Zebra Technologies Announces 2015 Fourth Quarter Financial Results

Company Provides Outlook for First Quarter and Full Year 2016

25 Feb, 2016, 06:30 ET from Zebra Technologies Corporation

LINCOLNSHIRE, Ill., Feb. 25, 2016 /PRNewswire/ -- Zebra Technologies Corporation (NASDAQ: ZBRA) today reported that net sales for the three months ended December 31, 2015, were $952.7 million, compared with $790.6 million for the fourth quarter of 2014. The GAAP net loss for the fourth quarter was $6.8 million, or $0.13 per share, compared with GAAP net loss of $51.7 million, or $1.02 per share, for the fourth quarter of 2014. Financial results for the 2014 fourth quarter and full year include two months of results of the Enterprise business that the company acquired on October 27, 2014.  

 

Summary Financial Highlights (Unaudited)

$ in millions except per share data

4Q15

4Q14

Change

GAAP net sales

$   952.7

$   790.6

20.5%

GAAP net (loss) income

$     (6.8)

$   (51.7)

            NM

GAAP (loss) earnings per share

$   (0.13)

$   (1.02)

            NM

Non-GAAP net income

$     78.5

$     62.1

26.4%

Non-GAAP earnings per diluted share

$     1.51

$     1.22

23.8%

Adjusted EBITDA (Non-GAAP)

$   165.2

$   145.2

13.7%

Adjusted EBITDA (%)

17.3%

18.2%

        (0.9) pts.

Note: The Company's calculation of Non-GAAP results adjust for certain items on a tax-effected basis. Please refer to the tables included in this press release for reconciliations of GAAP to Non-GAAP financial results.

 

Non-GAAP Financial Results (unaudited) 

For the fourth quarter of 2015, sales excluding the impact of purchase accounting were $956.3 million. Non-GAAP net income was $78.5 million, or $1.51 per diluted share, compared with $62.1 million, or $1.22 per diluted share, for the fourth quarter of 2014. Adjusted EBITDA for the fourth quarter of 2015 were $165.2 million, or 17.3% of sales compared to $145.2 million, or 18.2% of sales for the fourth quarter of 2014.  

"Our strong fourth quarter results were driven by solid growth in key markets and a focus on driving profitability. In 2015, we extended our leadership in Enterprise Asset Intelligence and made significant progress on integrating the transformational acquisition of the Enterprise business," said Anders Gustafsson, CEO of Zebra Technologies. "As we enter 2016, we remain committed to our strategic priorities of driving profitable growth, executing on cost synergies, de-levering the balance sheet and operating as One Zebra.  Our customers continue to invest in technology to improve efficiencies, and we are well positioned as their partner of choice. With a healthy pipeline of activity, we expect to gain momentum through the remainder of the year, enabling us to meet our growth goals for 2016 and longer-term."

Discussion and Analysis – Fourth Quarter

  • Net sales were $952.7 million on a GAAP basis, and include a reduction of $3.6 million for a purchase accounting adjustment related to service contracts acquired with the Enterprise business, reflecting an increase of $162.1 million from the fourth quarter of 2014. Excluding the purchase accounting adjustment noted above, sales in the Enterprise business accounted for $635.8 million compared to $482.2 million in the fourth quarter of 2014. Pre-transaction Zebra sales were $320.5 million compared to $314.6 million in the fourth quarter of 2014. On a constant currency basis, and excluding the purchase accounting adjustment, fourth quarter year-over-year sales growth inclusive of estimated 2014 Enterprise sales was 4% for total Zebra and 2% for Enterprise. Pre-transaction Zebra sales were up 7% in constant currency.
  • Gross margin for the fourth quarter on a GAAP basis was 44.9% including the impact of purchase accounting adjustments associated with service contracts and costs of goods sold. Excluding purchase accounting adjustments, adjusted gross margin for the quarter was 45.1%, compared to 46.6% in the fourth quarter of 2014, reflecting the change in mix associated with the sale of Enterprise products, which generally have a lower gross margin percentage than pre-transaction Zebra products, and the impact of foreign currency movements, net of hedges.
  • Operating expenses for the fourth quarter of 2015 of $405.5 million increased by $44.2 million from the prior year's fourth quarter, primarily as a result of the Enterprise acquisition. Operating expenses for the fourth quarter of 2015 include $53.6 million in acquisition, integration, exit and restructuring costs, versus $71.7 million in the prior year quarter, as well as $61.1 million for amortization of intangible assets, compared with $46.2 million for the fourth quarter of 2014.

Balance Sheet and Cash Flow

  • As of December 31, 2015, the company had cash of $192.4 million, accounts receivable of $674.3 million, inventories of $393.8 million, and long-term debt of $3.0 billion.
  • For the full year 2015, the company made $183 million of scheduled cash interest payments and $165 million in term loan principal payments. Subsequent to the end of 2015, the company paid an additional $80 million of term loan payments.
  • For the full year 2015, the company generated $102.6 million of cash flow from operations and made capital expenditures of $114.3 million.

Outlook

Full Year 2016

The company expects full year 2016 net sales, excluding purchase accounting adjustments, to grow approximately 1% to 4% from the comparable net sales of $3,668 million for the full year 2015. This view reflects an expectation of year-over-year growth of 2% to 5% on a constant currency basis.

Adjusted EBITDA margin is expected to be in the range of 17% to 18% for the full year 2016.

The company expects to pay down at least $300 million of debt principal in 2016.

Additional full year 2016 assumptions include:

  • Realization of approximately $50 million of incremental acquisition cost synergies compared to 2015
  • Of the remaining $130-150 million of integration-related expenses and capital expenditures for 2016-2017, the vast majority are expected to be incurred in 2016
  • Capital expenditures of approximately $70-75 million, including approximately $15-20 million related to acquisition integration
  • Depreciation and amortization expense of approximately $310-315 million

First Quarter

The company expects first quarter 2016 net sales, excluding purchase accounting adjustments, to decline approximately (3)% to 0% from the comparable net sales of $899 million in the first quarter of 2015. This expectation reflects year-over-year growth of (1)% to +2% on a constant currency basis.

Adjusted EBITDA margin is expected to be in the range of 16% to 17% for the first quarter 2016. Non-GAAP earnings are expected to be in the range of $1.19 to $1.34 per share.

Conference Call Notification

Investors are invited to listen to a live webcast of Zebra's conference call regarding the company's financial results for the fourth quarter of 2015. The conference call will be held at 7:30 A.M. Central Time (8:30 A.M. Eastern Time) today. To view the webcast, visit the investor relations section of the company's website at investors.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 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 continued uncertainty over future global economic conditions, the availability of credit and 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 supply chain constraints, 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. Because of its debt, 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. The success of integrating acquisitions, including the Enterprise business, could also affect profitability, reported results and the company's competitive position in it industry. 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," "outlook," 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, including the company's most recent Form 10-K.

About Zebra Technologies

Zebra (NASDAQ: ZBRA) makes businesses as smart and connected as the world we live in. Zebra tracking and visibility solutions transform the physical to digital, creating the data streams enterprises need to simplify operations, know more about their businesses, and empower their mobile workforces. For more information, visit www.zebra.com.  

Use of Non-GAAP Financial Information

This press release contains certain non-GAAP financial measures, consisting of "EBITDA," "Adjusted EBITDA," "Non-GAAP net income" and "Non-GAAP earnings per share" in addition to measure our operating performance. Management presents these measures to focus on the on-going operations and believes it is useful to investors because they enable them to perform meaningful comparisons of past and present operating results. The company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its ongoing operations and how management views the business. Reconciliations of Operating Income to EBITDA, EBITDA to Adjusted EBITDA, and GAAP net income to Non-GAAP net income are included in the financial schedules contained in this press release. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.

 

Contacts


Investors                             

Media

Michael Steele, CFA

Therese Van Ryne

Vice President, Investor Relations 

Director, Global PR and Industry Analyst Relations

+ 1 847 793 6707

+ 1 847 370 2317

msteele@zebra.com   

therese.vanryne@zebra.com

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)








December 31,
2015


December 31,
2014



Assets

(Unaudited)



Current assets:




Cash and cash equivalents

$            192,394


$            393,950

Investments and marketable securities

-


24,385

Accounts receivable, net 

674,336


670,402

Inventories, net

393,848


394,176

Deferred income taxes

-


122,772

Income tax receivable

4,108


12,988

Prepaid expenses and other current assets

67,755


53,377

Total Current assets

1,332,441


1,672,050





Property and equipment at cost, less accumulated depreciation and amortization

297,601


255,092

Goodwill

2,493,265


2,489,510

Other intangibles, net

757,524


1,029,293

Long term deferred income taxes

51,609


-

Other long-term assets

92,030


93,121

Total Assets

$         5,024,470


$         5,539,066





Liabilities and Stockholders' Equity








Current liabilities:




Accounts payable

$            289,349


$            326,524

Accrued liabilities

358,663


421,070

Deferred revenue

197,891


196,213

Current portion of long-term debt

24


4,209

Deferred income taxes

-


-

Income taxes payable

30,519


4,518

Total Current liabilities

876,446


952,534

Long-term debt

3,012,212


3,156,490

Long-term deferred tax liability

1,067


199,853

Long-term unearned revenue

123,415


115,847

Other long-term liabilities

98,461


74,434

Total Liabilities

4,111,601


4,499,158





Stockholders' Equity:




Preferred stock

-


-

Class A Common Stock

722


722

Additional paid-in capital

194,300


147,090

Treasury stock

(631,458)


(634,664)

Retained earnings

1,397,974


1,535,307

Accumulated other comprehensive loss

(48,669)


(8,547)

Total Stockholders' Equity

912,869


1,039,908

Total Liabilities and Stockholders' Equity

$         5,024,470


$         5,539,066

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)










Three Months Ended


Twelve Months Ended


December 31,
2015


December 31,
2014


December 31,
 2015


December 31,
2014

Net sales








  Net sales of tangible products

$            828,183


$            683,978


$         3,132,881


$         1,498,562

  Revenue from services and software

124,558


106,633


519,091


172,010

Total net sales

952,741


790,611


3,651,972


1,670,572









Cost of sales








  Cost of sales of tangible products

434,672


382,884


1,630,574


792,137

  Cost of services and software

90,292


71,315


377,165


100,410

Total cost of sales

524,964


454,199


2,007,739


892,547









Gross profit

427,777


336,412


1,644,233


778,025









Operating expenses:








   Selling and marketing

118,926


105,352


486,369


213,304

   Research and development

98,267


79,311


394,111


151,103

   General and administrative

73,626


58,761


276,656


138,214

   Amortization of intangible assets

61,081


46,160


250,869


54,096

   Acquisition and integration costs

49,139


66,094


143,646


126,711

   Exit and restructuring costs

4,427


5,573


39,279


6,007

Total operating expenses

405,466


361,251


1,590,930


689,435









Operating (loss) income

22,311


(24,839)


53,303


88,590









Other (expense) income:








   Foreign exchange income (loss) 

(854)


(8,427)


(22,048)


(8,759)

   Interest (expense)/income

(48,696)


(59,599)


(193,958)


(61,968)

   Other, net

(12)


146


(920)


(1,234)

Total other (expenses)

(49,562)


(67,880)


(216,926)


(71,961)









(Loss) income from continuing operations before income taxes

(27,251)


(92,719)


(163,623)


16,629

Income tax expense (benefit)

(20,423)


(41,040)


(26,290)


(15,800)

Net (loss) income

$              (6,828)


$            (51,679)


$          (137,333)


$              32,429









Basic (loss) earnings per share

$                (0.13)


$                (1.02)


$                (2.69)


$                  0.64

Diluted (loss) earnings per share

$                (0.13)


$                (1.02)


$                (2.69)


$                  0.63









Basic weighted average shares outstanding

51,207


50,452


50,996


50,789

Diluted weighted average and equivalent shares outstanding

51,207


50,452


50,996


51,380

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Amounts in thousands)

(Unaudited)










Three months ended


Twelve Months Ended


December 31,
2015


December 31,
2014


December 31,
2015


December 31,
2014












Net (loss) income

$              (6,828)


$          (51,679)


$          (137,333)


$           32,429









Unrealized (loss) gain on anticipated sales hedging transactions, net of tax

(260)


1,449


(6,024)


7,190

Unrealized gain (loss) on forward interest rate swaps hedging transactions, net of tax

3,593


(7,699)


(6,854)


(7,699)

Unrealized holding (loss) gain on investments, net of taxes

-


(311)


(272)


425

Foreign currency translation adjustment

(5,664)


1,704


(26,971)


1,318









Comprehensive (loss) income

$              (9,159)


$          (56,536)


$          (177,454)


$           33,663

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)






Twelve Months Ended


December 31,
2015


December 31,
201 4



Cash flows from operating activities:




Net (loss) income

$          (137,333)


$              32,429

Adjustments to reconcile net (loss) income to net cash provided by 




operating activities:




Depreciation and amortization

319,879


81,371

Amortization of debt issuance cost and discount

16,513


2,113

Share-based compensation

31,470


19,891

Impairment of long-term investment

-


2,333

Excess tax benefit from share-based compensation

(11,793)


(6,127)

Loss on sale of property and equipment

1,692


1,793

Deferred income taxes

(123,504)


(44,340)

(Gain) loss on forward interest rate swaps

(3,763)


4,649

All other, net

12,154


-

Changes in assets and liabilities, net of businesses acquired:




Accounts receivable, net

(6,447)


(69,628)

Inventories, net

(9,826)


(2,398)

Other assets

(6,724)


(12,947)

Accounts payable

(29,322)


62,188

Accrued liabilities

(12,777)


164,269

Deferred revenue

16,740


10,034

Income taxes 

37,957


(5,691)

Other operating activities

7,663


8,386

Net cash provided by operating activities

102,579


248,325





Cash flows from investing activities:




Acquisition of businesses, net of cash acquired

(51,889)


(3,398,600)

Purchases of property and equipment

(114,254)


(39,291)

Proceeds from sale of long-term investments

3,039


-

Purchases of long-term investments

(348)


(2,454)

Purchases of investments and marketable securities

(726)


(651,698)

Maturities of investments and marketable securities

-


336,329

Proceeds from sales of investments and marketable securities 

24,852


644,378

Net cash used in investing activities

(139,326)


(3,111,336)





Cash flows from financing activities:




Payment of debt issuance costs

-


(24,473)

Payment of debt

(165,000)


-

Proceeds from issuance of long-term debt

-


3,188,855

Proceeds from exercise of stock options and stock purchase plan purchases

17,265


26,477

Taxes paid related to net share settlement of equity awards

(13,228)


(4,752)

Excess tax benefit from share-based compensation

11,793


6,127

Net cash (used in) provided by financing activities 

(149,170)


3,192,234





Effect of exchange rate changes on cash

(15,639)


1,900





Net (decrease) increase in cash and cash equivalents

(201,556)


331,123

Cash and cash equivalents at beginning of period

393,950


62,827

Cash and cash equivalents at end of period

$            192,394


$            393,950





Supplemental disclosures of cash flow information:




Income taxes paid, net

37,675


17,433

Interest paid

182,813


-

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)











NET SALES BY PRODUCT CATEGORY












Three Months Ended 








December 31,
 2015


December 31, 
2014


Percent Change


Percent of Net Sales 2015


Percent of Net Sales 2014

Product category





Hardware 

$            763,182


$            614,529


24.2


80.1


77.8

Supplies 

65,001


70,750


-8.1


6.8


8.9

Service and software 

124,558


105,332


18.3


13.1


13.3

    Total net sales 

$            952,741


$            790,611


20.5


100.0


100.0












Twelve Months Ended








December 31, 
2015


December 31,  2014


Percent Change


Percent of Net Sales 2015


Percent of Net Sales 2014

Product category





Hardware 

$         2,864,615


$         1,233,386


132.3


78.4


73.8

Supplies 

268,266


265,176


1.2


7.4


15.9

Service and software 

519,091


172,010


201.8


14.2


10.3

    Total net sales 

$         3,651,972


$         1,670,572


118.6


100.0


100.0





















NET SALES BY GEOGRAPHIC REGION












Three Months Ended 








December 31, 
2015


December 31,
2014


Percent Change


Percent of Net Sales 2015


Percent of Net Sales 2014

Geographic region





Europe, Middle East and Africa

$            324,259


$            302,991


7.0


34.0


38.3

Latin America 

56,469


54,734


3.4


5.9


6.9

Asia-Pacific

116,917


91,904


27.2


12.3


11.6

    Total International

497,745


449,629


10.7


52.2


56.8

North America 

454,996


340,982


33.4


47.8


43.2

    Total net sales 

$            952,741


$            790,611


20.5


100.0


100.0












Twelve Months Ended








December 31, 
2015


December 31,
2014


Percent Change


Percent of Net Sales 2015


Percent of Net Sales 2014

Geographic region





Europe, Middle East and Africa

$         1,193,934


$            583,005


104.8


32.7


34.9

Latin America 

220,280


134,638


63.6


6.0


8.1

Asia-Pacific

462,474


215,911


114.2


12.7


12.9

    Total International

1,876,688


933,554


101.0


51.4


55.9

North America 

1,775,284


737,018


140.9


48.6


44.1

    Total net sales 

$         3,651,972


$         1,670,572


118.6


100.0


100.0

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(Amounts in thousands, except per share data)

(Unaudited)










Three Months Ended 


Twelve Months Ended 


December 31,
2015


December 31,
2014


December 31,
2015


December 31,
2014





Net (loss) income

$              (6,828)


$            (51,679)


$          (137,333)


$              32,429









Income tax (benefit) expense

(20,423)


(41,040)


(26,290)


(15,800)

Share-based compensation

6,251


9,587


32,654


19,891

Acquisition and integration costs

49,139


66,094


143,646


126,711

Exit and restructuring costs

4,427


5,573


39,279


6,007

Loss on minority investment







2,333

Purchase accounting adjustments

3,569


34,634


19,562


34,634

Foreign exchange loss (income)

854


8,427


22,048


8,759

Amortization of intangible assets

61,081


46,160


250,869


54,096

Amortization of debt issuance cost and discount

3,987


2,113


16,513


2,113

Forward interest rate swaps (loss) gain

(366)


2,401


(3,763)


4,649

Tax effects

(23,216)


(20,206)


(80,545)


(74,918)

Total adjustments

$              85,303


$            113,743


$            413,973


$            168,475

Non-GAAP net income

$              78,475


$              62,064


$            276,640


$            200,904









GAAP  (loss) earnings per share








       Basic

$                (0.13)


$                (1.02)


$                (2.69)


$                  0.64

       Diluted

$                (0.13)


$                (1.02)


$                (2.69)


$                  0.63

Non-GAAP  earnings per share








       Basic

$                  1.53


$                  1.23


$                  5.42


$                  3.96

       Diluted

$                  1.51


$                  1.22


$                  5.31


$                  3.91









Basic weighted average shares outstanding

51,207


50,452


50,996


50,789

Diluted weighted average and equivalent shares outstanding

51,978


50,983


52,096


51,380

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

(Amounts in thousands)

(Unaudited)










Three Months Ended 


Twelve Months Ended 


December 31,
2015


December 31,
2014


December 31, 
2015


December 31,
2014

Net (Loss) Income to EBITDA and Adjusted EBITDA











Net (loss) income

($6,828)


($51,679)


($137,333)


$32,429

Income tax expense (benefit)

(20,423)


(41,040)


(26,290)


(15,800)

Total other expense (income)

49,562


67,880


216,926


71,961

Operating (loss) income

$              22,311


$            (24,839)


$              53,303


$              88,590









Depreciation

18,381


7,988


69,010


27,275

Amortization of intangible assets

61,081


46,160


250,869


54,096

EBITDA (Non-GAAP)

$            101,773


$              29,309


$            373,182


$            169,961









Acquisition and integration costs

49,139


66,094


143,646


126,711

Purchase accounting adjustments

3,569


34,634


19,562


34,634

Exit and restructuring costs

4,427


5,573


39,279


6,007

Share-based compensation

6,251


9,587


32,654


19,891

Adjusted EBITDA (Non-GAAP)

$            165,159


$            145,197


$            608,323


$            357,204









Adjusted EBITDA % of Non-GAAP Sales

17.3%


18.2%


16.6%


21.3%

 

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SOURCE Zebra Technologies Corporation



RELATED LINKS

http://www.zebra.com