2014

Zebra Technologies Announces Record Financial Results for the 2014 First Quarter Effective execution on a proven growth strategy in an improving business environment leads to record results

LINCOLNSHIRE, Ill., May 6, 2014 /PRNewswire/ -- Zebra Technologies Corporation (NASDAQ: ZBRA) today reported diluted earnings per share of $0.82, up 78.3% from $0.46 per share for the first quarter of 2013. Earnings per share for the first quarter of 2014 include the impact of $0.09 per share of approximately $4,927,000 in acquisition expenses. Financial results for the first quarter of 2013 included exit, acquisition and restructuring costs of $0.04 per share. Net income for the first quarter of 2014 was $41,606,000, an increase of 76.7% from $23,542,000 for the first quarter of 2013.

Net sales for the first quarter of 2014 increased 21.7% to a record $288,268,000 from $236,937,000 for the first quarter a year ago.

For the first quarter of 2014, Adjusted EBITDA was $67,605,000, up 78.3% from $37,924,000 for the first quarter of 2013.

Summary Financial Performance (Unaudited)


1Q14

1Q13

Change

Net sales (in 000s)

$ 288,268

$ 236,937

21.7%

Gross margin (%)

51.3

47.7

               3.6 pts.





Adjusted EBITDA (in 000s)(1)

$  67,605

$   37,924

78.3%

Net income (in 000s)

$  41,606

$   23,542

76.7%





Diluted earnings per share

$             0.82

$        0.46

78.3%

(1)

A Reconciliation of Non-GAAP financial information to GAAP information is available in the financial tables in this release.

"First quarter results reflect continued sharp execution of an effective business strategy in an improving business environment," stated Anders Gustafsson, Zebra's chief executive officer. "A steady stream of new innovative products and deeper engagements with customers in targeted industries are enabling Zebra to help more customers gain greater visibility into their extended value chains to improve critical business processes."

Mr. Gustafsson added, "Our customers and channel partners are responding enthusiastically to our recently announced agreement to acquire the Enterprise business of Motorola Solutions. The acquisition will enable Zebra to play a greater strategic role in the important trends of mobility and enterprise asset intelligence and position Zebra for further success and value creation for our shareholders."

As of March 29, 2014, Zebra had $468,155,000 in cash and investments, and no long-term debt. Net inventories were $119,373,000, and net accounts receivable were $181,618,000.

Discussion and Analysis – First Quarter

  • Net sales growth of 21.7% from the comparable quarter a year ago included strong growth in all of the company's geographic regions. North American sales, which increased 29.1%, include the effect of revenues from Hart Systems, which was acquired in December 2013. The company experienced broad strength across multiple product lines. The 123.2% increase in service and software revenue reflects the impact of the revenues from the Hart Systems acquisition in addition to organic growth. Movements in foreign exchange, net of hedges, increased sales by $3,168,000.
  • Gross profit margin of 51.3% versus 47.7%, reflects the impact of higher sales, a reduction in freight costs, and the positive contribution of the operations of Hart Systems. Net of hedges, movements in foreign currency increased gross profit by $2,254,000.
  • Operating expense growth of 11.4% primarily resulted from higher employee-related expenses and increased expenditures for outside professional services. Operating expenses for the first quarter of 2014 also include $4,927,000 in acquisition costs, compared with $482,000 for the first quarter of 2013. The increase in acquisition costs is principally associated with the company's agreement to acquire the Enterprise business of Motorola Solutions, Inc. which was announced in April 2014.
  • The effective income tax rate of 22.3% for the first quarter of 2014 includes the impact of $3,700,000 of acquisition costs that are not deductible for income tax purposes.

Second Quarter Outlook
Zebra announced its financial forecast for the second quarter of 2014. Net sales are expected within a range of $280,000,000 to $290,000,000, which primarily reflects the company's typical seasonality in sales. Diluted earnings per share are expected within a range of $0.74 to $0.84.

Conference Call Notification
Investors are invited to listen to a live webcast of Zebra's conference call discussing the company's financial results for the first quarter of 2014. The conference call will be held at 11:00 AM Eastern Time today. To listen to the call, visit the company's website 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 2013 stated in the paragraph above captioned "Second Quarter Outlook." Similarly, statements herein that describe the proposed transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of managements' beliefs, intentions, or goals are also forward-looking statements. 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, 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 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. The success of integrating acquisitions, including Hart Systems, 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," "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, 2013.

About Zebra Technologies
A global leader respected for innovation and reliability, Zebra Technologies Corporation (NASDAQ: ZBRA) offers technologies that give a virtual voice to an organization's assets, people and transactions, enabling organizations to unlock greater business value. The company's extensive portfolio of marking and printing technologies, including RFID and real-time location solutions, illuminates mission-critical information to help customers take smarter business actions. For more information about Zebra's solutions, visit http://www.zebra.com.

Use of Non-GAAP Financial Information
This press release contains certain non-GAAP financial measures, consisting of "EBITDA," "Adjusted EBITDA," and "Diluted Cash EPS" 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 that EBITDA and Adjusted EBITDA provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency to key measures used to evaluate the performance and liquidity of the Company. Reconciliations of Operating Income to EBITDA, EBITDA to Adjusted EBITDA, and Diluted EPS to Diluted cash EPS 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.

 


ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)



March 29,

2014


December 31,

2013

ASSETS

(Unaudited)



Current assets:




Cash and cash equivalents

$       51,424


$       62,827

Investments and marketable securities

414,143


350,380

Accounts receivable, net

181,618


176,917

Inventories, net

119,373


121,023

Deferred income taxes

19,810


19,810

Income tax receivable

768


7,622

Prepaid expenses and other current assets

13,879


15,524

Total current assets

801,015


754,103





Property and equipment at cost, less accumulated depreciation and amortization

107,511


109,588

Goodwill

155,800


155,800

Other intangibles, net

66,296


68,968

Long-term investments and marketable securities

2,588


2,588

Other assets

29,169


28,765

Total assets

$  1,162,379


$  1,119,812





LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:




Accounts payable

$       34,637


$       34,688

Accrued liabilities

52,306


61,962

Deferred revenue

16,411


15,506

Income taxes payable

8,010


6,898

Total current liabilities

111,364


119,054

Long-term deferred tax liability

25,510


25,492

Deferred rent

1,050


1,131

Other long-term liabilities

15,515


15,477

Total liabilities

153,439


161,154





Stockholders' equity:




Class A Common Stock

722


722

Additional paid-in capital

146,910


143,295

Treasury stock

(673,989)


(678,456)

Retained earnings

1,544,484


1,502,878

Accumulated other comprehensive loss

(9,187)


(9,781)

                                Total stockholders' equity

1,008,940


958,658

               Total liabilities and stockholders' equity

$  1,162,379


$  1,119,812

 

 

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)



Three Months Ended


March 29,

2014


March 30,

2013

Net sales:




  Net sales of tangible products

$     261,892


$     225,121

  Revenue from services and software

26,376


11,816

Total net sales

288,268


236,937





Cost of sales:




  Cost of sales of tangible products

130,449


117,111

  Cost of services and software

9,881


6,761

Total cost of sales

140,330


123,872





Gross profit

147,938


113,065





Operating expenses:




   Selling and marketing

35,416


33,515

   Research and development

22,857


21,858

   General and administrative

28,391


25,277

   Amortization of intangible assets

2,672


1,863

   Acquisition costs

4,927


482

   Exit and restructuring costs

267


1,895

Total operating expenses

94,530


84,890





Operating income

53,408


28,175





Other income (expense):




   Investment income

421


677

   Foreign exchange loss

(292)


(98)

   Other, net

8


10

Total other income

137


589





Income before income taxes

53,545


28,764

Income taxes

11,939


5,222

Net income

$       41,606


$       23,542





Basic earnings per share

$          0.83


$          0.46

Diluted earnings per share

$          0.82


$          0.46





Basic weighted average shares outstanding

50,402


50,980

Diluted weighted average and equivalent shares outstanding

50,974


51,366

 

 

 


ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)



Three Months Ended


March 29,

2014


March 30,

2013





Net income

$   41,606


$   23,542





Other comprehensive income (loss):




        Unrealized gains on hedging transactions, net of income taxes

613


1,743

        Unrealized holding gains (losses) on investments, net of income taxes

148


(72)

        Foreign currency translation adjustment

(167)


94

Comprehensive income

$ 42,200


$ 25,307

 

 

 


ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



Three Months Ended


March 29,

2014


March 30,

2013

Cash flows from operating activities:




        Net income

$    41,606


$    23,542

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




        operating activities:




                Depreciation and amortization

9,003


7,372

                Share-based compensation

2,966


2,146

                Excess tax benefit from share-based compensation

(395)


(358)

                Loss on sale of property and equipment

12


136

                Deferred income taxes

18


990

                Changes in assets and liabilities:




                        Accounts receivable, net

(4,793)


(516)

                        Inventories, net

1,663


6,943

                        Other assets

2,419


(137)

                        Accounts payable

(2,435)


(7,119)

                        Accrued liabilities

(9,670)


(12,787)

                        Deferred revenue

682


1,618

                        Income taxes

8,146


649

                        Other operating activities

533


1,685

                                Net cash provided by operating activities

49,755


24,164





Cash flows from investing activities:




        Purchases of property and equipment

(2,374)


(1,952)

        Acquisition of intangible assets

0


(500)

        Acquisition of long-term investment

(405)


(604)

        Purchases of investments and marketable securities

(151,817)


(106,947)

        Maturities of investments and marketable securities

15,996


3,144

        Proceeds from sales of investments and marketable securities

72,206


65,094

                                Net cash used in investing activities

(66,394)


(41,765)





Cash flows from financing activities:




        Purchase of treasury stock

0


(3,888)

        Proceeds from exercise of stock options and stock purchase plan purchases

4,936


5,913

        Excess tax benefit from share-based compensation

395


358

                                Net cash provided by financing activities

5,331


2,383





Effect of exchange rate changes on cash

(95)


70





Net decrease in cash and cash equivalents

(11,403)


(15,148)

Cash and cash equivalents at beginning of period

62,827


64,740

Cash and cash equivalents at end of period

$   51,424


$   49,592





Supplemental disclosures of cash flow information:




 Income taxes paid, net

$     3,304


$     2,271

 

 

 


ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)


SALES BY PRODUCT CATEGORY



Three Months Ended






March 29,


March 30,


Percent


Percent of


Percent of

Product Category

2014


2013


Change


Net Sales - 2014


Net Sales - 2013

Hardware

$     196,217


$     166,692


17.7


68.1


70.3

Supplies

63,504


57,123


11.2


22.0


24.1

Service and software

26,376


11,816


123.2


9.1


5.0

   Subtotal products

286,097


235,631


21.4


99.2


99.4

Shipping and handling

2,171


1,306


66.2


0.8


0.6

   Total net sales

$     288,268


$     236,937


21.7


100.0


100.0



SALES BY GEOGRAPHIC REGION



Three Months Ended






March 29,


March 30,


Percent


Percent of


Percent of

Geographic Region

2014


2013


Change


Net Sales – 2014


Net Sales – 2013

Europe, Middle East and Africa

$       91,439


$       77,673


17.7


31.7


32.8

Latin America

25,640


23,131


10.8


8.9


9.8

Asia-Pacific

37,967


32,909


15.4


13.2


13.9

   Total International

155,046


133,713


16.0


53.8


56.5

North America

133,222


103,224


29.1


46.2


43.5

   Total net sales

$     288,268


$     236,937


21.7


100.0


100.0

 

 

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATIONS

(Amounts in thousands, except per-share data)

(Unaudited)



Three Months Ended

Operating Income to EBITDA and Adjusted EBITDA

March 29,

2014


March 30,

2013





Operating income (GAAP)

$    53,408


$      28,175

        Depreciation

6,331


5,509

        Amortization of intangible assets

2,672


1,863

                EBITDA (Non-GAAP)

$   62,411


$   35,547





        Acquisition costs

$     4,927


$        482

        Exit and restructuring costs

267


1,895

                Adjusted EBITDA (Non-GAAP)

$   67,605


$   37,924

 

 

 

Contact:


Investors: 

 Media:

Douglas A. Fox, CFA

 Robb Kristopher

Vice President, Investor Relations 

Director, Corporate Communications

and Treasurer 

and Public Relations

+ 1 847 793 6735

+ 1 847 793 5514

dfox@zebra.com 

rkristopher@zebra.com

SOURCE Zebra Technologies Corporation



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