Exhibit 99.1
FOR IMMEDIATE RELEASE
Zebra Technologies Announces Second Quarter Financial Results for 2005
Vernon Hills, IL, July 27, 2005—Zebra Technologies Corporation (NASDAQ: ZBRA) today announced net sales for the quarter that ended July 2, 2005, were a record $176,614,000, up 8.5% from $162,830,000 for the same period in 2004. Net income for the second quarter was $26,763,000 versus $29,428,000, with corresponding diluted earnings per share of $0.37 versus $0.41. Per-share figures have been adjusted for a three-for-two stock split paid on August 25, 2004, in the form of a 50% stock dividend.
“These financial results did not meet expectations and reflect weakness in sales to retail accounts in our two largest territories, a business slowdown in parts of Europe, and higher operating expenses,” stated Edward Kaplan, Zebra’s chairman and chief executive officer. “These circumstances mask significant progress and growth in several areas of our business. Shipments to customers other than retail remained firm, and the company benefited from strong growth in emerging Latin America, Asia Pacific and Eastern Europe regions. Zebra’s financial strength and leading position in fundamentally healthy markets with long-term favorable growth prospects keep us optimistic about our ability to build value in the company for all of its stockholders.”
Discussion and Analysis
For the second quarter of 2005:
• High growth in the company’s Latin America and Asia Pacific territories to record levels paced quarterly sales, which were moderated by slower growth in North America and the Europe, Middle East and Africa (EMEA) region, the company’s two largest territories. Quarterly sales growth was affected by a slowdown in shipments of mobile printers, compared with large shipments to major retail customers in North America and EMEA a year ago. In addition, deteriorating economic conditions reduced sales growth for the EMEA territory.
• Gross profit margin of 50.6% versus 51.9% was affected by unfavorable foreign exchange movements, higher distribution and freight expenses, and less efficient overhead absorption.
• Higher legal expenses and ongoing investments in personnel to support geographic expansion contributed to operating expense growth of 25.7%.
For the first six months of 2005, net sales were $347,342,000, an increase of 9.6% over $317,004,000 for the first half of 2004. First-half net income was $53,870,000, or $0.74 per diluted share, compared with $57,362,000, or $0.79 per diluted share, for the same period a year ago.
At July 2, 2005, Zebra had $573,810,000 in cash, investments and marketable securities, and no long-term debt. Inventories totaled $63,569,000. Accounts receivable were $104,999,000.
Third Quarter Outlook
Zebra also announced its financial forecast for the third quarter of 2005. Net sales are expected within a range of $170,000,000 and $180,000,000. Earnings are expected within a range of $0.35 and $0.39 per diluted share.
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
Zebra Technologies Corporation
333 Corporate Woods Parkway • Vernon Hills, IL 60061-3109 USA T+1 847 634 6700 F+1 847 913 8766 www.zebra.com
of 2005 stated in the paragraph directly 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. We may elect to update forward-looking statements but expressly disclaim any obligation to do so, even if our estimates change.
These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in general industry and market conditions, of general domestic and international economic conditions, and other factors. Generally, market acceptance of the company’s products and product lines and competitors’ product offerings, as well as the speed of adoption of the company’s printing technologies and competing technologies could also have an effect on the accuracy of our estimates and 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. 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, 2004, and Form 10-Q reports.
Zebra Technologies Corporation delivers innovative and reliable on-demand printing solutions for business improvement and security applications in 90 countries around the world. More than 90 percent of Fortune 500 companies use Zebra-brand printers. A broad range of applications benefit from Zebra-brand thermal bar code, “smart” label, receipt, and card printers, resulting in enhanced security, increased productivity, improved quality, lower costs, and better customer service. The company has sold more than four million printers, including RFID printer/encoders and wireless mobile solutions, and also offers software, connectivity solutions and printing supplies. Information about Zebra bar code, card and RFID products can be found at http://www.zebra.com.
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 2005. 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 www.zebra.com.
For Information, Contact:
Charles R. Whitchurch
Chief Financial Officer
Phone: 847.634.6700
Fax: 847.821.2545
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
|
| July 2, |
| December 31, |
| ||
|
| 2005 |
| 2004 |
| ||
|
| (Unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 10,098 |
| $ | 17,983 |
|
Investments and marketable securities |
| 563,712 |
| 540,010 |
| ||
Accounts receivable, net |
| 104,999 |
| 96,881 |
| ||
Inventories |
| 63,569 |
| 59,255 |
| ||
Deferred income taxes |
| 8,747 |
| 6,625 |
| ||
Prepaid expenses |
| 5,358 |
| 3,884 |
| ||
Total current assets |
| 756,483 |
| 724,638 |
| ||
|
|
|
|
|
| ||
Property and equipment at cost, less accumulated depreciation and amortization |
| 47,564 |
| 46,283 |
| ||
Goodwill |
| 69,095 |
| 61,793 |
| ||
Other intangibles |
| 14,809 |
| 6,517 |
| ||
Other assets |
| 30,912 |
| 22,991 |
| ||
Total assets |
| $ | 918,863 |
| $ | 862,222 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
| $ | 21,674 |
| $ | 24,130 |
|
Accrued liabilities |
| 27,501 |
| 29,248 |
| ||
Current portion of obligation under capital lease |
| 55 |
| 54 |
| ||
Income taxes payable |
| 1,969 |
| 6,144 |
| ||
Total current liabilities |
| 51,199 |
| 59,576 |
| ||
|
|
|
|
|
| ||
Obligation under capital lease, less current portion |
| 89 |
| 117 |
| ||
Deferred income taxes |
| 3,468 |
| 417 |
| ||
Deferred rent |
| 569 |
| 564 |
| ||
Other long-term liabilities |
| 4,883 |
| 3,894 |
| ||
Total liabilities |
| 60,208 |
| 64,568 |
| ||
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
| ||
Preferred stock |
| ¾ |
| ¾ |
| ||
Class A Common Stock |
| 721 |
| 718 |
| ||
Additional paid-in capital |
| 92,877 |
| 84,180 |
| ||
Retained earnings |
| 760,359 |
| 706,489 |
| ||
Accumulated other comprehensive income |
| 4,698 |
| 6,267 |
| ||
Total stockholders’ equity |
| 858,655 |
| 797,654 |
| ||
Total liabilities and stockholders’ equity |
| $ | 918,863 |
| $ | 862,222 |
|
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| July 2, |
| July 3, |
| July 2, |
| July 3, |
| ||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
Net sales |
| $ | 176,614 |
| $ | 162,830 |
| $ | 347,342 |
| $ | 317,004 |
|
Cost of sales |
| 87,266 |
| 78,315 |
| 170,629 |
| 151,886 |
| ||||
Gross profit |
| 89,348 |
| 84,515 |
| 176,713 |
| 165,118 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Selling and marketing |
| 22,554 |
| 18,023 |
| 43,621 |
| 35,231 |
| ||||
Research and development |
| 12,054 |
| 9,233 |
| 22,721 |
| 18,129 |
| ||||
General and administrative |
| 16,810 |
| 12,562 |
| 31,757 |
| 25,324 |
| ||||
Amortization of intangible assets |
| 387 |
| 626 |
| 1,034 |
| 1,275 |
| ||||
Acquired in-process technology |
| ¾ |
| ¾ |
| ¾ |
| 22 |
| ||||
Exit costs |
| 141 |
| 876 |
| 1,658 |
| 1,238 |
| ||||
Total operating expenses |
| 51,946 |
| 41,320 |
| 100,791 |
| 81,219 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating income |
| 37,402 |
| 43,195 |
| 75,922 |
| 83,899 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Investment income |
| 3,072 |
| 2,091 |
| 6,349 |
| 5,163 |
| ||||
Interest expense |
| (27 | ) | (6 | ) | (31 | ) | (32 | ) | ||||
Foreign exchange gains (losses) |
| 812 |
| 413 |
| 865 |
| (244 | ) | ||||
Other, net |
| (243 | ) | (537 | ) | (545 | ) | (836 | ) | ||||
Total other income |
| 3,614 |
| 1,961 |
| 6,638 |
| 4,051 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
| 41,016 |
| 45,156 |
| 82,560 |
| 87,950 |
| ||||
Income taxes |
| 14,253 |
| 15,728 |
| 28,690 |
| 30,588 |
| ||||
Net income |
| $ | 26,763 |
| $ | 29,428 |
| $ | 53,870 |
| $ | 57,362 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic earnings per share |
| $ | 0.37 |
| $ | 0.41 |
| $ | 0.75 |
| $ | 0.80 |
|
Diluted earnings per share |
| $ | 0.37 |
| $ | 0.41 |
| $ | 0.74 |
| $ | 0.79 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted average shares outstanding |
| 72,013 |
| 71,559 |
| 71,939 |
| 71,397 |
| ||||
Diluted weighted average and equivalent shares outstanding |
| 72,714 |
| 72,554 |
| 72,706 |
| 72,403 |
|
Note: Share and per-share figures for 2004 were adjusted for a three-for-two stock split paid in the form of a 50% stock dividend on August 25, 2004.
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
| Six Months Ended |
| ||||
|
| July 2, |
| July 3, |
| ||
|
| 2005 |
| 2004 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
| $ | 53,870 |
| $ | 57,362 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
| 6,399 |
| 6,080 |
| ||
Tax benefit from exercise of stock options |
| 2,100 |
| 5,516 |
| ||
Acquired in-process technology |
| ¾ |
| 22 |
| ||
Deferred income taxes |
| 859 |
| (685 | ) | ||
Changes in assets and liabilities, net of businesses acquired: |
|
|
|
|
| ||
Accounts receivable, net |
| (12,124 | ) | (12,496 | ) | ||
Inventories |
| (5,342 | ) | (4,527 | ) | ||
Other assets |
| (16,612 | ) | (3,105 | ) | ||
Accounts payable |
| (1,655 | ) | 398 |
| ||
Accrued liabilities |
| (1,291 | ) | (2,152 | ) | ||
Income taxes payable |
| (3,831 | ) | 1,767 |
| ||
Other operating activities |
| 1,532 |
| (807 | ) | ||
Net cash provided by operating activities |
| 23,905 |
| 47,373 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchases of property and equipment |
| (6,607 | ) | (7,737 | ) | ||
Acquisition of assets of Retail Systems International, Inc. |
| (7,655 | ) | ¾ |
| ||
Purchases of investments and marketable securities |
| (509,112 | ) | (709,560 | ) | ||
Maturities of investments and marketable securities |
| 313,076 |
| 475,442 |
| ||
Sales of investments and marketable securities |
| 172,334 |
| 178,143 |
| ||
Net cash used in investing activities |
| (37,964 | ) | (63,712 | ) | ||
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Proceeds from exercise of stock options and stock purchase plan purchases |
| 6,600 |
| 11,432 |
| ||
Payments for obligation under capital lease |
| (27 | ) | (8 | ) | ||
Net cash provided by financing activities |
| 6,573 |
| 11,424 |
| ||
|
|
|
|
|
| ||
Effect of exchange rate changes on cash |
| (399 | ) | 36 |
| ||
|
|
|
|
|
| ||
Net decrease in cash and cash equivalents |
| (7,885 | ) | (4,879 | ) | ||
Cash and cash equivalents at beginning of period |
| 17,983 |
| 14,266 |
| ||
Cash and cash equivalents at end of period |
| $ | 10,098 |
| $ | 9,387 |
|
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information: |
|
|
|
|
| ||
Interest paid |
| $ | 31 |
| $ | 32 |
|
Income taxes paid |
| 31,104 |
| 23,929 |
|
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
|
| Three Months Ended |
|
|
|
|
| ||||
|
| July 2, |
| July 3, |
| Percent |
| Percent of |
| ||
|
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Hardware |
| $ | 135,915 |
| $ | 127,167 |
| 6.9 |
| 77.0 |
|
Supplies |
| 33,071 |
| 28,273 |
| 17.0 |
| 18.7 |
| ||
Service and software |
| 6,648 |
| 6,283 |
| 5.8 |
| 3.8 |
| ||
Shipping and handling |
| 1,378 |
| 1,095 |
| 25.8 |
| 0.7 |
| ||
Cash flow from hedging activities |
| (398 | ) | 12 |
| NM |
| (0.2 | ) | ||
Total sales |
| $ | 176,614 |
| $ | 162,830 |
| 8.5 |
| 100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Sales by Geographic Region |
| ||||||||||
|
|
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|
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| ||
|
| Three Months Ended |
|
|
|
|
| ||||
|
| July 2, |
| July 3, |
| Percent |
| Percent of |
| ||
|
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Europe, Middle East and Africa |
| $ | 58,271 |
| $ | 53,156 |
| 9.6 |
| 33.0 |
|
Latin America |
| 12,897 |
| 9,452 |
| 36.4 |
| 7.3 |
| ||
Asia-Pacific |
| 15,665 |
| 12,039 |
| 30.1 |
| 8.9 |
| ||
Total international |
| 86,833 |
| 74,647 |
| 16.3 |
| 49.2 |
| ||
North America |
| 89,781 |
| 88,183 |
| 1.8 |
| 50.8 |
| ||
Total sales |
| $ | 176,614 |
| $ | 162,830 |
| 8.5 |
| 100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Sales by Product Category |
| ||||||||||
|
|
|
|
|
|
|
|
|
| ||
|
| Six Months Ended |
|
|
|
|
| ||||
|
| July 2, |
| July 3, |
| Percent |
| Percent of |
| ||
|
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Hardware |
| $ | 269,386 |
| $ | 245,645 |
| 9.7 |
| 77.6 |
|
Supplies |
| 63,019 |
| 56,947 |
| 10.7 |
| 18.1 |
| ||
Service and software |
| 12,728 |
| 12,824 |
| (0.7 | ) | 3.7 |
| ||
Shipping and handling |
| 2,880 |
| 2,219 |
| 29.8 |
| 0.8 |
| ||
Cash flow from hedging activities |
| (671 | ) | (631 | ) | NM |
| (0.2 | ) | ||
Total sales |
| $ | 347,342 |
| $ | 317,004 |
| 9.6 |
| 100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Sales by Geographic Region |
| ||||||||||
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|
|
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|
|
|
| ||
|
| Six Months Ended |
|
|
|
|
| ||||
|
| July 2, |
| July 3, |
| Percent |
| Percent of |
| ||
|
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Europe, Middle East and Africa |
| $ | 118,851 |
| $ | 105,608 |
| 12.5 |
| 34.2 |
|
Latin America |
| 23,023 |
| 17,891 |
| 28.7 |
| 6.6 |
| ||
Asia-Pacific |
| 28,124 |
| 24,189 |
| 16.3 |
| 8.1 |
| ||
Total international |
| 169,998 |
| 147,688 |
| 15.1 |
| 48.9 |
| ||
North America |
| 177,344 |
| 169,316 |
| 4.7 |
| 51.1 |
| ||
Total sales |
| $ | 347,342 |
| $ | 317,004 |
| 9.6 |
| 100.0 |
|