ZEBRA TECHNOLOGIES CORPORATION LINCOLNSHIRE, Ill., Nov. 4, 2014 /PRNewswire/ -- Zebra Technologies Corporation (NASDAQ: ZBRA) today reported 15.1% growth in net sales to a record $303,272,000 for the third quarter of 2014, compared with $263,523,000 for the third quarter of 2013. Diluted earnings per share of $0.29 for the third quarter of 2014 include $35,326,000 of acquisition expenses related to the acquisition of the Enterprise business of Motorola Solutions, which was completed on October 27, 2014. Diluted earnings per share for the third quarter of 2013 were $0.76 and included $268,000 of acquisition expenses.
For the third quarter of 2014, non-GAAP net income was $48,036,000, or $0.93 per diluted share, up 22.9% from $39,088,000, or $0.77 per diluted share, for the third quarter of 2013.
Summary Financial Performance (Unaudited)
----------------------------------------
3Q14 3Q13 Change
---- ---- ------
Net sales
(in 000s) $303,272 $263,523 15.1%
Gross
margin
(%) 50.0 48.8 1.2 pts.
GAAP net
income
(in 000s) $14,945 $38,600 (61.3)%
GAAP
Diluted
EPS $0.29 $0.76 (61.8)%
Non-GAAP
net
income
(in 000s) $48,036 $39,088 22.9%
Non-GAAP
Diluted
EPS $0.93 $0.77 20.8%
Adjusted
EBITDA $74,483 $58,324 27.7%
-------- ------- ------- ----
(1) A Reconciliation of Non-GAAP financial information to GAAP information is available
in the financial tables in this release.
---------------------------------------------------------------------------------------
"Broad strength across virtually all dimensions of our business led to excellent results for the quarter," stated Anders Gustafsson, Zebra's chief executive officer. "A surge in large deals complemented record distribution sales, as more customers turned to Zebra for best-of-breed solutions that provide greater visibility into critical enterprise assets worldwide."
Mr. Gustafsson added, "Favorable business momentum is continuing into the fourth quarter for Zebra and the Enterprise business that we acquired from Motorola Solutions on October 27. Together, no other company has the scale, focus and resources dedicated to enterprise asset intelligence. Zebra is now even better positioned to take advantage of important technology trends in mobility, cloud and the Internet of Things. We have great confidence in our future, and in our ability to create value for our customers, employees and shareholders over the long term."
As of September 27, 2014, Zebra had $541,920,000 in cash and investments, and no long-term debt. Net inventories were $139,621,000, and net accounts receivable were $187,543,000.
Discussion and Analysis - Third Quarter
-- Net sales for Zebra increased 15.1% from the comparable quarter a year
ago from sales growth in all geographic regions to new record levels.
The sales growth was broad, across multiple products and customers in
retail, manufacturing, transportation and logistics and healthcare,
among other industries. Movement in foreign currency, net of hedges,
increased sales by $2,862,000.
-- Gross margin of 50.0%, versus 48.8% in 2013, reflects higher sales
volumes across all regions and product categories, lower product costs,
and a reduction in freight costs. Favorable movements in foreign
currency, net of hedges, increased second quarter gross profit by
$1,668,000
-- Operating expenses for the third quarter increased 52.2%, including
$35,326,000 in acquisition costs related to the acquisition of the
Enterprise business of Motorola Solutions, which was announced in April
2014. Zebra completed the transaction on October 27, 2014.
-- The effective income tax rate was 39.8% for the quarter. During the
third quarter, a change in the U.K. tax laws relating to deductibility
of intercompany interest resulted in a reversal of the first and second
quarter benefit of $5.9 million and an additional tax expense of $2.6
million for the current quarter.
Fourth Quarter Outlook
Zebra announced its financial forecast for the fourth quarter of 2014. For the pre-transaction Zebra, the company expects net sales within a range of $300,000,000 to $310,000,000 and proforma operating income of $55,000,000 to $63,000,000.
Conference Call Notification
Investors are invited to listen to a live webcast of Zebra's conference call discussing the company's financial results for the third quarter of 2014. The conference call will be held at 9:00 AM Eastern Time today. To listen to the call, visit the company's website 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 fourth quarter of 2014 stated in the paragraph above captioned "Fourth Quarter Outlook." Similarly, statements herein that describe the transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of managements' beliefs, intentions, or goals are also forward-looking statements. 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. 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. 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. The success of integrating acquisitions, including the Enterprise business of Motorola Solutions, could also affect profitability, reported results and the company's competitive position in it industry. 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. 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, 2013.
About Zebra Technologies
Zebra (NASDAQ: ZBRA) makes businesses as smart and connected as the world we live in. Zebra tracking and visibility solutions transform the physical to digital, creating the data streams businesses need in order to simplify operations, know more about their business, and empower their mobile workforce. For more information, visit www.zebra.com/possibilities.
Use of Non-GAAP Financial Information
This press release contains certain non-GAAP financial measures, consisting of "EBITDA," "Adjusted EBITDA," "Non-GAAP net income" and "Non-GAAP earnings per share" in addition to measure our operating performance. Management presents these measures to focus on the on-going operations and believes it is useful to investors because they enable them to perform meaningful comparisons of past and present operating results. The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its ongoing operations and how management views the business. Reconciliations of Operating Income to EBITDA, EBITDA to Adjusted EBITDA, and GAAP net income to Non-GAAP net income are included in the financial schedules contained in this press release. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.
Contact:
Investors: Media:
---------- ------
Douglas A. Fox, CFA Robb Kristopher
Vice President, Investor Relations Director, Corporate Communications
and Treasurer and Public Relations
+ 1 847 793 6735 + 1 847 793 5514
dfox@zebra.com rkristopher@zebra.com
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
September 27, December 31,
2014 2013
---- ----
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $60,214 $62,827
Investments and marketable securities 481,706 350,380
Accounts receivable, net 187,543 176,917
Inventories, net 139,621 121,023
Deferred income taxes 19,480 19,810
Income tax receivable 9,813 7,622
Prepaid expenses and other current assets 22,673 15,524
Total current assets 921,050 754,103
------- -------
Property and equipment at cost, less accumulated
depreciation and amortization 113,206 109,588
Goodwill 153,515 155,800
Other intangibles, net 61,032 68,968
Other assets 34,367 31,353
Total assets $1,283,170 $1,119,812
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $46,083 $34,688
Accrued liabilities 83,035 61,962
Deferred revenue 18,965 15,506
Income taxes payable 10,131 6,898
------ -----
Total current liabilities 158,214 119,054
Long-term deferred tax liability 27,387 25,492
Deferred rent 1,796 1,131
Other long-term liabilities 19,024 15,477
Total liabilities 206,421 161,154
------- -------
Stockholders' equity:
Class A Common Stock 722 722
Additional paid-in capital 153,026 143,295
Treasury stock (660,294) (678,456)
Retained earnings 1,586,986 1,502,878
Accumulated other comprehensive loss (3,691) (9,781)
Total stockholders' equity 1,076,749 958,658
--------- -------
Total liabilities and stockholders' equity $1,283,170 $1,119,812
========== ==========
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 27, September 28, September 27, September 28,
2014 2013 2014 2013
---- ---- ---- ----
Net sales:
Net sales of
tangible products $282,643 $249,919 $814,584 $714,949
Revenue from
services and
software 20,629 13,604 65,377 38,671
Total net sales 303,272 263,523 879,961 753,620
------- ------- ------- -------
Cost of sales:
Cost of sales of
tangible products 141,842 128,191 409,253 370,966
Cost of services
and software 9,924 6,722 29,095 20,072
Total cost of sales 151,766 134,913 438,348 391,038
------- ------- ------- -------
Gross profit 151,506 128,610 441,613 362,582
------- ------- ------- -------
Operating expenses:
Selling and
marketing 36,781 34,395 107,952 101,740
Research and
development 25,225 22,376 71,792 67,435
General and
administrative 24,741 22,452 79,453 71,781
Amortization of
intangible assets 2,597 1,831 7,936 5,557
Acquisition and
integration costs 35,326 268 60,617 1,368
Exit and
restructuring
costs (120) 519 434 3,515
Total operating
expenses 124,550 81,841 328,184 251,396
------- ------ ------- -------
Operating income 26,956 46,769 113,429 111,186
------ ------ ------- -------
Other income (expense):
Investment income (2,448) 550 (1,648) 1,700
Foreign exchange
loss (83) (173) (332) (733)
Forward swaps gain/
(loss) 185 - (2,248) -
Other, net 196 (5) 147 1,468
Total other income
(expense) (2,150) 372 (4,081) 2,435
------ --- ------ -----
Income from
continuing
operations before
income taxes 24,806 47,141 109,348 113,621
Income taxes 9,861 8,541 25,240 20,921
----- ----- ------ ------
Income from
continuing
operations 14,945 38,600 84,108 92,700
Income from
discontinued
operations, net of
tax - - - 8
---
Net income $14,945 $38,600 $84,108 $92,708
======= ======= ======= =======
Basic earnings per share:
Income from
continuing
operations $0.29 $0.76 $1.66 $1.82
Income from
discontinued
operations - - - -
Net income $0.29 $0.76 $1.66 $1.82
===== ===== ===== =====
Diluted earnings per share:
Income from
continuing
operations $0.29 $0.76 $1.64 $1.81
Income from
discontinued
operations - - - -
Net income $0.29 $0.76 $1.64 $1.81
===== ===== ===== =====
Basic weighted
average shares
outstanding 50,835 50,590 50,615 50,808
Diluted weighted
average and
equivalent shares
outstanding 51,461 50,924 51,251 51,171
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 27, September 28, September 27, September 28,
2014 2013 2014 2013
---- ---- ---- ----
Net income $14,945 $38,600 $84,108 $92,708
Other comprehensive income (loss):
Unrealized gains (losses) on hedging transactions, net of income
taxes
4,352 (1,007) 5,741 345
Unrealized holding gains (losses) on investments, net of income
taxes
240 433 736 (506)
Foreign currency
translation adjustment (191) 182 (387) 499
Comprehensive income $19,346 $38,208 $90,198 $93,046
======= ======= ======= =======
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
-----------------
September 27, September 28,
2014 2013
---- ----
Cash flows from operating activities:
Net income $84,108 $92,708
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 27,223 23,312
Share-based compensation 10,304 9,372
Impairment of long term investment 2,333 -
Excess tax benefit from share-based
compensation (5,779) (4,170)
Loss on sale of property and equipment 135 172
Deferred income taxes 4,509 4,888
Loss on forward interest rate swaps 2,248 -
Changes in assets and liabilities:
Accounts receivable, net (10,810) (6,641)
Inventories, net (18,606) 16,702
Other assets (10,859) 2,257
Accounts payable 7,975 (445)
Accrued liabilities 21,160 (6,256)
Deferred revenue 2,667 1,752
Income taxes 6,664 3,040
Other operating activities 6,406 298
----- ---
Net cash provided by operating activities 129,678 136,989
------- -------
Cash flows from investing activities:
Purchases of property and equipment (20,023) (13,522)
Acquisition of intangible assets - (1,500)
Purchase of long-term investments (1,870) (1,708)
Purchase of investments and marketable
securities (384,134) (338,227)
Maturities of investments and marketable
securities 44,158 41,021
Proceeds from sales of investments and
marketable securities 211,975 223,905
------- -------
Net cash used in investing activities (149,894) (90,031)
-------- -------
Cash flows from financing activities:
Purchase of treasury stock - (58,459)
Proceeds from exercise of stock options and
stock purchase plan purchases 11,964 6,470
Excess tax benefit from share-based
compensation 5,779 4,170
----- -----
Net cash provided by (used in) financing
activities 17,743 (47,819)
------ -------
Effect of exchange rate changes on cash (140) 317
---- ---
Net decrease in cash and cash equivalents (2,613) (544)
Cash and cash equivalents at beginning of
period 62,827 64,740
Cash and cash equivalents at end of period $60,214 $64,196
======= =======
Supplemental disclosures of cash flow information:
Income taxes paid, net $12,656 $10,951
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
SALES BY PRODUCT CATEGORY
Three Months Ended
------------------
Product Category September 27, September 28, Percent Change Percent of Net Sales Percent of Net Sales
2014 2013
2014 2013
--- ---- ----
Hardware $215,700 $186,721 15.5 71.2 70.8
Supplies 65,643 61,897 6.1 21.6 23.5
Service and
software 20,629 13,604 51.6 6.8 5.2
------ ------ --- ---
Subtotal products 301,972 262,222 15.2 99.6 99.5
Shipping and
handling 1,300 1,301 -0.1 0.4 0.5
Total net sales $303,272 $263,523 15.1 100 100
======== ======== === ===
Nine Months Ended
-----------------
Product Category September 27, September 28, Percent Change Percent of Net Sales Percent of Net Sales
2014 2013
2014 2013
--- ---- ----
Hardware $615,132 $532,350 15.6 69.9 70.7
Supplies 194,426 178,638 8.8 22.1 23.7
Service and
software 65,377 38,671 69.1 7.4 5.1
------ ------ --- ---
Subtotal products 874,935 749,659 16.7 99.4 99.5
Shipping and
handling 5,026 3,961 26.9 0.6 0.5
Total net sales $879,961 $753,620 16.8 100 100
======== ======== === ===
SALES BY GEOGRAPHIC REGION
Three Months Ended
------------------
Geographic Region September 27, September 28, Percent Change Percent of Net Sales Percent of Net Sales
2014 2013
2014 2013
--- ---- ----
Europe, Middle
East and Africa $94,375 $79,225 19.1 31.1 30.1
Latin America 29,060 26,252 10.7 9.6 10
Asia-Pacific 45,705 41,922 9.0 15.1 15.9
------ ------ ---- ----
Total
International 169,140 147,399 14.7 55.8 56
North America 134,132 116,124 15.5 44.2 44
Total net sales $303,272 $263,523 15.1 100 100
======== ======== === ===
Nine Months Ended
-----------------
Geographic Region September 27, September 28, Percent Change Percent of Net Sales Percent of Net Sales
2014 2013
2014 2013
--- ---- ----
Europe, Middle
East and Africa $280,015 $237,811 17.7 31.8 31.6
Latin America 79,904 73,706 8.4 9.1 9.8
Asia-Pacific 124,007 111,803 10.9 14.1 14.8
------- ------- ---- ----
Total
International 483,926 423,320 14.3 55 56.2
North America 396,035 330,300 19.9 45 43.8
Total net sales $879,961 $753,620 16.8 100 100
======== ======== === ===
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(Amounts in thousands, except per-share data)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 27, September 28, September 27, September 28,
2014 2013 2014 2013
---- ---- ---- ----
Net income (GAAP) $14,945 $38,600 $84,108 $92,708
Acquisition costs $35,326 $268 $60,617 $1,368
Exit and
restructuring
costs (120) 519 434 3,515
Loss on minority
investment 2,333 2,333
Interest rate
swaps (Gain)
loss (185) - 2,248 -
Effect on income
taxes due to
change in the UK
tax laws 8,536 8,536
Tax effect on
pretax
adjustments (12,799) (299) (19,611) (1,856)
Total adjustments $33,091 $488 $54,557 $3,027
------- ---- ------- ------
Net income (Non-
GAAP) $48,036 $39,088 $138,665 $95,735
======= ======= ======== =======
GAAP net income per share
Basic $0.29 $0.76 $1.66 $1.82
===== ===== ===== =====
Diluted $0.29 $0.76 $1.64 $1.81
===== ===== ===== =====
Non-GAAP net income per share
Basic $0.94 $0.77 $2.74 $1.88
===== ===== ===== =====
Diluted $0.93 $0.77 $2.71 $1.87
===== ===== ===== =====
Basic weighted
average shares
outstanding 50,835 50,590 50,615 50,808
Diluted weighted
average and
equivalent
shares
outstanding 51,461 50,924 51,251 51,171
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION
(Amounts in thousands, except per-share data)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 27, September 28, September 27, September 28,
2014 2013 2014 2013
---- ---- ---- ----
Income from continuing operations to EBITDA
and Adjusted EBITDA
Income from continuing
operations (GAAP) $14,945 $38,600 $84,108 $92,700
Income taxes 9,861 8,541 25,240 20,921
Total other expense (income) 2,150 (372) 4,081 (2,435)
----- ---- ----- ------
Operating income $26,956 $46,769 $113,429 $111,186
Depreciation 6,530 6,069 19,287 17,756
Amortization of intangible
assets 2,597 1,831 7,936 5,557
EBITDA (Non-GAAP) $36,083 $54,669 $140,652 $134,499
------- ------- -------- --------
Acquisition costs 35,326 268 60,617 1,368
Exit and restructuring costs (120) 519 434 3,515
Stock-based compensation
expense 3,194 2,868 10,304 9,372
Adjusted EBITDA (Non-GAAP) $74,483 $58,324 $212,007 $148,754
======= ======= ======== ========
SOURCE Zebra Technologies Corporation
