Exhibit 99.1
FOR IMMEDIATE RELEASE
Zebra Technologies Announces Third Quarter Financial Results for 2005
Company completes stock purchase program;
Board authorizes the purchase of up to an additional 2.5 million shares.
Vernon Hills, IL, November 1, 2005–Zebra Technologies Corporation (NASDAQ: ZBRA) today announced that third quarter net sales were $175,636,000, an increase of 2.6% over the $171,176,000 recorded for the same period in 2004. Net income for the three months ended October 1, 2005, totaled $29,440,000, or $0.41 per diluted share, compared with $31,319,000, or $0.43 per diluted share, for 2004.
“Zebra delivered results in line with expectations that reflect the ongoing weakness in sales to North American retail accounts,” stated Edward Kaplan, Zebra’s chairman and chief executive officer. “Within this environment, we have taken the opportunity to maintain our programs to extend industry leadership to deliver real value to our customers. These programs are building stronger channel relationships, extending global reach, and positioning Zebra to benefit from the adoption of specialty printing solutions in emerging markets including RFID and health care. We have great confidence in Zebra’s future, and remain optimistic about Zebra’s prospects for growth and ability to build greater stockholder value.”
Discussion and Analysis
For the third quarter of 2005:
• The trend of slower mobile printer sales primarily to major retail customers in North America continued from the first half of this year. By contrast, sales benefited from ongoing high sales growth in the company’s Asia Pacific and Latin America regions as a result of the successful placement of Zebra sales representatives, sales engineers, and other support personnel in those territories to expand and strengthen customer relationships. In addition, sales reflect higher supplies shipments in North America from operational improvements, more effective sales strategies and the acquisition of label converting capacity on the West Coast that was completed in February 2005.
• Gross profit margin of 49.9% versus 50.9% was affected by less efficient overhead absorption, increased distribution costs, and higher warranty expense.
• Higher legal fees, personnel-related costs to support growth initiatives, and project expenses for product development contributed to a 13.0% increase in quarterly operating expense.
• The income tax rate of 32.9%, compared with 34.7% for the third quarter of 2004, benefited from an $800,000 reduction in tax reserves following the resolution of tax audits.
Year-to-date net sales were $522,977,000, up 7.1% from $488,180,000 for the first nine months of 2004. Corresponding net income was $83,309,000, or $1.15 per diluted share, for 2005, compared with $88,682,000, or $1.22 per diluted share, for 2004.
At October 1, 2005, Zebra had $529,723,000 in cash, investments and marketable securities, and no long-term debt. Inventories totaled $63,684,000. Accounts receivable were $98,298,000.
Stock Buyback Program Update
The company said that it completed the purchase of shares of Zebra common stock that was authorized by the board of directors earlier this year. During the quarter, the company bought approximately 1.8 million shares of Zebra
common stock, or approximately 2.5% of total shares outstanding. In addition, Zebra’s board of directors authorized the purchase of up to an additional 2.5 million shares of Zebra common stock. These purchases would be made from time to time, in the open market or in private transactions.
Fourth Quarter Outlook
Zebra also announced its financial forecast for the fourth 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 $0.36 and $0.41 per diluted share. These estimates do not take into consideration acquisitions, dispositions or other significant corporate events or reorganizations that may occur in the fourth quarter.
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 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. Specifically, these risks include the timing of product introductions and the market’s acceptance of those and current products, the success of competitors’ product offerings, as well as the speed of adoption of the company’s printing technologies and competing technologies. In addition, the pace and success of the company’s geographic expansion activities, as well as the effectiveness of its current and future sales and marketing initiatives to capture emerging business and established business opportunities could also have an effect on the accuracy of Zebra’s 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 100 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 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 third 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)
|
| October 1, |
| December 31, |
| ||
|
| 2005 |
| 2004 |
| ||
|
| (Unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 18,449 |
| $ | 17,983 |
|
Investments and marketable securities |
| 511,274 |
| 540,010 |
| ||
Accounts receivable, net |
| 98,298 |
| 96,881 |
| ||
Inventories, net |
| 63,684 |
| 59,255 |
| ||
Deferred income taxes |
| 8,843 |
| 6,625 |
| ||
Prepaid expenses |
| 5,172 |
| 3,884 |
| ||
Total current assets |
| 705,720 |
| 724,638 |
| ||
|
|
|
|
|
| ||
Property and equipment at cost, less accumulated depreciation and amortization |
| 47,523 |
| 46,283 |
| ||
Goodwill |
| 69,097 |
| 61,793 |
| ||
Other intangibles, net |
| 19,801 |
| 6,517 |
| ||
Other assets |
| 40,160 |
| 22,991 |
| ||
Total assets |
| $ | 882,301 |
| $ | 862,222 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
| $ | 24,117 |
| $ | 24,130 |
|
Accrued liabilities |
| 27,871 |
| 29,248 |
| ||
Current portion of obligation under capital lease |
| 56 |
| 54 |
| ||
Income taxes payable |
| 2,269 |
| 6,144 |
| ||
Total current liabilities |
| 54,313 |
| 59,576 |
| ||
Obligation under capital lease, less current portion |
| 75 |
| 117 |
| ||
Deferred income taxes |
| 1,727 |
| 417 |
| ||
Deferred rent |
| 571 |
| 564 |
| ||
Other long-term liabilities |
| 5,145 |
| 3,894 |
| ||
Total liabilities |
| 61,831 |
| 64,568 |
| ||
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
| ||
Preferred stock |
| ¾ |
| ¾ |
| ||
Class A common stock |
| 722 |
| 718 |
| ||
Additional paid-in capital |
| 94,003 |
| 84,180 |
| ||
Treasury stock |
| (68,164 | ) | ¾ |
| ||
Retained earnings |
| 789,798 |
| 706,489 |
| ||
Accumulated other comprehensive income |
| 4,111 |
| 6,267 |
| ||
Total stockholders’ equity |
| 820,470 |
| 797,654 |
| ||
Total liabilities and stockholders’ equity |
| $ | 882,301 |
| $ | 862,222 |
|
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
|
| Three Months Ended |
| Nine months Ended |
| ||||||||
|
| October 1, |
| October 2, |
| October 1, |
| October 2, |
| ||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
Net sales |
| $ | 175,636 |
| $ | 171,176 |
| $ | 522,977 |
| $ | 488,180 |
|
Cost of sales |
| 87,959 |
| 84,030 |
| 258,587 |
| 235,916 |
| ||||
Gross profit |
| 87,677 |
| 87,146 |
| 264,390 |
| 252,264 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Selling and marketing |
| 20,800 |
| 19,217 |
| 64,421 |
| 54,447 |
| ||||
Research and development |
| 11,501 |
| 9,596 |
| 34,222 |
| 27,725 |
| ||||
General and administrative |
| 14,489 |
| 11,917 |
| 46,246 |
| 37,242 |
| ||||
Amortization of intangible assets |
| 509 |
| 647 |
| 1,543 |
| 1,921 |
| ||||
Acquired in-process technology |
| ¾ |
| ¾ |
| ¾ |
| 22 |
| ||||
Exit costs |
| 283 |
| 715 |
| 1,941 |
| 1,953 |
| ||||
Total operating expenses |
| 47,582 |
| 42,092 |
| 148,373 |
| 123,310 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating income |
| 40,095 |
| 45,054 |
| 116,017 |
| 128,954 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Investment income |
| 3,254 |
| 2,515 |
| 9,603 |
| 7,678 |
| ||||
Interest expense |
| (41 | ) | (7 | ) | (71 | ) | (39 | ) | ||||
Foreign exchange gain |
| 334 |
| 737 |
| 1,199 |
| 493 |
| ||||
Other, net |
| 251 |
| (339 | ) | (296 | ) | (1,175 | ) | ||||
Total other income |
| 3,798 |
| 2,906 |
| 10,435 |
| 6,957 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
| 43,893 |
| 47,960 |
| 126,452 |
| 135,911 |
| ||||
Income taxes |
| 14,453 |
| 16,641 |
| 43,143 |
| 47,229 |
| ||||
Net income |
| $ | 29,440 |
| $ | 31,319 |
| $ | 83,309 |
| $ | 88,682 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic earnings per share |
| $ | 0.41 |
| $ | 0.44 |
| $ | 1.16 |
| $ | 1.24 |
|
Diluted earnings per share |
| $ | 0.41 |
| $ | 0.43 |
| $ | 1.15 |
| $ | 1.22 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted average shares outstanding |
| 71,263 |
| 71,696 |
| 71,653 |
| 71,489 |
| ||||
Diluted weighted average and equivalent shares outstanding |
| 71,822 |
| 72,673 |
| 72,347 |
| 72,485 |
|
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)
|
| Nine months Ended |
| ||||
|
| October 1, |
| October 2, |
| ||
|
| 2005 |
| 2004 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
| $ | 83,309 |
| $ | 88,682 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
| 9,559 |
| 9,030 |
| ||
Tax benefit from exercise of stock options |
| 2,832 |
| 6,346 |
| ||
Acquired in-process technology |
| ¾ |
| 22 |
| ||
Deferred income taxes |
| (983 | ) | (505 | ) | ||
Changes in assets and liabilities, net of effects of acquisitions: |
|
|
|
|
| ||
Accounts receivable, net |
| (5,441 | ) | (13,272 | ) | ||
Inventories |
| (5,548 | ) | (11,472 | ) | ||
Other assets |
| (7,317 | ) | (4,065 | ) | ||
Accounts payable |
| 136 |
| 5,705 |
| ||
Accrued liabilities |
| (775 | ) | (1,028 | ) | ||
Income taxes payable |
| (3,486 | ) | 2,697 |
| ||
Other operating activities |
| 1,560 |
| 542 |
| ||
Net cash provided by operating activities |
| 73,846 |
| 82,682 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchases of property and equipment |
| (9,236 | ) | (10,298 | ) | ||
Acquisition of assets of Retail Systems International, Inc. |
| (7,657 | ) | ¾ |
| ||
Acquisition of intangible assets |
| (13,754 | ) | ¾ |
| ||
Purchases of investments and marketable securities |
| (805,368 | ) | (1,082,568 | ) | ||
Maturities of investments and marketable securities |
| 520,470 |
| 728,872 |
| ||
Sales of investments and marketable securities |
| 303,606 |
| 264,479 |
| ||
Net cash used in investing activities |
| (11,939 | ) | (99,515 | ) | ||
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Purchase of treasury shares |
| (70,421 | ) | ¾ |
| ||
Proceeds from exercise of stock options and stock purchase plan purchases |
| 9,252 |
| 13,660 |
| ||
Payments for obligation under capital lease |
| (40 | ) | (419 | ) | ||
Other financing activities |
| ¾ |
| (238 | ) | ||
Net cash provided by (used in) financing activities |
| (61,209 | ) | 13,003 |
| ||
|
|
|
|
|
| ||
Effect of exchange rate changes on cash |
| (232 | ) | (167 | ) | ||
|
|
|
|
|
| ||
Net increase (decrease) in cash and cash equivalents |
| 466 |
| (3,997 | ) | ||
Cash and cash equivalents at beginning of period |
| 17,983 |
| 14,266 |
| ||
Cash and cash equivalents at end of period |
| $ | 18,449 |
| $ | 10,269 |
|
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information: |
|
|
|
|
| ||
Interest paid |
| $ | 71 |
| $ | 39 |
|
Income taxes paid |
| 46,191 |
| 39,515 |
|
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
|
| Three Months Ended |
|
|
|
|
| ||||
|
| October 1, |
| October 2, |
| Percent |
| Percent of |
| ||
Product Category |
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Hardware |
| $ | 133,488 |
| $ | 135,383 |
| (1.4 | ) | 76.0 |
|
Supplies |
| 32,563 |
| 29,007 |
| 12.3 |
| 18.5 |
| ||
Service and software |
| 6,309 |
| 5,431 |
| 16.2 |
| 3.6 |
| ||
Shipping and handling |
| 1,863 |
| 1,286 |
| 44.9 |
| 1.1 |
| ||
Cash flow hedging activities |
| 1,413 |
| 69 |
| NM |
| 0.8 |
| ||
Total sales |
| $ | 175,636 |
| $ | 171,176 |
| 2.6 |
| 100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Sales by Geographic Region | |||||||||||
|
|
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| ||
|
| Three Months Ended |
|
|
|
|
| ||||
|
| October 1, |
| October 2, |
| Percent |
| Percent of |
| ||
Geographic Region |
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Europe, Middle East and Africa |
| $ | 51,571 |
| $ | 48,553 |
| 6.2 |
| 29.4 |
|
Latin America |
| 10,932 |
| 9,631 |
| 13.5 |
| 6.2 |
| ||
Asia-Pacific |
| 18,983 |
| 13,578 |
| 39.8 |
| 10.8 |
| ||
Total International |
| 81,486 |
| 71,762 |
| 13.6 |
| 46.4 |
| ||
North America |
| 94,150 |
| 99,414 |
| (5.3 | ) | 53.6 |
| ||
Total sales |
| $ | 175,636 |
| $ | 171,176 |
| 2.6 |
| 100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Sales by Product Category | |||||||||||
|
|
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|
|
|
|
|
|
| ||
|
| Nine Months Ended |
|
|
|
|
| ||||
|
| October 1, |
| October 2, |
| Percent |
| Percent of |
| ||
Product Category |
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Hardware |
| $ | 402,874 |
| $ | 381,027 |
| 5.7 |
| 77.1 |
|
Supplies |
| 95,603 |
| 85,975 |
| 11.2 |
| 18.3 |
| ||
Service and software |
| 19,015 |
| 18,233 |
| 4.3 |
| 3.6 |
| ||
Shipping and handling |
| 4,743 |
| 3,506 |
| 35.3 |
| 0.9 |
| ||
Cash flow hedging activities |
| 742 |
| (561 | ) | NM |
| 0.1 |
| ||
Total sales |
| $ | 522,977 |
| $ | 488,180 |
| 7.1 |
| 100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Sales by Geographic Region | |||||||||||
|
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|
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|
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| ||
|
| Nine Months Ended |
|
|
|
|
| ||||
|
| October 1, |
| October 2, |
| Percent |
| Percent of |
| ||
Geographic Region |
| 2005 |
| 2004 |
| Change |
| Total Sales |
| ||
Europe, Middle East and Africa |
| $ | 170,422 |
| $ | 154,161 |
| 10.5 |
| 32.6 |
|
Latin America |
| 33,956 |
| 27,522 |
| 23.4 |
| 6.5 |
| ||
Asia-Pacific |
| 47,107 |
| 37,767 |
| 24.7 |
| 9.0 |
| ||
Total International |
| 251,485 |
| 219,450 |
| 14.6 |
| 48.1 |
| ||
North America |
| 271,492 |
| 268,730 |
| 1.0 |
| 51.9 |
| ||
Total sales |
| $ | 522,977 |
| $ | 488,180 |
| 7.1 |
| 100.0 |
|