Intermec Reports Final First Quarter 2012 Results

Intermec, Inc. (NYSE: IN), in its Form 10Q filed today, issued final GAAP financial results for the quarter ended April 1, 2012 reflecting a GAAP loss of $(242.1) million, or $(4.03) per diluted share. Two non-cash adjustments, a valuation allowance for deferred tax assets and an impairment charge against the Company’s goodwill balance, caused the GAAP loss to be greater than the Company’s preliminary results announced earlier this month.

The Company increased its deferred tax assets valuation allowance by a net $206.9 million to offset the entire U.S. deferred tax assets balance. A valuation allowance is required by U.S. GAAP if it is more likely than not that all or part of a deferred tax asset cannot be realized in the future. After considering a number of factors, most significantly the Company’s historical cumulative GAAP losses for the three-year period preceding the quarter and its forecast for U.S. profitability for the remainder of the year, the Company recorded a non-cash charge to increase the allowance up to the remaining balance of the U.S. deferred tax asset. The Company previously recorded an allowance of $21.4 million in the fourth quarter 2011.

The Company also recognized a non-cash impairment charge of $14.9 million against goodwill related to its Voice Solutions business segment. The impairment was based on an analysis of a number of factors after a decline in its market capitalization following the Company’s first quarter 2012 earnings announcements. The impairment did not result from underperformance of its recent acquisition of Vocollect, which is performing in line with expectations. The impairment charge is an estimate based on completion of step one of the goodwill impairment test prescribed by GAAP. The Company expects to complete the second step of this analysis and adjust the impairment amount as needed when it prepares its financial results for the second fiscal quarter of 2012.

First quarter 2012 revenues of $179.7 million and our Adjusted Non-GAAP operating loss of $(12.7) million and Non-GAAP EPS of $(0.21) per diluted share were unchanged from the preliminary results reported on May 1 st. Intermec believes it is appropriate to reflect both the deferred tax assets valuation allowance and the goodwill impairment charge as non-cash, non-operating adjustments to its GAAP results in presenting its adjusted, Non-GAAP results.

The following table presents the Company’s GAAP operating income (loss), net earnings (loss) and earnings (loss) per share reported for the first quarters of 2012 and 2011, and as adjusted excluding the impact of restructuring costs, acquisition-related costs and acquisition-related accounting adjustments:
                     
INTERMEC, INC.
RECONCILIATION OF GAAP TO NON-GAAP OPERATING INCOME,
NET EARNINGS AND EARNINGS PER SHARE
(In millions, except per share amounts)
(Unaudited)
 
Quarter Ended April 1, 2012 Quarter Ended April 3, 2011
Operating Income (loss)   Net earnings (loss)   Earnings (loss) per share   Operating Income (loss)   Net earnings (loss)   Earnings (loss) per share
 
Loss as reported $ (33.6 ) $ (242.1 ) $ (4.03 ) $ (8.6 ) $ (6.1 ) $ (0.10 )
Acquisition related adjustments 4.9 3.0 0.05 7.8 5.7 0.09
Impairment of goodwill 14.9 14.9 0.25 - - -
Income taxes - increase in valuation allowance   -     211.5     3.52     -     0.3     -  
Non-GAAP loss as adjusted $ (13.8 ) $ (12.7 ) $ (0.21 ) $ (0.8 ) $ (0.1 ) $ (0.01 )

The acquisition-related adjustments reflect amortization of acquisition intangibles of $4.9 million related to acquisitions closed in March 2011. Adjusted operating income for the first quarter of 2012 was $(13.8) million and adjusted net earnings was $(0.21) per share as described in the Non-GAAP Financial Measures section of this release.

About Intermec, Inc.

Intermec Inc. (NYSE:IN) develops and integrates products, services and technologies that identify, track and manage supply chain assets and information. Core technologies include rugged mobile computing and data collection systems, voice solutions that increase business performance, bar code printers, label media, and RFID. The company’s products and services are used by customers in many industries worldwide to improve the productivity, quality and responsiveness of business operations. For more information about Intermec, visit www.intermec.com or call 800-347-2636.

Non-GAAP Financial Measures

This press release includes Non-GAAP financial measures for operating income (loss), net earnings (loss), earnings (loss) per diluted share, EBITDA, Adjusted EBITDA and gross margins. Reconciliations of each of these Non-GAAP financial measures to the most directly comparable GAAP financial measures are detailed in the Reconciliation of GAAP to Non-GAAP operating (loss) and adjusted EBITDA, Reconciliation of GAAP to Non-GAAP Gross Margins, for the Quarter Ending April 1, 2012, attached to this press release.

Our Non-GAAP measures should be read in conjunction with the corresponding GAAP measures. The Non-GAAP measures should be considered in addition to and not as an alternative or substitute for the measures prepared in accordance with generally accepted accounting principles.

We believe that excluding items such as, but not limited to, allowances for deferred tax assets, impairment charges, restructuring charges (principally related to severance costs in connection with distinct organizational initiatives to reduce costs and improve operational efficiency), costs related to completion of acquisitions and certain opening accounting adjustments, goodwill impairments, amortization of intangibles and non-cash stock based compensation expenses provides supplemental information useful to investors’ and management’s understanding of Intermec’s core operating results, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods.

Statements made in this release and 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. The forward-looking statements contained herein include, without limitation, statements regarding: our view of general economic and market conditions, our revenue, expenses, earnings or financial outlook for the first two quarters of 2012, the full-year of 2012, the current period or any other period, our impairment analysis for goodwill and long-lived assets, our deferred tax valuation allowances, the applicability and results of accounting policies and analyses used in our financial reporting, the necessity to update information in our periodic or other required reports, our cost reduction plans, and 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. They also include, without limitation, statements about future financial and operating results of our company after the acquisition of other businesses and the benefits of such acquisitions. 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 risk factors include, but are not limited to, risks and uncertainties described more fully in our reports filed or to be filed with the Securities and Exchange Commission including, but not limited to, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, which are available, among other places, on our website at www.intermec.com .
INTERMEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
         
Three Months Ended
April 1, April 3,
  2012     2011  
 
Revenues:
Product $ 136,471 $ 141,736
Service   43,207     36,782  
Total revenues 179,678 178,518
 
Costs and expenses:
Cost of product revenues 91,339 87,797
Cost of service revenues 22,414 22,427
Research and development 20,009 17,815
Selling, general and administrative 66,007 54,242
Acquisition costs - 4,839
Gain on intellectual property sales (1,400 ) -
Impairment of goodwill   14,925     -  
Total costs and expenses   213,294     187,120  
 
Operating loss (33,616 ) (8,602 )
Interest income 121 98
Interest expense   (750 )   (511 )
Loss before income taxes (34,245 ) (9,015 )

Income tax expense (benefit)
  207,845     (2,938 )
Net loss   (242,090 )   (6,077 )
 
Basic loss per share $ (4.03 ) $ (0.10 )
Diluted loss per share $ (4.03 ) $ (0.10 )
 
Shares used in computing basic loss per share 60,030 60,367
Shares used in computing diluted loss per share 60,030 60,367
   
INTERMEC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 
April 1, December 31,
  2012     2011  
ASSETS
 
Current assets:
Cash and cash equivalents $ 85,321 $ 95,108
Short-term investments 203 170
Accounts receivable, net 112,837 139,737
Inventories 107,745 103,622
Current deferred tax assets, net 8,422 84,541
Other current assets   29,117     24,226  
Total current assets 343,645 447,404
 
Deferred tax assets, net 7,889 141,064
Goodwill 128,585 143,510
Intangibles, net 57,303 61,996
Property, plant and equipment, net 44,821 47,086
Other assets, net   27,786     28,230  
Total assets $ 610,029   $ 869,290  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 75,818 $ 92,607
Payroll and related expenses 23,872 32,540
Deferred revenue 54,598 47,234
Accrued expenses   28,928     35,118  
Total current liabilities 183,216 207,499
 
Long-term debt 85,000 85,000
Pension and other postretirement benefits liabilities 125,901 124,058
Long-term deferred revenue 28,567 28,960
Other long-term liabilities 16,298 15,344
 
Commitments and contingencies
 
Shareholders' equity:
Common stock (250,000 shares authorized, 63,096 and 62,956 shares issued
and 59,847 and 59,717 outstanding) 636 636
Additional paid-in capital 700,912 697,597
Accumulated deficit (452,417 ) (210,327 )
Accumulated other comprehensive loss   (78,084 )   (79,477 )
Total shareholders' equity   171,047     408,429  
Total liabilities and shareholders' equity $ 610,029   $ 869,290  
INTERMEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
     
Three Months Ended
April 1, April 3,
  2012     2011  
 

Cash and cash equivalents at beginning of the period
$ 95,108 $ 221,467
 
Cash flows from operating activities:
Net loss (242,090 ) (6,077 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 8,808 4,907
Impairment of goodwill 14,925
Deferred taxes 210,804 (4,383 )
Stock-based compensation 2,641 2,328
Gain on intellectual property sales (1,400 ) -
Change in pension and other postretirement plans, net (302 ) (159 )
Changes in operating assets and liabilities:
Accounts receivable 29,899 13,152
Inventories (3,916 ) 2,357
Accounts payable (17,113 ) (2,128 )
Accrued expenses (6,134 ) (14,454 )
Payroll and related expenses (8,964 ) 4,409
Deferred revenue 6,099 6,705
Other operating activities   (5,276 )   (4,310 )
Net cash provided by (used in)operating activities   (12,019 )   2,347  
 
Cash flows from investing activities:
Acquisitions, net of cash acquired - (199,018 )
Additions to property, plant and equipment (1,792 ) (4,115 )
Proceeds from intellectual property sales 1,650 -
Other investing activities   (11 )   (371 )
Net cash used in investing activities   (153 )   (203,504 )
 
Cash flows from financing activities:
Proceeds from issuance of debt - 97,000
Stock repurchase - (4,535 )
Stock options exercised and other   674     524  
Net cash provided by financing activities   674     92,989  
 
Effect of exchange rate changes on cash and cash equivalents   1,711     3,818  
Net change in cash and cash equivalents   (9,787 )   (104,350 )
 
Cash and cash equivalents at end of the period $ 85,321   $ 117,117  
                                   
INTERMEC, INC.
RECONCILIATION OF GAAP TO NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED EBITDA
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended April 1, 2012 Three Months Ended April 3, 2011
GAAP Operating Results Non-GAAP Adjustments   Non-GAAP Operating Results   EBITDA Adjustments   Adjusted EBITDA   GAAP Operating Results   Non-GAAP Adjustments   Non-GAAP Operating Results   EBITDA Adjustments   Adjusted EBITDA
 
Total revenues $ 179,678 $ - $ 179,678 $ - $ 179,678 $ 178,518 $ 726 $ 179,244 $ - $ 179,244
 
Costs and expenses:
Cost of revenues 113,753 (3,648 ) 110,105 (1,774 ) 108,331 110,224 (2,265 ) 107,959 (1,858 ) 106,101
Research and development 20,009 - 20,009 (297 ) 19,712 17,815 - 17,815 (277 ) 17,538
Selling, general and administrative 66,007 (1,201 ) 64,806 (4,882 ) 59,924 54,242 - 54,242 (3,998 ) 50,244
Acquisition costs - - - - - 4,839 (4,839 ) - - -
Gain on intellectual property sales (1,400 ) - (1,400 ) - (1,400 ) - - - - -
Impairment of goodwill   14,925     (14,925 )   -     -     -     -     -     -     -     -
Total costs and expenses   213,294     (19,774 )   193,520     (6,953 )   186,567     187,120     (7,104 )   180,016     (6,133 )   173,883
 
Operating income (loss) $ (33,616 ) $ 19,774   $ (13,842 ) $ 6,953   $ (6,889 ) $ (8,602 ) $ 7,830   $ (772 ) $ 6,133   $ 5,361

INTERMEC, INC.

RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGINS

(In thousands, except per share amounts)
(Unaudited)
                     
Three Months Ended April 1, 2012 Three Months Ended April 3, 2011
As Reported Non-GAAP Adjustments   Non-GAAP as Adjusted   As Reported   Non-GAAP Adjustments   Non-GAAP as Adjusted
Revenues:
Product $ 136,471 $ - $ 136,471 $ 141,736 $ - $ 141,736
Service   43,207     -     43,207     36,782     726   b   37,508  
Total revenues $ 179,678   $ -   $ 179,678   $ 178,518   $ 726.00   $ 179,244  
 
Cost of revenues:
Product $ 91,339 $ (3,648 )

a

 
$ 87,691 $ 87,797 $ (2,265 ) c $ 85,532
Service   22,414     -     22,414     22,427       22,427  
Total cost of revenues $ 113,753   $ (3,648 ) $ 110,105   $ 110,224     (2,265 ) $ 107,959  
 
Gross margins:
Product 33.1 % 35.7 % 38.1 % 39.7 %
Service 48.1 % 48.1 % 39.0 % 40.2 %
Total 36.7 % 38.7 % 38.3 % 39.8 %
 

a - Acquisition related intangible amortization

b - Acquisition fair value of service revenue.
c - $1,102 of acquisition related intangible amortization, $1,163 of acquisition fair value of inventory
INTERMEC, INC.
SUPPLEMENTAL INFORMATION: EBITDA AND ADJUSTED EBITDA CALCULATION
(In thousands, except per share amounts)
     
Three Months Ended
April 1, 2012 April 3, 2011
 
Operating Income (loss), as reported $ (33,616 ) $ (8,602 )
 

Acquisition adjustments
Acquisition fair-value adjustments - 1,889
Intangible amortization 4,496 1,102
Acquisition costs - 4,839
Impairment of goodwill 14,925 -
Other   353     -  
 
Total adjustments   19,774     7,830  
 
Non-GAAP operating income (loss) $ (13,842 ) $ (772 )
 

Adjusted EBITDA calculation
Add: depreciation and amortization (excluding acquisition related) $ 4,312 $ 3,805
 
Add: stock-based compensation   2,641     2,328  
 
Adjusted EBITDA $ (6,889 ) $ 5,361  
 
 
 
Intermec is providing disclosure of the reconciliation of certain Non-US GAAP financial measures used in our financial reporting and within our press release, among other places, to our comparable financial measures on a US GAAP basis. The Company believes that these Non-US GAAP financial measures provide investors the additional information to evaluate financial performance in a way that is comparable to measures reported by other technology companies.
 
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is net income/loss before provisions for income taxes, net interest expense, and depreciation and amortization. EBITDA should not be considered an alternative to, or more meaningful than, income before income taxes, cash flow from operations, or other traditional indicators of operating performance. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure that we believe provides relevant and useful information. Our calculation of adjusted EBITDA adds back the non-cash effect of stock-based compensation as accounted for under ACS 718 as we believe this is a meaningful view of our true cash earnings. Adjusted EBITDA may not be comparable to a similarly titled measure reported by other companies, since not all companies calculate this non-US GAAP measure in the same manner.
                     
INTERMEC, INC.
 
SUPPLEMENTAL SALES INFORMATION BY CATEGORY
(Amounts in millions)
(Unaudited)
 
Three Months Ended
April 1, 2012   Percent of Revenues   April 3, 2011   Percent of Revenues   Percent Change in Revenues
Revenues by category:
Intermec-branded:
Systems and solutions $ 81.8 45.5 % $ 90.4 50.6 % -9.5 %
Printer and media 35.5 19.8 % 43.4 24.3 % -18.2 %
Service 35.0 19.5 % 34.9 19.6 % 0.3 %
Voice solutions   27.4 15.2 %   9.8 5.5 % 179.6 %
Total revenues $ 179.7 100.0 % $ 178.5 100.0 % 0.7 %
 
 
 
SUPPLEMENTAL SALES INFORMATION BY GEOGRAPHICAL REGION
(Amounts in millions)
(Unaudited)
 
Three Months Ended
April 1, 2012   Percent of Revenues   April 3, 2011   Percent of Revenues   Percent Change in Revenues
Revenues by geographic region:
North America $ 91.7 51.0 % $ 78.4 43.9 % 17.0 %
Europe, Middle East and Africa (EMEA) 54.6 30.4 % 65.9 36.9 % -17.1 %
Latin America 19.9 11.1 % 19.9 11.2 % 0.0 %
Asia Pacific   13.5 7.5 %   14.3 8.0 % -5.6 %
Total revenues $ 179.7 100.0 % $ 178.5 100.0 % 0.7 %

Copyright Business Wire 2010

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