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 28, 2009ORo
              
              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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).
 Yes o
              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 oNon-accelerated
      filer o
              
              
              
              Smaller
      reporting company filer o(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 26, 2009Common
      Stock, $0.01 par value per share
              
              62,102,738
      shares





INTERMEC,
INC.


TABLE
OF CONTENTS


REPORT
ON FORM 10-Q


FOR
THE QUARTER ENDED JUNE 28, 2009




Page
                                  NumberPART I.
      FINANCIAL INFORMATIONITEM 1.
                                Financial StatementsCondensed
      Consolidated
      Statements of Operations (unaudited)for the Three
      and Six Months Ended June 28, 2009, and June 29,
      2008
                                
                                
                                1Condensed
      Consolidated
      Balance Sheets (unaudited)as of June 28,
      2009, and December 31, 2008
                                
                                
                                2Condensed
      Consolidated
      Statements of Cash Flows (unaudited)for the Six
      Months Ended June 28, 2009, and June 29,
    2008
                                
                                
                                3Notes
      to Condensed
      Consolidated
      Financial Statements
      (unaudited)
                                
                                
                                4 - 11ITEM 2.
                                Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                                
                                
                                12 - 18ITEM 3.
                                Quantitative and Qualitative Disclosures about Market
      Risk
                                
                                
                                19ITEM 4.
                                Controls and Procedures
                                
                                
                                19PART
      II. OTHER INFORMATIONITEM 1.
                                Legal Proceedings
                                
                                
                                20ITEM 1A.
                                Risk Factors
                                
                                
                                20ITEM 2.
                                Unregistered Sales of Equity Securities and Use of
      Proceeds
                                
                                
                                20ITEM 4.
                                Submission
      of Matters to a Vote of Security Holders
                                
                                
                                20ITEM 6.
                                Exhibits
                                
                                
                                21Signature



















PART I.
FINANCIAL INFORMATION




ITEM
1. FINANCIAL STATEMENTS




INTERMEC,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(In
thousands, except per share amounts)


(Unaudited)




Three
      Months Ended
                  
                  
                  Six
      Months EndedJune
      28, 2009
                  
                  
                  June
      29, 2008
                  
                  
                  June
      28, 2009
                  
                  
                  June
      29, 2008Revenues:Product
                  
                  $
                  123,339
                  
                  
                  $
                  180,455
                  
                  
                  $
                  252,002
                  
                  
                  $
                  360,028Service
                  
                  
                  34,376
                  
                  
                  
                  37,806
                  
                  
                  
                  68,286
                  
                  
                  
                  75,011Total
      Revenues
                  
                  
                  157,715
                  
                  
                  
                  218,261
                  
                  
                  
                  320,288
                  
                  
                  
                  435,039Costs
      and expenses:Cost
      of product revenues
                  
                  
                  80,927
                  
                  
                  
                  108,189
                  
                  
                  
                  164,293
                  
                  
                  
                  215,894Cost
      of service revenues
                  
                  
                  19,714
                  
                  
                  
                  21,154
                  
                  
                  
                  39,851
                  
                  
                  
                  42,859Research
      and development
                  
                  
                  15,375
                  
                  
                  
                  17,822
                  
                  
                  
                  31,288
                  
                  
                  
                  35,015Selling,
      general and administrative
                  
                  
                  44,711
                  
                  
                  
                  58,828
                  
                  
                  
                  95,719
                  
                  
                  
                  116,793Restructuring
      charges
                  
                  
                  7,345
                  
                  
                  
                  -
                  
                  
                  
                  15,927
                  
                  
                  
                  -Flood
      related charges
                  
                  
                  -
                  
                  
                  
                  1,122
                  
                  
                  
                  -
                  
                  
                  
                  1,122Total
      costs and expenses
                  
                  
                  168,072
                  
                  
                  
                  207,115
                  
                  
                  
                  347,078
                  
                  
                  
                  411,683Operating
      (loss) profit
                  
                  
                  (10,357
                  )
                  
                  
                  11,146
                  
                  
                  
                  (26,790
                  )
                  
                  
                  23,356Interest
      income
                  
                  
                  261
                  
                  
                  
                  1,171
                  
                  
                  
                  602
                  
                  
                  
                  2,846Interest
      expense
                  
                  
                  (227
                  )
                  
                  
                  (345
                  )
                  
                  
                  (452
                  )
                  
                  
                  (2,135
                  )(Loss)
      earnings before income taxes
                  
                  
                  (10,323
                  )
                  
                  
                  11,972
                  
                  
                  
                  (26,640
                  )
                  
                  
                  24,067Income
      tax (benefit) expense
                  
                  
                  (3,781
                  )
                  
                  
                  4,250
                  
                  
                  
                  (9,698
                  )
                  
                  
                  8,639Net
      (loss) earnings
                  
                  $
                  (6,542
                  )
                  
                  $
                  7,722
                  
                  
                  $
                  (16,942
                  )
                  
                  $
                  15,428Basic
      (loss) earnings per share
                  
                  $
                  (0.11
                  )
                  
                  $
                  0.13
                  
                  
                  $
                  (0.28
                  )
                  
                  $
                  0.25Diluted
      (loss) earnings per share
                  
                  $
                  (0.11
                  )
                  
                  $
                  0.13
                  
                  
                  $
                  (0.28
                  )
                  
                  $
                  0.25Shares
      used in computing basic (loss) earnings per share
                  
                  
                  61,606
                  
                  
                  
                  61,103
                  
                  
                  
                  61,532
                  
                  
                  
                  61,030Shares
      used in computing diluted (loss) earnings per share
                  
                  
                  61,606
                  
                  
                  
                  61,611
                  
                  
                  
                  61,532
                  
                  
                  
                  61,543








See
accompanying notes to condensed consolidated financial statements.








1


INTERMEC,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands)


(Unaudited)




June
      28, 2009
                
                
                December
      31, 2008ASSETSCurrent
      assets:Cash and cash equivalents
                
                $
                227,075
                
                
                $
                221,335Short-term
      investments
                
                
                132
                
                
                
                156Accounts
      receivable, net of allowance for doubtful accounts and sales returns of
      $8,188 and $10,789
                
                
                106,260
                
                
                
                138,549Inventories
                
                
                92,348
                
                
                
                116,949Net
      current deferred tax assets
                
                
                66,568
                
                
                
                56,295Other
      current assets
                
                
                18,041
                
                
                
                14,405Total
      current assets
                
                
                510,424
                
                
                
                547,689Property,
      plant and equipment, net
                
                
                38,924
                
                
                
                41,348Intangibles,
      net
                
                
                3,006
                
                
                
                3,521Net
      deferred tax assets
                
                
                153,428
                
                
                
                167,834Other
      assets
                
                
                31,137
                
                
                
                29,503Total
      assets
                
                $
                736,919
                
                
                $
                789,895LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                
                $
                78,964
                
                
                $
                112,772Payroll
      and related expenses
                
                
                31,924
                
                
                
                24,799Deferred
      revenues
                
                
                41,280
                
                
                
                38,712Total
      current liabilities
                
                
                152,168
                
                
                
                176,283Long-term
      deferred revenues
                
                
                22,219
                
                
                
                25,980Pension
      liability
                
                
                53,158
                
                
                
                92,129Other
      long-term liabilities
                
                
                12,478
                
                
                
                13,747CommitmentsShareholders'
      equity:Common
      stock (250,000 shares authorized, 62,038 and 61,766 shares issued and
      outstanding)
                
                
                620
                
                
                
                618Additional
      paid-in-capital
                
                
                698,789
                
                
                
                694,296Accumulated
      deficit
                
                
                (179,344
                )
                
                
                (162,402
                )Accumulated
      other comprehensive loss
                
                
                (23,169
                )
                
                
                (50,756
                )Total
      shareholders' equity
                
                
                496,896
                
                
                
                481,756Total
      liabilities and shareholders' equity
                
                $
                736,919
                
                
                $
                789,895








See
accompanying notes to condensed consolidated financial statements.




2


INTERMEC,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)




Six
      Months EndedJune
      28, 2009
                      
                      
                      June
      29, 2008Cash
      and cash equivalents at beginning of the period
                      
                      $
                      221,335
                      
                      
                      $
                      237,247Cash
      flows from operating activities:Net
      (loss) earnings
                      
                      
                      (16,942
                      )
                      
                      
                      15,428Adjustments
      to reconcile net (loss) earnings to net cashprovided
      by operating activities:Depreciation
      and amortization
                      
                      
                      7,846
                      
                      
                      
                      7,842Deferred
      taxes
                      
                      
                      (10,634
                      )
                      
                      
                      7,295Excess
      tax shortfall (benefit) from stock-based payment
    arrangements
                      
                      
                      547
                      
                      
                      
                      (1,340
                      )Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      
                      32,289
                      
                      
                      
                      31,823Inventories
                      
                      
                      24,516
                      
                      
                      
                      (27,481
                      )Accounts
      payable and accrued expenses
                      
                      
                      (34,968
                      )
                      
                      
                      (21,754
                      )Payroll
      and related expenses
                      
                      
                      7,125
                      
                      
                      
                      (3,192
                      )Other
      operating activities
                      
                      
                      (1,970
                      )
                      
                      
                      13,795Net
      cash provided by operating activities
                      
                      
                      7,809
                      
                      
                      
                      22,416Cash
      flows from investing activities:Capital
      expenditures
                      
                      
                      (4,720
                      )
                      
                      
                      (5,779
                      )Proceeds
      from sale of property
                      
                      
                      1,867
                      
                      
                      
                      5,497Purchases
      of investments
                      
                      
                      -
                      
                      
                      
                      (760
                      )Sales
      of investments
                      
                      
                      -
                      
                      
                      
                      28,515Capitalized
      patent legal fees
                      
                      
                      (2,321
                      )
                      
                      
                      (778
                      )Net
      cash (used in) provided by investing activities
                      
                      
                      (5,174
                      )
                      
                      
                      26,695Cash
      flows from financing activities:Repayment
      of debt
                      
                      
                      -
                      
                      
                      
                      (100,000
                      )Excess
      tax (shortfall) benefit from stock-based payment
    arrangements
                      
                      
                      (547
                      )
                      
                      
                      1,340Stock
      options exercised
                      
                      
                      218
                      
                      
                      
                      3,595Other
      financing activities
                      
                      
                      652
                      
                      
                      
                      1,559Net
      cash provided by (used in) financing activities
                      
                      
                      323
                      
                      
                      
                      (93,506
                      )Effect
      of exchange rate changes on cash and cash equivalents
                      
                      
                      2,782
                      
                      
                      
                      6,162Resulting
      increase (decrease) in cash and cash equivalents
                      
                      
                      5,740
                      
                      
                      
                      (38,233
                      )Cash
      and cash equivalents at end of the period
                      
                      $
                      227,075
                      
                      
                      $
                      199,014


See
accompanying notes to condensed consolidated financial statements.




















3


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 balance sheets, interim statements of
operations and statements of cash flows include all adjustments, consisting
mainly 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 consolidated financial statements include the
accounts of Intermec and our subsidiaries. Intercompany transactions and
balances have been eliminated. 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 for the year-ended December 31, 2008 (the “Annual Report on
Form 10-K for the year ended December 31, 2008”).




We have
evaluated subsequent events through the date the consolidated financial
statements were issued on July 30, 2009




Recently
Adopted Accounting Pronouncements




InJune2009, the
FinancialAccountingStandardsBoard
(“FASB”)issuedStatement
of Financial Accounting Standards (“SFAS”) No. 168,
The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, a replacement of SFAS 162.This
standardidentifies
the sources of accounting principles and the framework for selecting the
principles used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles (GAAP) in the United States (the GAAP hierarchy).We
adopted this standard for the quarter ended June 28,
2009.




In May
2009, the FASB issued SFAS No. 165, Subsequent
Events.This standard provides guidance to establish general accounting standards
of accounting for and disclosures of events that occur after balance sheet date
but before financial statements are issued or are available to be issued. We
adopted this standard for the quarter ended June 28, 2009. The adoption of this
standard did not have a material impact on our consolidated financial
statements.




In April
2009, the FASB issued FASB Staff Position (“FSP”) No. FAS 107-1 and APB 28-1,
Interim
Disclosures about Fair Value of Financial Instruments.This standard requires the fair value of financial
instruments to be disclosed in the interim periods as well as in annual
financial statements. We adopted this standard for the quarter ended June
28, 2009. The adoption of this standard did not have a material impact on
our consolidated financial statements.




Recent
Accounting Pronouncements Not Yet Adopted




In June
2009, the FASB issued SFAS No. 167, Amendments
to FASB Interpretation No. 46(R) (“SFAS
No. 167”). SFAS No. 167 amends certain requirements of FASB Interpretation
No.46(R),
Consolidation
of Variable Interest Entities to improve financial reporting by
enterprises involved with variable interest entities.
It is effective as of the beginning of the first fiscal year that begins after
November 15, 2009. We are currently assessing the potential impact that adoption
of this standard may have on our consolidated financial statements.




In December 2008, the FASB
issued FSP No. FAS 132 (R) -1, Employers’
Disclosures about Postretirement Benefit Plan Assets, an amendment of FASB
Statement No. 132 (revised 2003).It
provides guidance on an employer’s disclosures about plan assets, including: how
investment allocation decisions are made and factors that are pertinent to an
understanding of investment policies and strategies; the major categories of
plan assets; the inputs and valuation techniques used to measure the fair value
of plan assets; the effect of fair value measurements using significant
unobservable inputs (level 3) on changes in plan assets for the period, and
significant concentrations of risks within plan assets. This
standard is effective for fiscal years ending after December 15, 2009. We are
currently assessing the disclosure requirements that adoption of this standard
may have on the footnotes of our consolidated financial
statements.




Reclassification




Certain
amounts within the 2008 condensed consolidated financial statements have been
reclassified to conform to the 2009 presentation.


4


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)




2.
Fair Value Measurements




Assets
and Liabilities Measured at Fair Value on a Recurring Basis




Our
financial assets and liabilities subject to these fair value measurement
provisions as of June 28, 2009, were comprised of the following (in
thousands):




Balance
      as ofLevel
      1
                                  
                                  
                                  Level
      2
                                  
                                  
                                  Level
      3
                                  
                                  
                                  June
      28, 2009Money
      market funds
                                  
                                  $
                                  123,977
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  123,977Certificates
      of deposit
                                  
                                  
                                  3,723
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,723Stock
                                  
                                  
                                  132
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  132Derivative
      instruments – assets
                                  
                                  
                                  -
                                  
                                  
                                  
                                  817
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  817Total
      assets at fair value
                                  
                                  $
                                  127,832
                                  
                                  
                                  $
                                  817
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  128,649Balance
      as ofLevel
      1
                                  
                                  
                                  Level
      2
                                  
                                  
                                  Level
      3
                                  
                                  
                                  June
      28, 2009Derivative
      instruments – liabilities
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  (1,004
                                  )
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  (1,004
                                  )Total
      liabilities at fair value
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  (1,004
                                  )
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  (1,004
                                  )
  Our
financial assets and liabilities subject to these fair value measurement
provisions as of December 31, 2008, were comprised of the following (in
thousands):




Balance
      as ofLevel
      1
                      
                      
                      Level
      2
                      
                      
                      Level
      3
                      
                      
                      December
      31, 2008Money
      market funds
                      
                      $
                      132,309
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      132,309Certificates
      of deposit
                      
                      
                      3,709
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,709Stock
                      
                      
                      156
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      156Derivative
      instruments – assets
                      
                      
                      -
                      
                      
                      
                      3,712
                      
                      
                      
                      -
                      
                      
                      
                      3,712Total
      assets at fair value
                      
                      $
                      136,174
                      
                      
                      $
                      3,712
                      
                      
                      $
                      -
                      
                      
                      $
                      139,886Balance
      as ofLevel
      1
                      
                      
                      Level
      2
                      
                      
                      Level
      3
                      
                      
                      December
      31, 2008Derivative
      instruments – liabilities
                      
                      $
                      -
                      
                      
                      $
                      (7,271
                      )
                      
                      $
                      -
                      
                      
                      $
                      (7,271
                      )Total
      liabilities at fair value
                      
                      $
                      -
                      
                      
                      $
                      (7,271
                      )
                      
                      $
                      -
                      
                      
                      $
                      (7,271
                      )
  Assets
and Liabilities Measured at Fair Value on a Nonrecurring Basis




Effective
January 1, 2009, all other nonfinancial assets and liabilities measured at fair
values in the financial statements on a nonrecurring basis are subject
to fairvalue measurements and disclosures. Nonfinancial nonrecurring
assets and liabilities included on our condensed consolidated balance sheets
include long lived assets that are measured at fair value to test for and
measure an impairment charge, when necessary. No such nonfinancial assets or
liabilities were subject to fair value measurements for the quarter ended June
28, 2009.




The
estimated fair values of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses, and payroll and related
expenses at June 28, 2009, approximate their carrying values due to their
short-term nature.


5


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)




3.
Derivative Instruments




Effective
January 1, 2009, we adopted the disclosure requirements for our derivative
instruments and hedging activities. Due to our global operations, we are exposed
to foreign currency exchange rate fluctuations in the normal course of our
businesses. Our treasury policies allow us to offset the risks associated with
the effects of certain foreign currency exposures through the purchase of
foreign exchange forward contracts.  Our policy prohibits speculation
in financial instruments for profit on the exchange rate price fluctuation. We
enter into foreign exchange forward contracts primarily to hedge the impact
of fluctuations of foreign exchange arising from intercompany transactions,
specifically for inventory purchases made by our subsidiaries that are
denominated in U.S. dollars. Our foreign exchange forward contracts are not
designated as hedging instruments, accordingly, we record these contracts at
fair value on the consolidated balance sheets, with changes in fair value
recognized in earnings in the period of change. As of June 28, 2009, the
aggregate notional amounts of the forward contracts we held for foreign
currencies were $108.3 million. These contracts do not contain any
credit-risk-related contingent features.




We
attempt to manage the counterparty risk associated with these foreign forward
exchange contracts by limiting transactions to counterparties with which we have
an established banking relationship. In addition, these contracts generally
settle in approximately 30 days. See Note 2, Fair
Value Measurements, for information on the fair value of these
contracts.




The
amount of net gain recorded in selling, general and administrative expense in
the condensed consolidated statements of operations was not material for the
three and six months ended June 28, 2009.




4.
Inventories





Inventories
were comprised of the following (in thousands):




June
      28, 2009
                
                
                December
      31, 2008Raw
      materials
                
                $
                37,533
                
                
                $
                45,908Service
      parts
                
                
                8,054
                
                
                
                8,772Work
      in process
                
                
                162
                
                
                
                269Finished
      goods
                
                
                46,599
                
                
                
                62,000Inventories
                
                $
                92,348
                
                
                $
                116,949




In
addition to the inventories described above, service parts inventories totaling
$4.1 and $4.0 million that were not expected to be sold within the next 12
months are classified as other assets as of June 28, 2009, and December 31,
2008, respectively.




5.
Provision for Income Taxes


The tax
expense for the three and six months ended June 28, 2009, reflects an effective
tax rate for continuing operations of 36.6 % and 36.4%, respectively, compared
to a U.S. statutory rate of 35%.  The effective tax rate reflects our
estimated annual effective tax rate of approximately 37% for fiscal year 2009,
which excludes the impact of discrete items.




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%.








6


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)




6.
Shares Used in Computing (Loss) Earnings per
Share




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




Three
      Months Ended
                        
                        
                        Six
      Months EndedJune
      28, 2009
                        
                        
                        June
      29, 2008
                        
                        
                        June
      28, 2009
                        
                        
                        June
      29, 2008Weighted
      average shares - basic
                        
                        
                        61,606,452
                        
                        
                        
                        61,103,147
                        
                        
                        
                        61,532,026
                        
                        
                        
                        61,030,212Dilutive
      effect of unvested restricted shares and stock options
                        
                        
                        -
                        
                        
                        
                        507,476
                        
                        
                        
                        -
                        
                        
                        
                        512,975Weighted
      average shares - diluted
                        
                        
                        61,606,452
                        
                        
                        
                        61,610,623
                        
                        
                        
                        61,532,026
                        
                        
                        
                        61,543,187
  Our
employees and directors held options to purchase 3,152,452 and 2,931,060
shares of our common stock for the three and six months ended June 28,
2009, respectively, and 1,393,889 and 1,458,477 shares of our common stock for
the three and six months ended June 29, 2008, respectively, that were not
included in weighted average shares diluted calculation because they were
anti-dilutive to the diluted (loss) earnings per share computation. These
options would 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.




7.
Equity




A summary
of share-based compensation expense related to employee stock option, Restricted
Stock Units (“RSU”) and Performance Stock Units (“PSU”) for the three and six
months ended June 28, 2009 (in thousands) was as follows:




Three
      Months Ended June 28, 2009
                    
                    
                    Six
      Months Ended June 28, 2009Stock
      based compensation expense:Cost
      of revenue
                    
                    $
                    42
                    
                    
                    $
                    105Selling,
      general and administrative
                    
                    
                    1,965
                    
                    
                    
                    3,783Total
                    
                    $
                    2,007
                    
                    
                    $
                    3,888
  For the
three and six months ended June 28, 2009, we granted 580,109 and 689,109
options, respectively, to employees with an average fair value of $4.88 and
$4.89 per option, respectively, which will vest annually in substantially
equal quantities over four years from the date of grant. For the three
and six months ended June 28, 2009, we granted 85,560 options to our directors
with a fair value of $5.48 per option, which will vest quarterly over one year
from the date of grant. The Black-Scholes assumptions used for these
calculations were as follows:




Stock
      Options Granted to Employees
                    
                    Stock
      Options Granted to DirectorsThree
      Months Ended June 28, 2009
                    
                    
                    Six
      Months Ended June 28, 2009
                    
                    
                    Three
      and Six Months Ended June 28, 2009Fair
      value assumptions:Expected
      term in years
                    
                    
                    4.99
                    
                    
                    
                    4.95
                    
                    
                    
                    6.45Expected
      volatility
                    
                    
                    45.20
                    %
                    
                    
                    46.39
                    %
                    
                    
                    46.86
                    %Expected
      dividend yield
                    
                    
                    0.00
                    %
                    
                    
                    0.00
                    %
                    
                    
                    0.00
                    %Risk-free
      interest rate
                    
                    
                    2.39
                    %
                    
                    
                    2.28
                    %
                    
                    
                    2.38
                    %


7


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


7.
Equity (continued)


Our
accumulated other comprehensive loss was comprised of the following (in
thousands):




June
      28, 2009
                    
                    
                    December
      31, 2008Foreign
      currency translation adjustment, net of tax
                    
                    $
                    1,545
                    
                    
                    $
                    (792
                    )Unamortized
      benefit plan costs, net of tax
                    
                    
                    (24,379
                    )
                    
                    
                    (49,645
                    )Unrealized
      loss on securities, net of tax
                    
                    
                    (335
                    )
                    
                    
                    (319
                    )Accumulated
      other comprehensive loss
                    
                    $
                    (23,169
                    )
                    
                    $
                    (50,756
                    )


Other
comprehensive income for the three and six months ended June 28, 2009, and
June 29, 2008, was as follows (in thousands):




Three
      Months Ended
                        
                        Six
      Months EndedJune
      28, 2009
                        
                        
                        June
      29, 2008
                        
                        
                        June
      28, 2009
                        
                        
                        June
      29, 2008Net
      (loss) earnings
                        
                        $
                        (6,542
                        )
                        
                        $
                        7,722
                        
                        
                        $
                        (16,942
                        )
                        
                        $
                        15,428Other
      comprehensive income:Change
      in equity due to foreign currency translation adjustments, net of
      tax
                        
                        
                        5,906
                        
                        
                        
                        672
                        
                        
                        
                        2,337
                        
                        
                        
                        5,427Unrealized
      gain (loss) on investment, net of tax
                        
                        
                        40
                        
                        
                        
                        (54
                        )
                        
                        
                        (16
                        )
                        
                        
                        (118
                        )Remeasurement
      and amortization of benefit plan costs (credits), net of
    tax
                        
                        
                        24,558
                        
                        
                        
                        (190
                        )
                        
                        
                        25,266
                        
                        
                        
                        (201
                        )Other
      comprehensive income
                        
                        $
                        23,962
                        
                        
                        $
                        8,150
                        
                        
                        $
                        10,645
                        
                        
                        $
                        20,536





8. Segment
Reporting




Our
reportable segments are comprised of products and services. The product
segment generates revenue from the design, development, manufacture, sale and
resale of wired and wireless automated identification and data collection
(“AIDC”) products, mobile computing products, wired and wireless bar code
printers, label media and radio frequency identification (“RFID”) products and
license fees. The service segment generates revenue from customer support,
product maintenance and other services related to the products and 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 allocations are primarily measured by sales and gross profit. All other
earnings, costs and expenses are aggregated and reported on a consolidated
basis.




One
distributor, ScanSource Inc., accounted for more than 10% of our revenues. Total
sales to this distributor were $31.4 and $52.0 million for the three and
six months ended June 28, 2009, respectively, and $24.3 and $49.1 million
for the three and six months ended June 29, 2008, respectively.




The
following table sets forth our revenues and gross profit by reportable segment
(in thousands):




Three
      Months Ended
                            
                            
                            Six
      Months EndedJune
      28, 2009
                            
                            
                            June
      29, 2008
                            
                            
                            June
      28, 2009
                            
                            
                            June
      29, 2008Revenues:Product
                            
                            $
                            123,339
                            
                            
                            $
                            180,455
                            
                            
                            $
                            252,002
                            
                            
                            $
                            360,028Service
                            
                            
                            34,376
                            
                            
                            
                            37,806
                            
                            
                            
                            68,286
                            
                            
                            
                            75,011Total
                            
                            $
                            157,715
                            
                            
                            $
                            218,261
                            
                            
                            $
                            320,288
                            
                            
                            $
                            435,039Gross
      profit:Product
                            
                            $
                            42,412
                            
                            
                            $
                            72,266
                            
                            
                            $
                            87,709
                            
                            
                            $
                            144,134Service
                            
                            
                            14,662
                            
                            
                            
                            16,652
                            
                            
                            
                            28,435
                            
                            
                            
                            32,152Total
                            
                            $
                            57,074
                            
                            
                            $
                            88,918
                            
                            
                            $
                            116,144
                            
                            
                            $
                            176,286





8


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)




8. Segment
Reporting (continued)


The
following table sets forth our revenues by product lines (in
thousands):




Three
      Months Ended
                      
                      
                      Six
      Months EndedJune
      28, 2009
                      
                      
                      June
      29, 2008
                      
                      
                      June
      28, 2009
                      
                      
                      June
      29, 2008Revenues:Systems
      and solutions
                      
                      $
                      86,249
                      
                      
                      $
                      129,235
                      
                      
                      $
                      179,387
                      
                      
                      $
                      255,201Printer
      and media
                      
                      
                      37,090
                      
                      
                      
                      51,220
                      
                      
                      
                      72,615
                      
                      
                      
                      104,827Service
                      
                      
                      34,376
                      
                      
                      
                      37,806
                      
                      
                      
                      68,286
                      
                      
                      
                      75,011Total
                      
                      $
                      157,715
                      
                      
                      $
                      218,261
                      
                      
                      $
                      320,288
                      
                      
                      $
                      435,039




9. Commitments
and Contingencies The following table indicates the change in our warranty accrual included in
current liabilities (in thousands):




June
      28, 2009
                  
                  
                  December
      31, 2008Beginning
      balance
                  
                  $
                  4,220
                  
                  
                  $
                  4,305Payments
      or parts usage
                  
                  
                  (2,094
                  )
                  
                  
                  (2,402
                  )Additional
      provision
                  
                  
                  1,110
                  
                  
                  
                  2,317Ending
      balance
                  
                  $
                  3,236
                  
                  
                  $
                  4,220




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.




We
currently, and from time to time, are subject to claims and lawsuits arising in
the ordinary course of business. 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.




10. Pension
and Other Postretirement Benefit Plans




The
components of net pension and postretirement periodic benefit cost (income) for
the three and six months ended June 28, 2009, and June 29, 2008, were as follows
(in thousands):




U.S.
      Defined Benefit Plans
                    
                    
                    Non
      U.S. Defined Benefit Plans
                    
                    
                    Other
      Postretirement Benefit Plans2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Three
      Months Ended June 28, 2009, and June 29, 2008Service
      cost
                    
                    $
                    241
                    
                    
                    $
                    366
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Interest
      cost
                    
                    
                    2,975
                    
                    
                    
                    2,705
                    
                    
                    
                    426
                    
                    
                    
                    666
                    
                    
                    
                    64
                    
                    
                    
                    44Expected
      return on plan assets
                    
                    
                    (2,703
                    )
                    
                    
                    (2,871
                    )
                    
                    
                    (407
                    )
                    
                    
                    (903
                    )
                    
                    
                    -
                    
                    
                    
                    -Amortization
      and deferrals:Transition
      asset
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (31
                    )
                    
                    
                    (43
                    )
                    
                    
                    -
                    
                    
                    
                    -Actuarial
      loss
                    
                    
                    339
                    
                    
                    
                    349
                    
                    
                    
                    9
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Prior
      service cost
                    
                    
                    (246
                    )
                    
                    
                    144
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Curtailment
      gain
                    
                    
                    (475
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      pension and postretirement periodic benefit cost (income)
                    
                    $
                    131
                    
                    
                    $
                    693
                    
                    
                    $
                    (3
                    )
                    
                    $
                    (280
                    )
                    
                    $
                    64
                    
                    
                    $
                    44
   9


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)




10. Pension
and Other Postretirement Benefit Plans (continued)




U.S.
      Defined Benefit Plans
                            
                            
                            Non
      U.S. Defined Benefit Plans
                            
                            
                            Other
      Postretirement Benefit Plans2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008Six
      Months Ended June 28, 2009, and June 29, 2008Service
      cost
                            
                            $
                            569
                            
                            
                            $
                            733
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Interest
      cost
                            
                            
                            5,912
                            
                            
                            
                            5,410
                            
                            
                            
                            853
                            
                            
                            
                            1,331
                            
                            
                            
                            128
                            
                            
                            
                            88Expected
      return on plan assets
                            
                            
                            (5,397
                            )
                            
                            
                            (5,742
                            )
                            
                            
                            (815
                            )
                            
                            
                            (1,807
                            )
                            
                            
                            -
                            
                            
                            
                            -Amortization
      and deferrals:Transition
      asset
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (61
                            )
                            
                            
                            (85
                            )
                            
                            
                            -
                            
                            
                            
                            -Actuarial
      loss
                            
                            
                            1,291
                            
                            
                            
                            697
                            
                            
                            
                            17
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Prior
      service cost
                            
                            
                            (103
                            )
                            
                            
                            289
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Curtailment
      gain
                            
                            
                            (475
                            )
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Net
      pension and postretirement periodic benefit cost (income)
                            
                            $
                            1,797
                            
                            
                            $
                            1,387
                            
                            
                            $
                            (6
                            )
                            
                            $
                            (561
                            )
                            
                            $
                            128
                            
                            
                            $
                            88
  Our
business restructuring plan in April 2009 (see Note 11, Restructuring
Charges) resulted in a reduction of our workforce and the curtailment of
pension benefits to the terminated employees who were participants in the U.S.
pension plans. The curtailment required a new measurement of the liability
to determine the gain or loss on curtailment. Additionally, the measurement
resulted in a decrease in pension liability and a decrease in losses as a
component of accumulated other comprehensive income of $36.9 million as of June
28, 2009. The curtailment gain recorded in our condensed consolidated
Statements of Operations was $0.5 million for the three and six months ended
June 28, 2009.




During the
three months ended June 28, 2009, we contributed approximately $2.7 million
to our pension and other postretirement benefit plans, comprising $1.6 million
in benefits paid pertaining to funded and unfunded U.S. defined benefit plans,
$0.6 million in matching contributions to our 401(k) plan, and $0.5 million in
contributions to our foreign pension plans.


During
the six months ended June 28, 2009, we contributed approximately $6.0 million to
our pension and other postretirement benefit plans, comprising $3.7 million in
benefits paid pertaining to funded and unfunded U.S. defined benefit plans, $1.3
million in matching contributions to our 401(k) plan, and $1.0 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 28, 2009. We expect to contribute an additional $6.3
million to these plans during the remainder of 2009, of which $3.7 million
relates to benefit payments on our funded and unfunded U.S. defined benefit
plans, $1.4 million in matching contributions to our 401(k) plan, $1.0
million in contributions to our foreign pension plans and $0.2 million in
benefit payments pertaining to our other postretirement benefit
plans.




11. Restructuring
Charges


2008
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 relocated
the final assembly of our product lines from Everett, Washington, to Venture
Corporation Limited, a global electronics services provider. As part of the
plan, we also consolidated two U.S. service depots into existing locations in
Charlotte, North Carolina and Monterey, Mexico and transferred our on-site field
service repair to a third party supplier.




We
commenced implementation of the plan in the third quarter of 2008, and it was
fully implemented as of June 28, 2009. All severance and other
periodic transitional costs were cash expenditures. All restructuring costs
related to this action were accrued in 2008.


10


INTERMEC,
INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)




11. Restructuring
Charges (continued)




2009
Restructuring Charges:




In
January 2009, we committed to a business restructuring plan intended to
reorganize our sales function and to reduce our operating cost structure and
improve efficiency. The total
restructuring costs for this plan are expected to be approximately $10.1
million, including employee termination costs of approximately $9.1 million, and
$1.0 million of other transitional costs. We recorded most of
the restructuring charge in the first two quarters of 2009, and the
remainder will be recorded through the first quarter of 2010. We anticipate that
substantially all of the severance related and periodic transitional costs will
be cash expenditures.




In April
2009, we committed to a business restructuring plan primarily consisting of a
reduction of our work force. The total
restructuring costs for this plan are expected to be approximately $15.0
million, including employee termination costs of approximately $12.0
million, and approximately $3.0 million of other transitional costs. We recorded
some restructuring charges in the second quarter of 2009, and expected to
record the remainder through the first quarter of 2010. We anticipate that
substantially all of the severance related and periodic transitional costs will
be cash expenditures.




The
following table displays the restructuring charges incurred by business segment
(in millions):




Restructuring
      charges recorded forSegment
                          
                          Total
      charges for 2008 and 2009 restructuring plans expected to be
      incurred
                          
                          
                          Three
      Months Ended June 28, 2009
                          
                          
                          Six
      Months Ended June 28, 2009
                          
                          
                          Total
      restructuring charges incurred to dateProduct
                          
                          $
                          5.2
                          
                          
                          $
                          1.1
                          
                          
                          $
                          1.3
                          
                          
                          $
                          3.6Service
                          
                          
                          2.4
                          
                          
                          
                          -
                          
                          
                          
                          1.0
                          
                          
                          
                          2.2Unallocated
                          
                          
                          22.5
                          
                          
                          
                          6.2
                          
                          
                          
                          13.6
                          
                          
                          
                          15.9Total
                          
                          $
                          30.1
                          
                          
                          $
                          7.3
                          
                          
                          $
                          15.9
                          
                          
                          $
                          21.7


The
reconciliation of accrued restructuring charges is summarized in the table below
(in millions):




Accrued
      employee termination costs per contract
                        
                        
                        Accrued
      one-time employee termination costs
                        
                        
                        Accrued
      total employee termination costs
                        
                        
                        Accrued
      other costs
                        
                        
                        Total
      accrued restructuring chargesBalance
      at December 31, 2008
                        
                        $
                        1.2
                        
                        
                        $
                        -
                        
                        
                        $
                        1.2
                        
                        
                        $
                        0.1
                        
                        
                        $
                        1.32009
      restructuring charges
                        
                        
                        8.4
                        
                        
                        
                        6.9
                        
                        
                        
                        15.3
                        
                        
                        
                        0.6
                        
                        
                        
                        15.9Utilization
      of 2008 restructuring plan
                        
                        
                        (0.8
                        )
                        
                        
                        -
                        
                        
                        
                        (0.8
                        )
                        
                        
                        -
                        
                        
                        
                        (0.8
                        )Utilization
      of 2009 restructuring plans
                        
                        
                        (4.9
                        )
                        
                        
                        (1.8
                        )
                        
                        
                        (6.7
                        )
                        
                        
                        (0.7
                        )
                        
                        
                        (7.4
                        )Balance
      at June 28, 2009
                        
                        $
                        3.9
                        
                        
                        $
                        5.1
                        
                        
                        $
                        9.0
                        
                        
                        $
                        -
                        
                        
                        $
                        9.0






11


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. These factors include but are not
limited to our ability to maintain or to improve the revenues and profits of our
continuing operations, maintain or reduce expenses, maintain or improve
operational efficiency, use our investment in research and development to
generate future revenue, maintain or improve year-over-year growth in the
revenues and profits of our continuing operations and the other factors
described in Part I, “Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and in Part II, “Item 1A, Risk Factors,”
of this filing. 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 report
on Form 10-Q.




Such
forward-looking statements involve and are dependent upon certain risks and
uncertainties. When used in this document and in documents it refers to, the
words “anticipate,” “believe,” “will,” “intend,” “project” and “expect” and
similar expressions as they relate to us or our management are intended to
identify such forward-looking statements.




Forward-looking
statements 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 discussed 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 Part I, “Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations,”
and Part II, “Item 1A. Risk Factors,” of this filing, 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, 2008, which discuss risk factors associated with our
business.




Overview




Intermec, Inc. (“Intermec”,
“us”, “we”, “our”) designs, develops, integrates, sells, resells and services
wired and wireless  automated identification and data collection (“AIDC”)
products and provides related services. Our products include mobile computing
products, bar code scanners, radio frequency identification (“RFID”) products,
wired and wireless bar code printers and label media products. These products
and services allow customers to identify, track and manage their assets and
other resources in ways that improve the efficiency and effectiveness of their
business operations.  Our products are designed to withstand mobile
use and rugged warehouse and field conditions.




Our
products are sold globally for field mobility applications such as asset
visibility and management, direct store delivery, maintenance and repair,
in-transit visibility, routing and navigation, and telematics. Our products are
also sold globally for in-premise applications such as asset visibility, freight
yard operations, inventory management, warehouse operations, and work-in-process
management.




The key
elements of our strategy are to target high growth opportunities in selected
application markets; focus on developing and selling differentiated new products
and services; emphasize channel fulfillment; pursue geographic expansion
opportunities; and continue the transformation of our supply chain and our other
efficiency initiatives.




Our
financial reporting currency is the U.S. Dollar, and changes in exchange
rates can significantly affect our financial trends and reported results. 
Our consolidated revenues and operating expenses are more vulnerable to the
fluctuations of exchange rates; however, our cost of revenues is
less affected by changes in exchange rates as it is primarily denominated
in U.S. dollars. If the U.S. Dollar weakens year-over-year relative to
currencies in our international locations, our consolidated revenues and
operating expenses will be higher than if currencies had remained constant.
If the U.S. Dollar strengthens year-over-year relative to currencies in our
international locations, our consolidated revenues and operating expenses
will be lower than if currencies had remained constant. We believe it is
important to evaluate our operating results and growth rates before and after
the effect of currency changes.


12


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


Results
of Operations




The
following discussion compares our results of operations for the three and six
months ended June 28, 2009, and June 29, 2008.




Results
of operations and percentage of revenues were as follows (in
millions):




Three
      Months Ended
                                                                            
                                                                            Six
      Months EndedJune
      28, 2009
                                                                            
                                                                            
                                                                            June
      29, 2008
                                                                            
                                                                            
                                                                            June
      28, 2009
                                                                            
                                                                            
                                                                            June
      29, 2008Amounts
                                                                            
                                                                            
                                                                            Amounts
                                                                            
                                                                            
                                                                            Amounts
                                                                            
                                                                            
                                                                            AmountsRevenues
                                                                            
                                                                            $
                                                                            157.7
                                                                            
                                                                            
                                                                            $
                                                                            218.3
                                                                            
                                                                            
                                                                            $
                                                                            320.3
                                                                            
                                                                            
                                                                            $
                                                                            435.0Costs
      and expenses:Cost
      of revenues
                                                                            
                                                                            
                                                                            100.6
                                                                            
                                                                            
                                                                            
                                                                            129.4
                                                                            
                                                                            
                                                                            
                                                                            204.1
                                                                            
                                                                            
                                                                            
                                                                            258.8Research
      and development
                                                                            
                                                                            
                                                                            15.4
                                                                            
                                                                            
                                                                            
                                                                            17.8
                                                                            
                                                                            
                                                                            
                                                                            31.3
                                                                            
                                                                            
                                                                            
                                                                            35.0Selling,
      general and administrative
                                                                            
                                                                            
                                                                            44.7
                                                                            
                                                                            
                                                                            
                                                                            58.8
                                                                            
                                                                            
                                                                            
                                                                            95.7
                                                                            
                                                                            
                                                                            
                                                                            116.8Restructuring
      charges
                                                                            
                                                                            
                                                                            7.3
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            15.9
                                                                            
                                                                            
                                                                            
                                                                            -Flood
      related charges
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            1.1
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            1.1Total
      costs and expenses
                                                                            
                                                                            
                                                                            168.0
                                                                            
                                                                            
                                                                            
                                                                            207.1
                                                                            
                                                                            
                                                                            
                                                                            347.0
                                                                            
                                                                            
                                                                            
                                                                            411.7Operating
      (loss)  profit
                                                                            
                                                                            
                                                                            (10.3
                                                                            )
                                                                            
                                                                            
                                                                            11.2
                                                                            
                                                                            
                                                                            
                                                                            (26.7
                                                                            )
                                                                            
                                                                            
                                                                            23.3Interest,
      net
                                                                            
                                                                            
                                                                            0.0
                                                                            
                                                                            
                                                                            
                                                                            0.8
                                                                            
                                                                            
                                                                            
                                                                            0.1
                                                                            
                                                                            
                                                                            
                                                                            0.7(Loss)
      earnings before income taxes
                                                                            
                                                                            
                                                                            (10.3
                                                                            )
                                                                            
                                                                            
                                                                            12.0
                                                                            
                                                                            
                                                                            
                                                                            (26.6
                                                                            )
                                                                            
                                                                            
                                                                            24.0Income
      tax (benefit) expense
                                                                            
                                                                            
                                                                            (3.8
                                                                            )
                                                                            
                                                                            
                                                                            4.3
                                                                            
                                                                            
                                                                            
                                                                            (9.7
                                                                            )
                                                                            
                                                                            
                                                                            8.6Net
      (loss) earnings
                                                                            
                                                                            $
                                                                            (6.5
                                                                            )
                                                                            
                                                                            $
                                                                            7.7
                                                                            
                                                                            
                                                                            $
                                                                            (16.9
                                                                            )
                                                                            
                                                                            $
                                                                            15.4Basis
      (loss) earnings per share
                                                                            
                                                                            $
                                                                            (0.11
                                                                            )
                                                                            
                                                                            $
                                                                            0.13
                                                                            
                                                                            
                                                                            $
                                                                            (0.28
                                                                            )
                                                                            
                                                                            $
                                                                            0.25Diluted
      (loss) earnings per share
                                                                            
                                                                            $
                                                                            (0.11
                                                                            )
                                                                            
                                                                            $
                                                                            0.13
                                                                            
                                                                            
                                                                            $
                                                                            (0.28
                                                                            )
                                                                            
                                                                            $
                                                                            0.25Percent
      of Revenues
                                                                            
                                                                            
                                                                            Percent
      of Revenues
                                                                            
                                                                            
                                                                            Percent
      of Revenues
                                                                            
                                                                            
                                                                            Percent
      of RevenuesRevenuesCosts
      and expenses:Cost
      of revenues
                                                                            
                                                                            
                                                                            63.8
                                                                            %
                                                                            
                                                                            
                                                                            59.3
                                                                            %
                                                                            
                                                                            
                                                                            63.7
                                                                            %
                                                                            
                                                                            
                                                                            59.5
                                                                            %Research
      and development
                                                                            
                                                                            
                                                                            9.8
                                                                            %
                                                                            
                                                                            
                                                                            8.2
                                                                            %
                                                                            
                                                                            
                                                                            9.8
                                                                            %
                                                                            
                                                                            
                                                                            8.0
                                                                            %Selling,
      general and administrative
                                                                            
                                                                            
                                                                            28.3
                                                                            %
                                                                            
                                                                            
                                                                            26.9
                                                                            %
                                                                            
                                                                            
                                                                            29.9
                                                                            %
                                                                            
                                                                            
                                                                            26.9
                                                                            %Restructuring
      charges
                                                                            
                                                                            
                                                                            4.6
                                                                            %
                                                                            
                                                                            
                                                                            0.0
                                                                            %
                                                                            
                                                                            
                                                                            4.9
                                                                            %
                                                                            
                                                                            
                                                                            0.0
                                                                            %Flood
      related charges
                                                                            
                                                                            
                                                                            0.0
                                                                            %
                                                                            
                                                                            
                                                                            0.5
                                                                            %
                                                                            
                                                                            
                                                                            0.0
                                                                            %
                                                                            
                                                                            
                                                                            0.2
                                                                            %Total
      costs and expenses
                                                                            
                                                                            
                                                                            106.5
                                                                            %
                                                                            
                                                                            
                                                                            94.9
                                                                            %
                                                                            
                                                                            
                                                                            108.3
                                                                            %
                                                                            
                                                                            
                                                                            94.6
                                                                            %Operating
      (loss)  profit
                                                                            
                                                                            
                                                                            -6.5
                                                                            %
                                                                            
                                                                            
                                                                            5.1
                                                                            %
                                                                            
                                                                            
                                                                            -8.3
                                                                            %
                                                                            
                                                                            
                                                                            5.4
                                                                            %Interest,
      net
                                                                            
                                                                            
                                                                            0.0
                                                                            %
                                                                            
                                                                            
                                                                            0.4
                                                                            %
                                                                            
                                                                            
                                                                            0.0
                                                                            %
                                                                            
                                                                            
                                                                            0.1
                                                                            %(Loss)
      earnings before income taxes
                                                                            
                                                                            
                                                                            -6.5
                                                                            %
                                                                            
                                                                            
                                                                            5.5
                                                                            %
                                                                            
                                                                            
                                                                            -8.3
                                                                            %
                                                                            
                                                                            
                                                                            5.5
                                                                            %Income
      tax (benefit) expense
                                                                            
                                                                            
                                                                            -2.4
                                                                            %
                                                                            
                                                                            
                                                                            2.0
                                                                            %
                                                                            
                                                                            
                                                                            -3.0
                                                                            %
                                                                            
                                                                            
                                                                            2.0
                                                                            %Net
      (loss) earnings
                                                                            
                                                                            
                                                                            -4.1
                                                                            %
                                                                            
                                                                            
                                                                            3.5
                                                                            %
                                                                            
                                                                            
                                                                            -5.3
                                                                            %
                                                                            
                                                                            
                                                                            3.5
                                                                            %


13


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 for the
three and six months ended June 28, 2009, and June 29, 2008, as well as the same
three and six months revenue changes were as follows (in millions):




Three
      Months EndedJune
      28, 2009
                                                            
                                                            
                                                            Percent
      of Revenues
                                                            
                                                            
                                                            June
      29, 2008
                                                            
                                                            
                                                            Percent
      of Revenues
                                                            
                                                            
                                                            Change
                                                            
                                                            
                                                            Percentage
      ChangeRevenues
      by category:Systems
      and solutions
                                                            
                                                            $
                                                            86.2
                                                            
                                                            
                                                            
                                                            54.7
                                                            %
                                                            
                                                            $
                                                            129.3
                                                            
                                                            
                                                            
                                                            59.2
                                                            %
                                                            
                                                            $
                                                            (43.1
                                                            )
                                                            
                                                            
                                                            -33.3
                                                            %Printer
      and media
                                                            
                                                            
                                                            37.1
                                                            
                                                            
                                                            
                                                            23.5
                                                            %
                                                            
                                                            
                                                            51.2
                                                            
                                                            
                                                            
                                                            23.5
                                                            %
                                                            
                                                            
                                                            (14.1
                                                            )
                                                            
                                                            
                                                            -27.5
                                                            %Service
                                                            
                                                            
                                                            34.4
                                                            
                                                            
                                                            
                                                            21.8
                                                            %
                                                            
                                                            
                                                            37.8
                                                            
                                                            
                                                            
                                                            17.3
                                                            %
                                                            
                                                            
                                                            (3.4
                                                            )
                                                            
                                                            
                                                            -9.0
                                                            %Total
      revenues
                                                            
                                                            $
                                                            157.7
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            218.3
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            (60.6
                                                            )
                                                            
                                                            
                                                            -27.8
                                                            %Revenues
      by geographic region:North
      America
                                                            
                                                            $
                                                            88.4
                                                            
                                                            
                                                            
                                                            56.1
                                                            %
                                                            
                                                            $
                                                            112.6
                                                            
                                                            
                                                            
                                                            51.6
                                                            %
                                                            
                                                            $
                                                            (24.2
                                                            )
                                                            
                                                            
                                                            -21.5
                                                            %Europe,
      Middle East and Africa(EMEA)
                                                            
                                                            
                                                            48.5
                                                            
                                                            
                                                            
                                                            30.7
                                                            %
                                                            
                                                            
                                                            76.1
                                                            
                                                            
                                                            
                                                            34.9
                                                            %
                                                            
                                                            
                                                            (27.6
                                                            )
                                                            
                                                            
                                                            -36.3
                                                            %All
      others
                                                            
                                                            
                                                            20.8
                                                            
                                                            
                                                            
                                                            13.2
                                                            %
                                                            
                                                            
                                                            29.6
                                                            
                                                            
                                                            
                                                            13.6
                                                            %
                                                            
                                                            
                                                            (8.8
                                                            )
                                                            
                                                            
                                                            -29.7
                                                            %Total
      revenues
                                                            
                                                            $
                                                            157.7
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            218.3
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            (60.6
                                                            )
                                                            
                                                            
                                                            -27.8
                                                            %
  The
decrease in quarterly revenue of $60.6 million, or 27.8%, was attributable to a
$57.2 million decrease in product revenue and a $3.4 million decrease in service
revenue. The decrease in product revenue of $57.2 million, or 31.7%, was
primarily due to a $43.1 million decrease in systems and solutions and a $14.1
million decrease in printer and media products. The reduction in sales revenues
in systems and solutions and printer and media products was primarily driven by
reduced product volumes and pricing pressure due to the economic and
competitive environment.


The
decrease in quarterly service revenues of $3.4 million, or 9.0%, was primarily
due to a decline of service revenues from our EMEA region.
  Geographically,
revenues in North America and EMEA decreased $24.2 million, or 21.5%, and $27.6
million, or 36.3%, respectively, over the corresponding prior-year
period.  The changes in foreign currency conversion rates unfavorably
impacted EMEA revenue by $9.0 million, or 12 percentage points, as compared to
the prior-year period. Across all regions, the unfavorable impact of foreign
currency rates on total revenue was $10.5 million, or 5 percentage
points, as compared to the prior-year period.
















14


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




Six
      Months EndedJune
      28, 2009
                                                            
                                                            
                                                            Percent
      of Revenues
                                                            
                                                            
                                                            June
      29, 2008
                                                            
                                                            
                                                            Percent
      of Revenues
                                                            
                                                            
                                                            Change
                                                            
                                                            
                                                            Percentage
      ChangeRevenues
      by category:Systems
      and solutions
                                                            
                                                            $
                                                            179.4
                                                            
                                                            
                                                            
                                                            56.0
                                                            %
                                                            
                                                            $
                                                            255.2
                                                            
                                                            
                                                            
                                                            58.7
                                                            %
                                                            
                                                            $
                                                            (75.8
                                                            )
                                                            
                                                            
                                                            -29.7
                                                            %Printer
      and media
                                                            
                                                            
                                                            72.6
                                                            
                                                            
                                                            
                                                            22.7
                                                            %
                                                            
                                                            
                                                            104.8
                                                            
                                                            
                                                            
                                                            24.1
                                                            %
                                                            
                                                            
                                                            (32.2
                                                            )
                                                            
                                                            
                                                            -30.7
                                                            %Service
                                                            
                                                            
                                                            68.3
                                                            
                                                            
                                                            
                                                            21.3
                                                            %
                                                            
                                                            
                                                            75.0
                                                            
                                                            
                                                            
                                                            17.2
                                                            %
                                                            
                                                            
                                                            (6.7
                                                            )
                                                            
                                                            
                                                            -8.9
                                                            %Total
      revenues
                                                            
                                                            $
                                                            320.3
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            435.0
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            (114.7
                                                            )
                                                            
                                                            
                                                            -26.4
                                                            %Revenues
      by geographic region:North
      America
                                                            
                                                            $
                                                            192.0
                                                            
                                                            
                                                            
                                                            59.9
                                                            %
                                                            
                                                            $
                                                            226.7
                                                            
                                                            
                                                            
                                                            52.1
                                                            %
                                                            
                                                            $
                                                            (34.7
                                                            )
                                                            
                                                            
                                                            -15.3
                                                            %Europe,
      Middle East and Africa(EMEA)
                                                            
                                                            
                                                            87.5
                                                            
                                                            
                                                            
                                                            27.3
                                                            %
                                                            
                                                            
                                                            154.0
                                                            
                                                            
                                                            
                                                            35.4
                                                            %
                                                            
                                                            
                                                            (66.5
                                                            )
                                                            
                                                            
                                                            -43.2
                                                            %All
      others
                                                            
                                                            
                                                            40.8
                                                            
                                                            
                                                            
                                                            12.8
                                                            %
                                                            
                                                            
                                                            54.3
                                                            
                                                            
                                                            
                                                            12.5
                                                            %
                                                            
                                                            
                                                            (13.5
                                                            )
                                                            
                                                            
                                                            -24.9
                                                            %Total
      revenues
                                                            
                                                            $
                                                            320.3
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            435.0
                                                            
                                                            
                                                            
                                                            100.0
                                                            %
                                                            
                                                            $
                                                            (114.7
                                                            )
                                                            
                                                            
                                                            -26.4
                                                            %
  Revenue
for the six months ended June 28, 2009, decreased $114.7 million or 26.4%,
primarily due to a $108.0 million, or 30.0%, decrease in product revenues. The
decrease in product revenues was due to a $75.8 million decrease in systems and
solution products and a $32.2 million decrease in printer and media
products.  The decline of sales revenues in systems and solutions and
printer and media products was mainly driven by reduced product volumes and
pricing pressure due to the economic and competitive
environment.
  The
decrease in six month service revenues of $6.7 million, or 8.9%, was primarily
attributable to a decrease of service revenues from our EMEA
region.
  Geographically,
revenues in North America and EMEA decreased $34.7 million, or 15.3%, and $66.5
million, or 43.2%, respectively, over the corresponding prior-year period. The
changes in foreign currency conversion rates unfavorably impacted EMEA revenue
by $16.7 million, or 11 percentage points, as compared to
the prior-year period. Across all regions, the unfavorable impact of
foreign currency rates on total revenue was $20.8 million, or 5 percentage
points, as compared to the prior-year period.


15


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 28, 2009, and June 29, 2008, were as follows (in millions):




Three
      Months Ended
                                                                
                                                                Six
      Months EndedJune
      28, 2009
                                                                
                                                                June
      29, 2008
                                                                
                                                                June
      28, 2009
                                                                
                                                                June
      29, 2008Gross
      Profit
                                                                
                                                                
                                                                Gross
      Margin
                                                                
                                                                
                                                                Gross
      Profit
                                                                
                                                                
                                                                Gross
      Margin
                                                                
                                                                
                                                                Gross
      Profit
                                                                
                                                                
                                                                Gross
      Margin
                                                                
                                                                
                                                                Gross
      Profit
                                                                
                                                                
                                                                Gross
      MarginProduct
                                                                
                                                                $
                                                                42.4
                                                                
                                                                
                                                                
                                                                34.4
                                                                %
                                                                
                                                                $
                                                                72.3
                                                                
                                                                
                                                                
                                                                40.0
                                                                %
                                                                
                                                                $
                                                                87.7
                                                                
                                                                
                                                                
                                                                34.8
                                                                %
                                                                
                                                                $
                                                                144.1
                                                                
                                                                
                                                                
                                                                40.0
                                                                %Service
                                                                
                                                                
                                                                14.7
                                                                
                                                                
                                                                
                                                                42.7
                                                                %
                                                                
                                                                
                                                                16.6
                                                                
                                                                
                                                                
                                                                44.0
                                                                %
                                                                
                                                                
                                                                28.4
                                                                
                                                                
                                                                
                                                                41.6
                                                                %
                                                                
                                                                
                                                                32.2
                                                                
                                                                
                                                                
                                                                42.9
                                                                %Total
      gross profitand
      gross margin
                                                                
                                                                $
                                                                57.1
                                                                
                                                                
                                                                
                                                                36.2
                                                                %
                                                                
                                                                $
                                                                88.9
                                                                
                                                                
                                                                
                                                                40.7
                                                                %
                                                                
                                                                $
                                                                116.1
                                                                
                                                                
                                                                
                                                                36.3
                                                                %
                                                                
                                                                $
                                                                176.3
                                                                
                                                                
                                                                
                                                                40.5
                                                                %




The total
gross profit for the three and six months ended June 28, 2009, decreased by
$31.8 million and $60.2 million, respectively, compared to the corresponding
prior-year periods. The decrease in total gross profit was primarily due to a
$29.9 million, or 41.4%, and a $56.4 million, or 39.1%, decrease in gross profit
for product for the three and six months ended June 28, 2009, respectively,
compared to the corresponding prior-year periods. The decrease in product gross
profit was primarily due to reduced product volumes, competitive pricing in
the current economic environment, impact of currency translation and a less
favorable product and geographic related mix.
  Product
gross margin decreased 5.6% and 5.2% for the three and six months ended June 28,
2009, respectively, compared to the corresponding prior-year periods. The
decrease in product gross margin was primarily driven by lower product
volumes, competitive pricing in the current economic environment, the
impact of currency particularly in EMEA, and a less favorable product and
geographic related mix.
  The
decrease in service gross profit and gross margin from the corresponding prior
year periods was mainly attributable to lower volume.


Operating
Expenses and Interest Expense (in millions)





Three
      Months EndedJune
      28, 2009
                
                
                June
      29, 2008
                
                
                ChangeResearch
      and development
                
                $
                15.4
                
                
                $
                17.8
                
                
                $
                (2.4
                )Selling,
      general and administrative
                
                
                44.7
                
                
                
                58.8
                
                
                
                (14.1
                )Restructuring
      charges
                
                
                7.3
                
                
                
                -
                
                
                
                7.3Flood
      related charges
                
                
                -
                
                
                
                1.1
                
                
                
                (1.1
                )Interest,
      net
                
                
                -
                
                
                
                0.8
                
                
                
                (0.8
                )





Six
      Months EndedJune
      28, 2009
                
                
                June
      29, 2008
                
                
                ChangeResearch
      and development
                
                $
                31.3
                
                
                $
                35.0
                
                
                
                (3.7
                )Selling,
      general and administrative
                
                
                95.7
                
                
                
                116.8
                
                
                
                (21.1
                )Restructuring
      charges
                
                
                15.9
                
                
                
                -
                
                
                
                15.9Flood
      related charges
                
                
                -
                
                
                
                1.1
                
                
                
                (1.1
                )Interest,
      net
                
                
                0.1
                
                
                
                0.7
                
                
                
                (0.6
                )




Research
and Development Expenses




The total
research and development expenses (“R&D”) were $15.4 and $31.3 million
for the three and six months endedJune 28,
2009, respectively, compared to R&D expenses of $17.8 million and $35.0
million for the corresponding prior-year periods. The decrease in R&D
expenses was mainly driven by the labor-related savings of approximately $1.4
and $1.9 million from our restructuring activities and cost saving programs for
the three and six months ended June 28, 2009, respectively.  The
quarterly and year-to-date R&D expenses accounted for 9.8% of revenues in
2009, comparing to 8.2% and 8.0% of revenues from corresponding prior-year
periods. The amount spent in R&D activities decreased in 2009, while the
percentage of R&D expenses over total revenues increased in 2009, reflects
our continuing commitment and focus on key product development and release.






16


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




Selling,
General and Administrative Expenses




The total
selling, general and administrative (“SG&A”) expenses were $44.7 and $95.7
million for the three and six months ended June 28, 2009, respectively, compared
to SG&A expenses of $58.8 million and $116.8 million for the corresponding
prior-year periods. The decrease in quarterly SG&A expenses of $14.1 million
was primarily attributable to the labor-related savings of $2.4 million from
restructuring activities, a decrease of sales commission and bonus expenses of
$1.6 million due to lower headcount and lower sales revenues, and the favorable
changes of conversion of foreign denominated costs for $3.6 million. The
reduction in year-to-date SG&A expenses of $21.1 million was primarily due
to the labor-related savings of $2.7 million from restructuring activities,
a decrease of commission and bonus expenses of $2.8 million from lower headcount
and lower sales revenues in 2009, and the favorable changes of conversion of
foreign denominated costs for $7.3 million. The remaining decrease of quarterly
and year-to-date SG&A expenses was due to various cost saving programs
implemented in 2009.




Restructuring
Charges




The
increase in restructuring charges of $7.3 million and $15.9 million for the
three and six months ended June 28, 2009, respectively, compared to the
corresponding prior-year periods was mainly due to the following restructuring
activities:




2008
Restructuring Plan




In July
2008, we committed to a business restructuring plan intended to reduce our cost
structure and streamline operations. Pursuant to this plan, we relocated
the final assembly of our product lines from Everett, Washington, to Venture
Corporation Limited, a global electronics services provider.  As part
of the plan, we also consolidated two U.S. service depots into existing
locations in Charlotte, North Carolina and Monterey, Mexico and transferred our
on-site field service repair to a third party supplier.




We
commenced implementation of the plan in the third quarter of 2008, and it was
fully implemented as of June 28, 2009.  All severance and other
periodic transitional costs were cash expenditures. All restructuring costs
related to this action were accrued in 2008.




2009
Restructuring Plans




In
January 2009, we committed to a business restructuring plan intended to
reorganize our sales function and to reduce our operating cost structure and
improve efficiency.The total
restructuring costs for this plan are expected to be approximately $10.1
million, including employee termination costs of approximately $9.1 million, and
$1.0 million of other transitional costs. We recorded $9.1 million of the
restructuring charge in the first two quarters of 2009, and the remainder will
be recorded through the first quarter of 2010. We anticipate that substantially
all of the severance related and periodic transitional costs will be cash
expenditures. We expect to achieve an annual labor-related savings of $14.0
to $16.0 million upon completion of this restructuring plan.




In April
2009, we committed to a business restructuring plan primarily consisting of a
reduction of our work force.The total
restructuring costs for this plan are expected to be approximately $15.0
million, including employee termination costs of approximately $12.0
million, and approximately $3.0 million of other transitional costs. We recorded
$6.8 million of the restructuring charge in the second quarter of 2009, and
expected to record the remainder through the first quarter of 2010. We
anticipate that substantially all of the severance related and periodic
transitional costs will be cash expenditures.We expect to achieve an
annual labor-related savings of $20.0 to $22.0 million upon completion of
this restructuring plan.




We believe these actions
are appropriate strategically and are prudent in light of the generally weakened
global economy and uncertain market conditions expected in the foreseeable
future.




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. 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 have a significant impact 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 of
insurance proceeds for a net charge of $1.1 million.






17


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




Interest,
Net




Net
interest income was $0 and $0.1 million for the three and six months ended June
28, 2009, respectively, compared to net interest income of $0.8 and $0.7 million
for the corresponding prior-year periods. The decrease in net interest income
was mainly due to lower average interest rates comparing to prior-year
periods.




Income
tax (benefit) expense (in millions)




Three
      Months Ended
                      
                      
                      Six
      Months EndedJune
      28, 2009
                      
                      
                      June
      29, 2008
                      
                      Change
      from prior year
                      
                      
                      June
      28, 2009
                      
                      
                      June
      29, 2008
                      
                      Change
      from prior yearIncome
      tax (benefit) expense
                      
                      $
                      (3.8
                      )
                      
                      $
                      4.3
                      
                      
                      $
                      (8.1
                      )
                      
                      $
                      (9.7
                      )
                      
                      $
                      8.6
                      
                      
                      $
                      (18.3
                      )
  The tax
expense for the three and six months ended June 28, 2009, reflects an effective
tax rate for continuing operations of 36.6 % and 36.4%, respectively, compared
to a U.S. statutory rate of 35%.  The effective tax rate reflects our
estimated annual effective tax rate of approximately 37% for fiscal year 2009,
which excludes the impact of discrete items.




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%.




Liquidity
and Capital Resources




Our
principal sources of liquidity are cash flows generated from operations and our
cash, cash equivalents and short-term investments balances, which, at fair
value, were $227.2 and $221.5 million at June 28, 2009, and December 31, 2008,
respectively. Operating activities for the six months ended June 28,
2009, provided lower cash flows compared to the same period of 2008 due to
a net loss of $16.9 million and cash payment of approximately $8.2 million for
restructuring activities, offset by significant improvement in working
capital, in particular for inventory in 2009. Cash used in investing activities
for the six months ended June 28, 2009, was $5.2 million. This was related to
capital expenditures of $4.7 million and capitalized patent legal fees of $2.3
million, offset by proceeds from sale of property of $1.9 million. Cash provided
by financing activities for the six months ended June 28, 2009 was $0.3
million, related primarily to the exercise of stock options.




Under our
2007 Revolving Credit Facility (“Revolving Facility”), we have a maximum amount
available of $50.0 million. As of June 28, 2009, net of outstanding letters of
credit and limitations on minimum availability, we had borrowing capacity of
$48.5 million under the Revolving Facility. We made no borrowings under the
Revolving Facility during the three and six months ended June 28, 2009, and as
of June 28, 2009, no borrowings were outstanding. As of June 28, 2009, we were
in compliance with the financial covenants of the Revolving Facility.




There
have been no changes to key terms of the Revolving Facility as previously
disclosed on the Annual Report of Form 10-K for the year ended December 31,
2008.




We
believe that cash and cash equivalents combined with projected cash flows
from operations, will provide adequate funding to meet our expected working
capital, restructuring cost requirements, capital expenditure and pension
contribution for the foreseeable future. In the current economic environment, we
may hold more cash than what is required to fund our future investment in
working capital, capital expenditures and to implement changes in cost
structure. Projected cash flows from operations are largely based on our revenue
estimates, cost estimates, and the related timing of cash receipts and cash
disbursements. If actual performance differs from estimated performance, cash
flows from operations could be positively or negatively impacted. An additional
source of liquidity includes our Revolving Facility.




Contractual
Obligations




Our
contractual commitments as of June 28, 2009, have not changed materially from
those disclosed in Item 7 of our Annual Report on Form 10-K for the year ended
December 31, 2008.




Critical
Accounting Policies and Estimates




Our
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (“US GAAP”). The
preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual amounts could differ from those estimates under
different assumptions or conditions. Our critical accounting policies and
estimates are discussed in Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” section of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2008. There have been no
material changes to the critical accounting policies and estimates previously
disclosed in that report.




18


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Due to
our global operations, our cash flows and earnings are exposed to risk based on
movements in foreign exchange rates.  We conduct business in approximately
90 countries throughout the world and generally invoice customers in their local
currency and have a resulting foreign currency denominated revenue transaction
and accounts receivable balance. We also purchase certain raw materials and
other items in foreign currencies.




Our
treasury policies allow us to offset the risks associated with the effects of
certain foreign currency exposures through the purchase of foreign exchange
forward contracts. Our policy prohibits speculation in financial instruments for
profit on the exchange rate price fluctuation. We enter into foreign exchange
forward contracts primarily to hedge the impact of fluctuations of
foreign exchange arising from intercompany transactions, specifically for
inventory purchases made by our subsidiaries that are denominated in U.S.
dollars. Our foreign exchange forward contracts are not designated as hedging
instruments. Accordingly, we record these contracts at fair value on the
consolidated balance sheets, with changes in fair value recognized in earnings
in the period of change. These contracts do not contain any credit-risk-related
contingent features.




We
attempt to manage the counterparty risk associated with these forward foreign
exchange contracts by limiting transactions to counterparties with which we have
an established banking relationship. In addition, these contracts generally
settle in approximately 30 days. See Note 2, Fair
Value Measurements, and Note 3, Derivative
Instruments, of the notes to our financial statements for additional
information related to these contracts.




Except as
noted in the preceding paragraph, as of June 28, 2009, 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, 2008, which contains a complete discussion
of our material exposures to interest rate and foreign exchange rate
risks.




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 28, 2009.




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.






































19


PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS




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




ITEM 1A. RISK FACTORS




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




In
addition to the other information set forth in this Report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2008, and the factors
discussed in Part II, Item A, "Risk Factors" in our Quarterly Report on Form
10-Q for the quarter ended March 29, 2009 (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, 2008, 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.




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




None




ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS




(a)
The Company's Annual Meeting of Shareholders was held on May 27,
2009.




(b) At
the Annual Meeting, the following nominees were elected directors for terms
expiring at the annual meeting in 2010 and when their successors are elected and
qualified. The votes were as follows:




For
                      
                      
                      Against
                      
                      
                      AbstainPatrick
      J. Byrne
                      
                      
                      58,020,089
                      
                      
                      
                      562,732
                      
                      
                      
                      50,115Eric
      J. Draut
                      
                      
                      57,001,602
                      
                      
                      
                      1,578,289
                      
                      
                      
                      53,045Gregory
      K. Hinckley
                      
                      
                      57,793,617
                      
                      
                      
                      786,259
                      
                      
                      
                      53,060Lydia
      H. Kennard
                      
                      
                      57,852,258
                      
                      
                      
                      737,461
                      
                      
                      
                      43,218Allen
      J. Lauer
                      
                      
                      58,003,721
                      
                      
                      
                      568,509
                      
                      
                      
                      60,705Stephen
      P. Reynolds
                      
                      
                      57,896,411
                      
                      
                      
                      675,916
                      
                      
                      
                      60,609Steven
      B. Sample
                      
                      
                      57,551,512
                      
                      
                      
                      1,024,672
                      
                      
                      
                      56,751Oren
      G. Shaffer
                      
                      
                      57,896,226
                      
                      
                      
                      681,098
                      
                      
                      
                      55,612Larry
      D. Yost
                      
                      
                      56,823,597
                      
                      
                      
                      1,751,790
                      
                      
                      
                      57,549
  (c)
Proposal 2, an advisory proposal to ratify the selection of Deloitte &
Touche LLP as Independent Registered Public Accounting Firm for 2009, was
approved by the vote set forth below:




For
                
                
                Against
                
                
                AbstainProposal
      2
                
                
                58,107,543
                
                
                
                491,721
                
                
                
                33,673








20


ITEM 6. EXHIBITS




31.1
                  
                  Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, dated as of July 30, 200931.2
                  
                  Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, dated as of July 30, 200932.1
                  
                  Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, dated as of July 30, 200932.2
                  
                  Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, dated as of July 30,
2009
























































































21


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/
      Robert J. DriessnackRobert
      J. DriessnackChief
      Financial OfficerJuly
      30, 2009