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
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: |
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Investors: |
Media: |
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Douglas A. Fox, CFA |
Orlando De Bruce |
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Vice President, Investor Relations and Treasurer |
Director, Global Public Relations |
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+1 847 793 6735 |
+1 510 267 5052 |
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ZEBRA TECHNOLOGIES CORPORATION CONSOLIDATED BALANCE SHEETS (Amounts in thousands) |
||||
July 3, |
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 |
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Diluted earnings per share |
$ 0.39 |
$ 0.15 |
$ 0.82 |
$ 0.31 |
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Basic weighted average shares outstanding |
57,489 |
59,271 |
57,756 |
59,821 |
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Diluted weighted average and equivalent shares outstanding |
|
|
|
|
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ZEBRA TECHNOLOGIES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) |
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Six Months Ended |
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July 3, 2010 |
July 4, 2009 |
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Cash flows from operating activities: |
||||
Net income |
$ 47,410 |
$ 18,363 |
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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) |
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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) |
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Effect of exchange rate changes on cash |
(143) |
1,768 |
||
Net increase in cash and cash equivalents |
2,339 |
11,525 |
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Cash and cash equivalents at beginning of period |
38,943 |
33,267 |
||
Cash and cash equivalents at end of period |
$ 41,282 |
$ 44,792 |
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Supplemental disclosures of cash flow information: |
||||
Income taxes paid |
$ 9,472 |
$ 7,334 |
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ZEBRA TECHNOLOGIES CORPORATION |
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SUPPLEMENTAL SALES INFORMATION |
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(Amounts in thousands) |
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(Unaudited) |
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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 |
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SALES BY GEOGRAPHIC REGION |
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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 |
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SOURCE Zebra Technologies Corporation
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