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 June 29, 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 July 28, 2008Common
      Stock, $0.01 par value per share
              
              61,672,220
      shares
 
  
  
 
 INTERMEC,
INC.
 TABLE
OF CONTENTS
 REPORT
ON FORM 10-Q
 FOR
THE QUARTER ENDED JUNE 29, 2008
 
 Page
                NumberPART I.
      FINANCIAL INFORMATIONITEM 1.
              Financial Statements
      (unaudited)Condensed Consolidated Statements of Operations
      (unaudited)
                Three and Six Month
      PeriodsEnded June 29, 2008, and July 1, 2007
              
              
              3Condensed Consolidated Balance Sheets
      (unaudited)
                June 29, 2008, and
      December 31, 2007
              
              
              4Condensed Consolidated Statements of Cash Flows
      (unaudited)
                Six MonthsEnded June 29, 2008, and
      July1,
      2007
              
              
              5Notes to Condensed Consolidated Financial Statements
      (unaudited)
              
              
              6-13ITEM 2.
              Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
              
              
              14-20ITEM 3.
              Quantitative and Qualitative
      Disclosures about Market Risk
              
              
              20ITEM 4.
              Controls and
      Procedures
              
              
              21PART II. OTHER INFORMATIONITEM 1.
              Legal
      Proceedings
              
              
              22ITEM 1A.
              Risk Factors
              
              
              22ITEM 2.
              Unregistered Sales of Equity
      Securities and Use of Proceeds
              
              
              23ITEM 4.
              Submission of Matters to a Vote of Security
      Holders
              
              
              24ITEM 6.
              ExhibitsSignature
          
  2
  
 
 PART I.
FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 
 INTERMEC,
INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (thousands
of dollars, except per share amounts)
 (unaudited)
 
 Three
      Months Ended
              
              
              Six
      Months EndedJune
      29, 2008
              
              
              July
      1, 2007
              
              
              June
      29, 2008
              
              
              July
      1, 2007Revenues:Product
              
              $
              180,455
              
              
              $
              169,939
              
              
              $
              360,028
              
              
              $
              311,451Service
              
              
              37,806
              
              
              
              40,584
              
              
              
              75,011
              
              
              
              78,390Total
      revenues
              
              
              218,261
              
              
              
              210,523
              
              
              
              435,039
              
              
              
              389,841Costs
      and expenses:Cost
      of product revenues
              
              
              108,189
              
              
              
              108,726
              
              
              
              215,894
              
              
              
              200,920Cost
      of service revenues
              
              
              21,154
              
              
              
              20,623
              
              
              
              42,859
              
              
              
              43,206Research
      and development
              
              
              17,143
              
              
              
              16,465
              
              
              
              33,665
              
              
              
              32,971Selling,
      general and administrative
              
              
              59,506
              
              
              
              52,307
              
              
              
              118,143
              
              
              
              105,362Flood
      related charges
              
              
              1,122
              
              
              
              -
              
              
              
              1,122
              
              
              
              -Total
      costs and expenses
              
              
              207,114
              
              
              
              198,121
              
              
              
              411,683
              
              
              
              382,459Operating
      profit from continuing operations
              
              
              11,146
              
              
              
              12,402
              
              
              
              23,356
              
              
              
              7,382Interest
      income
              
              
              1,171
              
              
              
              2,467
              
              
              
              2,846
              
              
              
              5,020Interest
      expense
              
              
              (345
              )
              
              
              (2,348
              )
              
              
              (2,135
              )
              
              
              (4,643
              )Earnings
      from continuing operations before income taxes
              
              
              11,972
              
              
              
              12,521
              
              
              
              24,067
              
              
              
              7,759Provision
      for income taxes
              
              
              4,250
              
              
              
              4,591
              
              
              
              8,639
              
              
              
              4,261Earnings
      before discontinued operations
              
              
              7,722
              
              
              
              7,930
              
              
              
              15,428
              
              
              
              3,498Loss
      from discontinued operations, net of tax
              
              
              -
              
              
              
              (1,283
              )
              
              
              -
              
              
              
              (1,283
              )Net
      earnings
              
              $
              7,722
              
              
              $
              6,647
              
              
              $
              15,428
              
              
              $
              2,215Basic
      earnings (loss) per shareContinuing
      operations
              
              $
              0.13
              
              
              $
              0.13
              
              
              $
              0.25
              
              
              $
              0.06Discontinued
      operations
              
              
              -
              
              
              
              (0.02
              )
              
              
              -
              
              
              
              (0.02
              )Net
      earnings per share
              
              $
              0.13
              
              
              $
              0.11
              
              
              $
              0.25
              
              
              $
              0.04Diluted
      earnings (loss) per shareContinuing
      operations
              
              $
              0.13
              
              
              $
              0.13
              
              
              $
              0.25
              
              
              $
              0.06Discontinued
      operations
              
              
              -
              
              
              
              (0.02
              )
              
              
              -
              
              
              
              (0.02
              )Net
      earnings per share
              
              $
              0.13
              
              
              $
              0.11
              
              
              $
              0.25
              
              
              $
              0.04Shares
      used in computing earnings (loss) per shareBasic
              
              
              61,103
              
              
              
              60,251
              
              
              
              61,030
              
              
              
              60,121Diluted
              
              
              61,611
              
              
              
              61,065
              
              
              
              61,543
              
              
              
              60,987
 
 
 
 See
accompanying notes to condensed consolidated financial statements.
 
 
  3
  
 INTERMEC,
INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (amounts
in thousands of dollars)
 (unaudited)
 
 June
      29,2008
              
              
              December
      31, 2007ASSETSCurrentassets:Cash
      and cash equivalents
              
              $
              199,014
              
              
              $
              237,247Short-term
      investments
              
              
              293
              
              
              
              28,230Accounts
      receivable, net of allowance for doubtful accounts and sales returns of
      $10,042 and $12,854
              
              
              159,664
              
              
              
              191,487Inventories
              
              
              137,087
              
              
              
              113,145Net
      current deferred tax assets
              
              
              61,501
              
              
              
              61,532Other
      current assets
              
              
              14,543
              
              
              
              14,690Total
      current assets
              
              
              572,102
              
              
              
              646,331Property,
      plant and equipment, net
              
              
              42,462
              
              
              
              47,732Intangibles,
      net
              
              
              3,678
              
              
              
              4,138Net
      deferred tax assets
              
              
              144,079
              
              
              
              150,154Other
      assets
              
              
              59,138
              
              
              
              52,280Total
      assets
              
              $
              821,459
              
              
              $
              900,635LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
              
              $
              120,753
              
              
              $
              141,667Payroll
      and related expenses
              
              
              28,978
              
              
              
              32,170Deferred
      revenue
              
              
              53,776
              
              
              
              49,020Current
      debt
              
              
              -
              
              
              
              100,000Total
      current liabilities
              
              
              203,507
              
              
              
              322,857Long-term
      deferred revenue
              
              
              27,423
              
              
              
              20,109Other
      long-term liabilities
              
              
              75,280
              
              
              
              73,558Shareholders'
      equity:Common
      stock (250,000 shares authorized, 61,626 and 61,192 shares issued and
      outstanding)
              
              
              616
              
              
              
              612Additional
      paid-in-capital
              
              
              690,728
              
              
              
              679,241Accumulated
      deficit
              
              
              (182,195
              )
              
              
              (196,795
              )Accumulated
      other comprehensive income
              
              
              6,100
              
              
              
              1,053Total
      shareholders' equity
              
              
              515,249
              
              
              
              484,111Total
      liabilities and shareholders' equity
              
              $
              821,459
              
              
              $
              900,635
 
 
  
  
 See
accompanying notes to condensed consolidated financial statements.
 
  4
 
 INTERMEC,
INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (thousands
of dollars)
 (unaudited)
 
 Six
      Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007
      (as restated)Cashand cash equivalents at beginning of
      year
              
              $
              237,247
              
              
              $
              155,027Cash
      flows from operating activities:Net
      earnings
              
              
              15,428
              
              
              
              2,215Net
      loss from discontinued operations
              
              
              -
              
              
              
              1,283Adjustments
      to reconcile net earnings (loss) to net cash provided by operating
      activitiesof
      continuing operations:Depreciation
      and amortization
              
              
              7,842
              
              
              
              6,190Change
      in prepaid pension costs, net
              
              
              918
              
              
              
              (780
              )Deferred
      taxes
              
              
              7,295
              
              
              
              3,527Stock-based
      compensation and other
              
              
              4,997
              
              
              
              2,953Gain
      on sale of property, plant and equipment
              
              
              (2,873
              )
              
              
              (530
              )Excess
      tax benefits from stock-based payment arrangements
              
              
              (1,340
              )
              
              
              (1,181
              )Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              31,823
              
              
              
              3,686Inventories
              
              
              (27,481
              )
              
              
              4,135Other
      current assets
              
              
              147
              
              
              
              (1,397
              )Accounts
      payable and accrued expenses
              
              
              (21,754
              )
              
              
              (9,794
              )Payroll
      and related expenses
              
              
              (3,192
              )
              
              
              (6,648
              )Deferred
      revenue
              
              
              11,908
              
              
              
              2,425Other
      long-term liabilities
              
              
              (1,730
              )
              
              
              (4,317
              )Other
      operating activities
              
              
              428
              
              
              
              (1,219
              )Net
      cash provided by operating activities of continuing
    operations
              
              
              22,416
              
              
              
              548Cash
      flows from investing activities of continuing operations:Capital
      expenditures
              
              
              (5,779
              )
              
              
              (5,474
              )Proceeds
      from the sale of property, plant and equipment
              
              
              5,497
              
              
              
              -Purchases
      of investments
              
              
              (760
              )
              
              
              (1,355
              )Sale
      of investments
              
              
              28,515
              
              
              
              1,493Patent
      legal fees
              
              
              (778
              )
              
              
              (652
              )Other
      investing activities
              
              
              -
              
              
              
              (406
              )Net
      cash provided by (used in) investing activities of continuing
      operations
              
              
              26,695
              
              
              
              (6,394
              )Cash
      flows from financing activities of continuing operations:Repayment
      of debt
              
              
              (100,000
              )
              
              
              -Excess
      tax benefits from stock-based payment arrangements
              
              
              1,340
              
              
              
              1,181Stock
      options exercised
              
              
              3,595
              
              
              
              3,042Other
      financing activities
              
              
              1,559
              
              
              
              1,008Net
      cash (used in) provided by financing activities of continuing
      operations
              
              
              (93,506
              )
              
              
              5,231Effect
      of exchange rate changes on cash and cash
equivalents
              
              
              6,162
              
              
              
              3,822Net
      cash provided by investing activities of discontinued
      operations
              
              
              -
              
              
              
              1,601Resulting
      increase (decrease) in cash and cash equivalents
              
              
              (38,233
              )
              
              
              5,423Cash
      and cash equivalents at end of period
              
              $
              199,014
              
              
              $
              159,535
 
 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 and accordingly have reclassified
$3.8 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 six months ended July 1, 2007 to
correct the error. Also, expenses incurred for research and development have
been reclassified from selling, general and administrative expenses for the
three and six months ended July 1, 2007 for comparability. Additionally, in the
Condensed Consolidated Statement of Cash Flows for the six months ended July 1,
2007 we have reclassified $1.4 million of collection on notes receivable from
investing activities of operations to investing activities of discontinued
operations, and $1.3 million from Provision on bad debt to Other operating
activities.
 
 Accounting
Changes
 
 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 is 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
                
                
                June
      29, 2008Money
      market funds
                
                $
                93,178
                
                
                
                
                
                $
                
                
                
                $
                93,178Certificates
      of deposit
                
                
                14,649
                
                
                
                
                
                
                
                
                
                
                14,649Stock
                
                
                293
                
                
                
                
                
                
                
                
                
                
                293Derivative
      instruments - assets
                
                
                
                
                
                $
                522
                
                
                
                
                
                
                
                522Total
      assets at fair value
                
                $
                108,120
                
                
                $
                522
                
                
                $
                -
                
                
                $
                108,642Balance
      as ofLevel
      1
                
                
                Level
      2
                
                
                Level
      3
                
                
                June
      29, 2008Derivative
      instruments - liabilites
                
                $
                -
                
                
                $
                (1,172
                )
                
                $
                -
                
                
                $
                (1,172
                )Total
      liabilities at fair value
                
                $
                -
                
                
                $
                (1,172
                )
                
                $
                -
                
                
                $
                (1,172
                )
  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 expect to incur between $0.5 million and $1.0 million as an
adjustment to retained earnings upon adoption of the remainder of this
statement.
 
 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, 2009with the
exception of the accounting for valuation allowances on deferred taxes and
acquired tax contingencies. 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):
 
 June
      29, 2008
              
              
              December
      31, 2007Raw
      materials
              
              $
              70,018
              
              
              $
              65,257Work
      in process
              
              
              465
              
              
              
              1,318Finished
      goods
              
              
              66,604
              
              
              
              46,570Inventories
              
              $
              137,087
              
              
              $
              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 June 29, 2008, of $46.9 million under the Revolving Facility. We
made no borrowings under the Revolving Facility during 2008, and as of June 29,
2008, no borrowings were outstanding under this facility. As of June 29, 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 $3.9 million at June 29,
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 six months ended June 29, 2008, reflects an effective
tax rate for continuing operations of 35.5 % and 35.9 %, respectively,
compared to a U.S. statutory rate of 35%. Our expected effective tax rate
for fiscal year 2008, including the impact of discrete items, is approximately
37%.
 
 The tax
expense for the three and six months ended July 1, 2007, reflects an effective
tax rate for continuing operations of 36.7% and 54.9%, respectively, compared to
a U.S. statutory rate of 35%. In the first quarter of 2007, the tax
provision was increased primarily due to a reduction of foreign deferred tax
assets as a result of recording a valuation allowance on a foreign net operating
loss and the impact of changes in foreign tax rates.
  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 three and six months ended July 1,
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 (Loss) per Share
 Basic
earnings (loss) per share are calculated using the weighted average number of
common shares outstanding and issuable for the applicable period. Diluted
earnings (loss) 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 EndedJune
      29, 2008
                
                
                July
      1, 2007Weighted
      average shares - basic
                
                
                61,103,147
                
                
                
                60,250,995Dilutive
      effect of unvested restricted shares and stock options
                
                
                507,476
                
                
                
                814,239Weighted
      average shares - diluted
                
                
                61,610,623
                
                
                
                61,065,234Six
      Months EndedJune
      29, 2008
                
                
                July
      1, 2007Weighted
      average shares - basic
                
                
                61,030,212
                
                
                
                60,120,507Dilutive
      effect of unvested restricted shares and stock options
                
                
                512,975
                
                
                
                866,205Weighted
      average shares - diluted
                
                
                61,543,187
                
                
                
                60,986,712
 
 Our
employees and directors held options to purchase 1,393,889 and 1,458,477
shares of our common stock for the three and six months ended June 29,
2008, respectively, and 717,061 and 721,681 shares for the three and six months
ended July 1, 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 six months ended June 29, 2008, we granted 701,250 options to
employees with a Black-Scholes value of $8.52 an option, which will vest
annually in even quantities over the next four years, and 35,483 options to
Directors with a Black-Scholes value of $10.06 an option which will vest
quarterly over four quarters. The Black-Scholes assumptions used for this
calculation were as follows, except for the Directors where the Expected life in
years used was 6.59:
  Three
      months ended
              
              
              Six
      months endedFair
      value assumptions
              
              June
      29, 2008Expected
      life in years
              
              
              4.72
              
              
              
              4.73Expected
      volatility
              
              
              40.19
              %
              
              
              40.81
              %Annual
      rate of dividends
              
              
              0
              %
              
              
              0
              %Discount
      rate - bond equivalent yield
              
              
              3.15
              %
              
              
              3.12
              %
 
 Our
accumulated other comprehensive income comprised the following (thousands of
dollars):
 
 June
      29, 2008
              
              
              December
      31, 2007Foreign
      currency translation adjustment, net of tax
              
              $
              14,269
              
              
              $
              8,842Unamortized
      benefit plan costs, net of tax
              
              
              (8,085
              )
              
              
              (7,884
              )Unrealized
      gain (loss) on securities, net of tax
              
              
              (84
              )
              
              
              95Accumulated
      other comprehensive income
              
              $
              6,100
              
              
              $
              1,053
 
 Other
comprehensive income for the three and six months ended June 29, 2008 and July
1, 2007, was as follows (thousands of dollars):
 
 Three
      Months EndedJune
      29, 2008
              
              
              July
      1,2007Net
      income
              
              $
              7,722
              
              
              $
              6,647Other
      comprehensive income :Change
      in equity due to foreign currency translation adjustments, net of
      tax
              
              
              672
              
              
              
              1,863Unrealized
      (loss) on investment, net of tax
              
              
              (54
              )
              
              
              -Amortization
      of benefit plan costs, net of tax
              
              
              (190
              )
              
              
              1,671Other
      comprehensive income
              
              $
              8,150
              
              
              $
              10,181
 
 Six
      Months EndedJune
      29, 2008
              
              
              July
      1,
                2007Net
      income
              
              $
              15,428
              
              
              $
              2,215Other
      comprehensive income:Change
      in equity due to foreign currency translation adjustments, net of
      tax
              
              
              5,427
              
              
              
              1,934Unrealized
      (loss) gain on investment, net of tax
              
              
              (118
              )
              
              
              7Amortization
      of benefit plan costs, net of tax
              
              
              (201
              )
              
              
              2,634Other
      comprehensive income
              
              $
              20,536
              
              
              $
              6,790
 
 
 
  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.
 
 One
distributor accounted for more than 10% of our revenues. Total sales to this
distributor were $24.3 million and $49.1 million for the three and six months
ended June 29, 2008, and $22.7 million and $41.0 million three and six months
ended July 1, 2007, respectively.
 
 The
following table sets forth our operations by reportable segment (millions of
dollars):
  Three
      Months Ended
                
                
                Six
      Months EndedJune
      29, 2008
                
                
                July
      1, 2007
                
                
                June
      29, 2008
                
                
                July
      1, 2007Revenues:Product
                
                $
                180.5
                
                
                $
                169.9
                
                
                $
                360.0
                
                
                $
                311.4Service
                
                
                37.8
                
                
                
                40.6
                
                
                
                75.0
                
                
                
                78.4Total
                
                $
                218.3
                
                
                $
                210.5
                
                
                $
                435.0
                
                
                $
                389.8Gross
      profit:Product
                
                $
                72.3
                
                
                $
                61.2
                
                
                $
                144.1
                
                
                $
                110.5Service
                
                
                16.6
                
                
                
                20.0
                
                
                
                32.2
                
                
                
                35.2Total
                
                $
                88.9
                
                
                $
                81.2
                
                
                $
                176.3
                
                
                $
                145.7
   The
following table sets forth our revenues by product lines (millions of
dollars):
  Three
      Months Ended
                
                
                Six
      Months EndedJune
      29, 2008
                
                
                July
      1, 2007
                
                
                June
      29, 2008
                
                
                July
      1, 2007Revenues:Systems
      and solutions
                
                $
                129.3
                
                
                $
                117.6
                
                
                $
                255.2
                
                
                $
                211.1Printer
      and media
                
                
                51.2
                
                
                
                52.3
                
                
                
                104.8
                
                
                
                100.3Service
                
                
                37.8
                
                
                
                40.6
                
                
                
                75.0
                
                
                
                78.4Total
                
                $
                218.3
                
                
                $
                210.5
                
                
                $
                435.0
                
                
                $
                389.8
    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):
 
 Period
      EndedJune
      29, 2008
              
              
              July
      1, 2007Beginning
      Balance
              
              $
              4,305
              
              
              $
              6,800Payments
              
              
              (1,205
              )
              
              
              (1,998
              )Increase
      in liability (new warranties issued)
              
              
              1,382
              
              
              
              1,557Ending
      Balance
              
              $
              4,482
              
              
              $
              6,359
 
 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 June 29, 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
were 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 on our business. During the three and six months ended
June 29, 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.
  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.  We also will 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.
  This plan
will be implemented over the next 9 to 12 months and will reduce our workforce
by approximately 260 employees.  We currently employ approximately
2,300 employees worldwide.
  The total
restructuring costs are expected to be in a pre-tax range of $7.5 million to
$9.0 million, including employee termination costs of approximately $3.5
million, $0.5 million of non-cash asset impairment and $3.5 million to $5.0
million of other transitional costs. We expect to record approximately $6.0
million to $7.0 million of this restructuring charge in the second half of 2008,
and expect that the balance will be recorded in 2009. We anticipate that all of
the severance related and periodic transitional costs will be cash
expenditures.
  12
  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 132(R), “Employers’
Disclosures about Pensions and Other Postretirement Benefits (as amended).” The
components of net pension and postretirement periodic benefit cost (credit) for
the three and six months ended June 29, 2008, and July 1, 2007, is as follows
(thousands of dollars):
  U.S.
      Defined Benefit Plans
                
                
                Non-U.S.
      Defined Benefit Plans
                
                
                Other
      Postretirement Benefit PlansThree
      Months Ended June 29, 2008, and July 1, 2007
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Service
      cost
                
                $
                366
                
                
                $
                453
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Interest
      cost
                
                
                2,705
                
                
                
                2,678
                
                
                
                666
                
                
                
                664
                
                
                
                44
                
                
                
                44Expected
      Return on Plan Assets
                
                
                (2,871
                )
                
                
                (2,611
                )
                
                
                (903
                )
                
                
                (862
                )
                
                
                -
                
                
                
                -Amortization
      and Deferrals:Transition
      asset
                
                
                -
                
                
                
                -
                
                
                
                (43
                )
                
                
                (43
                )
                
                
                -
                
                
                
                -Actuarial
      loss
                
                
                349
                
                
                
                942
                
                
                
                -
                
                
                
                105
                
                
                
                -
                
                
                
                -Prior
      service cost
                
                
                144
                
                
                
                144
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      pension and postretirement periodic benefit cost (credit)
                
                $
                693
                
                
                $
                1,606
                
                
                $
                (280
                )
                
                $
                (136
                )
                
                $
                44
                
                
                $
                44Six
      Months Ended June 29, 2008,
                  and
      July 1, 2007Service
      cost
                
                $
                733
                
                
                $
                905
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Interest
      cost
                
                
                5,410
                
                
                
                5,356
                
                
                
                1,331
                
                
                
                1,308
                
                
                
                88
                
                
                
                88Expected
      Return on Plan Assets
                
                
                (5,742
                )
                
                
                (5,222
                )
                
                
                (1,807
                )
                
                
                (1,698
                )
                
                
                -
                
                
                
                -Amortization
      and Deferrals:Transition
      asset
                
                
                -
                
                
                
                -
                
                
                
                (85
                )
                
                
                (85
                )
                
                
                -
                
                
                
                -Actuarial
      loss
                
                
                697
                
                
                
                1,884
                
                
                
                -
                
                
                
                207
                
                
                
                -
                
                
                
                -Prior
      service cost
                
                
                289
                
                
                
                289
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      pension and postretirement periodic benefit cost (credit)
                
                $
                1,387
                
                
                $
                3,212
                
                
                $
                (561
                )
                
                $
                (268
                )
                
                $
                88
                
                
                $
                88
  During
the quarter ended June 29, 2008, we contributed approximately $2.7 million to
our pension and other postretirement benefit plans, comprising $1.4 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.
 
 During
the six months ended June 29, 2008, we contributed approximately $5.6 million to
our pension and other postretirement benefit plans, comprising $2.8 million in
benefits paid pertaining to unfunded U.S. defined benefit plans, $1.6 million in
matching contributions to our 401(k) plan, and $1.2 million in contributions to
our foreign pension plans. Benefits paid pertaining to our other postretirement
benefit plans were not material during the three and six month periods ended
June 29, 2008. We expect to contribute approximately $6.2 million to these plans
during the remainder of 2008, of which $3.6 million relates to benefit payments
on our unfunded U.S. defined benefit plans, $1.4 million in matching
contributions to our 401(k) plan, $1.2 million in contributions to our foreign
pension plans and $0.2 million in benefit payments pertaining to our other
postretirement benefit plans.
 
 In
September 2006, the EITF issued EITF 06-4, “Accounting for Deferred Compensation
and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance
Arrangements,” 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 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.
  We have
endorsement split-dollar life insurance policy agreements, which we own and
control, with a group of employees. Each of these agreements was entered into as
a separate agreement between us and the employee, and we endorsed a portion of
the death benefits to the employee’s beneficiary. Under the guidance of EITF
06-4 these agreements represent a post retirement plan, and we have accrued a
liability for the present value of the future death benefit in accordance with
SFAS No. 106, for our endorsement split-dollar life insurance
policies.
  13
  
 ITEM 2. MANAGEMENT’S DISCUSSION 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 Report on Form 10-Q for the period
ended March 30, 2008, which discuss risk factors associated with our
business.
  14
  
 Results
of Operations
 
 The
following discussion compares our results of operations for the three and six
months ended June 29, 2008, and July 1, 2007. Results of operations and
percentage of revenues were as follows (millions of dollars):
 
 Three
      Months Ended
              
              
              Six
      Months EndedJune
      29, 2008
              
              
              July
      1, 2007
              
              
              June
      29, 2008
              
              
              July
      1, 2007Amounts
              
              
              Amounts
              
              
              Amounts
              
              
              AmountsRevenues
              
              $
              218.3
              
              
              $
              210.5
              
              
              $
              435.0
              
              
              $
              389.8Costs
      and expenses:Cost
      of revenues
              
              
              129.4
              
              
              
              129.3
              
              
              
              258.8
              
              
              
              244.1Research
      and development
              
              
              17.1
              
              
              
              16.5
              
              
              
              33.7
              
              
              
              33.0Selling,
      general and administrative
              
              
              59.5
              
              
              
              52.3
              
              
              
              118.1
              
              
              
              105.3Flood
      related charges
              
              
              1.1
              
              
              
              -
              
              
              
              1.1
              
              
              
              -Total
      costs and expenses
              
              
              207.1
              
              
              
              198.1
              
              
              
              411.7
              
              
              
              382.4Operating
      profit from continuing operations
              
              
              11.2
              
              
              
              12.4
              
              
              
              23.3
              
              
              
              7.4Interest,
      net
              
              
              0.8
              
              
              
              0.1
              
              
              
              0.7
              
              
              
              0.4Earnings
      from continuing operations, before income tax
              
              
              12.0
              
              
              
              12.5
              
              
              
              24.0
              
              
              
              7.8Provision
      for income tax
              
              
              4.3
              
              
              
              4.6
              
              
              
              8.6
              
              
              
              4.3Earnings
      from continuing operations, net of tax
              
              
              7.7
              
              
              
              7.9
              
              
              
              15.4
              
              
              
              3.5Loss
      from discontinued operations, net of tax
              
              
              0.0
              
              
              
              (1.3
              )
              
              
              0.0
              
              
              
              (1.3
              )Net
      earnings
              
              $
              7.7
              
              
              $
              6.6
              
              
              $
              15.4
              
              
              $
              2.2Percent
      of Revenues
              
              
              Percent
      of Revenues
              
              
              Percent
      of Revenues
              
              
              Percent
      of RevenuesRevenuesCosts
      and expenses:Cost
      of revenues
              
              
              59.3
              %
              
              
              61.4
              %
              
              
              59.5
              %
              
              
              62.6
              %Research
      and development
              
              
              7.9
              %
              
              
              7.8
              %
              
              
              7.7
              %
              
              
              8.5
              %Selling,
      general and administrative
              
              
              27.2
              %
              
              
              24.8
              %
              
              
              27.2
              %
              
              
              27.0
              %Flood
      related charges
              
              
              0.5
              %
              
              
              -
              
              
              
              0.2
              %
              
              
              -Total
      costs and expenses
              
              
              94.9
              %
              
              
              94.1
              %
              
              
              94.6
              %
              
              
              98.1
              %Operating
      profit from continuing operations
              
              
              5.1
              %
              
              
              5.9
              %
              
              
              5.4
              %
              
              
              1.9
              %Interest,
      net
              
              
              0.4
              %
              
              
              -
              
              
              
              0.1
              %
              
              
              0.1
              %Earnings
      from continuing operations, before income tax
              
              
              5.5
              %
              
              
              5.9
              %
              
              
              5.5
              %
              
              
              2.0
              %Provision
      for income tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Earnings
      from continuing operations, net of tax
              
              
              3.5
              %
              
              
              3.8
              %
              
              
              3.6
              %
              
              
              0.9
              %Loss
      from discontinued operations, net of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      earnings
              
              
              3.5
              %
              
              
              3.1
              %
              
              
              3.6
              %
              
              
              0.6
              %
 
  15
  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 six months ended June 29, 2008, and July
1, 2007, as well as the same three and six months revenue changes were as
follows (millions of dollars):
 
 Three
      Months EndedJune
      29, 2008
              
              
              July
      1, 2007
              
              
              Change
              
              
              Percentage
      ChangeAmount
              
              
              Percent
      of Revenues
              
              
              Amount
              
              
              Percent
      of RevenuesRevenues
      by product line:Systems
      and solutions
              
              $
              129.3
              
              
              
              59.2
              %
              
              $
              117.6
              
              
              
              55.9
              %
              
              $
              11.6
              
              
              
              9.9
              %Printer
      and media
              
              
              51.2
              
              
              
              23.5
              %
              
              
              52.3
              
              
              
              24.9
              %
              
              
              (1.1
              )
              
              
              (2.1
              %)Service
              
              
              37.8
              
              
              
              17.3
              %
              
              
              40.6
              
              
              
              19.2
              %
              
              
              (2.8
              )
              
              
              (6.8
              %)Total
      revenues
              
              $
              218.3
              
              
              
              100.0
              %
              
              $
              210.5
              
              
              
              100.0
              %
              
              $
              7.8
              
              
              
              3.7
              %Revenues
      by geographic region:North
      America
              
              $
              112.6
              
              
              
              51.6
              %
              
              $
              108.0
              
              
              
              51.3
              %
              
              $
              4.6
              
              
              
              4.3
              %Europe,
      Middle East and Africa(EMEA)
              
              
              76.1
              
              
              
              34.9
              %
              
              
              68.5
              
              
              
              32.6
              %
              
              
              7.5
              
              
              
              10.9
              %All
      others
              
              
              29.6
              
              
              
              13.6
              %
              
              
              34.0
              
              
              
              16.1
              %
              
              
              (4.4
              )
              
              
              (12.8
              %)Total
      revenues
              
              $
              218.3
              
              
              
              100.0
              %
              
              $
              210.5
              
              
              
              100.0
              %
              
              $
              7.8
              
              
              
              3.7
              %
 
 Total
revenue increased $7.8 million for the three months ended June 29, 2008 compared
to the prior year period, from the $10.5 million increase in product revenue,
offset by a $2.8 million decrease in service revenue. The increase in product
revenue was attributable to a $11.6 million increase in systems and solution
products, primarily as a result of revenue growth in North America.  The
$1.1 million decline in printer and media product revenue is due to lower
revenue in Latin America, partially offset by revenue growth in EMEA (Europe,
Middle East and Africa). Sequentially, product and service revenue were both up
slightly from the first quarter of 2008.
 
 The
decrease in quarterly service revenues of $2.8 million, or 6.8%, is primarily
attributable to a decrease in North America as a result of lower custom software
and below normal break fix time and material revenues.
 
 Geographically,
revenues in North America and EMEA increased $4.6 million, or 4.3%, and $7.5
million, or 10.9%, 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
$8.3 million as compared to prior year period.
 
 In the
three months ended June 29, 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 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.
 
 
 
 
 16
 
 ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
 
 Six
      Months EndedJune
      29, 2008
              
              
              July
      1, 2007
              
              
              Change
              
              
              Percentage
      ChangeAmount
              
              
              Percent
      of Revenues
              
              
              Amount
              
              
              Percent
      of RevenuesRevenues
      by product line:Systems
      and solutions
              
              $
              255.2
              
              
              
              58.7
              %
              
              $
              211.1
              
              
              
              54.2
              %
              
              $
              44.1
              
              
              
              20.9
              %Printer
      and media
              
              
              104.8
              
              
              
              24.1
              %
              
              
              100.3
              
              
              
              25.7
              %
              
              
              4.5
              
              
              
              4.5
              %Service
              
              
              75.0
              
              
              
              17.2
              %
              
              
              78.4
              
              
              
              20.1
              %
              
              
              (3.4
              )
              
              
              (4.3
              %)Total
      revenues
              
              $
              435.0
              
              
              
              100.0
              %
              
              $
              389.8
              
              
              
              100.0
              %
              
              $
              45.2
              
              
              
              11.6
              %Revenues
      by geographic region:North
      America
              
              $
              226.7
              
              
              
              52.1
              %
              
              $
              199.1
              
              
              
              51.1
              %
              
              $
              27.6
              
              
              
              13.9
              %Europe,
      Middle East and Africa(EMEA)
              
              
              154.0
              
              
              
              35.4
              %
              
              
              131.5
              
              
              
              33.7
              %
              
              
              22.5
              
              
              
              17.1
              %All
      others
              
              
              54.3
              
              
              
              12.5
              %
              
              
              59.2
              
              
              
              15.2
              %
              
              
              (4.9
              )
              
              
              (8.2
              %)Total
      revenues
              
              $
              435.0
              
              
              
              100.0
              %
              
              $
              389.8
              
              
              
              100.0
              %
              
              $
              45.2
              
              
              
              11.6
              %
 
 Total
revenue for the six months ended June 29, 2008, increased $45.2 million or
11.6%, primarily due to a $48.6 million, or 15.6%, increase in product revenues,
partially offset by $3.4 million, or 4.3%, decrease in service
revenues.  The increase in product revenues was due to the $44.1
million increase in systems and solution products and a $4.5 million increase in
printer and media products.  The product revenue growth is primarily a
result of the 20.8% growth in North America and 18.8% growth in EMEA. Product
revenue for the rest of the world decreased 7.8%, primarily as a result of lower
printer revenue in Latin America.
 
 The
decrease in six month service revenues of $ 3.4 million, or
4.3 %, was primarily attributable to the slightly lower contract revenue in
the first quarter ended April 1, 2008, combined with lower year-to-date custom
software and break fix time and material revenues.
 
 Geographically,
revenues in North America and EMEA increased $27.6 million, or 13.9%, and $22.5
million, or 17.1%, 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
$15.3 million as compared to prior year period.
  17
  
 ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
 
 Gross
Profit
 
 Gross
profit and gross margin by revenue category for the three and six months ended
June 29, 2008 and July 1, 2007, were as follows (millions of
dollars):
 
 Three
      Months Ended
              
              
              Six
      Months EndedJune
      29, 2008
              
              
              July
      1, 2007
              
              
              June
      29, 2008
              
              
              July
      1, 2007Gross
      Profit
              
              
              Gross
      Margin
              
              
              Gross
      Profit
              
              
              Gross
      Margin
              
              
              Gross
      Profit
              
              
              Gross
      Margin
              
              
              Gross
      Profit
              
              
              Gross
      MarginProduct
              
              $
              72.3
              
              
              
              40.0
              %
              
              $
              61.2
              
              
              
              36.0
              %
              
              $
              144.1
              
              
              
              40.0
              %
              
              $
              110.5
              
              
              
              35.5
              %Service
              
              
              16.6
              
              
              
              44.0
              %
              
              
              20.0
              
              
              
              49.3
              %
              
              
              32.2
              
              
              
              42.9
              %
              
              
              35.2
              
              
              
              44.9
              %Total
      gross profitand
      gross margin
              
              $
              88.9
              
              
              
              40.7
              %
              
              $
              81.2
              
              
              
              38.6
              %
              
              $
              176.3
              
              
              
              40.5
              %
              
              $
              145.7
              
              
              
              37.4
              %
 
 The total
gross profit for the three and six months ended June 29, 2008, increased by $7.7
million and $ 30.6 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 at least 400 basis point
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 decreased $3.4 million and $3.0 million for the three and six
months ended June 29, 2008, respectively, primarily from lower
revenue.
 
 Research
and Development
 
 Three
      months ended
              
              
              Six
      months endedJune
      29, 2008
              
              
              July
      1, 2007
              
              
              Change
      from prior year
              
              
              June
      29, 2008
              
              
              July
      1, 2007
              
              
              Change
      from prior yearResearch
      and development expense
              
              $
              17.1
              
              
              $
              16.5
              
              
              $
              0.6
              
              
              $
              33.7
              
              
              $
              33.0
              
              
              $
              0.7
 
 The total
research and development expenses were $17.1 million and $33.7 million for
the three and six months ended June 29, 2008, respectively, compared with
research and development expenses of $16.5 million and $33.0 million for
the corresponding prior-year period.
 
 Selling,
General and Administrative
  Three
      months ended
                
                
                Six
      months endedJune
      29, 2008
                
                July
      1, 2007
                Change
      from prior year
                
                June
      29, 2008
                
                July
      1, 2007
                
                Change
      from prior yearSelling,
      general and administrative expense
                
                $
                59.5
                
                
                $
                52.3
                
                
                $
                7.2
                
                
                $
                118.2
                
                
                $
                105.4
                
                
                $
                12.8
  The total
selling, general and administrative (“SG&A”) expenses were $59.5 million and
$118.2 million for the three and six months ended June 29, 2008, respectively,
compared with SG&A expenses of $52.3 million and $105.4 million for the
corresponding prior-year period. The increase in SG&A expense in the second
quarter of 2008 is primarily a result of foreign exchange translation losses and
the related impact of international costs translated to US dollars at less
favorable exchange rates, higher costs related to information systems as a
result of our ERP upgrade, higher selling and marketing costs, and higher labor
costs. The higher SG&A expense was partially offset by a $2.9 million gain
from the sale of property. The second quarter of 2007 SG&A expense included
approximately $2.0 million of other operating gains.
 
 18
 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
were 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 on our business. During the three and six months ended
June 29, 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
  Three
      months ended
                  
                  
                  Six
      months endedJune
      29, 2008
                  
                  July
      1, 2007
                  Change
      from prior year
                  
                  June
      29, 2008
                  
                  July
      1, 2007
                  
                  Change
      from prior yearInterest
      (expense) income, net
                  
                  $
                  0.8
                  
                  
                  $
                  0.1
                  
                  
                  $
                  0.7
                  
                  
                  $
                  0.7
                  
                  
                  $
                  0.4
                  
                  
                  $
                  0.3
  Net
interest income was $0.8 million and $0.7 million for the three and six months
ended June 29, 2008, compared to net interest income of $0.1 million and
$0.4 million for the corresponding prior-year period.
 
 Restructuring
Announcement
 
 As
described in Item 1 of Part 1, “Financial Statements – Note 10 – “Restructuring
Charges,” (“Note 10”) in July, 2008 we announced a restructuring plan relating
to the relocation of product final assembly, consolidation of U.S. service
depots and transfer of on-site field service repair to a third party supplier.
This restructuring plan reflects our strategy to transform our supply chain.
Please refer to Note 10 for additional information about the estimated
restructuring charges and when they are expected to be recorded.
 
 Provision
for Income Taxes
  Three
      months ended
                
                
                Six
      months endedJune
      29, 2008
                
                July
      1, 2007
                Change
      from prior year
                
                June
      29, 2008
                
                July
      1, 2007
                
                Change
      from prior yearProvision
      for (Benefit from) income taxes
                
                $
                4.3
                
                
                $
                4.6
                
                
                $
                (0.3
                )
                
                $
                8.6
                
                
                $
                4.3
                
                
                $
                4.3
 The tax
expense for the three and six months ended June 29, 2008, reflects an effective
tax rate for continuing operations of 35.5 % and 35.9 %, respectively,
compared to a U.S. statutory rate of 35%. Our expected effective tax rate
for fiscal year 2008, including the impact of discrete items, is approximately
37%.
 
 The tax
expense for the three and six months ended July 1, 2007, reflects an effective
tax rate for continuing operations of 36.7% and 54.9%, respectively, compared to
a U.S. statutory rate of 35%. In the first quarter of 2007, the tax
provision was increased primarily due to a reduction of foreign deferred tax
assets as a result of recording a valuation allowance on a foreign net operating
loss and the impact of changes in foreign tax rates.
  19
  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 June 29, 2008, totaled $199.3
million, compared to $265.5 million as of December 31, 2007. Operating
activities for the six months ended June 29, 2008 provided
$22.4 million of cash flow, primarily resulting from customer receipts of
$535.3 million, partially offset by inventory purchases of $409.4 million and
employee payments of $103.9 million. Investing activities for the six months
ended June 29, 2008, provided $26.7 million related primarily to the sale of
investments totaling $28.5 million. Financing activities for the six months
ended June 29, 2008, used $93.5 million, primarily for the repayment
of $100 million of debt in March, 2008.
 
 Net of
outstanding letters of credit and limitations on minimum availability, we had
borrowing capacity at June 29, 2008, of $46.9 million under the Revolving
Facility. We made no borrowings under the Revolving Facility during the second
quarter of 2008, and as of June 29, 2008, no borrowings were outstanding under
the Revolving Facility. As of June 29, 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 June 29, 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. As of June 29, 2008, we held short-term contracts
for the purpose of hedging foreign currency cash flows with an aggregate
notional amount of $39.2 million.
 
 Except as
noted in the preceding paragraph, as of June 29, 2008, there have been no
material changes in 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.
   20
 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 June 29, 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.
 21
 
 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
counterclaims 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.
  22
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 
 (c)
              Issuer
      Purchases of Equity Securities
 NONE
  23
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 (a)
              The
      Company’s Annual Meeting of Shareholders was held on May 23,
      2008.
 
 (b)
              At
      the Annual Meeting, the following nominees were elected directors for
      terms expiring at the annual meeting in 2009 and when their successors are
      elected and qualified.  The votes were as
    follows:
 
 For
              
              
              WithheldPatrick
      J. Byrne
              
              
              55,934,090
              
              
              
              215,419Gregory
      K. Hinckley
              
              
              55,284,119
              
              
              
              865,390Lydia
      H. Kennard
              
              
              55,284,637
              
              
              
              864,872Allen
      J. Lauer
              
              
              55,900,388
              
              
              
              249,122Stephen
      P. Reynolds
              
              
              55,905,559
              
              
              
              243,950Steven
      B. Sample
              
              
              55,794,536
              
              
              
              354,973Oren
      G. Shaffer
              
              
              55,282,804
              
              
              
              866,706Larry
      D. Yost
              
              
              55,278,839
              
              
              
              870,670
 
 
 (c)
              Proposal
      2, an advisory proposal to ratify the appointment of Deloitte & Touche
      LLP as independent auditors for 2008, was approved by the vote set forth
      below:
 
 Number
      of VotesFor
              
              
              55,656,843Against
              
              
              426,697Abstain
              
              
              65,969Broker
      non-votes
              
              
              0
 
 
 (d)
              Proposal
      3, to approve the Intermec, Inc. 2008 Employee Stock Purchase Plan, was
      approved by the vote set forth
below.
 
 Number
      of VotesFor
              
              
              45,922,742Against
              
              
              248,900Abstain
              
              
              5,493,433Broker
      non-votes
              
              
              4,484,434
 
 (e)
              Proposal
      4, to approve the Intermec 2008 Omnibus Incentive Plan, was approved by
      the vote set forth below.
 
 Number
      of VotesFor
              
              
              39,132,193Against
              
              
              7,015,141Abstain
              
              
              5,517,740Broker
      non-votes
              
              
              4,484,435
 
 
 
  24
  ITEM
6.EXHIBITS
 
 10.1
              
              Intermec,
      Inc. 2008 Omnibus Incentive Plan, as amended effective July 9,
      200810.2
              
              Form
      of Employee Stock Option Grant Notice and Stock Option Agreement under the
      Intermec, Inc. 2008 Omnibus Incentive Plan10.3
              
              Form
      of Employee Restricted Stock Unit Agreement under the Intermec, Inc. 2008
      Omnibus Incentive Plan10.4
              
              Intermec,
      Inc. 2008 Long-Term Performance Share Program under the Intermec, Inc.
      2008 Omnibus Incentive Plan10.5
              
              Form
      of Employee Long-Term Performance Share Program Agreement under the
      Intermec, Inc. 2008 Omnibus Incentive Plan10.6
              
              Director
      Compensation Program under the Intermec, Inc. 2008 Omnibus Incentive
      Plan10.7
              
              Form
      of Stock Option Grant Notice and Stock Option Agreement for Non-Employee
      Directors under the Intermec, Inc. 2008 Omnibus Incentive
    Plan10.8
              
              Intermec,
      Inc. Director Deferred Compensation Plan10.9
              
              Intermec,
      Inc. 2008 Employee Stock Purchase Plan, approved by stockholders May 23,
      2008 and effective July 1, 200831.1
              
              Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, dated as of August 6, 200831.2
              
              Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, dated as of August 6, 200832.1
              
              Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, dated as of August 6, 200832.2
              
              Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, dated as of August 6,
2008
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  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 OfficerAugust
      6, 2008