Exhibit 99.1
FOR IMMEDIATE RELEASE
Zebra Technologies Announces First Quarter Financial Results for 2006
Vernon Hills, IL, April 26, 2006—Zebra Technologies Corporation (NASDAQ: ZBRA) today announced that net sales for the quarter ended April 1, 2006, were $175,814,000, a 3.0% increase over the $170,727,000 recorded for the first quarter of 2005. Quarterly net income was $26,091,000, or $0.37 per diluted share, compared with $25,819,000, or $0.36 per diluted share, for the same period a year ago. Financial results for 2006 include the cumulative effect of a change in accounting for the adoption of SFAS 123(R),Share-Based Payments. Results for 2005 have been restated to reflect this adoption as well.
“Zebra’s ability to build greater stockholder value remains firmly intact,” stated Edward Kaplan, Zebra’s chairman and chief executive officer. “Robust growth in international territories is the direct result of more Zebra representatives working with a greater number of channel partners. Our expansion activities in China, Eastern Europe and Latin America are extending Zebra’s global reach and enabling us to pursue more business opportunities in these developing market economies. New mobile, tabletop, card and photo printers are receiving excellent customer acceptance and broadening the range of specialty printing applications we serve. Our stronger channel partnerships and alliance relationships are yielding additional large business opportunities that we are now converting into a firm order stream in field force automation, supply chain management, route accounting, and retail.”
Discussion and Analysis
For the first quarter of 2006 compared with the first quarter of 2005:
• | All three of the company’s international territories experienced sales growth, with the Europe, Middle East and Africa region achieving record sales in local currencies. Nearly all printer product lines contributed to 12.5% unit volume growth, offset by lower average unit prices. Sales of supplies increased 14.6% for the quarter. Unfavorable foreign currency movements reduced first quarter sales by $5,405,000. |
• | Gross profit margin declined to 47.0% from 51.0%. During the quarter, unfavorable currency movements reduced first quarter gross profit by $4,855,000. The decline in gross margin also was due to a number of factors including: temporary capacity constraints in label manufacturing, new products currently undergoing ramp up and cost reduction, expediting costs for manufacturing materials to meet increased demand, mix shifts toward lower margin products, increases in material costs related to RoHS compliance, and various pricing actions focused on increasing market share. |
• | Operating expenses were affected by higher employee-related costs related to increased staffing in global sales and marketing and product development, offset by lower expenditures on legal activities, market development funds, consulting services, and audit and tax service fees. |
At April 1, 2006, Zebra had $569,523,000 in cash and investments, and no long-term debt. Inventories totaled $66,605,000. Accounts receivable increased to $116,415,000 from $111,551,000, primarily due to the timing of shipments.
Second Quarter Outlook
Zebra also announced upward sequential guidance in its financial forecast for the second quarter of 2006. Net sales are expected within a range of $180,000,000 and $190,000,000. Earnings are expected within a range of $0.34 and $0.39 per diluted share, compared with $0.35 per diluted share for the second quarter of 2005.
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 second quarter of 2006 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. These factors include market acceptance of Zebra’s printer and software products and competitors’ product offerings and the potential effects of technological changes. They also include the effect of market conditions in North America and other geographic regions on our financial results. Profits and profitability will be affected by our ability to control manufacturing and operating costs. Because of a large investment portfolio, interest rate 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 infringement of third party intellectual property rights, is another factor. Also, beginning July 1, 2006, Zebra’s product shipments into the European Union must conform with the RoHS Directive, or “the restriction of the use of certain hazardous substances in electrical and electronic equipment.” This Directive will ban the placing in the EU market of new electrical and electronic equipment containing more than agreed levels of certain substances beginning July 1, 2006. Zebra’s ability to meet this Directive will affect its results in the second and third quarters of 2006. 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, 2005.
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 five 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 first quarter of 2006. The conference call will be held at 11:00 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)
April 1, 2006 | December 31, 2005 | |||||||
(Unaudited) | (Restated) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 17,543 | $ | 25,621 | ||||
Investments and marketable securities | 198,762 | 518,618 | ||||||
Accounts receivable, net | 116,415 | 111,551 | ||||||
Inventories, net | 66,605 | 63,638 | ||||||
Deferred income taxes | 8,097 | 8,188 | ||||||
Prepaid expenses | 5,497 | 5,098 | ||||||
Total current assets | 412,919 | 732,714 | ||||||
Property and equipment at cost, less accumulated depreciation and amortization | 51,610 | 49,643 | ||||||
Long-term deferred income taxes | 6,220 | 6,216 | ||||||
Goodwill | 69,097 | 69,097 | ||||||
Other intangibles, net | 18,555 | 19,002 | ||||||
Long-term investments and marketable securities | 353,218 | — | ||||||
Other assets | 40,857 | 41,743 | ||||||
Total assets | $ | 952,476 | $ | 918,415 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 22,860 | $ | 24,885 | ||||
Accrued liabilities | 28,109 | 28,928 | ||||||
Income taxes payable | 7,027 | 535 | ||||||
Total current liabilities | 57,996 | 54,348 | ||||||
Deferred rent | 572 | 574 | ||||||
Other long-term liabilities | 5,898 | 5,521 | ||||||
Total liabilities | 64,466 | 60,443 | ||||||
Stockholders’ equity: | ||||||||
Preferred Stock | — | — | ||||||
Class A Common Stock | 722 | 722 | ||||||
Additional paid-in capital | 135,140 | 139,433 | ||||||
Treasury stock | (52,060 | ) | (64,013 | ) | ||||
Retained earnings | 805,544 | 779,453 | ||||||
Accumulated other comprehensive income (loss) | (1,336 | ) | 2,377 | |||||
Total stockholders’ equity | 888,010 | 857,972 | ||||||
Total liabilities and stockholders’ equity | $ | 952,476 | $ | 918,415 | ||||
Note: Figures for December 31, 2005, were restated for the adoption of SFAS 123 (R),Share-Based Payments, using the modified retrospective approach.
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended | ||||||||
April 1, 2006 | April 2, 2005 | |||||||
(Restated) | ||||||||
Net sales | $ | 175,814 | $ | 170,727 | ||||
Cost of sales | 93,116 | 83,599 | ||||||
Gross profit | 82,698 | 87,128 | ||||||
Operating expenses: | ||||||||
Selling and marketing | 22,109 | 21,564 | ||||||
Research and development | 12,035 | 11,052 | ||||||
General and administrative | 14,649 | 15,802 | ||||||
Amortization of intangible assets | 747 | 647 | ||||||
Exit costs | — | 1,517 | ||||||
Total operating expenses | 49,540 | 50,582 | ||||||
Operating income | 33,158 | 36,546 | ||||||
Other income (expense): | ||||||||
Investment income | 5,207 | 3,277 | ||||||
Interest expense | (218 | ) | (3 | ) | ||||
Foreign exchange gains (loss) | 110 | 53 | ||||||
Other, net | (448 | ) | (304 | ) | ||||
Total other income | 4,651 | 3,023 | ||||||
Income before income taxes and cumulative effect of accounting change | 37,809 | 39,569 | ||||||
Income taxes | 13,037 | 13,750 | ||||||
Income before cumulative effect of accounting change | 24,772 | 25,819 | ||||||
Cumulative effect of accounting change (net of tax) | 1,319 | — | ||||||
Net income | $ | 26,091 | $ | 25,819 | ||||
Basic earnings per share before cumulative effect of accounting change | $ | 0.35 | $ | 0.36 | ||||
Diluted earnings per share before cumulative effect of accounting change | $ | 0.35 | $ | 0.36 | ||||
Basic earnings per share | $ | 0.37 | $ | 0.36 | ||||
Diluted earnings per share | $ | 0.37 | $ | 0.36 | ||||
Basic weighted average shares outstanding | 70,566 | 71,873 | ||||||
Diluted weighted average and equivalent shares outstanding | 71,119 | 72,649 |
Note: Figures for the three months ended April 2, 2005, were restated for the adoption of SFAS 123 (R),Share-Based Payments, using the modified retrospective approach.
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three Months Ended | ||||||||
April 1, 2006 | April 2, 2005 | |||||||
(Restated) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 26,091 | $ | 25,819 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,669 | 3,093 | ||||||
Stock-based compensation | 1,511 | 1,975 | ||||||
Additional tax benefit from share-base compensation | 575 | 720 | ||||||
Excess tax benefit from share-base compensation | (1,285 | ) | (799 | ) | ||||
Cumulative effect of accounting change (net of tax) | (1,319 | ) | — | |||||
Deferred income taxes | 94 | (158 | ) | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable, net | (4,298 | ) | (5,157 | ) | ||||
Inventories | (2,817 | ) | (4,826 | ) | ||||
Other assets | 963 | (5,311 | ) | |||||
Accounts payable | (2,225 | ) | (640 | ) | ||||
Accrued liabilities | (875 | ) | (2,801 | ) | ||||
Income taxes payable | 6,459 | 9,487 | ||||||
Other operating activities | (920 | ) | (368 | ) | ||||
Net cash provided by operating activities | 25,623 | 21,034 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (4,836 | ) | (2,586 | ) | ||||
Acquisition of assets of Retail Systems International, Inc. | — | (7,700 | ) | |||||
Purchases of investments and marketable securities | (275,517 | ) | (254,856 | ) | ||||
Maturities of investments and marketable securities | 183,300 | 160,688 | ||||||
Sales of investments and marketable securities | 55,284 | 76,322 | ||||||
Net cash used in investing activities | (41,769 | ) | (28,132 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options and stock purchase plan purchases | 6,893 | 3,777 | ||||||
Benefit of stock option exercises in excess of compensation costs recognized | 1,285 | 799 | ||||||
Payments for obligation under capital lease | — | (13 | ) | |||||
Net cash provided by financing activities | 8,178 | 4,563 | ||||||
Effect of exchange rate changes on cash | (110 | ) | (97 | ) | ||||
Net decrease in cash and cash equivalents | (8,078 | ) | (2,632 | ) | ||||
Cash and cash equivalents at beginning of period | 25,621 | 17,983 | ||||||
Cash and cash equivalents at end of period | $ | 17,543 | $ | 15,351 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Interest paid | $ | 218 | $ | 3 | ||||
Income taxes paid | 3,442 | 3,794 |
Note: Figures for the three months ended April 2, 2005, were restated for the adoption of SFAS 123 (R),Share-Based Payments, using the modified retrospective approach.
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
Three Months Ended | Percent Change | Percent of Total Sales | ||||||||||
April 1, 2006 | April 2, 2005 | |||||||||||
Hardware | $ | 133,468 | $ | 133,470 | — | 75.9 | ||||||
Supplies | 34,326 | 29,949 | 14.6 | 19.5 | ||||||||
Service and software | 6,231 | 6,079 | 2.5 | 3.5 | ||||||||
Shipping and handling | 1,417 | 1,502 | (5.7 | ) | 0.9 | |||||||
Cash flow from hedging activities | 372 | (273 | ) | NM | 0.2 | |||||||
Total sales | $ | 175,814 | $ | 170,727 | 3.0 | 100.0 |
Sales by Geographic Region
Three Months Ended | Percent Change | Percent of Total Sales | |||||||||
April 1, 2006 | April 2, 2005 | ||||||||||
Europe, Middle East and Africa | $ | 60,681 | $ | 60,580 | 0.2 | 34.5 | |||||
Latin America | 12,919 | 10,127 | 27.6 | 7.3 | |||||||
Asia-Pacific | 15,227 | 12,458 | 22.2 | 8.7 | |||||||
Total international | 88,827 | 83,165 | 6.8 | 50.5 | |||||||
North America | 86,987 | 87,562 | (0.7 | ) | 49.5 | ||||||
Total sales | $ | 175,814 | $ | 170,727 | 3.0 | 100.0 |
ZEBRA TECHNOLOGIES CORPORATION
RESTATED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
For the three months ended | For the year ended | |||||||||||||||||||
April 2, 2005 | July 2, 2005 | October 1, 2005 | December 31, 2005 | December 31, 2005 | ||||||||||||||||
Net sales | $ | 170,727 | $ | 176,614 | $ | 175,636 | $ | 179,294 | $ | 702,271 | ||||||||||
Cost of sales | 83,599 | 87,467 | 88,103 | 89,682 | 348,851 | |||||||||||||||
Gross profit | 87,128 | 89,147 | 87,533 | 89,612 | 353,420 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling and marketing | 21,564 | 23,050 | 21,290 | 25,725 | 91,629 | |||||||||||||||
Research and development | 11,052 | 12,386 | 11,818 | 12,103 | 47,359 | |||||||||||||||
General and administrative | 15,802 | 17,801 | 15,631 | 14,817 | 64,051 | |||||||||||||||
Amortization of intangible assets | 647 | 387 | 509 | 798 | 2,341 | |||||||||||||||
Exit costs | 1,517 | 141 | 283 | 71 | 2,012 | |||||||||||||||
Total operating expenses | 50,582 | 53,765 | 49,531 | 53,514 | 207,392 | |||||||||||||||
Operating income | 36,546 | 35,382 | 38,002 | 36,098 | 146,028 | |||||||||||||||
Other income | ||||||||||||||||||||
Investment income | 3,277 | 3,072 | 3,254 | 3,814 | 13,417 | |||||||||||||||
Interest expense | (3 | ) | (27 | ) | (41 | ) | (8 | ) | (79 | ) | ||||||||||
Foreign exchange gain/(loss) | 53 | 812 | 334 | 87 | 1,286 | |||||||||||||||
Other, net | (304 | ) | (243 | ) | 251 | (74 | ) | (370 | ) | |||||||||||
Total other income | 3,023 | 3,614 | 3,798 | 3,819 | 14,254 | |||||||||||||||
Income before income taxes | 39,569 | 38,996 | 41,800 | 39,917 | 160,282 | |||||||||||||||
Income taxes | 13,750 | 13,551 | 13,724 | 13,073 | 54,098 | |||||||||||||||
Net income | $ | 25,819 | $ | 25,445 | $ | 28,076 | $ | 26,844 | $ | 106,184 | ||||||||||
Basic earnings per share | $ | 0.36 | $ | 0.35 | $ | 0.39 | $ | 0.38 | $ | 1.49 | ||||||||||
Diluted earnings per share | $ | 0.36 | $ | 0.35 | $ | 0.39 | $ | 0.38 | $ | 1.47 | ||||||||||
Basic weighted average shares outstanding | 71,873 | 72,013 | 71,263 | 70,385 | 71,364 | |||||||||||||||
Diluted weighted average and equivalent shares outstanding | 72,649 | 72,679 | 71,817 | 70,940 | 72,000 |
Note: Restated for the adoption of SFAS 123 (R),Share-Based Payments, using the modified retrospective approach.