Zebra Technologies Announces Record EPS for 2010 Third Quarter Earnings benefit from stronger-than-expected sales and higher gross margin

LINCOLNSHIRE, Ill., Nov. 4, 2010 /PRNewswire-FirstCall/ -- Zebra Technologies Corporation (Nasdaq: ZBRA) today announced 2010 third quarter net income of $26,151,000, or a record $0.46 per diluted share, on 23% growth in net sales to $246,507,000 from $200,778,000 for the third quarter of 2009. Net income for the third quarter of 2009 was $11,111,000, or $0.19 per diluted share, including $3,515,000 in exit, restructuring and integration costs which lowered diluted earnings by $0.04 per share.


Summary Financial Performance


3Q10

3Q09

Change

Net sales (in thousands)

$246,507

$200,778

22.8%

Gross margin (%)

48.2

45.7

2.5 pts.

Operating margin (%)

15.8

7.6

8.2 pts.

Net income (in thousands)

$26,151

$11,111

135.4%

Diluted EPS

$0.46

$0.19

142.1%




"Solid operating leverage on sequential sales growth in all geographic regions and higher gross margin led to the record EPS," stated Anders Gustafsson, Zebra's chief executive officer. "Early returns on our investments in expanding sales in emerging markets complemented a steady run-rate business and high level of large-deal activity. During the quarter we recruited new channel partners to help us better serve customers in retail, government and other targeted industries. We also finalized several new printer products for launch in the fourth quarter and early next year. These and other investments increase our confidence in Zebra's future as we extend industry leadership and drive greater returns for our shareholders."

As of October 2, 2010, Zebra had $262,196,000 in cash and investments, and no long-term debt. Net inventories were $95,842,000, and net accounts receivable were $165,423,000.

Discussion and Analysis

  • Net sales, up 22.8% from the third quarter of 2009, benefited from improved business conditions in all geographic regions, with the highest growth rates occurring in Latin America and Asia Pacific.
  • Gross margin of 48.2% versus 45.7% 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 4.4% from the third quarter of 2009 substantially from increased selling and marketing and research and development expenses. Increases relate to higher compensation costs, which include salaries, benefits, bonuses and commissions. Other costs that increased over 2009 include business development costs, advertising and direct marketing, outside professional services, travel and entertainment, and project expenses.

Stock Purchase Update

During the third quarter of 2010, Zebra repurchased 764,749 shares of Zebra Technologies Corporation Class A Common Stock. At October 2, 2010, 2,750,000 shares remained in the company's stock buyback authorization and 56,519,663 shares of common stock were outstanding.

Fourth Quarter Outlook

Zebra announced its financial forecast for the fourth quarter of 2010. Net sales are expected within a range of $240,000,000 and $252,000,000. Diluted earnings per share are expected within a range of $0.44 and $0.51.

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 third 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 fourth quarter of 2010 stated in the paragraph above captioned "Fourth 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)


October 2,
2010


December 31,
2009


(Unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$  47,447


$  38,943

Restricted cash

1,615


1,725

Investments and marketable securities

123,058


114,064

Accounts receivable, net

165,423


150,992

Inventories, net

95,842


79,926

Deferred income taxes

11,282


10,792

Income taxes receivable

-


4,724

Prepaid expenses and other current assets

11,043


9,771

Total current assets

455,710


410,937





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

84,809


77,589

Long-term deferred income taxes

32,234


35,842

Goodwill

152,418


153,225

Other intangibles, net

51,592


55,982

Long-term investments and marketable securities

90,076


91,989

Other assets

4,806


4,915

Total assets

$  871,645


$  830,479





LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:




Accounts payable

$  33,908


$  28,137

Accrued liabilities

66,486


52,591

Deferred revenue

22,292


24,082

Income taxes payable

5,752


-

Total current liabilities

128,438


104,810

Deferred rent

2,853


4,108

Other long-term liabilities

9,647


9,432

Total liabilities

140,938


118,350





Stockholders' equity:




Preferred Stock

-


-

Class A Common Stock

722


722

Additional paid-in capital

128,068


136,104

Treasury stock

(430,515)


(385,831)

Retained earnings

1,042,756


969,195

Accumulated other comprehensive loss

(10,324)


(8,061)

Total stockholders' equity

730,707


712,129

Total liabilities and stockholders' equity

$  871,645


$  830,479




ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)


Three Months Ended


Nine Months Ended


October 2, 2010


October 3, 2009


October 2, 2010


October 3, 2009

Net sales:








 Net sales of tangible products

$  221,795


$  175,334


$  632,198


$  503,947

 Revenue from services and software

24,712


25,444


76,475


77,116

Total net sales

246,507


200,778


708,673


581,063









Cost of sales:








 Cost of sales of tangible products

117,502


98,682


341,815


291,117

 Cost of services and software

10,291


10,398


29,630


30,703

Total cost of sales

127,793


109,080


371,445


321,820









Gross profit

118,714


91,698


337,228


259,243









Operating expenses:








  Selling and marketing

30,365


26,395


88,193


73,992

  Research and development

26,746


21,454


75,189


64,552

  General and administrative

20,302


22,447


60,889


61,881

  Amortization of intangible assets

2,444


2,649


7,147


7,857

  Exit, restructuring and integration costs

-


3,515


2,392


9,455

  Asset impairment charges

-


-


-


(1,058)

Total operating expenses

79,857


76,460


233,810


216,679









Operating income

38,857


15,238


103,418


42,564









Other income (expense):








  Investment income

635


813


2,111


2,238

  Foreign exchange gain (loss)

(325)


575


235


(840)

  Other, net

(216)


(286)


(1,052)


(622)

Total other income (expense)

94


1,102


1,294


776









Income before income taxes

38,951


16,340


104,712


43,340









Income taxes

12,800


5,229


31,151


13,866









Net income

$  26,151


$  11,111


$  73,561


$  29,474









Basic earnings per share

$  0.46


$  0.19


$  1.28


$  0.49

Diluted earnings per share

$  0.46


$  0.19


$  1.28


$  0.49









Basic weighted average shares outstanding

56,739


58,954


57,405


59,548

Diluted weighted average and equivalent
  shares outstanding


   56,998



   59,083



   57,657



   59,643




ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


Nine Months Ended


October 2, 2010


October 3, 2009

Cash flows from operating activities:




  Net income

$  73,561


$  29,474

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




  operating activities:




     Depreciation and amortization

23,698


24,409

     Equity-based compensation

8,155


8,687

     Excess tax benefit from equity-based compensation

(83)


(11)

     Gain on sale of assets

(58)


357

     Asset impairment charges

-


(1,058)

     Deferred income taxes

3,208


4,259

     Changes in assets and liabilities:




        Accounts receivable, net

(14,463)


13,797

        Inventories, net

(15,972)


22,632

        Other assets

(1,192)


178

        Accounts payable

6,747


(21,216)

        Accrued liabilities

13,861


(19,389)

        Deferred revenue

(1,530)


2,674

        Income taxes

9,197


(2,394)

        Other operating activities

(3,391)


584

           Net cash provided by operating activities

101,738


62,983





Cash flows from investing activities:




  Purchases of property and equipment

(23,752)


(19,499)

  Payments for patents and licensing arrangements

(2,882)


(425)

  Purchases of investments and marketable securities

(312,201)


(236,520)

  Maturities of investments and marketable securities

230,715


194,939

  Sales of investments and marketable securities

74,371


49,899

           Net cash provided by (used in) investing activities

(33,749)


(11,606)





Cash flows from financing activities:




  Purchase of treasury stock

(67,384)


(49,609)

  Proceeds from exercise of stock options and stock purchase plan purchases

7,772


3,250

  Excess tax benefit from equity-based compensation

83


11

           Net cash used in financing activities

(59,529)


(46,348)





Effect of exchange rate changes on cash

44


752





Net increase in cash and cash equivalents

8,504


5,781

Cash and cash equivalents at beginning of period

38,943


33,267

Cash and cash equivalents at end of period

$  47,447


$  39,048





Supplemental disclosures of cash flow information:




Income taxes paid

$  17,162


$  9,764








ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)


SALES BY PRODUCT CATEGORY


Three Months Ended







October 2,


October 3,


Percent


Percent of


Percent of

Product Category

2010


2009


Change


Net Sales - 2010


Net Sales - 2009

Hardware

$  178,991


$  130,856


36.8


72.6


65.2

Supplies

41,644


43,229


(3.7)


16.9


21.5

Service and software

24,712


25,443


(2.9)


10.0


12.7

Shipping and handling

1,160


1,250


(7.2)


0.5


0.6

  Total net sales

$  246,507


$  200,778


22.8


100.0


100.0






Nine Months Ended







October 2,


October 3,


Percent


Percent of


Percent of

Product Category

2010


2009


Change


Net Sales - 2010


Net Sales - 2009

Hardware

$  502,500


$  383,228


31.1


70.9


65.9

Supplies

125,914


116,836


7.8


17.8


20.1

Service and software

76,475


77,116


(0.8)


10.8


13.3

Shipping and handling

3,784


3,883


(2.5)


0.5


0.7

  Total net sales

$  708,673


$  581,063


22.0


100.0


100.0




SALES BY GEOGRAPHIC REGION


Three Months Ended







October 2,


October 3,


Percent


Percent of


Percent of

Geographic Region

2010


2009


Change


Net Sales - 2010


Net Sales - 2009

Europe, Middle East and Africa

$  82,456


$  67,591


22.0


33.4


33.7

Latin America

22,338


17,452


28.0


9.1


8.7

Asia-Pacific

35,453


20,889


69.7


14.4


10.4

  Total International

140,247


105,932


32.4


56.9


52.8

North America

106,260


94,846


12.0


43.1


47.2

  Total net sales

$  246,507


$  200,778


22.8


100.0


100.0






Nine Months Ended







October 2,


October 3,


Percent


Percent of


Percent of

Geographic Region

2010


2009


Change


Net Sales - 2010


Net Sales - 2009

Europe, Middle East and Africa

$  246,773


$  211,919


16.4


34.9


36.5

Latin America

64,063


44,864


42.8


9.0


7.7

Asia-Pacific

89,338


60,136


48.6


12.6


10.3

  Total International

400,174


316,919


26.3


56.5


54.5

North America

308,499


264,144


16.8


43.5


45.5

  Total net sales

$  708,673


$  581,063


22.0


100.0


100.0




ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SEGMENT INFORMATION

(Amounts in thousands)

(Unaudited)


Three Months Ended


Nine Months Ended


October 2, 2010


October 3, 2009


October 2, 2010


October 3, 2009

Net sales:








SPG

$  222,819


$  180,757


$  643,873


$  519,434

ZES

23,688


20,021


64,800


61,629

      Total

$  246,507


$  200,778


$  708,673


$  581,063









Cost of Sales:








SPG

$  115,574


$  101,926


$  342,092


$  297,058

ZES

12,219


7,154


29,353


24,762

      Total

$  127,793


$  109,080


$  371,445


$  321,820









Operating expenses:








SPG

$  47,161


$  42,149


$  134,324


$  121,607

ZES

16,397


15,779


49,638


46,706

Corporate and other

16,299


18,532


49,848


48,366

      Total

$  79,857


$  76,460


$  233,810


$  216,679









Operating income (loss):








SPG

$  60,084


$  36,682


$  167,457


$  100,769

ZES

(4,928)


(2,912)


(14,191)


(9,839)

Corporate and other

(16,299)


(18,532)


(49,848)


(48,366)

      Total

$  38,857


$  15,238


$  103,418


$  42,564


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


October 2,


October 3,


Percent


2010


2009


Change

Total printers shipped

265,962


201,713


31.9

Average selling price of printers shipped

$545


$530


2.8






Nine Months Ended


October 2,


October 3,


Percent


2010


2009


Change

Total printers shipped

781,147


606,130


28.9

Average selling price of printers shipped

$532


$518


2.6




Contact:


Investors:

Media:

Douglas A. Fox, CFA

Orlando De Bruce

Vice President, Investor Relations

Director, Global Public Relations

and Treasurer

+1 510 267 5052

+1 847 793 6735

odebruce@zebra.com

dfox@zebra.com




SOURCE Zebra Technologies Corporation



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