Fitch Affirms Intermec's IDR at 'BB-'; Outlook Stable.

NEW YORK -- Fitch has affirmed Intermec, Inc.'s (Intermec) ratings as follows:

--Issuer Default Rating (IDR) 'BB-';

--Secured bank facility 'BB+';

--Senior unsecured debt 'BB-'.

The Rating Outlook is Stable.

The ratings reflect Intermec's:

--Strong credit protection measures driven by limited outstanding debt and solid operating performance;

--Potential for earnings growth and margin expansion arising from the monetization of its radio frequency identification (RFID) patent portfolio through its Rapid Start License Program (RSLP), despite slower-than-anticipated industry rollouts to date of RFID products based on Gen 2 standards;

--Broad product and patent portfolios, which Fitch believes should enable Intermec to capitalize on the solid market growth for Automated Information and Data Collection (AIDC) products and services, especially RFID.

Fitch's rating concerns consist of:

--Strong competition from traditional bar code companies and new entrants, which include larger, better capitalized companies intent on capitalizing on the expected strong growth of the AIDC market;

--The extent to which the transition to RFID could potentially cannibalize Intermec's existing bar code business;

--Risks of rapid technological change in the AIDC industry as RFID standards evolve or alternate technologies emerge, both of which are mitigated by Intermec's significant product and patent portfolios, supply chain expertise cultivated through years of bar code technology deployments and ability to leverage existing customer relationships.

As a result of solid operating performance and minor debt reduction in the past year, leverage (total debt/operating EBITDA), excluding volatile intellectual property (IP) settlements, declined to 1.4 times (x) for the latest 12 months (LTM) ended July 2, 2006 from 1.8x in the corresponding year-ago period. Interest coverage (operating EBITDA/gross interest expense), excluding IP settlements, improved to 8x in the LTM period from 4.1x in the corresponding year-ago period. Fitch expects a slight improvement in these metrics near-term due to continued operating profit growth rather than debt reduction since Fitch believes Intermec is unlikely to call its last remaining debt issue prior to maturity on March 15, 2008.

Intermec's liquidity at July 2, 2006 consisted of approximately $323 million of cash and cash equivalents and a $50 million asset-based revolving credit facility that expires September 2007. As of July 2, 2006, no borrowings were outstanding under the facility, but Intermec had borrowing capacity of only $18.2 million due to outstanding letters of credit. In addition, Fitch estimates Intermec generated free cash flow of approximately $45 million for the LTM ended July 2, 2006, excluding non-recurring cash flow attributable to discontinued operations, IP settlements and RSLP origination fees, compared with nearly $28 million in 2005. Lastly, Intermec has $8.2 million of assets, primarily excess real estate, available for sale. Fitch believes Intermec has more than sufficient liquidity and financial flexibility to meet operational requirements and satisfy its remaining $100 million debt maturity in March 2008.

As of July 2, 2006, total debt was $100 million, down slightly from $108.5 million as of July 3, 2005. Intermec redeemed an $8.5 million industrial revenue bond upon maturity in July 2005, reducing total debt to $100 million. Intermec's sole remaining outstanding debt issue, consisting of $100 million of 7% senior unsecured notes, matures on March 15, 2008.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.