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Press release from PR Newswire

Zebra Technologies Announces 2010 First Quarter Financial Results

Tuesday, May 04, 2010

Zebra Technologies Announces 2010 First Quarter Financial Results03:00 EDT Tuesday, May 04, 2010Strong sales growth and improvement in gross margin lead to better-than-expected earnings growthLINCOLNSHIRE, Ill., May 4 /PRNewswire-FirstCall/ -- Zebra Technologies Corporation (Nasdaq: ZBRA) today announced 2010 first quarter net income of $24,733,000, or $0.42 per diluted share, including $1,816,000 in exit and restructuring costs which lowered diluted earnings by $0.02 per share. Net sales for the period ended April 3, 2010, were $226,431,000, up 17.6% from $192,609,000 for the first quarter of 2009. Net income for the first quarter of 2009 was $9,352,000, or $0.16 per diluted share, including $2,296,000 in exit, restructuring and integration costs which lowered diluted earnings by $0.02 per share. �Summary Financial Performance1Q101Q09ChangeNet sales (in thousands)$226,431$192,60917.6%Gross margin (%)47.444.62.8pts.Operating margin (%)14.07.46.6pts.Net income (in thousands)$24,733$9,352164.5%Diluted EPS$0.42$0.16173.8%"Broad-based demand across geographies, products and industries led to Zebra's strong first quarter performance, as customers invested in Zebra solutions to improve asset management and visibility across the supply chain," stated Anders Gustafsson, Zebra's chief executive officer. "During the quarter, we hired more sales and marketing employees in high growth emerging regions to capture more business opportunities. We also continued to develop innovative new products in terms of performance, features and integration to distance Zebra further from the competition. These activities give us optimism about Zebra's future and our direction in building shareholder value." As of April 3, 2010, Zebra had $254,098,000 in cash and investments, and no long-term debt. Net inventories were $81,565,000, and net accounts receivable were $145,642,000. �Discussion and AnalysisNet sales, up 17.6% from the first quarter of 2009 benefited from improved business conditions in all geographic regions, with the highest rates of growth occurring in Latin America and Asia Pacific. An improved product mix, with higher sales of high-performance and midrange tabletop printers and aftermarket parts, contributed to the sales growth from a year ago. Gross margin of 47.4% versus 44.6% a year ago was principally driven by the improved product mix, higher volumes, favorable foreign exchange rates, and benefits from outsourcing thermal printer production to a third-party manufacturer. These factors were partially offset by higher freight costs incurred to meet increased customer demand.Operating expenses increased 5.6% from the first quarter of 2009 substantially from increased selling and marketing expenses related to higher compensation costs, outside commissions, advertising and direct marketing, and travel and entertainment. The effective income tax rate for the first quarter of 2010 was 23.7%, compared with 32.0% for the first quarter of 2009. The decline was a reduction related to prior years for taxes associated with intercompany profit in ending inventories. This adjustment reduced income taxes by $2,764,000, or the effective rate by 8.5 percentage points, and had a favorable impact on earnings of $0.04 per diluted share. Stock Purchase UpdateDuring the first quarter of 2010, the company repurchased 750,000 shares of Zebra Technologies Corporation Class A Common Stock. At April 3, 2010, Zebra had 1,449,286 shares remaining in the company's stock buyback authorization and 57,724,510 shares of common stock outstanding. Second Quarter OutlookZebra announced its financial forecast for the first quarter of 2010. Net sales are expected within a range of $219,000,000 and $233,000,000. Diluted earnings per share are expected within a range of $0.26 and $0.34. This forecast includes expected exit and restructuring costs of $0.01 per diluted share. �Conference Call NotificationInvestors are invited to listen to a live Internet broadcast of Zebra's conference call discussing the company's financial results for the first 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 StatementThis 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 2010 stated in the paragraph above captioned "Second 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 TechnologiesZebra 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 CORPORATIONCONSOLIDATED BALANCE SHEETS(Amounts in thousands)April 3, 2010December 31, 2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents$ �35,988$ �38,943Restricted cash1,5981,725Investments and marketable securities136,565114,064Accounts receivable, net 145,642150,992Inventories, net81,56579,926Deferred income taxes10,56110,792Income taxes receivable-4,724Prepaid expenses and other current assets14,2889,771Total current assets426,207410,937Property and equipment at cost, net of accumulated depreciation and amortization77,95177,589Long-term deferred income taxes32,64335,842Goodwill152,288153,225Other intangibles, net53,48655,982Long-term investments and marketable securities79,94791,989Other assets4,4354,915Total assets$ �826,957$ �830,479LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable$ �26,870$ �28,137Accrued liabilities43,32252,591Deferred revenue22,55324,082Income taxes payable423-Total current liabilities93,168104,810Deferred rent3,7024,108Other long-term liabilities9,1689,432Total liabilities106,038118,350Stockholders' equity:Preferred Stock--Class A Common Stock722722Additional paid-in capital136,143136,104Treasury stock(401,123)(385,831)Retained earnings993,928969,195Accumulated other comprehensive loss(8,751)(8,061)Total stockholders' equity720,919712,129Total liabilities and stockholders' equity$ �826,957$ �830,479ZEBRA TECHNOLOGIES CORPORATIONCONSOLIDATED STATEMENTS OF EARNINGS(Amounts in thousands, except per share data)(Unaudited)Three Months EndedApril 3, 2010April 4, 2009Net sales: �Net sales of tangible products$ �202,084$ �166,684 �Revenue from services and software24,34725,925Total net sales226,431192,609Cost of sales: �Cost of sales of tangible products108,54095,859 �Cost of services and software10,55610,941Total cost of sales119,096106,800Gross profit107,33585,809Operating expenses: � Selling and marketing27,50023,199 � Research and development23,07222,149 � General and administrative20,86921,357 � Amortization of intangible assets2,3582,634 � Exit, restructuring and integration costs1,8162,296Total operating expenses75,61571,635Operating income 31,72014,174Other income (expense): � Investment income8421,178 � Foreign exchange gain (loss) 199(1,284) � Other, net(349)(317)Total other income (expense)692(423)Income before income taxes 32,41213,751Income taxes7,6794,399Net income$ �24,733$ �9,352Basic earnings per share$ �0.43$ �0.16Diluted earnings per share$ �0.42$ �0.16Basic weighted average shares outstanding58,01660,266Diluted weighted average and equivalent shares outstanding � �58,265 � �60,332ZEBRA TECHNOLOGIES CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands)(Unaudited)Three Months EndedApril 3, 2010April 4, 2009Cash flows from operating activities:Net income$ �24,733$ �9,352Adjustments to reconcile net income to net cash provided by (used in)operating activities:Depreciation and amortization7,8147,953Equity-based compensation2,2313,167Excess tax benefit from equity-based compensation(3)-Gain on sale of assets(82)-Deferred income taxes3,5353,263Changes in assets and liabilities:Accounts receivable, net3,99013,018Inventories, net(1,780)(1,400)Other assets224(244)Accounts payable870(6,539)Accrued liabilities(9,118)(23,946)Deferred revenue(1,618)2,544Income taxes4,295(8,055)Other operating activities(4,917)(327)Net cash provided by (used in) operating activities30,174(1,214)Cash flows from investing activities:Purchases of property and equipment(5,818)(6,802)Acquisition of intangible assets-(425)Purchases of investments and marketable securities(89,586)(57,473)Maturities of investments and marketable securities61,14472,401Sales of investments and marketable securities17,73622,583Net cash provided by (used in) investing activities(16,524)30,284Cash flows from financing activities:Purchase of treasury stock(20,823)(28,593)Proceeds from exercise of stock options and stock purchase plan purchases4,1911,168Excess tax benefit from equity-based compensation3-Net cash used in financing activities(16,629)(27,425)Effect of exchange rate changes on cash24(213)Net increase (decrease) in cash and cash equivalents(2,955)1,432Cash and cash equivalents at beginning of period38,94333,267Cash and cash equivalents at end of period$ �35,988$ �34,699Supplemental disclosures of cash flow information:Income taxes (refunded) paid(454)$ �8,302ZEBRA TECHNOLOGIES CORPORATIONSUPPLEMENTAL SALES INFORMATION(Amounts in thousands)(Unaudited)SALES BY PRODUCT CATEGORYThree Months EndedApril 3,April 4,PercentPercent ofPercent ofProduct Category20102009ChangeNet Sales - 2010Net Sales - 2009Hardware$ �160,030$ �127,23525.870.766.1Supplies40,69738,0816.918.019.8Service and software24,34725,925(6.1)10.813.5Shipping and handling1,3571,368(0.8)0.50.6 � Total net sales$ �226,431$ �192,60917.6100.0100.0SALES BY GEOGRAPHIC REGIONThree Months EndedApril 3,April 4,PercentPercent ofPercent ofGeographic Region20102009ChangeNet Sales - 2010Net Sales - 2009Europe, Middle East and Africa$ �83,544$ �74,62012.036.938.7Latin America20,99013,07160.69.36.8Asia-Pacific25,34719,40930.611.210.0 � Total International129,881107,10021.357.455.5North America96,55085,50912.942.644.5 � Total net sales$ �226,431$ �192,60917.6100.0100.0ZEBRA TECHNOLOGIES CORPORATIONSUPPLEMENTAL SEGMENT INFORMATION(Amounts in thousands)(Unaudited)Three Months EndedApril 3, 2010April 4, 2009Net sales:Specialty Printing Group$ �207,928$ �170,768Zebra Enterprise Solutions18,50321,841Total$ �226,431$ �192,609Cost of sales:Specialty Printing Group$ �111,499$ �97,096Zebra Enterprise Solutions7,5979,704Total$ �119,096$ �106,800Operating expenses:Specialty Printing Group$ �41,986$ �39,673Zebra Enterprise Solutions16,31715,496Corporate and other17,31216,466Total$ �75,615$ �71,635Operating income (loss):Specialty Printing Group$ �54,443$ �33,999Zebra Enterprise Solutions(5,411)(3,359)Corporate and other(17,312)(16,466)Total$ �31,720$ �14,174Corporate and other includes corporate administration costs or assets that support both reporting segments.ZEBRA TECHNOLOGIES CORPORATIONPRINTER UNITS and AVERAGE UNIT PRICES(Unaudited)Three Months Ended April 3, 2010April 4, 2009Total printers shipped244,422199,218Average selling price of printers shipped$547$517Contact:Investors:Media:Douglas A. Fox, CFAOrlando De BruceVice President, Investor Relations and TreasurerDirector, Global Public Relations+1 847 793 6735+1 510 267 5052dfox@zebra.comodebruce@zebra.comSOURCE Zebra Technologies CorporationFor further information: Investors, Douglas A. Fox, CFA, Vice President, Investor Relations and Treasurer, +1-847-793-6735, dfox@zebra.com, or Media, Orlando De Bruce, Director, Global Public Relations, +1-510-267-5052, odebruce@zebra.com, both of Zebra Technologies Corporation