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Press release from PR Newswire

Zebra Technologies Announces Record Earnings per Share in 2010 Fourth Quarter

Tuesday, February 15, 2011

Zebra Technologies Announces Record Earnings per Share in 2010 Fourth Quarter03:00 EST Tuesday, February 15, 2011Investments in geographic expansion contribute to strong growth in international regionsLINCOLNSHIRE, Ill., Feb. 15, 2011 /PRNewswire/ -- Zebra Technologies Corporation (Nasdaq: ZBRA) today announced 2010 fourth quarter net income of $28,217,000, or a record $0.50 per diluted share, including $1,134,000 in exit, restructuring and integration costs that reduced diluted earnings by $0.01 per share. Quarterly net sales of $248,175,000 were up 11.5% from $222,522,000 for the same period of 2009. Net income for the fourth quarter of 2009 was $17,630,000, or $0.30 per diluted share, including $2,737,000 in exit, restructuring and integration costs which lowered diluted earnings by $0.03 per share. Summary Financial Performance4Q104Q09ChangeNet sales (in thousands)$248,175$222,52211.5%Gross margin (%)49.845.64.2 pts.Operating margin (%)16.311.84.5 pts.Net income (in thousands)$28,217$17,63060.1%Diluted EPS$0.50$0.3066.7%"Zebra's sixth quarter of sequential sales growth accompanied further improvements in gross margin to produce our second quarterly record in EPS," stated Anders Gustafsson, Zebra's chief executive officer. "Our success in the fourth quarter and throughout 2010 is a direct result of the leverage we have in our financial strength, global go-to-market channels, broad product line and other competitive advantages. During the year we extended our industry leadership with additional sales representation in high-growth regions, broader and stronger distribution, and introductions of new, innovative products that enable us to serve more of our customers' asset tagging needs. These and other accomplishments make us optimistic in our capacity to achieve further growth and create greater value for all of our shareholders." As of December 31, 2010, Zebra had $259,899,000 in cash and investments, and no long-term debt. Net inventories were $113,742,000, and net accounts receivable were $154,146,000. Discussion and AnalysisNet sales for the fourth quarter of 2010 compared with the 2009 fourth quarter benefited from improved business conditions in all geographic regions, with the highest growth rates occurring in Latin America and Asia Pacific. All major printer product categories and aftermarket parts contributed to the growth. Quarterly sales increased 14.4% on a constant-currency basis from a year ago. Gross margin of 49.8% versus 45.6% a year ago was principally driven by higher volumes, an improved product mix, product material savings and lower overhead and freight charges. These factors were partially offset by unfavorable movements in foreign exchange rates.  Operating expenses increased 10.6% from the fourth quarter of 2009 substantially from increased selling and marketing and research and development expenses related to higher costs for compensation, business development, outside professional services, travel and entertainment, and project expenses. Fourth quarter operating expenses for 2010 include $1,082,000 in favorable litigation settlements related to escrow funds associated with prior acquisitions. The income tax rate of 29.9% for the fourth quarter of 2010 reflects an extension of Federal R&D tax credits. In addition, as Zebra's business continued to expand more rapidly in international regions that have lower tax rates, the company's consolidated global tax rate has declined. For the full year, net sales were $956,848,000, up 19.1% from $803,585,000. Net income for 2010 totaled $101,778,000, or a record $1.77 per diluted share, compared with $47,104,000, or $0.79 per diluted share for 2009. Exit, restructuring and integration costs for 2010 totaled $4,197,000 and reduced diluted earnings by $0.05 per share. For 2009, exit, restructuring and integration costs of $12,191,000 lowered diluted earnings by $0.14 per share.Stock Purchase UpdateDuring the fourth quarter of 2010, Zebra repurchased 900,000 shares of Zebra Technologies Corporation Class A Common Stock. At December 31, 2010, 1,850,000 shares remained in the company's stock buyback authorization, and 55,711,325 shares of common stock were outstanding. First Quarter OutlookZebra announced its financial forecast for the first quarter of 2011. Net sales are expected within a range of $224,000,000 to $235,000,000, reflecting the pending sale of the company's Navis operation and certain other assets. For the first quarter of 2010, Zebra's reported net sales were $226,431,000, including sales for Navis and the certain other assets in the range of $14,000,000 to $16,000,000. Adjusting for these sales, the company calculates that first quarter 2010 net sales were in the range of $210,431,000 and $212,431,000. Diluted earnings per share from continuing operations for the first quarter of 2011 are expected within a range of $0.41 to $0.47, including $0.02 per share in exit, restructuring and integration costs.  On January 31, 2011, Zebra announced a definitive agreement to sell its Navis operation and other related assets to Cargotec Corporation for approximately $190,000,000 in cash. The transaction is expected to be completed in the first quarter of 2011 and is subject to regulatory approvals, customary closing conditions and working capital adjustments. The Navis operation and certain other assets will be designated as discontinued operations beginning in the first quarter of 2011. 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 fourth 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 first quarter of 2011 stated in the paragraph above captioned "First 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 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. Risks to financial results also include the timing and successful completion of the Navis divestiture as well as the successful integration of the remaining portion of Zebra Enterprise Solutions into Zebra. 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)December 31, 2010December 31, 2009ASSETSCurrent assets:    Cash and cash equivalents$  47,476$  38,943    Restricted cash1,3781,725    Investments and marketable securities125,567114,064    Accounts receivable, net of allowances of $2,161 in 2010 and $2,186 in 2009154,146150,992    Inventories, net113,74279,926    Deferred income taxes19,39310,792    Income taxes receivable-4,724    Prepaid expenses and other current assets14,8339,771        Total current assets476,535410,937Property and equipment at cost, net of    accumulated depreciation and amortization88,98377,589Long term deferred income taxes21,02335,842Goodwill151,933153,225Other intangibles, net49,70655,982Long term investments and marketable securities85,47891,989Other assets5,2064,915Total assets$  878,864$  830,479LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:    Accounts payable$  35,304$  28,137    Accrued liabilities68,09052,591    Deferred revenue26,75724,082    Income taxes payable5,900-        Total current liabilities136,051104,810Deferred rent2,4064,108Other long-term liabilities10,3759,432Total liabilities148,832118,350Stockholders' equity:    Preferred stock--    Class A Common Stock 722722    Additional paid-in capital129,715136,104    Treasury stock(462,029)(385,831)    Retained earnings1,070,973969,195    Accumulated other comprehensive income (loss)(9,349)(8,061)            Total stockholders' equity730,032712,129            Total liabilities and stockholders' equity$  878,864$  830,479ZEBRA TECHNOLOGIES CORPORATIONCONSOLIDATED STATEMENTS OF EARNINGS(Amounts in thousands, except per share data)(Unaudited)Three Months EndedTwelve Months EndedDecember 31, 2010December 31, 2009December 31, 2010December 31, 2009Net sales:  Net sales of tangible products$         223,071$         197,097$  855,269$  701,044  Revenue from services and software25,10425,425101,579102,541Total net sales248,175222,522956,848803,585Cost of sales:  Cost of sales of tangible products113,191110,611455,007401,727  Cost of services and software11,34310,43340,97241,137Total cost of sales124,534121,044495,979442,864Gross profit123,641101,478460,869360,721Operating expenses:   Selling and marketing34,49628,543122,689102,535   Research and development26,74121,838101,93086,390   General and administrative19,49219,51479,71081,395   Amortization of intangible assets2,4262,6089,57310,466   Litigation/claim settlement(1,082)-(1,082)-   Exit, restructuring and integration costs1,1342,7374,19712,191   Asset impairment charges---(1,058)Total operating expenses83,20775,240317,017291,919Operating income40,43426,238143,85268,802Other income (expense):   Investment income5706952,6812,933   Foreign exchange gain (loss) (448)795(213)(45)   Other, net(333)(545)(1,385)(1,167)Total other income (expense)(211)9451,0831,721Income before income taxes 40,22327,183144,93570,523Income taxes12,0069,55343,15723,419Net income$           28,217$        17,630$  101,778$  47,104Basic earnings per share$      0.50$  0.30$  1.78$  0.79Diluted earnings per share$      0.50$  0.30$  1.77$  0.79Basic weighted average shares outstanding56,33258,58357,14359,306Diluted weighted average and equivalent   shares outstanding56,69258,76957,42859,425ZEBRA TECHNOLOGIES CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands)(Unaudited)Twelve Months EndedDecember 31, 2010December 31, 2009Cash flows from operating activities:   Net income$  101,778$  47,104   Adjustments to reconcile net income to net cash provided by (used in)   operating activities:      Depreciation and amortization31,20932,913      Equity-based compensation11,87111,467      Asset impairment charges-(1,058)      Impairment of investments-958      Excess tax benefit from share-based compensation(244)(13)      Loss (gain) on sale of assets(58)829      Deferred income taxes6,36112,550      Changes in assets and liabilities, net of businesses acquired:         Accounts receivable, net(4,603)8,747         Inventories, net(33,884)22,315         Other assets(3,993)(733)         Accounts payable6,619(16,105)         Accrued liabilities15,386(16,315)         Deferred revenue3,4144,966         Income taxes payable9,272(2,008)         Other operating activities(2,669)81            Net cash provided by operating activities140,459105,698Cash flows from investing activities:   Purchases of property and equipment(30,721)(24,890)   Acquisition of intangible assets(3,497)(425)   Purchases of investments (382,091)(329,292)   Maturities of investments 274,208257,936   Proceeds from sales of investments 102,48556,020            Net cash provided by (used in) investing activities(39,616)(40,651)Cash flows from financing activities:   Purchase of treasury shares(102,091)(65,445)   Proceeds from exercise of stock options and stock purchase plan purchases8,9754,972   Excess tax benefit from share-based compensation24413            Net cash used in financing activities (92,872)(60,460)Effect of exchange rate changes on cash5621,089Net increase (decrease) in cash and cash equivalents8,5335,676Cash and cash equivalents at beginning of year38,94333,267Cash and cash equivalents at end of year$  47,476$  38,943Supplemental disclosures of cash flow information:   Income taxes paid26,56310,742ZEBRA TECHNOLOGIES CORPORATIONSUPPLEMENTAL SALES INFORMATION(Amounts in thousands)(Unaudited)SALES BY PRODUCT CATEGORYThree Months EndedDecember 31,December 31,PercentPercent ofPercent ofProduct Category20102009ChangeNet Sales - 2010Net Sales - 2009Hardware$   179,956$   156,70614.872.570.4Supplies41,71939,0116.916.817.5Service and software25,10425,425(1.3)10.111.4   Subtotal products246,779221,14211.699.499.3Shipping and handling1,3961,3801.20.60.7   Total net sales$   248,175$   222,52211.5100.0100.0Twelve Months EndedDecember 31,December 31,PercentPercent ofPercent ofProduct Category20102009ChangeNet Sales - 2010Net Sales - 2009Hardware$   682,455$   539,93426.471.467.1Supplies167,633155,8477.617.519.4Service and software101,579102,541(0.9)10.612.8   Subtotal products951,667798,32219.299.599.3Shipping and handling5,1815,263(1.6)0.50.7   Total net sales$    956,848$    803,58519.1100.0100.0SALES BY GEOGRAPHIC REGIONThree Months EndedDecember 31,December 31,PercentPercent ofPercent ofGeographic Region20102009ChangeNet Sales - 2010Net Sales - 2009Europe, Middle East and Africa$        91,800$        82,37711.437.037.0Latin America23,21520,19614.99.49.1Asia-Pacific34,45821,98456.713.99.9   Total International149,473124,55720.060.356.0North America98,70297,9650.839.744.0   Total net sales$      248,175$      222,52211.5100.0100.0Twelve Months EndedDecember 31,December 31,PercentPercent ofPercent ofGeographic Region20102009ChangeNet Sales - 2010Net Sales - 2009Europe, Middle East and Africa$          338,573$       294,29615.035.436.6Latin America87,27865,06034.29.18.1Asia-Pacific123,79682,12050.812.910.2   Total International549,647441,47624.557.454.9North America407,201362,10912.542.645.1    Total sales$        956,848$        803,58519.1100.0100.0ZEBRA TECHNOLOGIES CORPORATIONSUPPLEMENTAL SEGMENT INFORMATION(Amounts in thousands)(Unaudited)Three Months EndedTwelve Months EndedDecember 31, 2010December 31, 2009December 31, 2010December 31, 2009Net sales:SPG$  227,163$  203,122$  871,036$  722,556ZES21,01219,40085,81281,029       Total$  248,175$  222,522$  956,848$  803,585Cost of Sales:SPG $  115,276$  113,253$  457,368$  410,311ZES9,2587,79138,61132,553       Total$  124,534$  121,044$  495,979$  442,864Operating expenses:SPG $  49,445$  42,519$  183,770$  164,124ZES17,13517,02466,77263,730Corporate and other16,62715,69766,47564,065       Total$  83,207$  75,240$  317,017$  291,919Operating income (loss):SPG $  62,442$  47,350$  229,898$ 148,121ZES(5,381)(5,415)(19,571)(15,254)Corporate and other(16,627)(15,697)(66,475)(64,065)       Total$  40,434$  26,238$  143,852$  68,802Corporate and other includes corporate administration costs or assets that support both reporting segments.ZEBRA TECHNOLOGIES CORPORATIONPRINTER UNITS and AVERAGE UNIT PRICES(Unaudited)Three Months EndedDecember 31,December 31,Percent20102009ChangeTotal printers shipped276,597244,10013.3Average selling price of printers shipped$535$5310.8Twelve Months EndedDecember 31,December 31,Percent20102009ChangeTotal printers shipped1,057,744850,23024.4Average selling price of printers shipped$533$5222.1Contact: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