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Press release from PR Newswire

Zebra Technologies Announces Record EPS for 2010 Third Quarter

Thursday, November 04, 2010

Zebra Technologies Announces Record EPS for 2010 Third Quarter03:00 EDT Thursday, November 04, 2010Earnings benefit from stronger-than-expected sales and higher gross marginLINCOLNSHIRE, 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 Performance3Q103Q09ChangeNet sales (in thousands)$246,507$200,77822.8%Gross margin (%)48.245.72.5 pts.Operating margin (%)15.87.68.2 pts.Net income (in thousands)$26,151$11,111135.4%Diluted EPS$0.46$0.19142.1%"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 AnalysisNet 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 UpdateDuring 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 OutlookZebra 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 NotificationInvestors 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 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 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 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)October 2, 2010December 31,2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents$  47,447$  38,943Restricted cash1,6151,725Investments and marketable securities123,058114,064Accounts receivable, net 165,423150,992Inventories, net95,84279,926Deferred income taxes11,28210,792Income taxes receivable-4,724Prepaid expenses and other current assets11,0439,771Total current assets455,710410,937Property and equipment at cost, net of accumulated depreciation and amortization84,80977,589Long-term deferred income taxes32,23435,842Goodwill152,418153,225Other intangibles, net51,59255,982Long-term investments and marketable securities90,07691,989Other assets4,8064,915Total assets$  871,645$  830,479LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable$  33,908$  28,137Accrued liabilities66,48652,591Deferred revenue22,29224,082Income taxes payable5,752-Total current liabilities128,438104,810Deferred rent2,8534,108Other long-term liabilities9,6479,432Total liabilities140,938118,350Stockholders' equity:Preferred Stock--Class A Common Stock722722Additional paid-in capital128,068136,104Treasury stock(430,515)(385,831)Retained earnings1,042,756969,195Accumulated other comprehensive loss(10,324)(8,061)Total stockholders' equity730,707712,129Total liabilities and stockholders' equity$  871,645$  830,479ZEBRA TECHNOLOGIES CORPORATIONCONSOLIDATED STATEMENTS OF EARNINGS(Amounts in thousands, except per share data)(Unaudited)Three Months EndedNine Months EndedOctober 2, 2010October 3, 2009October 2, 2010October 3, 2009Net sales:  Net sales of tangible products$  221,795$  175,334$  632,198$  503,947  Revenue from services and software24,71225,44476,47577,116Total net sales246,507200,778708,673581,063Cost of sales:  Cost of sales of tangible products117,50298,682341,815291,117  Cost of services and software10,29110,39829,63030,703Total cost of sales127,793109,080371,445321,820Gross profit118,71491,698337,228259,243Operating expenses:   Selling and marketing30,36526,39588,19373,992   Research and development26,74621,45475,18964,552   General and administrative20,30222,44760,88961,881   Amortization of intangible assets2,4442,6497,1477,857   Exit, restructuring and integration costs-3,5152,3929,455   Asset impairment charges---(1,058)Total operating expenses79,85776,460233,810216,679Operating income38,85715,238103,41842,564Other income (expense):   Investment income6358132,1112,238   Foreign exchange gain (loss) (325)575235(840)   Other, net(216)(286)(1,052)(622)Total other income (expense)941,1021,294776Income before income taxes 38,95116,340104,71243,340Income taxes12,8005,22931,15113,866Net income$  26,151$  11,111$  73,561$  29,474Basic earnings per share$  0.46$  0.19$  1.28$  0.49Diluted earnings per share$  0.46$  0.19$  1.28$  0.49Basic weighted average shares outstanding56,73958,95457,40559,548Diluted weighted average and equivalent   shares outstanding    56,998    59,083    57,657    59,643ZEBRA TECHNOLOGIES CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands)(Unaudited)Nine Months EndedOctober 2, 2010October 3, 2009Cash 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 amortization23,69824,409      Equity-based compensation8,1558,687      Excess tax benefit from equity-based compensation(83)(11)      Gain on sale of assets(58)357      Asset impairment charges-(1,058)      Deferred income taxes3,2084,259      Changes in assets and liabilities:         Accounts receivable, net(14,463)13,797         Inventories, net(15,972)22,632         Other assets(1,192)178         Accounts payable6,747(21,216)         Accrued liabilities13,861(19,389)         Deferred revenue(1,530)2,674         Income taxes9,197(2,394)         Other operating activities(3,391)584            Net cash provided by operating activities101,73862,983Cash 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 securities230,715194,939   Sales of investments and marketable securities74,37149,899            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 purchases7,7723,250   Excess tax benefit from equity-based compensation8311            Net cash used in financing activities (59,529)(46,348)Effect of exchange rate changes on cash44752Net increase in cash and cash equivalents8,5045,781Cash and cash equivalents at beginning of period38,94333,267Cash and cash equivalents at end of period$  47,447$  39,048Supplemental disclosures of cash flow information: Income taxes paid$  17,162$  9,764ZEBRA TECHNOLOGIES CORPORATIONSUPPLEMENTAL SALES INFORMATION(Amounts in thousands)(Unaudited)SALES BY PRODUCT CATEGORYThree Months EndedOctober 2,October 3,PercentPercent ofPercent ofProduct Category20102009ChangeNet Sales - 2010Net Sales - 2009Hardware$  178,991$  130,85636.872.665.2Supplies41,64443,229(3.7)16.921.5Service and software24,71225,443(2.9)10.012.7Shipping and handling1,1601,250(7.2)0.50.6   Total net sales$  246,507$  200,77822.8100.0100.0Nine Months EndedOctober 2,October 3,PercentPercent ofPercent ofProduct Category20102009ChangeNet Sales - 2010Net Sales - 2009Hardware$  502,500$  383,22831.170.965.9Supplies125,914116,8367.817.820.1Service and software76,47577,116(0.8)10.813.3Shipping and handling3,7843,883(2.5)0.50.7   Total net sales$  708,673$  581,06322.0100.0100.0SALES BY GEOGRAPHIC REGIONThree Months EndedOctober 2,October 3,PercentPercent ofPercent ofGeographic Region20102009ChangeNet Sales - 2010Net Sales - 2009Europe, Middle East and Africa$  82,456$  67,59122.033.433.7Latin America22,33817,45228.09.18.7Asia-Pacific35,45320,88969.714.410.4   Total International140,247105,93232.456.952.8North America106,26094,84612.043.147.2   Total net sales$  246,507$  200,77822.8100.0100.0Nine Months EndedOctober 2,October 3,PercentPercent ofPercent ofGeographic Region20102009ChangeNet Sales - 2010Net Sales - 2009Europe, Middle East and Africa$  246,773$  211,91916.434.936.5Latin America64,06344,86442.89.07.7Asia-Pacific89,33860,13648.612.610.3   Total International400,174316,91926.356.554.5North America308,499264,14416.843.545.5   Total net sales$  708,673$  581,06322.0100.0100.0ZEBRA TECHNOLOGIES CORPORATIONSUPPLEMENTAL SEGMENT INFORMATION(Amounts in thousands)(Unaudited)Three Months EndedNine Months EndedOctober 2, 2010October 3, 2009October 2, 2010October 3, 2009Net sales:SPG$  222,819$  180,757$  643,873$  519,434ZES23,68820,02164,80061,629       Total$  246,507$  200,778$  708,673$  581,063Cost of Sales:SPG $  115,574$  101,926$  342,092$  297,058ZES12,2197,15429,35324,762       Total$  127,793$  109,080$  371,445$  321,820Operating expenses:SPG $  47,161$  42,149$  134,324$  121,607ZES16,39715,77949,63846,706Corporate and other16,29918,53249,84848,366       Total$  79,857$  76,460$  233,810$  216,679Operating income (loss):SPG $  60,084$  36,682$  167,457$  100,769ZES(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$  42,564Corporate and other includes corporate administration costs or assets that support both reporting segments.ZEBRA TECHNOLOGIES CORPORATIONPRINTER UNITS and AVERAGE UNIT PRICES(Unaudited)Three Months EndedOctober 2,October 3,Percent20102009ChangeTotal printers shipped265,962201,71331.9Average selling price of printers shipped$545$5302.8Nine Months EndedOctober 2,October 3,Percent20102009ChangeTotal printers shipped781,147606,13028.9Average selling price of printers shipped$532$5182.6Contact:Investors:Media:Douglas A. Fox, CFAOrlando De BruceVice President, Investor RelationsDirector, Global Public Relationsand Treasurer+1 510 267 5052+1 847 793 6735odebruce@zebra.comdfox@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