Solid performance across the company leads to record sales and sustained high gross margin
VERNON HILLS, Ill., July 24 /PRNewswire-FirstCall/ -. Zebra Technologies
Corporation (Nasdaq: ZBRA) today announced 21.5% growth in net sales to a
record $253,782,000 for the second quarter of 2008 from $208,912,000 for the
second quarter of 2007. Net income for the period was $25,526,000, or $0.39
per diluted share, including exit costs of $4,680,000 which reduced earnings
by $0.05 per diluted share. For the second quarter of 2007, net income was
$25,633,000, or $0.37 per diluted share.
'Strong business execution led to high international and North American
sales growth for specialty printing and a sharp sequential increase in our
enterprise solutions business,' stated Anders Gustafsson, Zebra's chief
executive officer. 'Our programs to penetrate more deeply into targeted
vertical markets and extend our geographic reach are building a more
diversified customer base. We are winning additional business opportunities
with new products and solutions that help our customers identify, manage and
track a broader range of assets within the enterprise and across the supply
chain. These activities make us optimistic about further growth and give us
confidence in our ability to meet our long-term objectives.'
Discussion and Analysis
For the second quarter of 2008 compared with the second quarter of 2007:
-- Consolidated sales growth of 21.5% resulted from 12.8% growth in the
company's Specialty Printing Group (SPG) and $25,020,000 in sales from the
company's Enterprise Solutions Group (ESG). International sales increased
28.0%, with record sales in the Asia Pacific and Latin America regions. North
American sales increased 14.1%. Consolidated sales were affected by $5,009,000
in unfavorable adjustments from revenue hedging activities.
-- Gross profit margin increased to 50.3% from 47.6%. Profitability was
favorably affected by lower product costs, favorable changes in foreign
exchange, and certain one-time items that accounted for 1.0 percentage points
of the gross margin improvement.
-- Operating expenses increased from acquisition-related additions of
personnel and other expenses, the implementation of annual merit pay
increases, higher SPG marketing expenses and costs for two customer
conferences.
-- Operating expenses were also affected by a $2,059,000 increase in the
amortization of intangible assets from the acquisitions of Navis and
Multispectral Solutions, as well as $4,680,000 in exit costs related to the
company's previously announced initiative to transfer final assembly of
thermal printers to a third party.
For the first six months of 2008, the company had net sales of
$500,059,000, up 19.8% from $417,488,000 for the same period a year ago.
First-half net income totaled $53,170,000, or $0.81 per diluted share,
including $7,914,000 in exit costs which reduced earnings by $0.08 per diluted
share.
At June 28, 2008, Zebra had $270,148,000 in cash and investments, and no
long-term debt. Net inventories were $101,339,000, and accounts receivable,
net, were $179,081,000.
During the second quarter of 2008, the company repurchased 461,000 shares
of Zebra Technologies Class A Common Stock under an authorization to purchase
up to 3,000,000 shares. In the first six months of 2008, the company
repurchased 1,490,600 shares of Zebra stock for $48,402,000.
Third Quarter Outlook
Zebra announced its financial forecast for the third quarter of 2008. Net
sales are expected within a range of $242,000,000 to $253,000,000, which
reflects an expected seasonal slowdown in Europe, a more cautious economic
outlook and unfavorable adjustments from revenue hedging activities of
approximately $5,000,000. Earnings are expected between $0.35 and $0.41 per
diluted share. This outlook includes approximately $3,500,000 expenses related
to exit costs.
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 2008. The conference call will be held at 11:00 a.m. 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 2008 stated in the paragraph above. 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
may elect to update forward-looking statements but expressly disclaims any
obligation to do so, even if the company's estimates change.
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
market conditions in North America and other geographic regions and market
acceptance of Zebra's printer and software products and competitors' product
offerings and the potential effects of technological changes. Other factors
include U.S. and foreign regulations that pertain to electrical and electronic
equipment, including European Union and other country directives relating to
the collection, recycling, treatment and disposal of products and the
reduction or elimination of certain specified materials in such products.
Zebra's failure to comply with these regulations may subject Zebra to
penalties, prevent Zebra from selling its products in a certain country, or
increase the cost of supplying the products. Profits and profitability will be
affected by the company'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 is involved,
and particularly litigation or claims related to alleged infringement of
third-party intellectual property rights, is another factor. In addition, the
acquisitions of WhereNet, proveo and Navis, which were completed in 2007, and
Multispectral Solutions, which was completed in April 2008, have risks
relating to integrating these companies' businesses and operations with
Zebra's. 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, 2007.
Zebra Technologies Corporation helps companies identify, track and manage
assets, transactions and people with on-demand specialty digital printing and
automatic identification solutions. In more than 100 countries around the
world, more than 90 percent of Fortune 500 companies use innovative and
reliable Zebra printers, supplies, RFID products and software to increase
productivity, improve quality, lower costs, and deliver better customer
service. Information about Zebra and Zebra-brand products can be found at
http://www.zebra.com.
CONTACT: Investors:
Douglas A. Fox, CFA
Vice President, Investor Relations
+1 847 793 6735
dfox@zebra.com
Media:
Michelle Meek
Outlook Marketing Services
+1 312 873 3424
michelle@outlookmarketingsrv.com
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 28, December 31,
2008 2007
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $41,916 $38,211
Restricted cash 1,870 2,497
Investments and marketable securities 81,936 98,438
Accounts receivable, net 179,081 150,775
Inventories, net 101,339 85,038
Deferred income taxes 14,625 14,772
Prepaid expenses 8,915 31,101
Total current assets 429,682 420,832
Property and equipment at cost, less
accumulated depreciation and amortization 78,948 67,686
Long-term deferred income taxes 28,592 28,407
Goodwill 261,517 246,510
Other intangibles, net 119,058 119,424
Long-term investments and marketable securities 144,426 142,033
Other assets 8,240 9,386
Total assets $1,070,463 $1,034,278
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $56,882 $42,351
Accrued liabilities 66,663 69,437
Deferred revenue 14,750 9,633
Income taxes payable 2,587 751
Total current liabilities 140,882 122,172
Deferred rent 2,212 961
Other long-term liabilities 9,878 8,452
Total liabilities 152,972 131,585
Stockholders' equity:
Preferred Stock - -
Class A Common Stock 722 722
Additional paid-in capital 144,725 141,522
Treasury stock (247,409) (205,058)
Retained earnings 1,013,682 960,512
Accumulated other comprehensive income 5,771 4,995
Total stockholders' equity 917,491 902,693
Total liabilities and stockholders'
equity $1,070,463 $1,034,278
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net sales $253,782 $208,912 $500,059 $417,488
Cost of sales 126,067 109,510 249,429 218,296
Gross profit 127,715 99,402 250,630 199,192
Operating expenses:
Selling and marketing 34,322 29,069 65,183 57,233
Research and
development 22,849 13,869 42,756 28,054
General and
administrative 24,216 19,875 49,261 37,808
Amortization of
intangible assets 4,679 2,620 9,193 4,943
Exit costs 4,680 - 7,914 -
Acquired in-process
research and
development - - - 1,853
Total operating
expenses 90,746 65,433 174,307 129,891
Operating income 36,969 33,969 76,323 69,301
Other income (expense):
Investment income 2,722 5,724 5,127 11,028
Foreign exchange
gains (69) (182) 631 (7)
Other, net (651) (376) (905) (300)
Total other income 2,002 5,166 4,853 10,721
Income before income
taxes 38,971 39,135 81,176 80,022
Income taxes 13,445 13,502 28,006 27,673
Net income $25,526 $25,633 $53,170 $52,349
Basic earnings per
share $0.39 $0.37 $0.81 $0.76
Diluted earnings per
share $0.39 $0.37 $0.81 $0.75
Basic weighted average
shares outstanding 65,128 69,098 65,664 68,996
Diluted weighted
average and equivalent
shares outstanding 65,502 69,559 66,046 69,453
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
June 28, 2008 June 30, 2007
Cash flows from operating activities:
Net income $53,170 $52,349
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 18,607 12,243
Stock-based compensation 6,536 6,557
Excess tax benefit from share-based
compensation (131) (690)
Acquired in-process research and development - 1,853
Deferred income taxes (3,185) (1,893)
Changes in assets and liabilities, net
of effects of acquisitions:
Accounts receivable, net (29,780) 6,676
Inventories (14,754) 3,515
Other assets 1,485 (547)
Accounts payable 13,129 (7,022)
Accrued liabilities (3,876) (381)
Deferred revenue 6,793 168
Income taxes payable 1,796 (1,114)
Other operating activities 762 1,002
Net cash provided by operating
activities 50,552 72,716
Cash flows from investing activities:
Purchases of property and equipment (20,249) (10,903)
Acquisition of businesses acquired, net
of cash acquired (17,987) (127,426)
Acquisition of intangible assets (470) -
Purchases of investments and marketable
securities (305,088) (360,792)
Maturities of investments and marketable
securities 227,129 332,542
Sales of investments and marketable
securities 113,838 114,145
Net cash used in investing activities (2,827) (52,434)
Cash flows from financing activities:
Purchase of treasury stock (48,402) (6,048)
Proceeds from exercise of stock options
and stock purchase plan purchases 3,383 6,382
Excess tax benefit from share-based
compensation 131 690
Net cash provided by (used in)
financing activities (44,888) 1,024
Effect of exchange rate changes on cash 868 835
Net increase in cash and cash equivalents 3,705 22,141
Cash and cash equivalents at beginning of
period 38,211 39,648
Cash and cash equivalents at end of period $41,916 $61,789
Supplemental disclosures of cash flow
information:
Income taxes paid 27,096 30,101
Supplemental disclosures of non-cash
transactions:
Purchase of treasury shares not paid in
the second quarter of 2008 $570 -
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
Three Months Ended
June 28, June 30, Percent Percent of
2008 2007 Change Total Sales
Hardware $185,640 $158,297 17.3 73.1
Supplies 43,803 40,285 8.7 17.3
Service and software 27,516 9,559 187.9 10.8
Shipping and handling 1,832 1,726 6.1 0.8
Cash flow from hedging
activities (5,009) (955) NM (2.0)
Total sales $253,782 $208,912 21.5 100.0
Sales by Geographic Region
Three Months Ended
June 28, June 30, Percent Percent of
2008 2007 Change Total Sales
Europe, Middle East
and Africa $93,787 $76,146 23.2 37.0
Latin America 21,367 15,412 38.6 8.4
Asia-Pacific 26,356 18,986 38.8 10.4
Total international 141,510 110,544 28.0 55.8
North America 112,272 98,368 14.1 44.2
Total sales $253,782 $208,912 21.5 100.0
Sales by Product Category
Six Months Ended
June 28, June 30, Percent Percent of
2008 2007 Change Total Sales
Hardware $365,821 $317,885 15.1 73.3
Supplies 85,706 78,367 9.4 17.1
Service and software 52,695 18,952 178.0 10.5
Shipping and handling 3,634 3,374 7.7 0.7
Cash flow from hedging
activities (7,797) (1,090) NM (1.6)
Total sales $500,059 $417,488 19.8 100.0
Sales by Geographic Region
Six Months Ended
June 28, June 30, Percent Percent of
2008 2007 Change Total Sales
Europe, Middle East
and Africa $191,157 $152,130 25.7 38.2
Latin America 37,350 27,935 33.7 7.5
Asia-Pacific 50,134 34,549 45.1 10.0
Total international 278,641 214,614 29.8 55.7
North America 221,418 202,874 9.1 44.3
Total sales $500,059 $417,488 19.8 100.0
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Sales
Specialty Printing $228,762 $202,794 $453,513 $404,689
Enterprise
Solutions 25,020 6,118 46,546 12,799
Total $253,782 $208,912 $500,059 $417,488
Cost of sales
Specialty Printing 113,338 105,688 226,151 209,954
Enterprise
Solutions 12,729 3,822 23,278 8,342
Total 126,067 109,510 249,429 218,296
Gross profit 127,715 99,402 250,630 199,192
Operating expenses
Specialty Printing 55,829 46,028 106,161 91,866
Enterprise
Solutions 19,957 5,266 37,997 11,007
Administrative and
other 14,960 14,139 30,149 27,018
Total 90,746 65,433 174,307 129,891
Operating income $36,969 $33,969 $76,323 $69,301
ZEBRA TECHNOLOGIES CORPORATION
PRINTER UNITS and AVERAGE UNIT PRICES
(Unaudited)
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Total Printers
Shipped 238,458 226,542 480,859 456,329
Average Unit Prices $630 $573 $622 $570
SOURCE Zebra Technologies Corporation
