UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





ý
            
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended September 28, 2008ORo
            
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from to





Commission
file number: 001-13279









Intermec,
Inc.


(Exact
name of registrant as specified in its charter)





Delaware
            
            95-4647021(State
      or other jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      No.)6001
      36th Avenue West, Everett, WA
            
            98203-1264(Address
      of principal executive offices)
            
            (Zip
      Code)


(425)
265-2400


(Registrant’s
telephone number, including area code)





[None]


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes ý
            No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check
one):




Large
      accelerated filer ý
            
            
            
            Accelerated
      filer Non-accelerated
      filer 
            
            
            
            Smaller
      reporting company filer (Do
      not check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes o
            No ý





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.


Class
            
            Outstanding
      at October 26, 2008Common
      Stock, $0.01 par value per share
            
            61,763,445
      shares










INTERMEC,
INC.


TABLE
OF CONTENTS


REPORT
ON FORM 10-Q


FOR
THE QUARTER ENDED SEPTEMBER 28, 2008





Page
              NumberPART I. FINANCIAL INFORMATIONITEM
    1.
            Financial Statements
      (unaudited)Condensed Consolidated Statements
      of Operations (unaudited)
              Three and Nine Month
      Periods Ended September 28, 2008 and September 30,
      2007.
            
            
            3Condensed Consolidated Balance
      Sheets (unaudited)
              September 28, 2008, and December
      31, 2007
            
            
            4Condensed Consolidated
      Statements of Cash Flows (unaudited)
              Nine Months Ended September 28,
      2008, and September 30, 2007
            
            
            5Notes to Condensed
      Consolidated Financial Statements (unaudited)
            
            
            6-14ITEM
    2.
            Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
            
            
            15-22ITEM
    3.
            Quantitative and Qualitative
      Disclosures about Market Risk
            
            
            22ITEM
    4.
            Controls and
      Procedures
            
            
            23PART II. OTHER
      INFORMATIONITEM
      1.
            Legal
      Proceedings
            
            
            24ITEM
      1A.
            Risk Factors
            
            
            24-25ITEM
      2.
            Unregistered Sales of Equity
      Securities and Use of Proceeds
            
            
            26ITEM
    6.
            Exhibits
            
            
            26Signature





























PART I. FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS




INTERMEC,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(in
thousands of dollars, except per share amounts)


(unaudited)





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007
            
            
            September
      28, 2008
            
            
            September
      30, 2007Revenues:Product
            
            $
            195,727
            
            
            $
            169,219
            
            
            $
            555,756
            
            
            $
            480,669Service
            
            
            38,656
            
            
            
            36,787
            
            
            
            113,667
            
            
            
            115,178Total revenues
            
            
            234,383
            
            
            
            206,006
            
            
            
            669,423
            
            
            
            595,847Costs
      and expenses:Cost
      of product revenues
            
            
            119,948
            
            
            
            105,536
            
            
            
            335,842
            
            
            
            306,454Cost
      of service revenues
            
            
            22,783
            
            
            
            22,404
            
            
            
            65,642
            
            
            
            65,611Research
      and development
            
            
            15,000
            
            
            
            16,006
            
            
            
            48,665
            
            
            
            48,977Selling,
      general and administrative
            
            
            57,271
            
            
            
            57,527
            
            
            
            175,415
            
            
            
            162,890Flood
      related charges
            
            
            -
            
            
            
            -
            
            
            
            1,122
            
            
            
            -Restructuring
            
            
            3,337
            
            
            
            -
            
            
            
            3,337
            
            
            
            -Total
      costs and expenses
            
            
            218,339
            
            
            
            201,473
            
            
            
            630,023
            
            
            
            583,932Operating
      profit from continuing operations
            
            
            16,044
            
            
            
            4,533
            
            
            
            39,400
            
            
            
            11,915Interest
      income
            
            
            874
            
            
            
            2,910
            
            
            
            3,720
            
            
            
            7,930Interest
      expense
            
            
            (156
            )
            
            
            (2,204
            )
            
            
            (2,291
            )
            
            
            (6,847
            )Earnings
      from continuing operations before income taxes
            
            
            16,762
            
            
            
            5,239
            
            
            
            40,829
            
            
            
            12,998Provision
      for income taxes
            
            
            5,784
            
            
            
            847
            
            
            
            14,423
            
            
            
            5,108Earnings
      before discontinued operations
            
            
            10,978
            
            
            
            4,392
            
            
            
            26,406
            
            
            
            7,890Loss
      from discontinued operations, net of tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,283
            )Net
      earnings
            
            $
            10,978
            
            
            $
            4,392
            
            
            $
            26,406
            
            
            $
            6,607Basic
      earnings (loss) per shareContinuing
      operations
            
            $
            0.18
            
            
            $
            0.07
            
            
            $
            0.43
            
            
            $
            0.13Discontinued
      operations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (0.02
            )Net
      earnings per share
            
            $
            0.18
            
            
            $
            0.07
            
            
            $
            0.43
            
            
            $
            0.11Diluted
      earnings (loss) per shareContinuing
      operations
            
            $
            0.18
            
            
            $
            0.07
            
            
            $
            0.43
            
            
            $
            0.13Discontinued
      operations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (0.02
            )Net
      earnings per share
            
            $
            0.18
            
            
            $
            0.07
            
            
            $
            0.43
            
            
            $
            0.11Shares
      used in computing earnings (loss) per shareBasic
            
            
            61,238
            
            
            
            60,484
            
            
            
            61,121
            
            
            
            60,242Diluted
            
            
            61,644
            
            
            
            61,325
            
            
            
            61,599
            
            
            
            61,099











See
accompanying notes to condensed consolidated financial statements.





3


INTERMEC,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(amounts
in thousands of dollars)


(unaudited)





September
      28, 2008
            
            
            December
      31, 2007ASSETSCurrent assets:Cash
      and cash equivalents
            
            $
            201,854
            
            
            $
            237,247Short-term
      investments
            
            
            304
            
            
            
            28,230Accounts
      receivable, net of allowance for doubtful accounts and sales returns of
      $13,400 and $12,854
            
            
            150,810
            
            
            
            191,487Inventories
            
            
            122,491
            
            
            
            113,145Net
      current deferred tax assets
            
            
            61,480
            
            
            
            61,532Other
      current assets
            
            
            16,755
            
            
            
            14,690Total
      current assets
            
            
            553,694
            
            
            
            646,331Property,
      plant and equipment, net
            
            
            42,572
            
            
            
            47,732Intangibles,
      net
            
            
            3,799
            
            
            
            4,138Net
      deferred tax assets
            
            
            141,695
            
            
            
            150,154Other
      assets
            
            
            51,454
            
            
            
            52,280Total
      assets
            
            $
            793,214
            
            
            $
            900,635LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
            
            $
            103,244
            
            
            $
            141,667Payroll
      and related expenses
            
            
            27,345
            
            
            
            32,170Deferred
      revenue
            
            
            44,434
            
            
            
            49,020Current
      debt
            
            
            -
            
            
            
            100,000Total
      current liabilities
            
            
            175,023
            
            
            
            322,857Long-term
      deferred revenue
            
            
            26,340
            
            
            
            20,109Other
      long-term liabilities
            
            
            75,677
            
            
            
            73,558Shareholders'
      equity:Common
      stock (250,000 shares authorized, 61,725 and 61,192 shares issued and
      outstanding)
            
            
            617
            
            
            
            612Additional
      paid-in-capital
            
            
            694,234
            
            
            
            679,241Accumulated
      deficit
            
            
            (170,891
            )
            
            
            (196,795
            )Accumulated
      other comprehensive income (loss)
            
            
            (7,786
            )
            
            
            1,053Total
      shareholders' equity
            
            
            516,174
            
            
            
            484,111Total
      liabilities and shareholders' equity
            
            $
            793,214
            
            
            $
            900,635



















See
accompanying notes to condensed consolidated financial statements.




4


INTERMEC,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(thousands
of dollars)


(unaudited)





Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007(as
      restated)Cash and cash equivalents at beginning of
year
            
            $
            237,247
            
            
            $
            155,027Cash
      flows from operating activities:Net
      earnings
            
            
            26,406
            
            
            
            7,890Adjustments
      to reconcile net earnings (loss) to net cash provided by operating
      activitiesof
      continuing operations:Depreciation
      and amortization
            
            
            11,770
            
            
            
            9,601Provision
      for bad debt
            
            
            (2,106
            )
            
            
            1,551Change
      in prepaid pension costs, net
            
            
            844
            
            
            
            705Deferred
      taxes
            
            
            12,099
            
            
            
            3,598Stock-based
      compensation and other
            
            
            7,729
            
            
            
            6,754Gain
      on sale of property, plant and equipment
            
            
            (2,873)
            
            
            
            (51
            )Excess
      tax benefits from stock-based payment arrangements
            
            
            (937
            )
            
            
            (2,232
            )Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            42,783
            
            
            
            (5,889
            )Inventories
            
            
            (11,974
            )
            
            
            7,834Other
      current assets
            
            
            (2,065
            )
            
            
            3,513Accounts
      payable and accrued expenses
            
            
            (38,320
            )
            
            
            5,300Payroll
      and related expenses
            
            
            (4,825
            )
            
            
            (8,164
            )Deferred
      revenue
            
            
            1,645
            
            
            
            7,685Other
      long-term liabilities
            
            
            (2,167
            )
            
            
            (6,846
            )Other
      operating activities
            
            
            272
            
            
            
            (9,456
            )Net
      cash provided by operating activities of continuing
    operations
            
            
            38,282
            
            
            
            21,794Cash
      flows from investing activities of continuing operations:Capital
      expenditures
            
            
            (9,880
            )
            
            
            (10,136
            )Proceeds
      from the sale of property, plant and equipment
            
            
            5,497
            
            
            
            -Purchases
      of investments
            
            
            (760
            )
            
            
            (1,465
            )Sale
      of investments
            
            
            28,515
            
            
            
            1,407Patent
      legal fees
            
            
            (2,827
            )
            
            
            (1,562
            )Other
      investing activities
            
            
            -
            
            
            
            (140
            )Net
      cash provided by (used in) investing activities of continuing
      operations
            
            
            20,545
            
            
            
            (11,896
            )Cash
      flows from financing activities of continuing operations:Repayment
      of debt
            
            
            (100,000
            )
            
            
            -Excess
      tax benefits from stock-based payment arrangements
            
            
            937
            
            
            
            2,232Proceeds
      from stock options exercised
            
            
            4,167
            
            
            
            5,654Other
      financing activities
            
            
            2,165
            
            
            
            1,756Net
      cash (used in) provided by financing activities of continuing
      operations
            
            
            (92,731
            )
            
            
            9,642Effect
      of exchange rate changes on cash and cash
equivalents
            
            
            (1,488)
            
            
            
            9,137Net
      cash provided by investing activities of discontinued
      operations
            
            
            -
            
            
            
            1,601Resulting
      (decrease) increase in cash and cash equivalents
            
            
            (35,392
            )
            
            
            30,278Cash
      and cash equivalents at end of period
            
            $
            201,854
            
            
            $
            185,305





See
accompanying notes to condensed consolidated financial
statements.


5


INTERMEC,
INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(unaudited)




1.
Basis of Presentation





Our
interim financial periods are based on a thirteen-week internal accounting
calendar. In our opinion, the accompanying condensed consolidated balance
sheets, interim statements of operations and statements of cash flows include
all adjustments, consisting only of normal recurring items, necessary for their
fair presentation in conformity with accounting principles generally accepted in
the United States of America (“U.S. GAAP”). The financial statements include the
accounts of Intermec and our subsidiaries. Intercompany transactions and
balances have been eliminated. Equity investments in which we exercise
significant influence but do not exercise control and are not the primary
beneficiary are accounted for using the equity method. Investments in which we
are not able to exercise significant influence over the investee are accounted
for under the cost method. Preparing our financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses, and financial data included in the accompanying
notes to the financial statements. Actual results and outcomes may differ from
our estimates and assumptions.





Interim
results are not necessarily indicative of results for a full year. The
information included in this Form 10-Q should be read in conjunction with
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and notes thereto
included in our Annual Report on Form 10-K, as amended, for the year-ended
December 31, 2007 (the “Annual Report on Form 10-K for the year ended December
31, 2007”).




Reclassification
and Correction of Error





Prior to
the fourth quarter of 2007, we provided the effect of exchange rates on cash and
cash equivalents as supplemental information within the Consolidated Statement
of Cash Flows. We have determined that the effect of exchange rates on cash and
cash equivalents should have been recorded as a reconciling item between
beginning and ending cash and cash equivalents.  Accordingly, we
reclassified $9.1 million from “net cash provided by operating activities”
within the Condensed Consolidated Statement of Cash Flows to “effect of exchange
rate changes on cash and cash equivalents” for the nine months ended September
30, 2007 to correct the error.  Additionally, in the Condensed Consolidated
Statement of Cash Flows for the nine months ended September 30, 2007 we
reclassified $1.4 million of collection on notes receivable from investing
activities of operations to investing activities of discontinued operations,
and reclassified and separately presented cash provided by deferred revenue
from accounts payable and accrued expenses and other long-term liabilities for
comparability with the current year.





In the
Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 2007 we reclassified and separately presented research and
development expenses from selling, general and administrative expenses for
comparability with the current year.




Recent
Accounting Pronouncements





In April
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position (FSP) No. FAS 142-3, Determination of the Useful Life of
Intangible Assets. The final FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other
Intangible Assets”. The FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. We are in the process of evaluating the impact FSP 142-3 will have
on our consolidated financial statements.





In March
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133, which requires additional disclosures about the objectives of
the derivative instruments and hedging activities, the method of accounting for
such instruments under SFAS No. 133 and its related interpretations, and a
tabular disclosure of the effects of such instruments and related hedged items
on our financial position, financial performance, and cash flows. SFAS No. 161
is effective for us beginning January 1, 2009. We are currently assessing the
potential impact that adoption of SFAS No. 161 may have on our financial
statements.





In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, Including an Amendment of FASB Statement No.
115. SFAS No. 159 permits entities to measure eligible financial assets,
financial liabilities and firm commitments at fair value, on an
instrument-by-instrument basis, that are otherwise not permitted to be accounted
for at fair value under other generally accepted accounting principles. The fair
value measurement election is irrevocable and subsequent changes in fair value
must be recorded in earnings. We adopted SFAS No. 159 effective January 1, 2008
and elected to not adopt the fair value option for any financial assets or
liabilities. The adoption did not have a material impact on our consolidated
financial statements.





6


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)






1.
Basis of Presentation (continued)





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosures about fair
value measurements. This statement applies to all financial instruments that are
being measured and reported on a fair value basis. As defined in this statement,
fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. We adopted SFAS No. 157 effective January 1, 2008. The
adoption of SFAS No. 157 did not have a material impact on our condensed
consolidated financial statements. While SFAS 157 was effective in the
first fiscal quarter of 2008, the FASB provided a one year deferral for the
implementation with respect to other nonfinancial assets and liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). We have deferred
implementation of SFAS No. 157 for our nonfinancial assets and
liabilities.





SFAS No.
157 requires financial assets and liabilities to be classified and disclosed in
one of the following three categories:





§              Level
1: Inputs based on quoted market prices for identical assets or liabilities in
active markets.


§              Level
2: Observable market based inputs or unobservable inputs that are corroborated
by market data.


§              Level
3: Unobservable inputs that are not corroborated by market data.





Our level
1 financial instrument values are based on quoted market prices in active
markets for identical assets, which we use to value our certificates of deposit,
money market funds and equity securities. Our level 2 financial instrument
values are based on comparable sales, such as quoted market rates for similar
contracts. We do not have any financial instruments that require valuation using
level 3 inputs.




Our
financial assets and liabilities subject to these fair value measurement
provisions comprised the following (thousands of dollars):







Balance
      as ofLevel
      1
            
            
            Level
      2
            
            
            Level
      3
            
            
            September
      28, 2008Money
      market funds
            
            $
            79,997
            
            
            -
            
            
            $
            -
            
            
            $
            79,997Certificates
      of deposit
            
            
            4,365
            
            
            -
            
            
            
            -
            
            
            
            4,365Stock
            
            
            304
            
            
            -
            
            
            
            -
            
            
            
            304Derivative
      instruments - assets
            
            
            -
            
            
            $
            1,378
            
            
            
            -
            
            
            
            1,378Total
      assets at fair value
            
            $
            84,666
            
            
            $
            1,378
            
            
            $
            -
            
            
            $
            86,044Balance
      as ofLevel
      1
            
            
            Level
      2
            
            
            Level
      3
            
            
            September
      28, 2008Derivative
      instruments - liabilities
            
            $
            -
            
            
            $
            (1,286
            )
            
            $
            -
            
            
            $
            (1,286
            )Total
      liabilities at fair value
            
            $
            -
            
            
            $
            (1,286
            )
            
            $
            -
            
            
            $
            (1,286
            )







7


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)






1.
Basis of Presentation (continued)




In
September 2006, the FASB issued SFAS No. 158, Employer’s Accounting for Defined
Pension and Other Postretirement Plans—an amendment of FASB Statements
No. 87, 88, 106 and 132(R). SFAS No. 158 has new provisions
regarding the measurement date as well as certain disclosure requirements.
Effective December 31, 2008, SFAS No. 158 will require us to measure
plan assets and benefit obligations at fiscal year end. We currently perform
this measurement at September 30 of each year. In addition, beginning in
fourth quarter of 2007, SFAS No. 158 required that we eliminate the use of a
three-month lag period when recognizing the impact of curtailments or
settlements and instead, recognize these amounts in the period in which they
occur. The provisions of SFAS No. 158 do not permit retrospective
application. We recorded $0.3 million as an adjustment to opening retained
earnings in the quarter as a result of adopting this provision for our U.S.
pension plan due to the curtailment event.  We expect to incur
approximately$0.2 million as an adjustment to retained earnings upon adoption of
the remainder of this statement for our other plans.





In
September 2006, the Emerging Issues Task Force (“EITF”) issued EITF 06-4, Accounting for Deferred Compensation
and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance
Arrangements (“EITF 06-04”), which we adopted on January 1, 2008. The
Task Force concluded that an employer should recognize a liability for future
benefits in accordance with SFAS No. 106, “Employers' Accounting for
Postretirement Benefits Other Than Pensions” or Accounting Principles Board
Opinion 12 (“Opinion 12”), “Classification and Disclosure of Allowances
Disclosure of Depreciable Assets and Depreciation Deferred Compensation
Contracts Capital Changes Convertible Debt and Debt Issued with Stock Warrants
Amortization of Debt Discount and Expense or Premium” based on the substantive
agreement with the employee. Upon adoption of EITF 06-4, as of January 1, 2008,
we increased accumulated deficit $0.9 million, recognized a $1.4 million
long-term liability, and recorded a tax effect of $0.5 million within long-term
deferred tax assets.





In
December 2007, the FASB issued SFAS No. 141R, Business Combinations, which
will be effective on a prospective basis for all business combinations with an
acquisition date on or after January 1, 2009 with the exception of the
accounting for deferred taxes, related valuation allowances and acquired
uncertain tax positions. This statement generally requires an acquirer to
recognize the assets acquired, the liabilities assumed, contingent purchase
consideration, and any noncontrolling interest in the acquiree, at fair value on
the date of acquisition. SFAS No. 141R also requires an acquirer to expense most
transaction and restructuring costs as incurred, and not include such items in
the cost of the acquired entity. We are currently evaluating the impact of the
adoption of SFAS No. 141R on our consolidated financial statements.








2.
Inventories





Inventories
comprise the following (thousands of dollars):





September
      28, 2008
            
            
            December
      31, 2007Raw
      materials
            
            $
            59,730
            
            
            $
            65,257Work
      in process
            
            
            335
            
            
            
            1,318Finished
      goods
            
            
            62,426
            
            
            
            46,570Inventories
            
            $
            122,491
            
            
            $
            113,145







8


INTERMEC, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)







3.
Debt





We have
an unsecured Revolving Credit Facility (the “Revolving Facility”) with a maximum
amount available under the Revolving Facility of $50.0 million. Net of
outstanding letters of credit and limitations on availability, we had borrowing
capacity at September 28, 2008, of $46.9 million under the Revolving Facility.
We made no borrowings under the Revolving Facility during 2008, and as of
September 28, 2008, no borrowings were outstanding under this facility. As of
September 28, 2008, we were in compliance with all financial covenants of the
Revolving Facility. The Revolving Facility matures in October 2012.





We also
have letter-of-credit reimbursement agreements totaling $ 3.7 million at
September 28, 2008, and December 31, 2007.





During
March 2008, we paid off our $100.0 million senior unsecured debt.







4.
Provision for Income Taxes





The tax
expense for the three and nine months ended September 28, 2008,
reflects an effective tax rate for continuing operations of 34.5% and
35.3%, respectively, compared to a U.S. statutory rate of 35%. In the third
quarter of 2008, we recorded tax benefits which decreased our Q3 effective tax
rate 1.7% for a foreign tax refund and adjustments pertaining to our 2007 tax
returns filed this quarter.  These rates reflect our recurring estimated
effective tax rate of approximately 37% for fiscal year 2008, which
excludes the impact of discrete items.




The tax
expense for the three and nine months ended September 30, 2007, reflects an
effective tax rate for continuing operations of 16.2% and 39.3%, respectively,
compared to a U.S. statutory rate of 35%. In the third quarter of 2007, the
tax provision was decreased to record benefits primarily resulting from certain
changes in foreign and state tax law and for deferred taxes related to tax
amortizable goodwill. These rates reflect our recurring estimated effective tax
rate of approximately 36% for fiscal year 2007, which excludes the impact of
discrete items.







5.
Discontinued Operations





We
completed our divestiture of the IAS businesses with the sale of the Cincinnati
Lamb business in the first quarter of 2005 and the sale of the Landis Grinding
Systems business in the fourth quarter of 2005. There was a net loss of $1.3
million from discontinued operations for the nine months ended September 30,
2007. Final operations ceased on April 3, 2005 for our Cincinnati Lamb business
and December 9, 2005 for our Landis Grinding Systems business.







6.
Shares Used in Computing Earnings per Share





Basic
earnings per share are calculated using the weighted average number of common
shares outstanding and issuable for the applicable period. Diluted earnings per
share is computed using basic weighted average shares plus the dilutive effect
of unvested restricted stock and outstanding stock options using the “treasury
stock” method.





Three
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007Weighted
      average shares – basic
            
            
            61,238,149
            
            
            
            60,483,794Dilutive
      effect of unvested restricted shares and stock options
            
            
            406,345
            
            
            
            840,780Weighted
      average shares – diluted
            
            
            61,644,494
            
            
            
            61,324,574Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007Weighted
      average shares – basic
            
            
            61,120,946
            
            
            
            60,241,602Dilutive
      effect of unvested restricted shares and stock options
            
            
            477,565
            
            
            
            857,730Weighted
      average shares – diluted
            
            
            61,598,511
            
            
            
            61,099,332





Our
employees and directors held total options to purchase 2,484,295 and 2,059,248
shares of our common stock for the three and nine months ended September
28, 2008, respectively, and 863,331 and 768,898 shares for the three and nine
months ended September 30, 2007, respectively, that were not included in
weighted average shares diluted because they were anti-dilutive to the diluted
earnings per share computation. These options could become dilutive in future
periods if the average market price of our common stock exceeds the exercise
price of the outstanding options and we report net earnings.


9


INTERMEC, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)








7. Equity





For the
three and nine months ended September 28, 2008, we granted to employees 70,000
and  884,250 options respectively  with an average
Black-Scholes value of $8.52 per option, which vest annually in even quantities
over  four years. For the three and nine months ended September 28,
2008 we granted to Directors 83,684 and 118,167 options
respectively  with a Black-Scholes value of $10.06 per option which
vest quarterly beginning on the date of grant and each quarter thereafter for
the year following the most recent annual meeting of stockholders. The
Black-Scholes assumptions used for this calculation were as follows, except for
the Directors where we use an expected life in years of 6.59.




Three
      months ended
            
            
            Nine
      months endedFair
      value assumptions
            
            September
      28, 2008Expected
      life in years
            
            
            4.72
            
            
            
            4.73Expected
      volatility
            
            
            43.56
            %
            
            
            41.02
            %Annual
      rate of dividends
            
            
            0
            %
            
            
            0
            %Discount
      rate - bond equivalent yield
            
            
            3.18
            %
            
            
            3.13
            %





Our
accumulated other comprehensive income (loss) comprised the following (thousands
of dollars):





September
      28, 2008
            
            
            December
      31, 2007Foreign
      currency translation adjustment, net of tax
            
            $
            5,940
            
            
            $
            8,842Unamortized
      benefit plan costs, net of tax
            
            
            (13,555
            )
            
            
            (7,884
            )Unrealized
      gain (loss) on securities, net of tax
            
            
            (171
            )
            
            
            95Accumulated
      other comprehensive income (loss)
            
            $
            (7,786
            )
            
            $
            1,053





Other
comprehensive income (loss) for the three and nine months ended September 28,
2008 and September 30, 2007, was as follows (thousands of dollars):





Three
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007Net
      income
            
            $
            10,978
            
            
            $
            4,392Other
      comprehensive income (loss) :Change
      in equity due to foreign currency translation adjustments, net of
      tax
            
            
            (8,405
            )
            
            
            (3,463
            )Unrealized
      (loss) on investment, net of tax
            
            
            (11
            )
            
            
            (21
            )Amortization
      of benefit plan costs, net of tax
            
            
            (5,260
            )
            
            
            (744
            )Other
      comprehensive income (loss)
            
            $
            (2,698
            )
            
            $
            164





Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007Net
      income
            
            $
            26,406
            
            
            $
            6,607Other
      comprehensive income (loss):Change
      in equity due to foreign currency translation adjustments, net of
      tax
            
            
            (2,902
            )
            
            
            (5,326
            )Unrealized
      loss on investment, net of tax
            
            
            (266
            )
            
            
            (21
            )Amortization
      of benefit plan costs, net of tax
            
            
            (5,671
            )
            
            
            (2,415
            )Other
      comprehensive income (loss)
            
            $
            17,567
            
            
            $
            (1,155
            )














10


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)







8.
Segment Reporting





We
design, develop, manufacture, integrate, sell, resell and service wired and
wireless automated identification and data collection (“AIDC”) products, which
include radio frequency identification (“RFID”) products, wired and wireless
AIDC products, mobile computing products, barcode scanners, wired and wireless
bar code printers and label media products. Our revenue also comes from license
fees and royalty revenue from our intellectual property licenses. Our
reportable segments comprise products and services. The product segment
generates revenue from the design, development, manufacture, sale and resale of
AIDC products, including RFID products and intellectual property licenses. The
service segment generates revenue from customer support, product maintenance and
other services related to the products and to systems integration.





The
accounting policies of our two reportable segments are the same as those used to
prepare our condensed consolidated financial statements. Performance and
resource allocation are primarily measured by sales and standard gross profit.
All other earnings, costs and expenses are aggregated and reported on a
consolidated basis.





ScanSource,
Inc., one of our distributors, accounted for sales of $31.0 million and $80.1
for the three and nine months ended September 28, 2008, and $29.7 million and
$70.7 million for the three and nine months ended September 30, 2007,
respectively.





The
following table sets forth our operations by reportable segment (millions of
dollars):










Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007
            
            
            September
      28, 2008
            
            
            September
      30, 2007Revenues:Product
            
            $
            195.7
            
            
            $
            169.2
            
            
            $
            555.8
            
            
            $
            480.6Service
            
            
            38.7
            
            
            
            36.8
            
            
            
            113.7
            
            
            
            115.2Total
            
            $
            234.4
            
            
            $
            206.0
            
            
            $
            669.4
            
            
            $
            595.8Gross
      profit:Product
            
            $
            75.8
            
            
            $
            63.7
            
            
            $
            219.9
            
            
            $
            174.2Service
            
            
            15.9
            
            
            
            14.4
            
            
            
            48.0
            
            
            
            49.6Total
            
            $
            91.7
            
            
            $
            78.1
            
            
            $
            267.9
            
            
            $
            223.8






The
following table sets forth our revenues by product lines (millions of
dollars):







Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007
            
            
            September
      28, 2008
            
            
            September
      30, 2007Revenues:Systems
      and solutions
            
            $
            145.5
            
            
            $
            118.4
            
            
            $
            400.7
            
            
            $
            329.4Printer
      and media
            
            
            50.2
            
            
            
            50.8
            
            
            
            155.0
            
            
            
            151.2Service
            
            
            38.7
            
            
            
            36.8
            
            
            
            113.7
            
            
            
            115.2Total
            
            $
            234.4
            
            
            $
            206.0
            
            
            $
            669.4
            
            
            $
            595.8









11


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)







9.
Commitments and Contingencies





Provisions
for estimated expenses related to product warranties are made at the time
products are sold. These estimates are established using historical information
on the nature, frequency, and average cost of warranty claims. We actively study
trends of warranty claims and take action to improve product quality and
minimize warranty claims. The following table indicates the change in our
warranty accrual included in current liabilities (thousands of
dollars):





Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007Beginning
      Balance
            
            $
            4,482
            
            
            $
            6,800Payments
            
            
            (904
            )
            
            
            (3,234
            )Increase
      in liability (new warranties issued)
            
            
            1,813
            
            
            
            2,297Ending
      Balance
            
            $
            5,391
            
            
            $
            5,863





We have
entered into a variety of agreements with third parties that include
indemnification clauses, both in the ordinary course of business and in
connection with our divestitures of certain product lines. These clauses require
us to compensate these third parties for certain liabilities and damages
incurred by them.





FASB
Interpretation No. 45, “Guarantors’ Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others,” requires
that we estimate and record the fair value of guarantees as a liability. We do
not believe that we have any significant exposure related to such guarantees and
therefore have not recorded a liability as of September 28, 2008, or December
31, 2007. We have not made any significant indemnification payments as a result
of these clauses.




We
currently, and from time to time, are subject to claims and lawsuits arising in
the ordinary course of business. Such claims and lawsuits may take the form of
counter claims in lawsuits we bring to enforce our rights. The ultimate
resolution of currently pending proceedings is not expected to have a material
adverse effect on our business, financial condition, results of operations or
liquidity.





In June
2008, our Cedar Rapids, Iowa facilities were flooded, and we incurred damages to
both a facility that we own and one that we lease. A portion of these damages
was covered by insurance. While the flood caused significant damage, we were
able to redirect the work done by our Cedar Rapids groups to temporary
locations, and therefore the flood did not cause a significant interruption of
our business. During the three and nine months ended September 28, 2008, we had
$5.1 million in clean up costs and property damages that were offset by $4.0
million of insurance proceeds, for a net pre-tax charge of $1.1
million.


12


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)








10.
Restructuring Charges





In July
2008, we committed to a business restructuring plan intended to reduce our cost
structure and streamline operations. Pursuant to this plan, we will
relocate the final assembly of our product lines from Everett, Washington, to
Venture Corporation Limited, a global electronics services
provider.  As part of the plan we will also consolidate two U.S.
service depots to existing locations in Charlotte, North Carolina, and Monterey,
Mexico, and transfer our on-site field service repair to a third party supplier.
We expect the plan to be fully implemented by June 30,
2009.




As of
September 28, 2008, 55 employees have been terminated as part of the
restructuring.  All severance and other periodic transitional costs
will be cash expenditures. Our remaining future expected costs are $0.2
million  for employee termination and $ 0.8 million for other costs. The
aggregate costs incurred to date are presented in restructuring costs in the
Condensed Consolidated Statement of Operations and are itemized along with
expected additional costs in the table below:





In
      millions of dollars
            
            SFAS
      112 (1)
            
            
            SFAS
      146 (2)
            
            
            Employee
      termination
            
            
            Other
      costs
            
            
            Total
      restructuringTotal
      RestructuringOriginal
      restructuring charge, Third quarter of 2008
            
            $
            2.7
            
            
            $
            0.3
            
            
            $
            3.0
            
            
            $
            0.3
            
            
            $
            3.3Utilization
            
            
            (0.6
            )
            
            
            -
            
            
            
            (0.6
            )
            
            
            (0.3
            )
            
            
            (0.9
            )Balance
      at September 28, 2008
            
            $
            2.1
            
            
            $
            0.3
            
            
            $
            2.4
            
            
            $
            -
            
            
            $
            2.4Utilization
      by segmentService
            
            $
            0.6Products
            
            $
            0.3

















13


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)






11.
Pension and Other Postretirement Benefit Plans





The
information in this note represents the net periodic pension and post-retirement
benefit costs and related components in accordance with SFAS No.132(R),
“Employers’ Disclosures about Pensions and Other Postretirement Benefits (as
amended).” The components of net pension and post-retirement periodic benefit
cost (credit) for the three and nine months ended September 28, 2008, and
September 30, 2007, is as follows (thousands of dollars):




U.S.
      Defined Benefit Plans
            
            
            Non-U.S.
      Defined Benefit Plans
            
            
            Other
      Postretirement Benefit PlansThree
      Months Ended September 28, 2008, and September 30, 2007
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Service
      cost
            
            $
            284
            
            
            $
            453
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Interest
      cost
            
            
            2,713
            
            
            
            2,678
            
            
            
            666
            
            
            
            689
            
            
            
            44
            
            
            
            44Expected
      return on plan assets
            
            
            (2,699
            )
            
            
            (2,610
            )
            
            
            (903
            )
            
            
            (894
            )
            
            
            -
            
            
            
            -Amortization
      and deferrals:Transition
      asset
            
            
            -
            
            
            
            -
            
            
            
            (43
            )
            
            
            (45
            )
            
            
            -
            
            
            
            -Actuarial
      loss
            
            
            18
            
            
            
            941
            
            
            
            -
            
            
            
            110
            
            
            
            -
            
            
            
            -Prior
      service cost
            
            
            144
            
            
            
            144
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Curtailment
      loss (gain)
            
            
            8
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      pension and postretirement periodic benefit cost (credit)
            
            $
            468
            
            
            $
            1,606
            
            
            $
            (280
            )
            
            $
            (140
            )
            
            $
            44
            
            
            $
            44Nine
      Months Ended September 28, 2008,and
      September 30,
              2007Service
      cost
            
            $
            1,017
            
            
            $
            1,358
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Interest
      cost
            
            
            8,123
            
            
            
            8,034
            
            
            
            1,997
            
            
            
            1,997
            
            
            
            132
            
            
            
            132Expected
      return on plan assets
            
            
            (8,441
            )
            
            
            (7,832
            )
            
            
            (2,710
            )
            
            
            (2,592
            )
            
            
            -
            
            
            
            -Amortization
      and deferrals:Transition
      asset
            
            
            -
            
            
            
            -
            
            
            
            (128
            )
            
            
            (130
            )
            
            
            -
            
            
            
            -Actuarial
      loss
            
            
            715
            
            
            
            2,825
            
            
            
            -
            
            
            
            317
            
            
            
            -
            
            
            
            -Prior
      service cost
            
            
            432
            
            
            
            433
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Curtailment
      loss (gain)
            
            
            8
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      pension and postretirement periodic benefit cost (credit)
            
            $
            1,853
            
            
            $
            4,818
            
            
            $
            (841
            )
            
            $
            (408
            )
            
            $
            132
            
            
            $
            132




During
the quarter ended September 28, 2008, we contributed approximately
$3.1 million to our pension and other postretirement benefit plans,
comprising $1.8 million in benefits paid pertaining to unfunded U.S. defined
benefit plans, $0.7 million in matching contributions to our 401(k) plan, and
$0.6 million in contributions to our foreign pension plans.





Our
business restructuring plan (see Note 10) resulted in a reduction of our
workforce and the curtailment of pension benefits to the redundant employees who
were participants in the U.S. pension plan.  In accordance with SFAS
No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits” (“SFAS 88”), the curtailment
required a new measurement date to determine the gain or loss on
curtailment.  Additionally, the measurement resulted in a decrease in
asset value of $8.6 million and an increase in losses as a component of
Accumulated Other Comprehensive Income.





During
the nine months ended September 28, 2008, we contributed approximately $8.7
million to our pension and other postretirement benefit plans, comprising $4.6
million in benefits paid pertaining to unfunded U.S. defined benefit plans, $2.3
million in matching contributions to our 401(k) plan, and $1.8 million in
contributions to our foreign pension plans. Benefits paid pertaining to our
other postretirement benefit plans were not material during the three and nine
month periods ended September 28, 2008. We expect to contribute approximately
$3.0 million to these plans during the remainder of 2008, of which $1.7 million
relates to benefit payments on our unfunded U.S. defined benefit plans,
$0.6 million in matching contributions to our 401(k) plan, $0.6 million in
contributions to our foreign pension plans and $0.1 million in benefit payments
pertaining to our other postretirement benefit plans.


14


ITEM 2. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





Forward-Looking
Statements and Risk Factors




Forward-looking
statements contained in this filing are subject to the safe harbor created by
the Private Securities Litigation Reform Act of 1995 (alternatively: Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934) and are dependent upon a variety of important factors that could cause
actual results to differ materially from those reflected in such forward-looking
statements.





Forward-looking
statements include but are not limited to statements about: maintaining or
improving our revenues, gross margins or profits of our continuing operations,
for the current period or any future period; competing effectively with our
current products and planned products, and introducing new products; effectively
completing restructuring activities, including the closure of certain facilities
and redeployment of related functions; maintaining or reducing expenses;
maintaining or improving operational efficiency; increasing product development
capacity; using our investment in research and development to generate future
revenue; and the applicability of accounting policies used in our financial
reporting. When used in this document and in documents it references, the words
“anticipate,” “believe,” “will,” “intend,” “project” and “expect” and similar
expressions as they relate to Intermec or our management are intended to
identify such forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, changed circumstances or any other reason after the
date of this quarterly report.





Forward-looking
statements involve and are dependent upon certain risks and uncertainties and
are not guarantees of future performance. A number of factors can impact our
business and determine whether we can or will achieve any forward-looking
statement made in this report. Any one of these factors could cause our actual
results to differ materially from those expressed or implied in a
forward-looking statement. We outline these risk factors in reports that we file
with the SEC, in press releases and on our website, www.intermec.com. You are
encouraged to review the discussion below in this Part I, “Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” as
well as the Risk Factors set forth in Item 1A of our Annual Report on Form 10-K
for the year ended December 31, 2007, and the Risk Factors set forth in Part II,
“Item 1A. Risk Factors” of our Quarterly Reports on Form 10-Q which discuss risk
factors associated with our business.





15


Results
of Operations





The
following discussion compares our results of operations for the three and nine
months ended September 28, 2008, and September 30, 2007. Results of operations
and percentage of revenues were as follows (millions of dollars):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007
            
            
            September
      28, 2008
            
            
            September
      30, 2007Amounts
            
            
            Amounts
            
            
            Amounts
            
            
            AmountsRevenues
            
            $
            234.4
            
            
            $
            206.0
            
            
            $
            669.4
            
            
            $
            595.8Costs
      and expenses:Cost
      of revenues
            
            
            142.7
            
            
            
            127.9
            
            
            
            401.5
            
            
            
            372.0Research
      and development
            
            
            15.0
            
            
            
            16.0
            
            
            
            48.7
            
            
            
            49.0Selling,
      general and administrative
            
            
            57.3
            
            
            
            57.6
            
            
            
            175.4
            
            
            
            162.9Flood
      related charges
            
            
            -
            
            
            
            -
            
            
            
            1.1
            
            
            
            -Restructuring
            
            
            3.3
            
            
            
            -
            
            
            
            3.3
            
            
            
            -Total
      costs and expenses
            
            
            218.3
            
            
            
            201.5
            
            
            
            630.0
            
            
            
            583.9Operating
      profit from continuing operations
            
            
            16.0
            
            
            
            4.5
            
            
            
            39.4
            
            
            
            11.9Interest,
      net
            
            
            0.7
            
            
            
            0.7
            
            
            
            1.4
            
            
            
            1.1Earnings
      from continuing operations, before income tax
            
            
            16.8
            
            
            
            5.2
            
            
            
            40.8
            
            
            
            13.0Provision
      for income tax
            
            
            5.8
            
            
            
            0.8
            
            
            
            14.4
            
            
            
            5.1Earnings
      from continuing operations, net of tax
            
            
            11.0
            
            
            
            4.4
            
            
            
            26.4
            
            
            
            7.9Loss
      from discontinued operations, net of tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1.3
            )Net
      earnings
            
            $
            11.0
            
            
            $
            4.4
            
            
            $
            26.4
            
            
            $
            6.6Percent
      of Revenues
            
            
            Percent
      of Revenues
            
            
            Percent
      of Revenues
            
            
            Percent
      of RevenuesRevenuesCosts
      and expenses:Cost
      of revenues
            
            
            60.9
            %
            
            
            62.1
            %
            
            
            60.0
            %
            
            
            62.4
            %Research
      and development
            
            
            6.4
            %
            
            
            7.7
            %
            
            
            7.3
            %
            
            
            8.2
            %Selling,
      general and administrative
            
            
            24.4
            %
            
            
            28.0
            %
            
            
            26.2
            %
            
            
            27.4
            %Flood
      related charges
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Restructuring
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      costs and expenses
            
            
            93.2
            %
            
            
            97.8
            %
            
            
            94.1
            %
            
            
            98.0
            %Operating
      profit from continuing operations
            
            
            6.9
            %
            
            
            2.2
            %
            
            
            5.9
            %
            
            
            2.0
            %Interest,
      net
            
            
            0.3
            %
            
            
            -
            
            
            
            0.2
            %
            
            
            -
            %Earnings
      from continuing operations, before income tax
            
            
            7.2
            %
            
            
            2.5
            %
            
            
            6.1
            %
            
            
            2.2
            %Provision
      for income tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Earnings
      from continuing operations, net of tax
            
            
            4.7
            %
            
            
            2.1
            %
            
            
            3.9
            %
            
            
            1.3
            %Loss
      from discontinued operations, net of tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      earnings
            
            
            4.7
            %
            
            
            2.1
            %
            
            
            3.9
            %
            
            
            1.1
            %








16


ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)





Revenues





Revenues
by category and geographic region and as a percentage of total revenues from
continuing operations for the three and nine months ended September 28, 2008,
and September 30, 2007, as well as the same three and nine month’s revenue
changes were as follows (millions of dollars):







Three
      Months EndedSeptember
      28, 2008
            
            September
      30, 2007
            
            Change
            Percentage
      ChangeAmount
            
            Percent
      of Revenues
            
            Amount
            Percent
      of RevenuesRevenues
      by product line:Systems
      and solutions
            $
            145.5
            
            
            62.1
            %
            $
            118.4
            57.5
            %
            $
            27.1
            22.9
            %Printer
      and media
            
            50.2
            
            
            21.4
            %
            
            50.8
            24.6
            %
            
            (0.6)
            (1.3
            %)Service
            
            38.7
            
            
            16.5
            %
            
            36.8
            17.9
            %
            
            1.9
            5.1
            %Total
      revenues
            $
            234.4
            
            
            100.0
            %
            $
            206.0
            100.0
            %
            $
            28.4
            13.8
            %Revenues
      by geographic region:North
      America
            $
            129.1
            
            
            55.1
            %
            $
            100.8
            48.9
            %
            $
            28.4
            28.1
            %Europe,
      Middle East and Africa(EMEA)
            
            78.1
            
            
            33.3
            %
            
            74.2
            36.0
            %
            
            3.8
            5.1
            %All
      others
            
            27.2
            
            
            11.6
            %
            
            31.0
            15.1
            %
            
            (3.8)
            (12.3
            %)Total
      revenues
            $
            234.4
            
            
            100.0
            %
            $
            206.0
            100.0
            %
            $
            73.6
            13.8
            %




Total
revenue increased $28.4 million, or 13.8% for the three months ended September
28, 2008 compared to the prior year period, as a result of a $26.5 million
increase in product revenue and a $1.9 increase in service revenue. The increase
in product revenue was attributable to a $27.1 million increase in systems and
solution products, primarily as a result of revenue growth in North America.
 The $0.6 million decline in printer and media product revenue is due to
lower printer revenue in Latin America, partially offset by revenue growth in
EMEA (Europe, Middle East and Africa). Sequentially, total revenue increased
7.4% from the second quarter of 2008, primarily from the increase in product
revenue and modest growth in service revenue.





The
increase in quarterly service revenues of $1.9 million, or 5.1%, is primarily
attributable to a 16.7% increase in EMEA as a result of improved pricing and the
impact of favorable foreign currency exchange rates compared to the prior year
period.  North America service revenue was relatively flat, while the
rest of the world experienced 8.2% growth on a relatively smaller
base.





Geographically,
revenues in North America and EMEA increased $28.4 million, or 28.1%, and $3.8
million, or 5.1%, respectively, over the corresponding prior-year period. The
increase in North America was primarily attributable to increased hardware
demand for handheld computers, particularly from governmental agencies.
The changes in foreign currency conversion rates favorably impacted EMEA
revenue by $3.7 million in the third quarter of 2008, as compared to the prior
year period.




In the
three months ended September 28, 2008, we observed longer purchase
decision-making time frames among large enterprise customers. Thus far, this
appears to have resulted in a delay, rather than a cancellation, of some
customer projects. We believe that customers in our target markets will continue
to invest in projects intended to enhance mobile worker productivity but they
may subject these projects to closer scrutiny and longer decision-making
processes, in response to uncertainty in the general economic
outlook.




17


ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)





Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007
            
            
            Change
            
            
            Percentage
      ChangeAmount
            
            
            Percent
      of Revenues
            
            
            Amount
            
            
            Percent
      of RevenuesRevenues
      by product line:Systems
      and solutions
            
            $
            400.7
            
            
            
            59.9
            %
            
            $
            329.5
            
            
            
            55.3
            %
            
            $
            71.2
            
            
            
            21.6
            %Printer
      and media
            
            
            155.0
            
            
            
            23.1
            %
            
            
            151.1
            
            
            
            25.4
            %
            
            
            3.9
            
            
            
            2.5
            %Service
            
            
            113.7
            
            
            
            17.0
            %
            
            
            115.2
            
            
            
            19.3
            %
            
            
            (1.5
            )
            
            
            (1.3
            %)Total
      revenues
            
            $
            669.4
            
            
            
            100.0
            %
            
            $
            595.8
            
            
            
            100.0
            %
            
            $
            73.6
            
            
            
            12.3
            %Revenues
      by geographic region:North
      America
            
            $
            355.8
            
            
            
            53.1
            %
            
            $
            299.8
            
            
            
            50.4
            %
            
            $
            56.0
            
            
            
            18.7
            %Europe,
      Middle East and Africa(EMEA)
            
            
            232.0
            
            
            
            34.7
            %
            
            
            205.8
            
            
            
            34.5
            %
            
            
            26.3
            
            
            
            12.8
            %All
      others
            
            
            81.6
            
            
            
            12.2
            %
            
            
            90.2
            
            
            
            15.1
            %
            
            
            (8.7
            )
            
            
            (9.6
            %)Total
      revenues
            
            $
            669.4
            
            
            
            100.0
            %
            
            $
            595.8
            
            
            
            100.0
            %
            
            $
            73.6
            
            
            
            12.3
            %





Total
revenue for the nine months ended September 28, 2008, increased $73.6 million,
or 12.3%, due to a $75.1 million, or  24.1%, increase in product
revenues, partially offset by $1.5 million, or 1.3%, decrease in service
revenues.  The increase in product revenues was due to the $71.2
million increase in systems and solution products and a $3.9 million increase in
printer and media products.  The product revenue growth is primarily a
result of the 18.7% growth in North America and 12.8% growth in EMEA. New
product introductions continue to drive increased hardware demand in both
regions. Product revenue for the rest of the world decreased 9.6%, primarily due
to lower revenue in Latin America.





The
decrease in nine month service revenues of $ 1.5 million, or 1.3%, was
primarily attributable to the slightly lower contract revenue in the first
quarter ended March 30, 2008, combined with lower year-to-date custom software
and break fix time and material revenues.





Geographically,
revenues in North America and EMEA increased $56 million, or 18.7%, and $26.3
million, or 12.8%, respectively, over the corresponding prior-year period. The
increases were primarily attributable to increased hardware demand in both
regions, with new product introductions driving a majority of the growth. The
changes in foreign currency conversion rates favorably impacted EMEA revenue by
$19.0 million for the nine months ended September 28, 2008, as compared to the
prior year period.


18


ITEM
2.  MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)





Gross
Profit





Gross
profit and gross margin by revenue category for the three and nine months ended
September 28, 2008 and September 30, 2007, were as follows (millions of
dollars):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      28, 2008
            
            
            September
      30, 2007
            
            
            September
      28, 2008
            
            
            September
      30, 2007Gross
      Profit
            
            
            Gross
      Margin
            
            
            Gross
      Profit
            
            
            Gross
      Margin
            
            
            Gross
      Profit
            
            
            Gross
      Margin
            
            
            Gross
      Profit
            
            
            Gross
      MarginProduct
            
            $
            75.8
            
            
            
            38.7
            %
            
            $
            63.7
            
            
            
            37.6
            %
            
            $
            219.9
            
            
            
            39.6
            %
            
            $
            174.2
            
            
            
            36.2
            %Service
            
            
            15.9
            
            
            
            41.1
            %
            
            
            14.4
            
            
            
            39.1
            %
            
            
            48.0
            
            
            
            42.3
            %
            
            
            49.6
            
            
            
            43.0
            %Total
      gross profitand
      gross margin
            
            $
            91.7
            
            
            
            39.1
            %
            
            $
            78.1
            
            
            
            37.9
            %
            
            $
            267.9
            
            
            
            40.0
            %
            
            $
            223.8
            
            
            
            37.6
            %





The total
gross profit for the three and nine months ended September 28, 2008, increased
by $13.6 million and $44.1 million, respectively, compared to the corresponding
prior year periods. The increases are attributable to product revenue growth in
the North America and EMEA regions, as well as improvements in product gross
margins in the respective periods. The increase in product gross margins is
primarily due to new product introductions, favorable manufacturing absorption
on higher volumes and product cost reductions.





Service
gross profit increased $1.5 million for the three months ended September 28,
2008 compared to the prior year period, primarily due to the increase in
revenue. The cost reductions as a result of the restructuring activities were
partially offset by transition-related costs in the period. The decrease in
service gross profit of $1.6 million for the nine months ended September 28,
2009 compared to the corresponding 2007 period is primarily due to the lower
revenue in the first half of 2008.





Research
and Development




Research
and development costs for the three and nine months ended September 28, 2008 and
September 30, 2007, were as follows (millions of dollars):





Three
      Months ended
            
            
            Nine
      Months endedSeptember
      28, 2008
            
            
            September
      30, 2007
            
            
            Change
      from prior year
            
            
            September
      28, 2008
            
            
            September
      30, 2007
            
            
            Change
      from prior yearResearch
      and development expense
            
            $
            15.0
            
            
            $
            16.0
            
            
            $
            (1.0
            )
            
            $
            48.7
            
            
            $
            49.0
            
            
            $
            (0.3
            )





The total
research and development (“R&D”) expense was $15.0 million and $48.6
million for the three and nine months ended September 28, 2008, respectively,
compared with R&D expense of $16.0 million and $49.0 million for the
corresponding prior-year periods. R&D expense for the current quarter
includes a $1.4 million credit recorded for the reimbursement of certain R&D
expenses under a foreign grant program that became realizable in the
quarter.





Selling,
General and Administrative





Selling,
General and Administrative costs for the three and nine months ended September
28, 2008 and September 30, 2007, were as follows (millions of
dollars):




Three
      Months ended
            
            
            Nine
      Months endedSeptember
      28, 2008
            
            September
      30, 2007
            Change
      from prior year
            
            September
      28, 2008
            
            September
      30, 2007
            
            Change
      from prior yearSelling,
      general and administrative expense
            
            $
            57.3
            
            
            $
            57.6
            
            
            $
            (0.3.
            )
            
            $
            175.4
            
            
            $
            162.9
            
            
            $
            12.5




The total
selling, general and administrative (“SG&A”) expense was $57.3 million and
$175.4 million for the three and nine months ended September 28, 2008,
respectively, compared with SG&A expense of $57.6 million and $162.9 million
for the corresponding prior-year period. The increase in SG&A expense in the
third quarter of 2008 is primarily related to the impact of international costs
translated to US dollars at less favorable exchange rates. The third quarter of
2007 SG&A expense included approximately $2.0 million of other operating
gains. The higher costs for the nine month period in 2008 is primarily related
to the impact of international costs translated to US dollars at less favorable
exchange rates than in the same period of 2007, higher information systems
expense as a result of our ERP upgrade, higher selling and marketing costs, and
higher labor costs, partially offset by a $2.9 million gain from the sale of
property in the second quarter of2008.




19
 ITEM
2.  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)




Flood
related charges





In June
2008, our Cedar Rapids, Iowa facilities were flooded, and we incurred damages to
both a facility that we own and one that we lease. A portion of these damages
was covered by insurance to the extent reasonable. While the flood caused
significant damage, we were able to redirect the work done by our Cedar Rapids
groups to temporary locations, and therefore the flood did not cause a
significant interruption of our business. During the three and nine months ended
September 28, 2008, we had $5.1 million in clean up costs and property damages
that were offset by $4.0 million of insurance for a net
pre-tax charge of $1.1 million.




Interest,
Net




Interest
income, net of interest expense for the three and nine months ended September
28, 2008 and September 30, 2007, was as follows (millions of
dollars):




Three
      Months ended
            
            
            Nine
      Months endedSeptember
      28, 2008
            
            September
      30, 2007
            Change
      from prior year
            
            September
      28, 2008
            
            September
      30, 2007
            
            Change
      from prior yearInterest
      income, net
            
            $
            0.7
            
            
            $
            0.7
            
            
            $
            -
            
            
            $
            1.4
            
            
            $
            1.1
            
            
            $
            0.3





Net
interest income was $0.7 million and $1.4 million for the three and nine months
ended September 28, 2008, compared to net interest income of $0.7 million
and $1.1 million for the corresponding prior-year period.





Restructuring





In July
2008, we committed to a business restructuring plan intended to reduce our cost
structure and streamline operations. Pursuant to this plan, we will
relocate the final assembly of our product lines from Everett, Washington, to
Venture Corporation Limited, a global electronics services
provider.  As part of the plan we will also consolidate two U.S.
service depots to existing locations in Charlotte, North Carolina, and Monterey,
Mexico, and transfer our on-site field service repair to a third party supplier.
We expect the plan to be fully implemented by June 30,
2009.
  As of
September 28, 2008, 55 employees have been terminated as part of the
restructuring.  All severance and other periodic transitional costs
will be cash expenditures. Our remaining future expected costs are $0.2
million  for employee termination and $ 0.8 million for other costs. The
aggregate costs incurred to date are presented in restructuring costs in the
Condensed Consolidated Statement of Operations and are itemized along with
expected additional costs in the table below:


In
      millions of dollars
            
            SFAS
      112
            
            
            SFAS
      146
            
            
            Employee
      termination
            
            
            Other
      costs
            
            
            Total
      restructuringTotal
      RestructuringOriginal
      restructuring charge, Third quarter of 2008
            
            $
            2.7
            
            
            $
            0.6
            
            
            $
            3.0
            
            
            $
            0.3
            
            
            $
            3.3Utilization
            
            
            (0.6
            )
            
            
            -
            
            
            
            (0.6
            )
            
            
            (0.3
            )
            
            
            (0.9
            )Balance
      at September 28, 2008
            
            $
            2.1
            
            
            $
            0.6
            
            
            $
            2.4
            
            
            $
            -
            
            
            $
            2.4Utilization
      by segmentService
            
            $
            0.6Products
            
            $
            0.3







20


ITEM
2.  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)




Provision
for Income Taxes




The
provision for income taxes for the three and nine months ended September 28,
2008 and September 30, 2007, was as follows (millions of dollars):




Three
      Months ended
            
            
            Nine
      Months endedSeptember
      28, 2008
            
            September
      30, 2007
            Change
      from prior year
            
            September
      28, 2008
            
            September
      30, 2007
            
            Change
      from prior yearProvision
      for income taxes
            
            $
            5.8
            
            
            $
            0.8
            
            
            $
            5.0
            
            
            $
            14.4
            
            
            $
            5.1
            
            
            $
            9.3







The tax
expense for the three and nine months ended September 28, 2008,
reflects an effective tax rate for continuing operations of 34.5% and
35.3%, respectively, compared to a U.S. statutory rate of 35%. In the third
quarter of 2008, we recorded tax benefits which decreased our Q3 effective tax
rate 1.7% for a foreign tax refund and adjustments pertaining to our 2007 tax
returns filed this quarter.  These rates reflect our recurring estimated
effective tax rate of approximately 37% for fiscal year 2008, which excludes the
impact of discrete items.




The tax
expense for the three and nine months ended September 30, 2007, reflects an
effective tax rate for continuing operations of 16.2% and 39.3%, respectively,
compared to a U.S. statutory rate of 35%. In the third quarter of 2007, the
tax provision was decreased to record benefits primarily resulting from certain
changes in foreign and state tax law and for deferred taxes related to tax
amortizable goodwill. These rates reflect our recurring estimated effective tax
rate of approximately 36% for fiscal year 2007, which excludes the impact of
discrete items.






21


ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS(continued)





Liquidity
and Capital Resources





Cash,
cash equivalents and short-term investments as of September 28, 2008, totaled
$202.1 million, compared to $265.5 million as of December 31, 2007. Operating
activities for the nine months ended September 28, 2008 provided
$38.3 million of cash flow, primarily resulting from customer receipts
exceeding billings by $40.7 million and $12.1 million from teh utilization of
deferred tax assets, partially offset by a decrease in accounts payable of
$38.3 million and increased inventory of $12.0 million. Investing activities for
the nine months ended September 28, 2008, provided $20.5 million related
primarily to the sale of investments totaling $28.5 million. Financing
activities for the nine months ended September 28, 2008, used
$92.7 million, primarily for the $100 million debt repayment in March,
2008.





Net of
outstanding letters of credit and limitations on minimum availability, we had
borrowing capacity at September 28, 2008, of $46.9 million under the Revolving
Facility. We made no borrowings under the Revolving Facility during the third
quarter of 2008, and as of September 28, 2008, no borrowings were outstanding
under the Revolving Facility. As of September 28, 2008, we were in compliance
with the financial covenants of the Revolving Facility.





The key
terms of the Revolving Facility are as follows:





- Loans
  will bear interest at a variable rate equal to (at our option) (i) LIBOR plus
  the applicable margin, which ranges from 0.60% to 1.00%, or (ii) the Bank’s
  prime rate, less the applicable margin, which ranges from 0.25% to
  1.00%.  If an event of default occurs and is continuing, then the
  interest rate on all obligations under the Revolving Facility may be increased
  by 2.0% above the otherwise applicable rate, and the Bank may declare any
  outstanding obligations under the Revolving Facility to be immediately due and
  payable.
- A fee
  ranging from 0.60% to 1.00% on the maximum amount available to be drawn under
  each letter of credit that is issued and outstanding under the Revolving
  Facility will be required.  The fee on the unused portion of the
  Revolving Facility ranges from 0.125% to 0.20%.
- Certain
  of our domestic subsidiaries have guaranteed the Revolving
  Facility.
- The
  Revolving Facility contains various restrictions and covenants, including
  restrictions on our ability and the ability of our subsidiaries to consolidate
  or merge, make acquisitions, create liens, incur additional indebtedness or
  dispose of assets.
- Financial
  covenants include a Maximum Leverage test and a Minimum Tangible Net Worth
  test, each as defined in the Revolving Facility.

Management
believes that cash and cash equivalents on hand, combined with projected cash
flow from operations and available borrowings under our Revolving Facility will
be sufficient to fund our operations, research and development efforts,
anticipated capital expenditures, liabilities, commitments, and other capital
requirements, for at least the next twelve months.





Contractual
Obligations





Our
contractual commitments as of September 28, 2008, have not changed materially
from those disclosed in Item 7 of our Annual Report on Form 10-K for the year
ended December 31, 2007.






ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





We are
exposed to foreign exchange rate risk with respect to our foreign operations and
from foreign currency transactions.





Due to
our global operations, our cash flows and earnings are exposed to foreign
exchange rate fluctuations. When appropriate, we may attempt to limit our
exposure to changing foreign exchange rates by entering into short-term foreign
currency exchange contracts.





Except as
noted in the preceding paragraph, as of September 28, 2008, there have been no
material changes from the information provided in Item 7A of our Annual Report
on Form 10-K for the year ended December 31, 2007, which contains a complete
discussion of our material exposures to interest rate and foreign exchange rate
risks.






22


ITEM 4.  CONTROLS AND PROCEDURES





We
maintain disclosure controls and procedures, which are designed to ensure that
information required to be disclosed in the reports we file or submit under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to management, including the Chief Executive Officer, or CEO, and
Chief Financial Officer, or CFO, as appropriate to allow timely decisions
regarding required disclosure.





Under the
supervision and with the participation of management, including the CEO and CFO,
an evaluation was performed on the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the period covered by
this quarterly report. Based on that evaluation, management, including the CEO
and CFO, concluded that our disclosure controls and procedures were effective as
of September 28, 2008.





An
evaluation was also performed under the supervision and with the participation
of management, including the CEO and CFO, of any change in our internal controls
over financial reporting that occurred during the last fiscal quarter and that
has materially affected, or is reasonably likely to materially affect, our
internal controls over financial reporting. That evaluation did not identify any
change in our internal controls over financial reporting that occurred during
the latest fiscal quarter and that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial
reporting.


23


PART
II. OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS





We
currently, and from time to time, are subject to claims and lawsuits arising in
the ordinary course of business. Such claims and lawsuits may take the form of
counter claims in lawsuits we bring to enforce our rights. The ultimate
resolution of currently pending proceedings is not expected to have a material
adverse effect on our business, financial condition, results of operations or
liquidity.







ITEM
1A. RISK FACTORS





You are
encouraged to review the discussion of Forward Looking Statements and Risk
Factors appearing in this report at Part I, “Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”




In
addition to the other information set forth in this Report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2007, and the factors
discussed in Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form
10-Q for the quarter ended March 30, 2008 (the “First Quarter Form 10-Q”), which
could materially affect our business, financial condition or operating results.
The risks described in our Annual Report on Form 10-K for the year ended
December 31, 2007, and in the First Quarter Form 10-Q are not the only risks
facing our Company. Additional risks and uncertainties not currently known to us
or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition or operating results.




The risk
factor included in the Annual Report on Form 10-K for the year ended December
31, 2007 under the caption  “Macroeconomic conditions beyond our
control could lead to decreases in demand for our products, reduced
profitability or deterioration in the quality of our accounts receivable”
is restated in its entirety as follows:





Ÿ
            Macroeconomic conditions
      beyond our control could lead to decreases in demand for our products,
      reduced profitability or deterioration in the quality of our accounts
      receivable. Domestic and international political and economic
      conditions are uncertain due to a variety of factors,
      including





·
            global,
      regional and national economic
downturns;


·
            the
      availability and cost of credit;


·
            volatility
      in stock and credit markets;


·
            energy
      costs;


·
            fluctuations
      in currency exchange rates;


·
            the
      risk of global conflict;


·
            the
      risk of terrorism and war in a given country or region;
  and


·
            public
      health issues.





Our
business depends on our customers’ demand for our products and services, the
general economic health of current and prospective customers, and their desire
or ability to make technology capital expenditures.  A deterioration
of global political or economic conditions or in a given country or region could
affect potential customers in a way that reduces demand for our products and
disrupts our manufacturing and sales plans.  Changes in foreign
currency exchange rates may negatively impact reported revenue and/or
expenses.  In addition, our sales are typically made on unsecured
credit terms that are generally consistent with the prevailing business
practices in the country in which the customer is located. A deterioration of
political or economic conditions in a given country or region could reduce or
eliminate our ability to collect on accounts receivable in that country or
region. In any of these events, our results of operations could be materially
and adversely affected.





The risk
factor included in the First Quarter Form 10-Q under the
caption  “Our use of
third-party suppliers and distributors could adversely affect our business and
financial results” is deleted and replaced by the following three risk
factors:





Ÿ
            On July 10, 2008, we announced our plan to
      streamline our supply chain by having Venture Corporation Limited
      ("Venture") perform the final assembly of our product lines at various
      locations in Asia.  Accordingly, we will be dependent on Venture
      for the manufacture of substantially all of our products and any failure
      or inability of Venture to provide its manufacturing services to us would
      adversely affect our business.  In relying on
      Venture to assemble our products, we will no longer have direct physical
      control over the manufacturing process and operations.  This
      might adversely affect our ability to control the quality of our products
      and the timeliness of their delivery to our customers.  Either
      of those adverse conditions could negatively affect our customer
      relationships and our revenues.  Furthermore, Venture’s access
      to our intellectual property could possibly increase the risk of
      infringement or misappropriation of our assets by a third
      party.





If
Venture were unable to manufacture our products at one or more of its facilities
for any extended period, we would be required to obtain alternative sources of
manufacturing.  There is no assurance that any such sources would be
available in a timely manner or at comparable cost.  Any such
interruption of Venture’s manufacturing capabilities could increase our costs,
impair our ability to provide our customers with our products in a timely and
efficient manner and adversely affect our customer relationships and our
financial results.





Finally,
the transition of our manufacturing to foreign jurisdictions could also result
in operational risk as well as customer concerns regarding product quality and
delivery schedules during the transition period.  We expect to
complete the transition by the end of the second quarter of
2009.  However, completion of the transition could be delayed by
foreign or U.S. regulatory requirements or other unforeseen
events.  If the transition is inefficient or delayed, our sales and
income could be adversely affected.


24


ITEM 1A. RISK FACTORS
(continued)





Ÿ
              Venture’s use of third-party
      suppliers could adversely affect our product quality, delivery schedules
      or customer satisfaction, any of which could have an adverse effect on our
      financial results.  Third-party suppliers that we approve
      will be providing the components that Venture will use in the final
      assembly of our products.  Some of these components may be
      available only from a single source or limited sources, and if they become
      unavailable for any reason, we or Venture may be unable to obtain
      alternative sources of supply on a timely basis.  Our products
      may also be adversely affected by the quality control of these third-party
      suppliers or by their inability to meet delivery
      deadlines.  Failure of these third-party suppliers in any of
      these respects may negatively affect our revenue and customer
      relationships.  Furthermore, these suppliers may have access to
      our intellectual property, which may increase the risk of infringement or
      misappropriation.


Ÿ
            Our reliance on third-party
      distributors could adversely affect our business, revenues and
      earnings.  In addition to offering our products to
      certain customers and resellers directly, we rely to a great degree on
      third-party distributors and integrators to sell our products to
      end-users.  In 2006 and 2007, one distributor, ScanSource, Inc.,
      accounted for more than 10% of our sales, and it or other distributors may
      account for a substantial portion of our sales in the
      future.  Changes in markets, customers or products may adversely
      affect the ability of these distributors to effectively bring our products
      to market at the right time and in the right locations.  In
      addition, if a significant distributor, such as ScanSource, were to become
      unavailable or substantially reduce its purchases from us, we would be
      required to obtain alternative sources of distribution or enhance our
      internal sales force.  Such a disruption in the distribution of
      our products could impair or delay sales of our products to end users and
      increase our costs of distribution, which could adversely affect our sales
      and income.








The risk
factor included in the Annual Report on Form 10-K for the year ended December
31, 2007 under the caption  “Fluctuations in currency exchange
rates may adversely impact our cash flows and earnings” is restated in
its entirety as follows:





Ÿ
            Fluctuations in currency
      exchange rates may adversely impact our cash flows and earnings.
      Due to our global operations, our cash flow, revenue and earnings are
      exposed to currency exchange rate fluctuations.  Our
      international sales our typically quoted, billed and collected in the
      customer’s local currency, and therefore exposed to changes in exchange
      rates.  Our product costs are largely denominated in U.S.
      dollars, and as such, do not significantly change with exchange rate
      fluctuations.  Exchange rate fluctuations may also affect the
      cost of goods and services that we purchase and personnel we
      employ.  When appropriate, we may attempt to limit our exposure
      to exchange rate changes by entering into short-term currency exchange
      contracts. There is no assurance that we will hedge or will be able to
      hedge such foreign currency exchange risk or that our hedges will be
      successful.





Our
currency exchange gains or losses (net of hedges) may materially and adversely
impact our cash flows and earnings.  Additionally, adverse movements
in currency exchange rates could result in increases in our cost of goods sold
or reduction in growth in international orders, materially impacting our cash
flows and earnings.


25


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





(c)
              Issuer
      Purchases of Equity
Securities




NONE








ITEM
6. EXHIBITS





31.1
            
            Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, dated as of November 04, 200831.2
            
            Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, dated as of November 04, 200832.1
            
            Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, dated as of November 04, 200832.2
            
            Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, dated as of November 04,
2008





26


SIGNATURE





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.








Intermec,
      Inc.(Registrant)/s/ Lanny H. MichaelLanny
      H. MichaelChief
      Financial OfficerNovember
      04, 2008


27