Zebra Technologies Announces 2010 First Quarter Financial Results Strong sales growth and improvement in gross margin lead to better-than-expected earnings growth

LINCOLNSHIRE, Ill., May 4 /PRNewswire-FirstCall/ -- Zebra Technologies Corporation (Nasdaq: ZBRA) today announced 2010 first quarter net income of $24,733,000, or $0.42 per diluted share, including $1,816,000 in exit and restructuring costs which lowered diluted earnings by $0.02 per share. Net sales for the period ended April 3, 2010, were $226,431,000, up 17.6% from $192,609,000 for the first quarter of 2009. Net income for the first quarter of 2009 was $9,352,000, or $0.16 per diluted share, including $2,296,000 in exit, restructuring and integration costs which lowered diluted earnings by $0.02 per share.  


Summary Financial Performance


1Q10

1Q09

Change

Net sales (in thousands)

$226,431

$192,609

17.6%


Gross margin (%)

47.4

44.6

2.8

pts.

Operating margin (%)

14.0

7.4

6.6

pts.

Net income (in thousands)

$24,733

$9,352

164.5%


Diluted EPS

$0.42

$0.16

173.8%





"Broad-based demand across geographies, products and industries led to Zebra's strong first quarter performance, as customers invested in Zebra solutions to improve asset management and visibility across the supply chain," stated Anders Gustafsson, Zebra's chief executive officer. "During the quarter, we hired more sales and marketing employees in high growth emerging regions to capture more business opportunities. We also continued to develop innovative new products in terms of performance, features and integration to distance Zebra further from the competition. These activities give us optimism about Zebra's future and our direction in building shareholder value."

As of April 3, 2010, Zebra had $254,098,000 in cash and investments, and no long-term debt. Net inventories were $81,565,000, and net accounts receivable were $145,642,000.  

Discussion and Analysis

  • Net sales, up 17.6% from the first quarter of 2009 benefited from improved business conditions in all geographic regions, with the highest rates of growth occurring in Latin America and Asia Pacific. An improved product mix, with higher sales of high-performance and midrange tabletop printers and aftermarket parts, contributed to the sales growth from a year ago.
  • Gross margin of 47.4% versus 44.6% a year ago was principally driven by the improved product mix, higher volumes, favorable foreign exchange rates, and benefits from outsourcing thermal printer production to a third-party manufacturer. These factors were partially offset by higher freight costs incurred to meet increased customer demand.
  • Operating expenses increased 5.6% from the first quarter of 2009 substantially from increased selling and marketing expenses related to higher compensation costs, outside commissions, advertising and direct marketing, and travel and entertainment.
  • The effective income tax rate for the first quarter of 2010 was 23.7%, compared with 32.0% for the first quarter of 2009. The decline was a reduction related to prior years for taxes associated with intercompany profit in ending inventories. This adjustment reduced income taxes by $2,764,000, or the effective rate by 8.5 percentage points, and had a favorable impact on earnings of $0.04 per diluted share.

Stock Purchase Update

During the first quarter of 2010, the company repurchased 750,000 shares of Zebra Technologies Corporation Class A Common Stock. At April 3, 2010, Zebra had 1,449,286 shares remaining in the company's stock buyback authorization and 57,724,510 shares of common stock outstanding.

Second Quarter Outlook

Zebra announced its financial forecast for the first quarter of 2010. Net sales are expected within a range of $219,000,000 and $233,000,000. Diluted earnings per share are expected within a range of $0.26 and $0.34. This forecast includes expected exit and restructuring costs of $0.01 per diluted share.  

Conference Call Notification

Investors are invited to listen to a live Internet broadcast of Zebra's conference call discussing the company's financial results for the first quarter of 2010. The conference call will be held at 11:00 AM Eastern Time today. To listen to the call, visit the company's Web site at http://www.zebra.com.  

Forward-looking Statement

This press release contains forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements regarding the company's financial forecast for the second quarter of 2010 stated in the paragraph above captioned "Second Quarter Outlook." Actual results may differ from those expressed or implied in the company's forward-looking statements. These statements represent estimates only as of the date they were made. Zebra undertakes no obligation, other than as may be required by law, 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 release.

These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in Zebra's industry, market conditions, general domestic and international economic conditions, and other factors. These factors include customer acceptance of Zebra's hardware and software products and competitors' product offerings, and the potential effects of technological changes. The widely reported uncertainty over future global economic conditions, the availability of credit, capital markets volatility, may have adverse effects on Zebra, its suppliers and its customers. In addition, a disruption in our ability to obtain products from vendors as a result of natural disasters or other circumstances could restrict sales and negatively affect customer relationships. Profits and profitability will be affected by Zebra's ability to control manufacturing and operating costs, including the effect of Zebra's activities to transfer final assembly of its printers to a third-party manufacturer. Because of a large investment portfolio, interest rates and financial market conditions will also have an impact on results. Foreign exchange rates will have an effect on financial results because of the large percentage of our international sales. The outcome of litigation in which Zebra may be involved is another factor. These and other factors could have an adverse effect on Zebra's sales, gross profit margins and results of operations and increase the volatility of our financial results. When used in this release and documents referenced, the words "anticipate," "believe," "estimate," and "expect" and similar expressions, as they relate to the company or its management, are intended to identify such forward-looking statements, but are not the exclusive means of identifying these statements. Descriptions of the risks, uncertainties and other factors that could affect the company's future operations and results can be found in Zebra's filings with the Securities and Exchange Commission. In particular, readers are referred to Zebra's Form 10-K for the year ended December 31, 2009.

About Zebra Technologies

Zebra Technologies Corporation (NASDAQ: ZBRA) provides the broadest range of innovative technology solutions to identify, track, and manage the deployment of critical assets for improved business efficiency. Zebra's products include reliable on-demand printers and state-of-the-art software and hardware solutions utilizing a wide array of automatic identification technologies. By enabling improvements in sourcing, visibility, security and accuracy, Zebra helps its customers to put the right asset in the right place at the right time. Zebra serves more than 90 percent of Fortune 500 companies worldwide. For more information about Zebra's solutions, visit http://www.zebra.com.

ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


April 3,
2010


December 31, 2009


(Unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$  35,988


$  38,943

Restricted cash

1,598


1,725

Investments and marketable securities

136,565


114,064

Accounts receivable, net

145,642


150,992

Inventories, net

81,565


79,926

Deferred income taxes

10,561


10,792

Income taxes receivable

-


4,724

Prepaid expenses and other current assets

14,288


9,771

Total current assets

426,207


410,937





Property and equipment at cost, net of accumulated depreciation and amortization

77,951


77,589

Long-term deferred income taxes

32,643


35,842

Goodwill

152,288


153,225

Other intangibles, net

53,486


55,982

Long-term investments and marketable securities

79,947


91,989

Other assets

4,435


4,915

Total assets

$  826,957


$  830,479





LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:




Accounts payable

$  26,870


$  28,137

Accrued liabilities

43,322


52,591

Deferred revenue

22,553


24,082

Income taxes payable

423


-

Total current liabilities

93,168


104,810

Deferred rent

3,702


4,108

Other long-term liabilities

9,168


9,432

Total liabilities

106,038


118,350





Stockholders' equity:




Preferred Stock

-


-

Class A Common Stock

722


722

Additional paid-in capital

136,143


136,104

Treasury stock

(401,123)


(385,831)

Retained earnings

993,928


969,195

Accumulated other comprehensive loss

(8,751)


(8,061)

Total stockholders' equity

720,919


712,129

Total liabilities and stockholders' equity

$  826,957


$  830,479




ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)


Three Months Ended


April 3, 2010


April 4, 2009

Net sales:




 Net sales of tangible products

$  202,084


$  166,684

 Revenue from services and software

24,347


25,925

Total net sales

226,431


192,609





Cost of sales:




 Cost of sales of tangible products

108,540


95,859

 Cost of services and software

10,556


10,941

Total cost of sales

119,096


106,800





Gross profit

107,335


85,809





Operating expenses:




  Selling and marketing

27,500


23,199

  Research and development

23,072


22,149

  General and administrative

20,869


21,357

  Amortization of intangible assets

2,358


2,634

  Exit, restructuring and integration costs

1,816


2,296

Total operating expenses

75,615


71,635





Operating income

31,720


14,174





Other income (expense):




  Investment income

842


1,178

  Foreign exchange gain (loss)

199


(1,284)

  Other, net

(349)


(317)

Total other income (expense)

692


(423)





Income before income taxes

32,412


13,751





Income taxes

7,679


4,399





Net income

$  24,733


$  9,352





Basic earnings per share

$  0.43


$  0.16

Diluted earnings per share

$  0.42


$  0.16





Basic weighted average shares outstanding

58,016


60,266

Diluted weighted average and equivalent shares outstanding

   58,265


   60,332




ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


Three Months Ended


April 3, 2010


April 4, 2009

Cash flows from operating activities:




Net income

$  24,733


$  9,352

Adjustments to reconcile net income to net cash provided by (used in)




operating activities:




Depreciation and amortization

7,814


7,953

Equity-based compensation

2,231


3,167

Excess tax benefit from equity-based compensation

(3)


-

Gain on sale of assets

(82)


-

Deferred income taxes

3,535


3,263

Changes in assets and liabilities:




Accounts receivable, net

3,990


13,018

Inventories, net

(1,780)


(1,400)

Other assets

224


(244)

Accounts payable

870


(6,539)

Accrued liabilities

(9,118)


(23,946)

Deferred revenue

(1,618)


2,544

Income taxes

4,295


(8,055)

Other operating activities

(4,917)


(327)

Net cash provided by (used in) operating activities

30,174


(1,214)





Cash flows from investing activities:




Purchases of property and equipment

(5,818)


(6,802)

Acquisition of intangible assets

-


(425)

Purchases of investments and marketable securities

(89,586)


(57,473)

Maturities of investments and marketable securities

61,144


72,401

Sales of investments and marketable securities

17,736


22,583

Net cash provided by (used in) investing activities

(16,524)


30,284





Cash flows from financing activities:




Purchase of treasury stock

(20,823)


(28,593)

Proceeds from exercise of stock options and stock purchase plan purchases

4,191


1,168

Excess tax benefit from equity-based compensation

3


-

Net cash used in financing activities

(16,629)


(27,425)





Effect of exchange rate changes on cash

24


(213)





Net increase (decrease) in cash and cash equivalents

(2,955)


1,432

Cash and cash equivalents at beginning of period

38,943


33,267

Cash and cash equivalents at end of period

$  35,988


$  34,699





Supplemental disclosures of cash flow information:




Income taxes (refunded) paid

(454)


$  8,302








ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)


SALES BY PRODUCT CATEGORY


Three Months Ended







April 3,


April 4,


Percent


Percent of


Percent of

Product Category

2010


2009


Change


Net Sales - 2010


Net Sales - 2009

Hardware

$  160,030


$  127,235


25.8


70.7


66.1

Supplies

40,697


38,081


6.9


18.0


19.8

Service and software

24,347


25,925


(6.1)


10.8


13.5

Shipping and handling

1,357


1,368


(0.8)


0.5


0.6

  Total net sales

$  226,431


$  192,609


17.6


100.0


100.0




SALES BY GEOGRAPHIC REGION


Three Months Ended







April 3,


April 4,


Percent


Percent of


Percent of

Geographic Region

2010


2009


Change


Net Sales - 2010


Net Sales - 2009

Europe, Middle East and Africa

$  83,544


$  74,620


12.0


36.9


38.7

Latin America

20,990


13,071


60.6


9.3


6.8

Asia-Pacific

25,347


19,409


30.6


11.2


10.0

  Total International

129,881


107,100


21.3


57.4


55.5

North America

96,550


85,509


12.9


42.6


44.5

  Total net sales

$  226,431


$  192,609


17.6


100.0


100.0




ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SEGMENT INFORMATION

(Amounts in thousands)

(Unaudited)


Three Months Ended


April 3, 2010


April 4, 2009

Net sales:




Specialty Printing Group

$  207,928


$  170,768

Zebra Enterprise Solutions

18,503


21,841

Total

$  226,431


$  192,609





Cost of sales:




Specialty Printing Group

$  111,499


$  97,096

Zebra Enterprise Solutions

7,597


9,704

Total

$  119,096


$  106,800





Operating expenses:




Specialty Printing Group

$  41,986


$  39,673

Zebra Enterprise Solutions

16,317


15,496

Corporate and other

17,312


16,466

Total

$  75,615


$  71,635





Operating income (loss):




Specialty Printing Group

$  54,443


$  33,999

Zebra Enterprise Solutions

(5,411)


(3,359)

Corporate and other

(17,312)


(16,466)

Total

$  31,720


$  14,174





Corporate and other includes corporate administration costs or assets that support both reporting segments.




ZEBRA TECHNOLOGIES CORPORATION

PRINTER UNITS and AVERAGE UNIT PRICES

(Unaudited)


Three Months Ended


April 3, 2010


April 4, 2009

Total printers shipped

244,422


199,218

Average selling price of printers shipped

$547


$517




Contact:


Investors:

Media:

Douglas A. Fox, CFA

Orlando De Bruce

Vice President, Investor Relations and Treasurer

Director, Global Public Relations

+1 847 793 6735

+1 510 267 5052

dfox@zebra.com

odebruce@zebra.com



SOURCE Zebra Technologies Corporation



RELATED LINKS
http://www.zebra.com

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