Zebra Technologies Announces 2010 Second Quarter Financial Results

Sales and earnings exceed expectations on strength of business in all geographic regions; Board authorizes new share repurchase program

Aug 05, 2010, 03:00 ET from Zebra Technologies Corporation

LINCOLNSHIRE, Ill., Aug. 5 /PRNewswire-FirstCall/ -- Zebra Technologies Corporation (Nasdaq: ZBRA) today announced 2010 second quarter net income of $22,677,000, or $0.39 per diluted share, including $576,000 in exit and restructuring costs which lowered diluted earnings by $0.01 per share. Net sales for the period ended July 3, 2010, were $235,735,000, which was the fourth consecutive sequential sales increase for Zebra and up 25.6% from $187,676,000 for the second quarter of 2009. Net income for the second quarter of 2009 was $9,011,000, or $0.15 per diluted share, including $3,643,000 in exit, restructuring and integration costs which lowered diluted earnings by $0.04 per share.  

Summary Financial Performance

2Q10

2Q09

Change

Net sales (in thousands)

$235,735

$187,676

25.6%

Gross margin (%)

47.2

43.6

3.6 pts.

Operating margin (%)

14.0

7.1

6.9 pts.

Net income (in thousands)

$22,677

$9,011

151.6%

Diluted EPS

$0.39

$0.15

160.0%

"Ongoing broad-based strength, with a solid run-rate business and improving large-deal activity, led to better-than-expected second quarter results," stated Anders Gustafsson, Zebra's chief executive officer. "Zebra's performance is in part a result of management's integrated strategy to extend industry leadership and increase profitability. Over the past two years, we used our financial strength to invest through the downturn to strengthen our product portfolio, lower costs and extend Zebra's global reach to more effectively serve customers. We are positioning Zebra higher in the value chain with more innovative products and solutions focused on high-growth markets. Our strategy and execution make us optimistic about further success and growth for Zebra."

As of July 3, 2010, Zebra had $255,194,000 in cash and investments, and no long-term debt. Net inventories were $85,010,000, and net accounts receivable were $150,092,000.  

Discussion and Analysis

  • Net sales, up 25.6% from the second quarter of 2009, benefited from improved business conditions in all geographic regions, with the highest growth rates occurring in Latin America and Asia Pacific. Record printer units shipped, with improved product mix, including higher sales of high-performance and midrange tabletop printers and aftermarket parts, contributed to the sales growth from a year ago.
  • Gross margin of 47.2% versus 43.6% a year ago was principally driven by the improved product mix, higher volumes, and benefits from outsourcing thermal printer production to a third-party manufacturer. These factors were partially offset by unfavorable movements in foreign exchange rates and higher freight costs incurred to meet increased customer demand.
  • Operating expenses increased 14.2% from the second quarter of 2009 substantially from increased selling and marketing and research and development expenses. Increases relate to higher compensation costs, outside commissions, advertising and direct marketing, and travel and entertainment.

Stock Purchase Update

During the second quarter of 2010, Zebra repurchased 934,537 shares of Zebra Technologies Corporation Class A Common Stock. At July 3, 2010, 514,749 shares remained in the company's stock buyback authorization and 57,195,930 shares of common stock were outstanding.

Subsequent to the end of the second quarter, the company repurchased the remaining 514,749 shares in the buyback authorization. In a new authorization from the Board, Zebra can purchase up to an additional 3,000,000 shares of Zebra Technologies Corporation Class A Common Stock. These purchases can be made from time to time in the open market or in private transactions. There is no expiration date on the authorization.

Third Quarter Outlook

Zebra announced its financial forecast for the third quarter of 2010. Net sales are expected within a range of $230,000,000 and $244,000,000. Diluted earnings per share are expected within a range of $0.36 and $0.43.

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 second 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 third quarter of 2010 stated in the paragraph above captioned "Third 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.

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

ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

July 3, 2010

December 31, 2009

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$  41,282

$  38,943

Restricted cash

1,458

1,725

Investments and marketable securities

136,414

114,064

Accounts receivable, net

150,092

150,992

Inventories, net

85,010

79,926

Deferred income taxes

10,562

10,792

Income taxes receivable

--

4,724

Prepaid expenses and other current assets

18,644

9,771

Total current assets

443,462

410,937

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

81,141

77,589

Long-term deferred income taxes

33,357

35,842

Goodwill

151,008

153,225

Other intangibles, net

52,597

55,982

Long-term investments and marketable securities

76,040

91,989

Other assets

4,350

4,915

Total assets

$  841,955

$  830,479

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$  30,200

$  28,137

Accrued liabilities

53,152

52,591

Deferred revenue

23,404

24,082

Income taxes payable

1,687

--

Total current liabilities

108,443

104,810

Deferred rent

3,278

4,108

Other long-term liabilities

9,581

9,432

Total liabilities

121,302

118,350

Stockholders' equity:

Preferred Stock

--

--

Class A Common Stock

722

722

Additional paid-in capital

125,682

136,104

Treasury stock

(412,972)

(385,831)

Retained earnings

1,016,605

969,195

Accumulated other comprehensive loss

(9,384)

(8,061)

Total stockholders' equity

720,653

712,129

Total liabilities and stockholders' equity

$  841,955

$  830,479

ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

July 3, 2010

July 4, 2009

July 3, 2010

July 4, 2009

Net sales

 Net sales of tangible products

$  208,319

$  161,928

$  410,403

$  328,612

 Revenue from services and software

27,416

25,748

51,763

51,673

Total net sales

235,735

187,676

462,166

380,285

Cost of sales

 Cost of sales of tangible products

114,663

96,576

224,313

192,435

 Cost of services and software

9,893

9,364

19,339

20,305

Total cost of sales

124,556

105,940

243,652

212,740

Gross profit

111,179

81,736

218,514

167,545

Operating expenses:

  Selling and marketing

30,328

24,398

57,828

47,597

  Research and development

25,371

20,949

48,443

43,098

  General and administrative

19,718

18,077

40,587

39,434

  Amortization of intangible assets

2,345

2,575

4,703

5,208

  Exit, restructuring and integration costs

576

3,643

2,392

5,940

  Asset impairment charges

--

(1,058)

--

(1,058)

Total operating expenses

78,338

68,584

153,953

140,219

Operating income

32,841

13,152

64,561

27,326

Other income (expense):

  Investment income

634

247

1,476

1,425

  Foreign exchange gain (loss)

361

(131)

560

(1,415)

  Other, net

(487)

(19)

(836)

(336)

Total other income (expense)

508

97

1,200

(326)

Income before income taxes

33,349

13,249

65,761

27,000

Income taxes

10,672

4,238

18,351

8,637

Net income

$  22,677

$  9,011

$  47,410

$  18,363

Basic earnings per share

$  0.39

$  0.15

$  0.82

$  0.31

Diluted earnings per share

$  0.39

$  0.15

$  0.82

$  0.31

Basic weighted average shares outstanding

57,489

59,271

57,756

59,821

Diluted weighted average and equivalent shares outstanding

   57,737

   59,352

   58,003

   59,896

ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

Six Months Ended

July 3, 2010

July 4, 2009

Cash flows from operating activities:

  Net income

$  47,410

$  18,363

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

     Depreciation and amortization

16,021

15,947

     Equity-based compensation

5,155

5,586

     Excess tax benefit from equity-based compensation

(16)

--

     Gain on sale of assets

(58)

--

     Asset impairment charges

--

(1,058)

     Deferred income taxes

2,961

1,710

     Changes in assets and liabilities:

        Accounts receivable, net

(1,956)

17,512

        Inventories, net

(5,383)

10,133

        Other assets

(8,664)

(212)

        Accounts payable

6,672

(14,479)

        Accrued liabilities

779

(21,855)

        Deferred revenue

(337)

2,030

        Income taxes

5,429

(2,773)

        Other operating activities

(683)

1,524

           Net cash provided by operating activities

67,330

32,428

Cash flows from investing activities:

  Purchases of property and equipment

(15,053)

(12,648)

       Payments for patents and licensing arrangements

(1,634)

(425)

  Purchases of investments and marketable securities

(200,939)

(126,605)

  Maturities of investments and marketable securities

149,929

100,830

  Sales of investments and marketable securities

44,567

55,750

           Net cash provided by (used in) investing activities

(23,130)

16,902

Cash flows from financing activities:

  Purchase of treasury stock

(46,767)

(41,600)

  Proceeds from exercise of stock options and stock purchase plan purchases

5,033

2,027

  Excess tax benefit from equity-based compensation

16

--

           Net cash used in financing activities

(41,718)

(39,573)

Effect of exchange rate changes on cash

(143)

1,768

Net increase in cash and cash equivalents

2,339

11,525

Cash and cash equivalents at beginning of period

38,943

33,267

Cash and cash equivalents at end of period

$  41,282

$  44,792

Supplemental disclosures of cash flow information:

Income taxes paid

$  9,472

$  7,334

ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)

SALES BY PRODUCT CATEGORY

Three Months Ended

July 3,

July 4,

Percent

Percent of

Percent of

Product Category

2010

2009

Change

Net Sales - 2010

Net Sales - 2009

Hardware

$  163,479

$  125,075

30.7

69.3

66.7

Supplies

43,573

35,588

22.4

18.5

19.0

Service and software

27,416

25,748

6.5

11.6

13.7

Shipping and handling

1,267

1,265

0.2

0.6

0.6

  Total net sales

$  235,735

$  187,676

25.6

100.0

100.0

Six Months Ended

July 3,

July 4,

Percent

Percent of

Percent of

Product Category

2010

2009

Change

Net Sales - 2010

Net Sales - 2009

Hardware

$  323,509

$  252,372

28.2

70.0

66.3

Supplies

84,270

73,607

14.5

18.2

19.4

Service and software

51,763

51,673

0.2

11.2

13.6

Shipping and handling

2,624

2,633

(0.3)

0.6

0.7

  Total net sales

$  462,166

$  380,285

21.5

100.0

100.0

SALES BY GEOGRAPHIC REGION

Three Months Ended

July 3,

July 4,

Percent

Percent of

Percent of

Geographic Region

2010

2009

Change

Net Sales - 2010

Net Sales - 2009

Europe, Middle East and Africa

$  80,774

$  69,708

15.9

34.3

37.1

Latin America

20,734

14,341

44.6

8.8

7.6

Asia-Pacific

28,538

19,839

43.8

12.1

10.5

  Total International

130,046

103,888

25.2

55.2

55.2

North America

105,689

83,788

26.1

44.8

44.8

  Total net sales

$  235,735

$  187,676

25.6

100.0

100.0

Six Months Ended

July 3,

July 4,

Percent

Percent of

Percent of

Geographic Region

2010

2009

Change

Net Sales - 2010

Net Sales - 2009

Europe, Middle East and Africa

$  164,318

$  144,328

13.9

35.6

38.0

Latin America

41,724

27,412

52.2

9.0

7.2

Asia-Pacific

53,885

39,247

37.3

11.7

10.3

  Total International

259,927

210,987

23.2

56.3

55.5

North America

202,239

169,298

19.5

43.7

44.5

  Total net sales

$  462,166

$  380,285

21.5

100.0

100.0

ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SEGMENT INFORMATION

(Amounts in thousands)

(Unaudited)

Three Months Ended

Six Months Ended

July 3, 2010

July 4, 2009

July 3, 2010

July 4, 2009

Net sales:

SPG

$  213,126

$  167,909

$  421,054

$  338,677

ZES

22,609

19,767

41,112

41,608

      Total

$  235,735

$  187,676

$  462,166

$  380,285

Cost of Sales:

SPG

$  115,020

$  98,037

$  226,518

$  195,132

ZES

9,536

7,903

17,134

17,608

      Total

$  124,556

$  105,940

$  243,652

$  212,740

Operating expenses:

SPG

$  45,177

$  39,784

$  87,163

$  79,458

ZES

16,926

15,432

33,241

30,927

Corporate and other

16,235

13,368

33,549

29,834

      Total

$  78,338

$  68,584

$  153,953

$  140,219

Operating income (loss):

SPG

$  52,929

$  30,088

$  107,373

$  64,087

ZES

(3,853)

(3,568)

(9,263)

(6,927)

Corporate and other

(16,235)

(13,368)

(33,549)

(29,834)

      Total

$  32,841

$  13,152

$  64,561

$  27,326

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

July 3,

July 4,

Percent

2010

2009

Change

Total printers shipped

270,882

205,199

32.0

Average selling price of printers shipped

$505

$508

(0.6)

Six Months Ended

July 3,

July 4,

Percent

2010

2009

Change

Total printers shipped

515,304

404,417

27.4

Average selling price of printers shipped

$525

$512

2.5

SOURCE Zebra Technologies Corporation



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