due primarily to our projected mix of taxable income between jurisdictions and the U.S. research and development tax credit benefits that existed in 2009 which Congress has not renewed for 2010.
The Company generated positive cash flow from operations during the quarter, year-to-date cash flow from operations were slightly negative. The Company’s cash, cash equivalents, and short-term investments ended the quarter at approximately $223 million. The Company has no debt.

Outlook – Third Quarter 2010

Intermec announced its financial guidance for the third quarter of 2010.

Q3’10 Revenues are expected to be within a range of $160 to $170 million, compared to Q3’09 Revenues of $159 million.
Q3’10 GAAP EPS is expected to be within a range of $0.00 to $0.03 per diluted share, compared to Q3’09 GAAP EPS of $0.00.
Excluding restructuring charges of approximately $1.5 million, Q3’10 Non-GAAP EPS is expected to be $0.01 to $0.04, compared to Q3’09 Non-GAAP EPS of $0.03.

Conference Call Information

Intermec will hold its conference call on July 29, 2010 at 5:00 p.m. ET (2:00 p.m. PT). The dial-in number for participants is 1-(888)-790-1746 (US and International); Passcode: (“Intermec”). The call will be broadcast on the Internet via a link from the investor’s Web page at www.intermec.com/InvestorRelations

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures for earnings (loss) from continuing operations before taxes, net earnings (loss), and earnings (loss) per diluted share. It also includes an outlook for the third quarter 2010 non-GAAP earnings from continuing operations per diluted share. Reconciliations of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures are detailed in the Reconciliation of GAAP to Non-GAAP Net Earnings attached to this press release.

Our non-GAAP measures should be read in conjunction with the corresponding GAAP measures. The non-GAAP measures should be considered in addition to and not as an alternative or substitute for the measures prepared in accordance with generally accepted accounting principles.

We believe that excluding our facility impairment and restructuring charges (principally related to severance costs in connection with distinct organizational initiatives to reduce costs and improve operational efficiency) provides supplemental information useful to investors’ and management’s understanding of the company’s core operating results, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods.

About Intermec, Inc.

Intermec Inc. (NYSE:IN) develops and integrates products, services and technologies that identify, track and manage supply chain assets and information. Core technologies include rugged mobile computing and data collection systems, bar code printers, label media, and RFID. The company’s products and services are used by customers in many industries worldwide to improve the productivity, quality and responsiveness of business operations. For more information about Intermec, visit www.intermec.com or call 800-347-2636.

(Forward-looking Statements)

Statements made in this release and related statements that express Intermec’s or our management’s intentions, indications, beliefs, expectations, guidance, estimates, forecasts or predictions of the future constitute forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, and relate to matters that are not historical facts. They include, without limitation, statements regarding: our cost reduction plans; our view of general economic and market conditions; and our revenue, expense, earnings or financial outlook for the third quarter of 2010 or any current or future period. They also include statements about our ability to develop, produce, market or sell our products, either directly or through third parties, reduce or control expenses, improve efficiency, realign resources, continue operational improvement and year-over-year or sequential growth, and about the applicability of accounting policies used in our financial reporting. These statements represent beliefs and expectations only as of the date they were made. We may elect to update forward-looking statements but we expressly disclaim any obligation to do so, even if our beliefs and expectations change. Actual results may differ from those expressed or implied in our forward-looking statements. Such forward-looking statements involve and are subject to certain risks and uncertainties that may cause our actual results to differ materially from those discussed in a forward looking statement. These include, but are not limited to, risks and uncertainties described more fully in our reports filed or to be filed with the Securities and Exchange Commission including, but not limited to, our annual reports on Form 10-K and quarterly reports on Form 10-Q, which are available on our website at www.intermec.com.

INTERMEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

			Three Month Ended						Six Months Ended
			June			June			June			June
				27, 2010			28, 2009			27, 2010			28, 2009

Revenues:
	Product		$	128,729		$	123,339		$	244,472		$	252,002
	Service			32,432			34,376			65,919			68,286
		Total revenues		161,161			157,715			310,391			320,288

Costs and expenses:
	Cost of product revenues			81,952			80,927			154,843			164,293
	Cost of service revenues			19,799			19,714			39,119			39,851
	Research and development			18,315			15,375			33,288			31,288
	Selling, general and administrative			45,916			44,711			90,832			95,719
	Restructuring charges			225			7,345			962			15,927
	Impairment of facility			587			-			3,008			-
		Total costs and expenses		166,794			168,072			322,052			347,078

Operating loss				(5,633	)		(10,357	)		(11,661	)		(26,790	)
Interest income				394			261			544			602
Interest expense				(323	)		(227	)		(668	)		(452	)
Loss before income taxes				(5,562	)		(10,323	)		(11,785	)		(26,640	)
	Income tax benefit			(2,854	)		(3,781	)		(5,431	)		(9,698	)
Net loss				(2,708	)		(6,542	)		(6,354	)		(16,942	)

Basic loss per share			$	(0.04	)	$	(0.11	)	$	(0.10	)	$	(0.28	)
Diluted loss per share			$	(0.04	)	$	(0.11	)	$	(0.10	)	$	(0.28	)

Shares used in computing basic loss per share				61,949			61,606			61,896			61,532
Shares used in computing diluted loss per share				61,949			61,606			61,896			61,532

INTERMEC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

			June			December
			27, 2010			31, 2009
ASSETS

Current assets:
	Cash and cash equivalents		$	186,622		$	201,884
	Short-term investments			36,608			36,301
	Accounts receivable, net			94,307			106,890
	Inventories, net			92,997			101,537
	Current deferred tax assets, net			53,080			51,140
	Assets held for sale			3,196			-
	Other current assets			15,662			16,826
		Total current assets		482,472			514,578

Property, plant and equipment, net				36,880			37,383
Other acquired intangibles, net				2,057			2,587
Deferred tax assets, net				188,160			182,457
Other assets				28,004			34,404
Total assets			$	737,573		$	771,409

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	81,222		$	102,607
	Payroll and related expenses			21,968			20,683
	Deferred revenue			38,559			39,038
		Total current liabilities		141,749			162,328

Long-term deferred revenue				21,641			22,010
Pension and other postretirement benefits liabilities				79,116			81,897
Other long-term liabilities				14,319			14,891

Commitments

Shareholders' equity:
	Common stock (250,000 shares authorized, 62,362 and 62,203 shares issued
	and 61,795 and 61,653 outstanding)			624			622
	Additional paid-in capital			708,696			703,590
	Accumulated deficit			(180,599	)		(174,245	)
	Accumulated other comprehensive loss			(47,973	)		(39,684	)
		Total shareholders' equity		480,748			490,283
Total liabilities and shareholders' equity			$	737,573		$	771,409

INTERMEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

				Six Month Ended
				June 27,			June 28,
				2010			2009

Cash and cash equivalents at beginning of the period				$	201,884		$	221,335

Cash flows from operating activities:
	Net loss				(6,354	)		(16,942	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization			7,422			7,846
		Impairment of facility			3,008			-
		Deferred taxes			(6,790	)		(10,524	)
		Stock-based compensation			4,241			4,172
		Changes in operating assets and liabilities:
			Accounts receivable		8,809			33,604
			Inventories		7,025			25,021
			Accounts payable and accrued expenses		(19,554	)		(34,884	)
			Other long-term liabilities		54			(3,153	)
		Other operating activities			1,425			3,531
			Net cash (used in) provided by operating activities		(714	)		8,671

Cash flows from investing activities:
	Additions to property, plant and equipment				(6,759	)		(4,720	)
	Sale of property, plant and equipment				-			1,867
	Other investing activities				(1,487	)		(2,321	)
			Net cash used in investing activities		(8,246	)		(5,174	)

Cash flows from financing activities:
	Stock options exercised and other				863			870
			Net cash provided by financing activities		863			870

Effect of exchange rate changes on cash and cash equivalents					(7,165	)		1,373
Resulting (decrease) increase in cash and cash equivalents					(15,262	)		5,740

Cash and cash equivalents at end of the period				$	186,622		$	227,075

INTERMEC, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET EARNINGS
(In thousands, except per share amounts)
(Unaudited)

			Three Months Ended																			Three Months Ended
			June 27,				Non-GAAP			Adjusted June 27,			June 28,			Non-GAAP			Adjusted June 28,			March 28,			Non-GAAP			Adjusted March 28,
				2010			Adjustments				2010			2009		Adjustments				2009			2010		Adjustments				2010

Revenues:
	Product		$	128,729						$	128,729		$	123,339					$	123,339		$	115,743					$	115,743
	Service			32,432							32,432			34,376						34,376			33,487						33,487
		Total revenues		161,161							161,161			157,715						157,715			149,230						149,230

Costs and expenses:
	Cost of product revenues			81,952							81,952			80,927						80,927			72,891						72,891
	Cost of service revenues			19,799							19,799			19,714						19,714			19,320						19,320
	Research and development			18,315							18,315			15,375						15,375			14,973						14,973
	Selling, general and administrative			45,916							45,916			44,711						44,711			44,916						44,916
	Restructuring charges			225			$	(225	)		-			7,345		$	(7,345	)		-			737		$	(737	)		-
	Impairment of facility			587				(587	)		-			-						-			2,421			(2,421	)		-
		Total costs and expenses		166,794				(812	)		165,982			168,072			(7,345	)		160,727			155,258			(3,158	)		152,100

Operating loss				(5,633	)			812			(4,821	)		(10,357	)		(7,345	)		(3,012	)		(6,028	)		3,158			(2,870	)
Interest income				394							394			261						261			150						150
Interest expense				(323	)						(323	)		(227	)					(227	)		(345	)					(345	)
Loss before income taxes				(5,562	)			812			(4,750	)		(10,323	)		(7,345	)		(2,978	)		(6,223	)		3,158			(3,065	)
	Income tax benefit			(2,854	)			263			(2,591	)		(3,781	)		2,701			(1,080	)		(2,578	)		1,271			(1,307	)
Net loss			$	(2,708	)		$	549		$	(2,159	)	$	(6,542	)	$	4,644		$	(1,898	)	$	(3,645	)	$	1,887		$	(1,758	)

Basic loss per share			$	(0.04	)		$	0.01		$	(0.03	)	$	(0.11	)	$	0.08		$	(0.03	)	$	(0.06	)	$	0.03		$	(0.03	)
Diluted loss per share			$	(0.04	)		$	0.01		$	(0.03	)	$	(0.11	)	$	0.08		$	(0.03	)	$	(0.06	)	$	0.03		$	(0.03	)

Shares used in computing basic loss per share				61,949				61,949			61,949			61,606			61,606			61,606			61,841			61,841			61,841
Shares used in computing diluted loss per share				61,949				61,949			61,949			61,606			61,606			61,606			61,841			61,841			61,841


			Six Months Ended
			June 27,				Non-GAAP			Adjusted June 27,			June 28,			Non-GAAP			Adjusted June 28,
				2010			Adjustments				2010			2009		Adjustments				2009

Revenues:
	Product		$	244,472						$	244,472		$	252,002					$	252,002
	Service			65,919							65,919			68,286						68,286
		Total revenues		310,391							310,391			320,288						320,288

Costs and expenses:
	Cost of product revenues			154,843							154,843			164,293						164,293
	Cost of service revenues			39,119							39,119			39,851						39,851
	Research and development			33,288							33,288			31,288						31,288
	Selling, general and administrative			90,832							90,832			95,719						95,719
	Restructuring charges			962			$	(962	)		-			15,927		$	(15,927	)		-
	Impairment of facility			3,008				(3,008	)		-			-			-			-
		Total costs and expenses		322,052				(3,970	)		318,082			347,078			(15,927	)		331,151

Operating loss				(11,661	)			3,970			(7,691	)		(26,790	)		15,927			(10,863	)
Interest income				544							544			602						602
Interest expense				(668	)						(668	)		(452	)					(452	)
Loss before income taxes				(11,785	)			3,970			(7,815	)		(26,640	)		15,927			(10,713	)
	Income tax benefit			(5,431	)			1,414			(4,017	)		(9,698	)		5,770			(3,928	)
Net loss			$	(6,354	)		$	2,556		$	(3,798	)	$	(16,942	)	$	10,157		$	(6,785	)

Basic loss per share			$	(0.10	)		$	0.04		$	(0.06	)	$	(0.28	)	$	0.17		$	(0.11	)
Diluted loss per share			$	(0.10	)		$	0.04		$	(0.06	)	$	(0.28	)	$	0.17		$	(0.11	)

Shares used in computing basic loss per share				61,896				61,896			61,896			61,532			61,532			61,532
Shares used in computing diluted loss per share				61,896				61,896			61,896			61,532			61,532			61,532


INTERMEC, INC.
RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK FOR THE QUARTER ENDED SEPTEMBER 26, 2010
(Unaudited)

						Diluted earnings per share

		As reported					$ 0.00 to 0.03
		Restructuring charge						0.01

		As adjusted					$ 0.01 to 0.04

INTERMEC, INC.
SUPPLEMENTAL SALES INFORMATION
(Amounts in millions)
(Unaudited)


		Three Months Ended										Three Months Ended
		June 27, 2010		Percent of Revenues		June 28, 2009		Percent of Revenues		Percent Change in Revenues		March 28, 2010		Percent of Revenues		Percent Change in Revenues
Revenues by category:
Systems and solutions		$	86.3	53.5	%	$	86.2	54.7	%	0.1	%	$	79.1	53.0	%	9.1	%
Printer and media			42.4	26.3	%		37.1	23.5	%	14.3	%		36.6	24.5	%	15.8	%
	Total product		128.7	79.8	%		123.3	78.2	%	4.4	%		115.7	77.5	%	11.2	%
Service			32.5	20.2	%		34.4	21.8	%	(5.5	%)		33.5	22.5	%	(3.0	%)
	Total revenues	$	161.2	100.0	%	$	157.7	100.0	%	2.2	%	$	149.2	100.0	%	8.0	%


		Six Months Ended
		June 27, 2010		Percent of Revenues		June 28, 2009		Percent of Revenues		Percent Change in Revenues
Revenues by category:
Systems and solutions		$	165.5	53.3	%	$	179.4	56.0	%	(7.7	%)
Printer and media			79.0	25.5	%		72.6	22.7	%	8.8	%
	Total product		244.5	78.8	%		252.0	78.7	%	(3.0	%)
Service			65.9	21.2	%		68.3	21.3	%	(3.5	%)
	Total revenues	$	310.4	100.0	%	$	320.3	100.0	%	(3.1	%)


		Three Months Ended										Three Months Ended
		June 27, 2010		Percent of Revenues		June 28, 2009		Percent of Revenues		Percent Change in Revenues		March 28, 2010		Percent of Revenues		Percent Change in Revenues
Revenues by geographic region:
North America		$	84.7	52.5	%	$	88.4	56.1	%	(4.2	%)	$	74.5	49.9	%	13.7	%
Europe, Middle East and Africa (EMEA)			49.7	30.8	%		48.5	30.7	%	2.5	%		50.9	34.1	%	(2.4	%)
All others			26.8	16.7	%		20.8	13.2	%	28.8	%		23.8	16.0	%	12.6	%
	Total revenues	$	161.2	100.0	%	$	157.7	100.0	%	2.2	%	$	149.2	100.0	%	8.0	%


		Six Months Ended
		March 28, 2010		Percent of Revenues		March 29, 2009		Percent of Revenues		Percent Change in Revenues
Revenues by geographic region:
North America		$	159.3	51.3	%	$	192.0	59.9	%	(17.0	%)
Europe, Middle East and Africa (EMEA)			100.6	32.4	%		87.5	27.3	%	15.0	%
All others			50.5	16.3	%		40.8	12.8	%	23.8	%
	Total revenues	$	310.4	100.0	%	$	320.3	100.0	%	(3.1	%)