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.

“Going forward, we are focused on introducing new products and taking successful enterprise pilots into larger scale mobility deployments.”

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	%)