Attached files
file | filename |
---|---|
EX-32.1 - CEO 906 - Intermec, Inc. | exhibi32_1.htm |
EX-31.1 - CEO - Intermec, Inc. | exhibit31_1.htm |
EX-10.1 - DEFERRED COMP PLAN - Intermec, Inc. | exhibit10_1.htm |
EX-31.2 - CFO - Intermec, Inc. | exhibit31_2.htm |
EX-10.4 - FORM OF RSU AGREEMENT - Intermec, Inc. | exhibit10_4.htm |
EX-10.5 - FORM OF PSU AGREEMENT - Intermec, Inc. | exhibit10_5.htm |
EX-32.2 - CFO 906 - Intermec, Inc. | exhibit32_2.htm |
EX-10.2 - INTERMEC COC PLAN - Intermec, Inc. | exhibit10_2.htm |
EX-10.3 - SENIOR OFFICER SEVERANCE PLAN - Intermec, Inc. | exhibit10_3.htm |
EXCEL - IDEA: XBRL DOCUMENT - Intermec, Inc. | Financial_Report.xls |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
||
For the quarterly
period ended March 28, 2010
|
||
OR
|
||
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
||
For
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.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
6001
36th Avenue West, Everett, WA
|
98203-1264
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(425)
348-2600
(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
|
|||
Non-accelerated
filer
|
Smaller
reporting company filer
|
|||
(Do
not check if a smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o
|
No ý
|
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
|
Outstanding
at April 23, 2010
|
|
Common
Stock, $0.01 par value per share
|
61,776,580
shares
|
INTERMEC,
INC.
TABLE
OF CONTENTS
REPORT
ON FORM 10-Q
FOR
THE QUARTER ENDED MARCH 28, 2010
Page
Number
|
||
PART I.
FINANCIAL INFORMATION
|
||
ITEM
1.
|
||
1 | ||
2 | ||
3 | ||
4-11 | ||
ITEM
2.
|
12-18 | |
ITEM
3.
|
18 | |
ITEM
4.
|
18 | |
PART
II. OTHER INFORMATION
|
||
ITEM
1.
|
19 | |
ITEM
1A.
|
19 | |
ITEM
6.
|
19 | |
20 |
Three
Months Ended
|
||||||||
March 28, 2010 | March 29, 2009 | |||||||
Revenues:
|
||||||||
Product
|
$ | 115,743 | $ | 128,664 | ||||
Service
|
33,487 | 33,909 | ||||||
Total
revenues
|
149,230 | 162,573 | ||||||
Costs
and expenses:
|
||||||||
Cost
of product revenues
|
72,891 | 83,366 | ||||||
Cost
of service revenues
|
19,320 | 20,136 | ||||||
Research
and development
|
14,973 | 15,913 | ||||||
Selling,
general and administrative
|
44,916 | 51,009 | ||||||
Restructuring
charges
|
737 | 8,582 | ||||||
Impairment
of facility
|
2,421 | - | ||||||
Total
costs and expenses
|
155,258 | 179,006 | ||||||
Operating
loss
|
(6,028 | ) | (16,433 | ) | ||||
Interest
income
|
150 | 341 | ||||||
Interest
expense
|
(345 | ) | (226 | ) | ||||
Loss
before income taxes
|
(6,223 | ) | (16,318 | ) | ||||
Income
tax benefit
|
(2,578 | ) | (5,917 | ) | ||||
Net
loss
|
$ | (3,645 | ) | $ | (10,401 | ) | ||
Basic
loss per share
|
$ | (0.06 | ) | $ | (0.17 | ) | ||
Diluted
loss per share
|
$ | (0.06 | ) | $ | (0.17 | ) | ||
Shares
used in computing basic loss per share
|
61,841 | 61,455 | ||||||
Shares
used in computing diluted loss per share
|
61,841 | 61,455 |
See
accompanying notes to condensed consolidated financial statements.
1
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands)
(Unaudited)
March 28, 2010 | December 31, 2009 | |||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 188,862 | $ | 201,884 | ||||
Short-term
investments
|
36,601 | 36,301 | ||||||
Accounts
receivable, net
|
100,317 | 106,890 | ||||||
Inventories,
net
|
94,715 | 101,537 | ||||||
Current
deferred tax assets, net
|
51,118 | 51,140 | ||||||
Assets held for sale | 3,783 | - | ||||||
Other
current assets
|
13,839 | 16,826 | ||||||
Total
current assets
|
489,235 | 514,578 | ||||||
Property,
plant and equipment, net
|
37,309 | 37,383 | ||||||
Other
acquired intangibles, net
|
2,321 | 2,587 | ||||||
Deferred
tax assets, net
|
186,222 | 182,457 | ||||||
Other
assets
|
28,873 | 34,404 | ||||||
Total
assets
|
$ | 743,960 | $ | 771,409 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 80,622 | $ | 102,607 | ||||
Payroll
and related expenses
|
18,693 | 20,683 | ||||||
Deferred
revenue
|
42,364 | 39,038 | ||||||
Total
current liabilities
|
141,679 | 162,328 | ||||||
Long-term
deferred revenue
|
21,136 | 22,010 | ||||||
Pension
and other postretirement benefits liabilities
|
80,212 | 81,897 | ||||||
Other
long-term liabilities
|
14,876 | 14,891 | ||||||
Commitments
|
||||||||
Shareholders'
equity:
|
||||||||
Common
stock (250,000 shares authorized, 62,253 and 62,203 shares issued and
61,702 and 61,653 outstanding)
|
623 | 622 | ||||||
Additional
paid-in capital
|
706,048 | 703,590 | ||||||
Accumulated
deficit
|
(177,890 | ) | (174,245 | ) | ||||
Accumulated
other comprehensive loss
|
(42,724 | ) | (39,684 | ) | ||||
Total
shareholders' equity
|
486,057 | 490,283 | ||||||
Total
liabilities and shareholders' equity
|
$ | 743,960 | $ | 771,409 |
See
accompanying notes to condensed consolidated financial statements.
2
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
Three
Months Ended
|
||||||||
March
28, 2010
|
March
29, 2009
|
|||||||
Cash
and cash equivalents at beginning of the period
|
$ | 201,884 | $ | 221,335 | ||||
Cash flows from operating
activities:
|
||||||||
Net
loss
|
(3,645 | ) | (10,401 | ) | ||||
Adjustments
to reconcile net loss to net cash (used in) provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
3,746 | 3,974 | ||||||
Impairment
of facility
|
2,421 | - | ||||||
Deferred
taxes
|
(3,195 | ) | (6,183 | ) | ||||
Stock-based compensation | 1,905 | 2,036 | ||||||
Excess
tax shortfall from stock-based payment arrangements
|
- | 557 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
6,573 | 30,613 | ||||||
Inventories
|
6,683 | 9,228 | ||||||
Accounts
payable and accrued expenses
|
(22,166 | ) | (31,192 | ) | ||||
Other
long-term liabilities
|
2,785 | 975 | ||||||
Other
operating activities
|
(1,007 | ) | 484 | |||||
Net
cash (used in) provided by operating activities
|
(5,900 | ) | 91 | |||||
Cash
flows from investing activities:
|
||||||||
Additions
to property, plant and equipment
|
(2,890 | ) | (2,385 | ) | ||||
Sales
of property, plant and equipment
|
- | 1,866 | ||||||
Other
investing activities
|
(842 | ) | (1,096 | ) | ||||
Net
cash used in investing activities
|
(3,732 | ) | (1,615 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Excess
tax shortfall from stock-based payment arrangements
|
- | (557 | ) | |||||
Stock
options exercised and other
|
554 | 362 | ||||||
Net
cash provided by (used in) financing activities
|
554 | (195 | ) | |||||
Effect
of exchange rate changes on cash and cash
equivalents
|
(3,944 | ) | (3,567 | ) | ||||
Resulting
decrease in cash and cash equivalents
|
(13,022 | ) | (5,286 | ) | ||||
Cash
and cash equivalents at end of the period
|
$ | 188,862 | $ | 216,049 |
See
accompanying notes to condensed consolidated financial statements.
3
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, Inc. 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, 2009,
as amended (the "2009 Form 10-K”).
Recent
Accounting Pronouncements Not Yet Adopted
In
October 2009, the Financial Accounting Standard Board (“FASB”) updated its
guidance on software revenue recognition. According to this
update, tangible products containing software components and non-software
components that function together to deliver the tangible product’s essential
functionality are no longer within the scope of the software revenue guidance.
This update provides additional guidance on how to determine which software, if
any, relating to the tangible product should be excluded from the scope of the
software revenue guidance. This update will be effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010, but early adoption is permitted. This
update must be adopted in the same period using the same transition method as
indicated below in the update to revenue arrangements with multiple
deliverables. The adoption of this guidance is not expected to have a
material impact on our consolidated financial statements.
In
October 2009, the FASB updated its guidance on revenue arrangements with
multiple deliverables. This guidance alters the criteria for
separating consideration in multiple-deliverable arrangements. This update
establishes a selling price hierarchy for determining the selling price of a
deliverable. The selling price used for each deliverable will be based on
vendor-specific objective evidence if available, third-party evidence if
vendor-specific objective evidence is not available, or estimated selling price
if neither vendor-specific objective evidence nor third-party evidence is
available. This update also replaces the term fair value in the revenue
allocation guidance with selling price to clarify that the allocation of revenue
is based on entity-specific assumptions rather than assumptions of a market
participant. It also eliminates the residual method of allocation and requires
that arrangement consideration be allocated at the inception of the arrangements
to all deliverables using the relative selling price method. This update will be
effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010, but early adoption
is permitted. We are currently assessing the potential impact that adoption of
this guidance may have on our consolidated financial statements.
Reclassification
Certain
amounts within the 2009 condensed consolidated financial statements have been
reclassified to conform to the 2010 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 March 28, 2010, consisted of the following (in
thousands):
Balance
as of
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
March
28, 2010
|
|||||||||||||
Money
market funds
|
$ | 108,373 | $ | - | $ | - | $ | 108,373 | ||||||||
Certificates
of deposit
|
24,168 | - | - | 24,168 | ||||||||||||
Bond
fund
|
30,573 | - | - | 30,573 | ||||||||||||
Stock
|
201 | - | - | 201 | ||||||||||||
Derivative
instruments - assets
|
- | 1,033 | - | 1,033 | ||||||||||||
Total
assets at fair value
|
$ | 163,315 | $ | 1,033 | $ | - | $ | 164,348 | ||||||||
Balance
as of
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
March
28, 2010
|
|||||||||||||
Derivative
instruments - liabilities
|
$ | - | $ | (991 | ) | $ | - | $ | (991 | ) | ||||||
Total
liabilities at fair value
|
$ | - | $ | (991 | ) | $ | - | $ | (991 | ) |
Our
financial assets and liabilities subject to these fair value measurement
provisions as of December 31, 2009, consisted of the following (in
thousands):
Balance
as of
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
December
31, 2009
|
|||||||||||||
Money
market funds
|
$ | 111,971 | $ | - | $ | - | $ | 111,971 | ||||||||
Certificates
of deposit
|
12,142 | - | - | 12,142 | ||||||||||||
Bond
fund
|
30,459 | - | - | 30,459 | ||||||||||||
Stock
|
166 | - | - | 166 | ||||||||||||
Derivative
instruments - assets
|
- | 1,743 | - | 1,743 | ||||||||||||
Total
assets at fair value
|
$ | 154,738 | $ | 1,743 | $ | - | $ | 156,481 | ||||||||
Balance
as of
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
December
31, 2009
|
|||||||||||||
Derivative
instruments - liabilities
|
$ | - | $ | (1,199 | ) | $ | - | $ | (1,199 | ) | ||||||
Total
liabilities at fair value
|
$ | - | $ | (1,199 | ) | $ | - | $ | (1,199 | ) |
Our level
2 financial instrument values are based on comparable sales, such as quoted
market rates for similar contracts. Level 3 values refer to fair values using
unobservable inputs that are not corroborated by market data.
5
INTERMEC,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2.
Fair Value Measurements (continued)
Assets
and Liabilities Measured at Fair Value on a Nonrecurring Basis
All other
nonfinancial assets and liabilities measured at fair values in the financial
statements on a nonrecurring basis are subject to fair value 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 impairment, when necessary.
During the quarter ended March 28, 2010, we recorded an approximately $2.4
million impairment loss related to a real estate asset we
held using unobservable inputs (level 3). This asset with adjusted
carrying value of $3.8 million was reclassified from long-term other assets to
assets held for sale as of March 28, 2010.
The
estimated fair values of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses, and payroll and related
expenses at March 28, 2010 and March 29, 2009, approximate their carrying values
due to their short-term nature.
3.
Derivative Instruments
Due to
our global operations, we are exposed to foreign currency exchange rate
fluctuations in the normal course of our business. 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, including inventory purchases made by
our subsidiaries that are denominated in U.S. dollars. Our foreign exchange
forward contracts are not designated as hedging instruments for accounting
purposes; 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. The aggregate notional amounts of the forward contracts
we held for foreign currencies were $79.7 million as of March 28,
2010. Principal currencies we hedged include the euro, British
pound, Mexico Peso, Danish Krona and Swedish Krona. These
contracts do not contain any credit-risk-related contingent
features.
We
attempt to manage the counterparty risk associated with these foreign exchange
forward 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 net
gain resulted from these contracts recorded in selling, general and
administrative expense was approximately $0.7 and $0.3 million for the quarters
ended March 28, 2010 and March 29, 2009, respectively. We recorded a net
liability of $0 and $0.6 million in accounts payable and accrued expense for the
quarters ended March 28, 2010 and March 29, 2009, respectively.
4.
Accounts Receivable, net
Accounts receivable, net consisted of the following (in thousands):
March
28, 2010
|
December
31, 2009
|
|||||||
Accounts
receivable, gross
|
$ | 105,740 | $ | 117,223 | ||||
Less:
|
||||||||
Allowance
for sales returns
|
4,205 | 9,006 | ||||||
Allowance
for doubtful accounts
|
1,218 | 1,327 | ||||||
Accounts
receivable, net
|
$ | 100,317 | $ | 106,890 |
Our
allowance for sales returns include estimated customer returns and other
incentives that were part of the sales for March 28, 2010. For the period ended
December 31, 2009 our allowance for sales returns included estimated customer
returns, price exceptions of $2.8 million, and other incentives that were part
of sales. Beginning in 2010, we began to globally record price exceptions
directly to the customers' account instead of an allowance to gross receivables.
One customer, ScanSource accounted for 15% and 18% of our accounts
receivable as of March 28, 2010, and December 31, 2009,
respectively.
6
INTERMEC,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5.
Inventories
Inventories
consisted of the following (in thousands):
March
28, 2010
|
December
31, 2009
|
|||||||
Raw
materials
|
$ | 45,257 | $ | 45,449 | ||||
Service
parts
|
8,720 | 7,794 | ||||||
Work
in process
|
1,117 | 252 | ||||||
Finished
goods
|
39,621 | 48,042 | ||||||
Inventories, net
|
$ | 94,715 | $ | 101,537 |
In
addition to the inventories described above, service parts inventories totaling
$4.5 and $4.3 million that were not expected to be sold within the next 12
months are classified as other assets as of March 28, 2010, and December
31, 2009, respectively.
6.
Income Tax Benefit
The tax
benefit for the quarter ended March 28, 2010 reflects an effective tax rate for
continuing operations of 41.4% compared to a U.S. statutory rate of 35.0%. The
effective tax rate reflects our estimated annual effective tax rate of
approximately 41.0% for fiscal year 2010, which excludes the impact of discrete
items. Our projected 2010 effective tax rate is higher than 2009 due primarily
to our projected mix of taxable income between jurisdictions and the U.S.
research and development tax credit benefits that existed in 2009 which Congress
has not renewed for 2010.
The U.S.
Congress is currently considering bills that will extend the availability of the
research and development tax credit. If the research and development credit is
legislatively extended in and applicable to calendar year 2010, there will be a
favorable impact on our 2010 effective income tax rate.
The tax
benefit for the quarter ended March 29, 2009, reflected an effective tax rate
for continuing operations of 36.3% compared to a U.S. statutory rate of 35.0%.
The effective tax rate reflected our then estimated annual effective tax rate of
approximately 37.0% for fiscal year 2009, which excluded the impact of discrete
items.
7.
Shares Used in Computing Loss per Share
Basic
loss per share is calculated using the weighted average number of common shares
outstanding and issuable for the applicable period. Diluted loss per share is
computed using basic weighted average shares plus the dilutive effect of
unvested restricted stock and outstanding stock options using the “treasury
stock” method.
Three
Months Ended
|
||||||||
March
28, 2010
|
March
29, 2009
|
|||||||
Weighted
average shares - basic
|
61,840,652 | 61,455,061 | ||||||
Dilutive
effect of unvested restricted shares and stock options
|
- | - | ||||||
Weighted
average shares - diluted
|
61,840,652 | 61,455,061 |
Our
employees and directors held options to purchase 2,358,719 and 2,709,667 shares
of our common stock for the quarters ended March 28, 2010, and March 29, 2009,
respectively, that were not included in weighted average shares diluted
calculation because they were anti-dilutive to the diluted loss 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
INTERMEC,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
8.
Stock-Based Compensation
A summary
of share-based compensation expense related to employee stock options,
Restricted Stock Units (“RSU”) and Performance Stock Units (‘PSU”) for the
quarters ended March 28, 2010, and March 29, 2009, is as follows (in
thousands):
Three
Months Ended
|
||||||||
March
28, 2010
|
March
29, 2009
|
|||||||
Cost
of revenue
|
$ | 63 | $ | 63 | ||||
Selling,
general and administrative
|
1,726 | 1,818 | ||||||
Total
|
$ | 1,789 | $ | 1,881 |
For the quarter ended March 28, 2010, we granted 100,749 options to
employees with an average fair value of $5.63 per option, which will vest
annually in substantially equal quantities over four years from the
date of grant. The Black-Scholes assumptions used for these calculations
were as follows:
Three
Months Ended
|
||||
March
28, 2010
|
||||
Fair
value assumptions:
|
||||
Expected
life in years
|
4.99 | |||
Expected
volatility
|
40.52 | % | ||
Expected
dividend yield
|
0.00 | % | ||
Risk-free
interest rate
|
2.42 | % |
9.
Shareholders’ Equity
Our
accumulated other comprehensive loss consisted of the following (in
thousands):
March
28, 2010
|
December
31, 2009
|
|||||||
Foreign
currency translation adjustment
|
$ | 305 | $ | 3,900 | ||||
Unamortized
benefit plan costs, net of tax of $24,022 and $23,918
|
(42,869 | ) | (43,402 | ) | ||||
Unrealized
loss on investments, net of tax of $(57) and $(65)
|
(160 | ) | (182 | ) | ||||
Accumulated other comprehensive loss
|
$ | (42,724 | ) | $ | (39,684 | ) |
Our
comprehensive loss for the quarters ended March 28, 2010, and March 29, 2009,
was as follows (in thousands):
Three
Months Ended
|
||||||||
March
28, 2010
|
March
29, 2009
|
|||||||
Net
loss
|
$ | (3,645 | ) | $ | (10,401 | ) | ||
Other
comprehensive loss:
|
||||||||
Foreign
currency translation adjustments
|
(3,595 | ) | (3,571 | ) | ||||
Unrealized
gain (loss) on investment, net of tax of $12 and $(19)
|
22 | (54 | ) | |||||
Amortization
of benefit plan costs, net of tax of $104 and
$393
|
533 | 708 | ||||||
Total
other comprehensive loss
|
(3,040 | ) | (2,917 | ) | ||||
Total
comprehensive loss
|
$ | (6,685 | ) | $ | (13,318 | ) |
8
INTERMEC,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
10. Segment Reporting
Our
reportable segments are comprised of products and services. The product
segment generates revenue from 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
professional 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 consolidated financial statements. Performance and resource
allocation are primarily measured by sales and standard gross profit. All other
earnings, costs and expenses are aggregated and reported on a consolidated
basis.
For the
quarters ended March 28, 2010, and March 29, 2009, one distributor, ScanSource
Inc., accounted for more than 10% of our revenues. Total sales to this
distributor were $30.2 and $20.2 million for the quarters ended March 28, 2010,
and March 29, 2009, respectively.
The
following table sets forth our revenues and gross profit by reportable segment
(in thousands):
Three
Months Ended
|
||||||||
March
28, 2010
|
March
29, 2009
|
|||||||
Revenues:
|
||||||||
Product
|
$ | 115,743 | $ | 128,664 | ||||
Service
|
33,487 | 33,909 | ||||||
Total
|
$ | 149,230 | $ | 162,573 | ||||
Gross
profit:
|
||||||||
Product
|
$ | 42,852 | $ | 45,298 | ||||
Service
|
14,167 | 13,773 | ||||||
Total
|
$ | 57,019 | $ | 59,071 |
The
following table sets forth our revenues by product lines (in
thousands):
Three
Months Ended
|
||||||||
March
28, 2010
|
March
29, 2009
|
|||||||
Revenues:
|
||||||||
Systems
and solutions
|
$ | 79,151 | $ | 93,138 | ||||
Printer
and media
|
36,592 | 35,526 | ||||||
Service
|
33,487 | 33,909 | ||||||
Total
|
$ | 149,230 | $ | 162,573 |
11.
Product Warranties
The
following table indicates the change in our warranty liability included in
current liabilities (in thousands):
March
28, 2010
|
December
31, 2009
|
|||||||
Beginning
balance
|
$ | 2,913 | $ | 4,220 | ||||
Payments
or parts usage
|
(682 | ) | (5,789 | ) | ||||
Additional
provision
|
1,013 | 4,482 | ||||||
Ending
balance
|
$ | 3,244 | $ | 2,913 |
9
INTERMEC,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
12.
Commitments and Contingencies
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. Fair value of guarantees is required to be recorded as a
liability. We do not believe that we have any significant exposure related to
such guarantees and therefore have not recorded a liability as of March 28,
2010, and December 31, 2009, respectively. We have not made any significant
indemnification payments as a result of these clauses.
We currently, and from time to time, are subject to
claims and lawsuits arising in the ordinary course of business. 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.
13.
Pension and Other Postretirement Benefits Liabilities
The
components of net pension and postretirement periodic benefit cost (income) for
the quarters ended March 28, 2010, and March 29, 2009, are as follows (in
thousands):
U.S.
Defined Benefit Plans
|
Non-U.S.
Defined Benefit Plans
|
Other
Postretirement Benefit Plans
|
||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||
Quarters
Ended March 28, 2010 and March 29, 2009:
|
||||||||||||||||||||||||
Service
cost
|
$ | 255 | $ | 327 | $ | 74 | $ | - | $ | - | $ | - | ||||||||||||
Interest
cost
|
2,949 | 2,937 | 462 | 426 | 64 | 64 | ||||||||||||||||||
Expected
return on plan assets
|
(2,686 | ) | (2,694 | ) | (559 | ) | (407 | ) | - | - | ||||||||||||||
Amortization
and deferrals:
|
||||||||||||||||||||||||
Transition
asset
|
- | - | (31 | ) | (31 | ) | - | - | ||||||||||||||||
Actuarial
loss
|
6 | 952 | 9 | 9 | 11 | - | ||||||||||||||||||
Prior
service cost
|
106 | 144 | - | - | - | - | ||||||||||||||||||
Net pension and postretirement periodic benefit cost
(income)
|
$ | 630 | $ | 1,666 | $ | (45 | ) | $ | (3 | ) | $ | 75 | $ | 64 |
During
the quarter ended March 28, 2010, we contributed approximately $3.0 million to
our pension and other postretirement benefit plans, comprising $1.8 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 $0.6 million in
contributions to our foreign pension plans. Benefits paid pertaining to our
other postretirement benefit plans were not material during the first quarter of
2010. We expect to contribute an additional $9.3 million to these plans during
the remainder of 2010, of which $5.4 million relates to benefit payments on our
funded and unfunded U.S. defined benefit plans, $1.8 million in matching
contributions to our 401(k) plan, $1.8 million in contributions to our foreign
pension plans and $0.3 million in benefit payments pertaining to our other
postretirement benefit plans.
10
INTERMEC,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
14.
Restructuring Charges
The total
pre-tax restructuring costs for the restructuring plan announced in
January 2009 were approximately $9.5 million, including employee
termination costs of approximately $8.4 million, and $1.1 million of other
transitional costs. We recorded the entire restructuring charge in 2009,
and substantially all of the severance-related and periodic transitional costs
were cash expenditures. We expect to achieve an annual labor-related savings of
$14.0 to $16.0 million in connection with this restructuring plan.
The total
restructuring costs for the restructuring plan announced in April 2009
are in an anticipated pre-tax range of $11.0 to $13.0 million, including
employee termination costs of $10.0 to $11.0 million, and $1.0 to $2.0
million of other transitional costs. We recorded $11.1 million of the
restructuring charges in 2009, and $0.7 million in the quarter ended March 28,
2010. We expect to record the remaining charge throughout 2010. We
anticipate that substantially all of the severance-related and periodic
transitional costs will be cash expenditures. We expect to achieve annualized
labor-related savings of $17.0 to $19.0 million in connection with this
restructuring plan.
We made
cash payments totalling $2.2 million in the quarter ended March 28, 2010 in
connection with the restructuring plans announced in January and April
2009.
The
following table displays the restructuring charges incurred by reportable
segment (in millions):
Restructuring
Charges Recorded for the Quarter Ended
|
||||||||||||||||
Segment
|
Total
Charges Expected to be Incurred
|
March
28, 2010
|
March
29, 2009
|
Total
Restructuring Charges Incurred to Date
|
||||||||||||
Product
|
$
|
1.7
|
$
|
-
|
$
|
0.2
|
$
|
1.7
|
||||||||
Service
|
1.8
|
-
|
1.0
|
1.8
|
||||||||||||
Unallocated
|
20.0
|
0.7
|
7.4
|
17.8
|
||||||||||||
Total
|
$
|
23.5
|
$
|
0.7
|
$
|
8.6
|
$
|
21.3
|
The
reconciliation of accrued restructuring charges as of March 28, 2010, 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 Charges
|
||||||||||||||||
Balance
at December 31, 2009
|
$
|
2.6
|
$
|
0.3
|
$
|
2.9
|
$
|
-
|
$
|
2.9
|
||||||||||
Restructuring
charges recorded in Q1 2010
|
0.1
|
0.6
|
0.7
|
-
|
0.7
|
|||||||||||||||
Utilization
of 2009 restructuring plans
|
(1.3)
|
(0.9)
|
(2.2)
|
-
|
(2.2)
|
|||||||||||||||
Balance
at March 28, 2010
|
$
|
1.4
|
$
|
-
|
$
|
1.4
|
$
|
-
|
$
|
1.4
|
11
FORWARD-LOOKING
STATEMENTS AND RISK FACTORS; SAFE HARBOR
Statements
made in this filing and any related statements that express Intermec’s or our
management’s intentions, hopes, indications, beliefs, expectations, guidance,
estimates, forecasts or predictions of the future constitute forward-looking
statements, as defined by the Private Securities Litigation Reform Act of 1995,
and relate to matters that are not historical facts. They include, without
limitation, statements about our view of general economic and market conditions,
our cost reduction plans, our revenue, expense, earnings or financial outlook
for the current or any future period, our ability to develop, produce, market or
sell our products, either directly or through third parties, to reduce or
control expenses, to improve efficiency, to realign resources, or to continue
operational improvement and year-over-year or sequential growth, and about the
applicability of accounting policies used in our financial reporting. 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. These statements represent beliefs and expectations
only as of the date they were made. We may elect to update forward-looking
statements but we expressly disclaim any obligation to do so, even if our
beliefs and expectations change.
Actual
results may differ from those expressed or implied in our forward-looking
statements. Such
forward-looking statements involve and are subject to certain risks and
uncertainties, which may cause our actual results to differ materially
from those discussed in a forward-looking statement. These include, but are
not limited to, risks
and uncertainties described more fully in our reports filed or to be filed with
the Securities and Exchange Commission including, but not limited to, our 2009
Form 10-K and quarterly reports on Form 10-Q, which are available on our website
at www.intermec.com.
You are
encouraged to review the Risk Factors portion of Item 1A of Part II of this
filing, which discusses the 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, wired and wireless bar code printers and label
media products and radio frequency identification (“RFID”) 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.
The key
element of our strategy is to provide rugged mobile business solutions that help
our customers improve their visibility and control of their businesses and, in
the process, lower their costs, increase their revenues and improve customer
satisfaction and loyalty. These business solutions are a
collaborative effort between Intermec and our channel partners. In
the pursuit of this strategy, we target high growth opportunities in selected
application markets; focus on developing and selling differentiated new products
and services; emphasize sales through multi-tiered channel arrangements; and
continue the evolution of our supply chain and other initiatives to enhance the
efficiency of our global operations.
Our
reportable segments comprise products and services. The product segment
generates revenue from the design, development, manufacture, sale and resale of
wired and wireless AIDC products, mobile computing products, wired and wireless
bar code printers, label media and RFID products and license fees. We sell
products worldwide for field mobility applications, including asset
management, direct store delivery, maintenance and repair, in-transit
visibility, and routing and navigation, as well as in-premise applications,
including asset management, freight yard operations, inventory management,
warehouse operations, and work-in-process management. Our service segment
generates revenue from customer support, product maintenance and professional
services related to the products and to systems integration.
The
unfavorable global economy continued to adversely affect our business and
revenue during the first quarter of 2010. Although there are mixed signs that a
gradual recovery has begun in some sectors of the economy and regions, we
believe that capital spending for both commercial and public sector customers
continues to be constrained or slow, particularly for large projects, as
contrasted to incremental purchases or small deployments. For potential civilian
and military customers in the U.S. Federal government, we expect budgets to
continue to be affected by the pace and priority of appropriations and military
spending.
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
vulnerable to the fluctuations of foreign exchange rates; however, our cost of
revenues is primarily denominated in U.S. dollars, and therefore, is less
affected by changes in foreign exchange rates. If the U.S. Dollar weakens
year-over-year relative to currencies in our international locations, our
consolidated revenues, costs of 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, costs of 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 foreign
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 quarters ended
March 28, 2010, and March 29, 2009.
Results
of operations and percentage of revenues were as follows (in millions except for
per share data):
Three
Months Ended
|
||||||||||||||||
March
28, 2010
|
March
29, 2009
|
|||||||||||||||
Amounts
|
Percent
of Revenues
|
Amounts
|
Percent
of Revenues
|
|||||||||||||
Revenues
|
$ | 149.2 | $ | 162.6 | ||||||||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of revenues
|
92.2 | 61.8 | % | 103.5 | 63.7 | % | ||||||||||
Research
and development
|
15.0 | 10.1 | % | 15.9 | 9.8 | % | ||||||||||
Selling,
general and administrative
|
44.9 | 30.1 | % | 51.0 | 31.3 | % | ||||||||||
Restructuring
charges
|
0.7 | 0.5 | % | 8.6 | 5.3 | % | ||||||||||
Impairment
of facility
|
2.4 | 1.6 | % | - | ||||||||||||
Total
costs and expenses
|
155.2 | 104.1 | % | 179.0 | 110.1 | % | ||||||||||
Operating
loss
|
(6.0 | ) | (4.0 | %) | (16.4 | ) | (10.1 | %) | ||||||||
Interest,
net
|
(0.2 | ) | (0.1 | %) | 0.1 | 0.1 | % | |||||||||
Loss
before income taxes
|
(6.2 | ) | (4.1 | %) | (16.3 | ) | (10.0 | %) | ||||||||
Income
tax benefit
|
(2.6 | ) | (1.7 | %) | (5.9 | ) | (3.6 | %) | ||||||||
Net
loss
|
$ | (3.6 | ) | (2.4 | %) | $ | (10.4 | ) | (6.4 | %) | ||||||
Basic
loss per share
|
$ | (0.06 | ) | $ | (0.17 | ) | ||||||||||
Diluted
loss per share
|
$ | (0.06 | ) | $ | (0.17 | ) |
13
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Revenues
Revenues
by category and as a percentage of total revenues from operations for the
quarters ended March 28, 2010, and March 29, 2009, were as follows (in
millions):
Three
Months Ended
|
||||||||||||||||||||||||
March
28, 2010
|
Percent
of Revenues
|
March
29, 2009
|
Percent
of Revenues
|
Change
|
Percentage
Change
|
|||||||||||||||||||
Revenues
by category:
|
||||||||||||||||||||||||
Systems
and solutions
|
79.1 | 53.0 | % | $ | 93.1 | 57.3 | % | $ | (14.0 | ) | (15.0 | %) | ||||||||||||
Printer
and media
|
36.6 | 24.5 | % | 35.6 | 21.9 | % | 1.0 | 2.8 | % | |||||||||||||||
Service
|
33.5 | 22.5 | % | 33.9 | 20.8 | % | (0.4 | ) | (1.2 | %) | ||||||||||||||
Total
revenues
|
$ | 149.2 | 100.0 | % | $ | 162.6 | 100.0 | % | $ | (13.4 | ) | (8.2 | %) |
Revenues
by geographic region and as a percentage of total revenues from operations for
the quarters ended March 28, 2010, and March 29, 2009, were as follows (in
millions):
Three
Months Ended
|
||||||||||||||||||||||||
March
28, 2010
|
Percent
of Revenues
|
March
29, 2009
|
Percent
of Revenues
|
Change
|
Percentage
Change
|
|||||||||||||||||||
Revenues
by geographic region:
|
||||||||||||||||||||||||
North
America
|
74.5 | 49.9 | % | $ | 103.6 | 63.7 | % | $ | (29.1 | ) | (28.1 | %) | ||||||||||||
Europe,
Middle East and Africa (EMEA)
|
50.9 | 34.1 | % | 39.0 | 24.0 | % | 11.9 | 30.5 | % | |||||||||||||||
All
others
|
23.8 | 16.0 | % | 20.0 | 12.3 | % | 3.8 | 19.0 | % | |||||||||||||||
Total
revenues
|
$ | 149.2 | 100.0 | % | $ | 162.6 | 100.0 | % | $ | (13.4 | ) | (8.2 | %) |
The
decrease in quarterly revenue of $13.4 million, or 8.2%, was attributable to a
$13.0 million decrease in product revenue, and a $0.4 million decrease in
service revenue. The decrease in product revenue was primarily attributable to a
$14.0 million decrease in systems and solution products, which was partially
offset by a $1.0 million increase in printer and media revenues. The
decrease in our systems and solution products revenue was primarily due to
on-going economic and capital spending constraints in North
American enterprise and public sector projects. Additionally, Q1 2009
product revenues included some government projects that were not repeated in Q1
2010. The increase in printer and media revenues was driven by increase in
our enterprise deals and distribution business.
Service
revenues for the quarter ended March 28, 2010 were consistent compared to the
corresponding prior-year period.
Geographically,
revenues in North America decreased by $29.1 million or 28.1%, while revenues in
EMEA and the rest of the world increased by $11.9 million or 30.5%, and $3.8
million or 19.0%, respectively, over the corresponding prior-year
period. The reduction in North America revenues was primarily due to
on-going economic and capital spending constraints in enterprise and public
sector projects. The changes in foreign currency conversion rates as
compared to the foreign currency exchange rate used in prior-year period
favorably impacted EMEA revenue by $3.3 million, or 8 percentage points. The
remaining increase in EMEA revenues was mainly attributable to increase in our
enterprise deals and distribution business. Across all regions the favorable
impact of foreign currency rates as compared to the foreign currency exchange
rate used in the prior-year period was $6.0 million, or 4 percentage
points.
14
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 quarters ended March 28,
2010, and March 29, 2009, were as follows (in millions):
Three
Months Ended
|
||||||||||||||||
March
28, 2010
|
March
29, 2009
|
|||||||||||||||
Gross
Profit
|
Gross
Margin
|
Gross
Profit
|
Gross
Margin
|
|||||||||||||
Product
|
$ | 42.8 | 37.0 | % | $ | 45.3 | 35.2 | % | ||||||||
Service
|
14.2 | 42.3 | % | 13.8 | 40.6 | % | ||||||||||
Total gross profit and gross margin
|
$ | 57.0 | 38.2 | % | $ | 59.1 | 36.3 | % |
The total
gross profit for the quarter ended March 28, 2010, decreased $2.1million, or
3.6%, compared to the corresponding prior-year period. The decrease in total
gross profit primarily resulted from a $2.5 million decrease in product gross
profit due to reduced volumes of product sales.
Product
gross margin for the quarter ended March 28, 2010, increased 1.8 percentage
points as compared to the quarter ended March 29, 2009. The increase in product
gross margin was primarily due to improved economic conditions, favorable
foreign exchange impact and margin management. Service gross margins increased
1.7 percentage points for the quarter ended March 28, 2010, over the
corresponding prior-year period, primarily due to favorable foreign
exchange impact and margin management.
Operating
Expenses and Interest Expense (in millions)
Three
Months Ended
|
||||||||||||
March
28, 2010
|
March
29, 2009
|
Change
|
||||||||||
Research
and development expense
|
$ | 15.0 | $ | 15.9 | $ | (0.9 | ) | |||||
Selling,
general and administrative expense
|
44.9 | 51.0 | (6.1 | ) | ||||||||
Restructuring
charges
|
0.7 | 8.6 | (7.9 | ) | ||||||||
Impairment
loss
|
2.4 | - | 2.4 | |||||||||
Interest,
net
|
(0.2 | ) | 0.1 | (0.3 | ) |
Research and development
expense. The total research and development (“R&D”) expense was $15.0
and $15.9 million for the quarters ended March 28, 2010, and March 29, 2009,
respectively. The decrease was due to the timing of projects within our research
and development group.
Selling, general and administrative
expense. The total selling, general and administrative (“SG&A”)
expenses were $44.9 million and $51.0 million for the quarters ended March 28,
2010 and March 29, 2009, respectively. The decrease in SG&A expense for the
three months ended March 28, 2010, of $6.1 million, compared to the three month
period ended March 29, 2009, was primarily attributable to labor-related savings
from our two restructuring activities announced in 2009, reduction in
pension-related costs from the freezing of our pension plans in December 2009
and other ongoing cost reduction programs.
Impairment of facility. The
impairment loss of $2.4 million reflected our write down of a real estate asset
we held at March 28, 2010.
Interest, net. Net interest
expense was $0.2 million for the quarter ended March 28, 2010, compared to net
interest income of $0.1 million for the corresponding prior-year period. The
decrease in interest income was mainly due to lower average interest rates as
compared to the prior-year period.
15
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Restructuring charges. The
restructuring charges were $0.7 and $8.6 million for the quarters ended March
28, 2010, and March 29, 2009, respectively. We announced two restructuring
programs in 2009 to reduce our operating costs and improve efficiency in light
of the economic downturn. Details of these two programs are as
follows:
The total
pre-tax restructuring costs for the restructuring plan announced in
January 2009 were approximately $9.5 million, including employee
termination costs of approximately $8.4 million, and $1.1 million of other
transitional costs. We recorded the entire restructuring charge in 2009,
and substantially all of the severance-related and periodic transitional costs
were cash expenditures. We expect to achieve an annual labor-related savings of
$14.0 to $16.0 million in connection with this restructuring plan.
The total
restructuring costs for the restructuring plan announced in April 2009 are
in an anticipated pre-tax range of $11.0 to $13.0 million, including employee
termination costs of $10.0 to $11.0 million, and $1.0 to $2.0 million of
other transitional costs. We recorded $11.1 million of the restructuring charges
in 2009, and $0.7 million in the quarter ended March 28, 2010. We expect to
record the remaining charge throughout 2010. We anticipate that
substantially all of the severance-related and periodic transitional costs will
be cash expenditures. We expect to achieve annualized labor-related savings of
$17.0 to $19.0 million in connection with this restructuring
plan.
Income
Tax Benefit (in millions)
Three
Months Ended
|
||||||||||||
March
28, 2010
|
March
29, 2009
|
Change
|
||||||||||
Income
tax benefit
|
$ | (2.6 | ) | $ | (5.9 | ) | $ | 3.3 |
The tax
benefit for the quarter ended March 28, 2010 reflects an effective tax rate for
continuing operations of 41.4% compared to a U.S. statutory rate of 35.0%. The
effective tax rate reflects our estimated annual effective tax rate of
approximately 41.0% for fiscal year 2010, which excludes the impact of discrete
items. Our projected 2010 effective tax rate is higher than 2009 due primarily
to our projected mix of taxable income between jurisdictions and the U.S.
research and development tax credit benefits that existed in 2009 which Congress
has not renewed for 2010.
The U.S.
Congress is currently considering bills that will extend the availability of the
research and development tax credit. If the research and development credit is
legislatively extended in and applicable to calendar year 2010, there will be a
favorable impact on our 2010 effective income tax rate.
The tax
benefit for the quarter ended March 29, 2009, reflected an effective tax rate
for continuing operations of 36.3% compared to a U.S. statutory rate of 35.0%.
The effective tax rate reflected our then estimated annual effective tax rate of
approximately 37.0% for fiscal year 2009, which excluded the impact of discrete
items.
Liquidity
and Capital Resources
Our
principal sources of liquidity are our cash, cash equivalents and short-term
investments, as well as the cash flow that we generate from our operations. In
addition, we have an unsecured Revolving Credit Facility as described in Capital
Resources section.
Cash
Flow Summary
Our cash
flows are summarized in the following table (in thousands):
Three
Months Ended
|
||||||||
March
28, 2010
|
March
29, 2009
|
|||||||
Net
cash (used in) provided by operating activities
|
$ | (5,900 | ) | $ | 91 | |||
Net
cash used in investing activities
|
(3,732 | ) | (1,615 | ) | ||||
Net
cash provided by (used in) financing activities
|
554 | (195 | ) |
At March
28, 2010, cash, cash equivalents and short-term investments totaled $225.5
million, a decrease of $12.7 million compared to the December 31, 2009
balance of $238.2 million. Our short-term investments consist primarily of
low risk securities, including short-term bond funds and time deposits. We
invest in these short-term securities mainly to facilitate liquidity and for
capital preservation. Due to the nature of these instruments, we consider it
reasonable to expect that their fair market values will not be significantly
impacted by a change in interest rates, and that they can be liquidated for cash
upon demand.
16
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Liquidity
and Capital Resources (continued)
Cash used
in operating activities for the quarter ended March 28, 2010, was $5.9 million
and consisted of net loss of $3.6 million, adjustments for non-cash items of
$4.9 million and cash used by working capital and other activities of $7.2
million. Cash used in operating activities in the first quarter of 2010 was
primarily due to net loss and payment of trade payables from year end inventory
and other purchases during the late fourth quarter of 2009.
For the
quarter ended March 28, 2010, investing activities used $3.7 million of cash
primarily due to capital expenditures of $2.9 million. Cash used in investing
activities for the first quarter of 2009 was $1.6 million. This was related to
capital expenditures of $2.4 million and capitalized patent legal fees of $1.1
million, offset by proceeds from sale of property of $1.9 million.
Financing
activities for the quarter ended March 28, 2010, provided cash of $0.6 million,
related primarily to the issuance of stock under our Employee Stock Purchase
Plan and exercised stock options. Cash used in financing activities for the
first quarter of 2009 was $0.2 million, related primarily to the tax effect on
stock-based payment arrangement.
Capital
Resources
Our
principal capital resources include cash, cash equivalents and short-term
investments. In addition, we have an unsecured Revolving Credit Facility (the
“Revolving Facility”) with a maximum amount available under the Revolving
Facility of $50.0 million. Net of outstanding letters of credit and limitations
on availability, we had borrowing capacity at March 28, 2010, of $48.5 million
under the Revolving Facility. We had no borrowings under the Revolving Facility
as of March 28, 2010. As of March 28, 2010, we were in compliance with the
financial covenants of the Revolving Facility. The Revolving Facility matures in
October 2012. There have been no changes to key terms of the Revolving Facility
as previously disclosed on the 2009 Form 10-K.
We
believe that cash, cash equivalents, and short-term investments combined
with projected cash flows from operations will provide adequate funding to
meet our expected working capital, restructuring cost, capital expenditure and
pension contribution requirements for the next twelve
months.
Depending
on our assessment of the economic environment from time-to-time, we may decide
to hold more cash than may be required to fund our future investment in working
capital, capital expenditures and research and development and to
implement changes in our 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.
17
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Contractual
Obligations
Our
contractual commitments as of March 28, 2010, have not changed materially from
those disclosed in Item 7 of our 2009 Form 10-K.
Critical
Accounting Policies and Estimates
Our
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. 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 2009 Form 10-K. There have
been no material changes to the critical accounting policies and estimates
previously disclosed in that report.
As of
March 28, 2010, there have been no material changes in the information
provided in Item 7A of our 2009 Form 10-K, which contains a complete discussion
of our material exposures to foreign currency exchange rate risk.
Under the
supervision and with the participation of management, including the Chief
Executive Officer, or CEO, and Chief Financial Officer, or CFO, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as required by Exchange Act Rule 13a-15(e) as of the end
of the period covered by this quarterly report. Based on that evaluation,
management, including the CEO and CFO, has concluded that our disclosure
controls and procedures as defined in Rule 13a-15(e) were effective as of March
28, 2010. There were no changes in our internal control over financial reporting
during the quarter ended March 28, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
18
PART
II. OTHER INFORMATION
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.
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 2009 Form 10-K,
which could materially affect our business, financial condition or operating
results. The risks described in our 2009 Form 10-K and in this report on Form
10-Q are not the only risks facing our Company. Additional risks and
uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial
condition or operating results.
The risk
factor included in the 2009 Form 10-K under the caption “Macroeconomic conditions beyond our
control could lead to decreases in demand for our products, reduced
profitability or deterioration in the quality of our accounts receivable”
is restated in its entirety as follows:
●
|
Macroeconomic
conditions beyond our control could lead to decreases in demand for our
products, reduced profitability or deterioration in the quality of our
accounts receivable. Domestic and international economic,
political and social conditions are uncertain due to a variety of factors,
including
|
Ÿ
|
global,
regional and national economic downturns;
|
Ÿ
|
the
availability and cost of credit;
|
Ÿ
|
volatility
in stock and credit markets;
|
Ÿ
|
energy
costs;
|
Ÿ
|
fluctuations
in currency exchange rates;
|
Ÿ
|
the
risk of global conflict;
|
Ÿ
|
the
risk of terrorism and war in a given country or region;
and
|
Ÿ
|
public
health issues.
|
Our
business depends on our customers’ demand for our products and services, the
general economic health of current and prospective customers, and their desire
or ability to make investments in technology. A
deterioration of global, regional or local political, economic or social
conditions could affect potential customers in a way that reduces demand for our
products and disrupts our manufacturing and sales plans and
efforts. These global, regional or local conditions may also cause
governments to change their spending priorities, which may delay, reduce or
eliminate funding for the types of hardware, software and services we sell.
These conditions also could disrupt commerce in ways that could interrupt our
supply chain and our ability to get products to our customers. These
conditions may also affect our ability to conduct business as
usual. Changes in foreign currency exchange rates may negatively
impact reported revenue and expenses. In addition, our sales are
typically made on unsecured credit terms that are generally consistent with the
prevailing business practices in the country in which the customer is located. A
deterioration of political, economic or social conditions in a given country or
region could reduce or eliminate our ability to collect accounts receivable in
that country or region. In any of these events, our results of operations could
be materially and adversely affected.
10.1 |
Action
and Second Amendment to the Intermec Deferred Compensation Plan, dated
March 18, 2010
|
||
10.2 |
Intermec,
Inc. Change of Control Severance Plan, Amended and Restated as of March
22, 2010
|
||
10.3 |
Intermec,
Inc. Senior Officer Severance Plan, Amended and Restated Effective
February 16, 2010 (formerly, the Corporate Executive Severance
Plan)
|
||
10.4 |
Form
of Restricted Stock Unit Agreement for awards under the Intermec, Inc.
2008 Omnibus Incentive Plan
|
||
10.5 |
Form
of Performance Share Unit Agreement under the 2008 Long-Term
Performance Share Program, as amended, under the Intermec, Inc. 2008
Omnibus Incentive Plan
|
||
31.1 |
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, dated as of April 29, 2010
|
||
31.2 |
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, dated as of April 29, 2010
|
||
32.1 |
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, dated as of April 29, 2010
|
||
32.2 |
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, dated as of April 29, 2010
|
19
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. Driessnack
|
|||
Robert
J. Driessnack
|
|||
Senior
Vice President and Chief Financial Officer
|
|||
April
29, 2010
|
20