Exhibit 99.1
CONTACT: | Investors: | Media: | ||
Douglas A. Fox, CFA | Michelle Meek | |||
Vice President, Investor Relations | Outlook Marketing Services | |||
+1 847 793 6735 | +1 312 873 3424 | |||
dfox@zebra.com | michelle@outlookmarketingsrv.com |
FOR IMMEDIATE RELEASE
Zebra Technologies Announces 2008 Second Quarter Financial Results
Solid performance across the company leads to record sales and sustained high gross margin
Vernon Hills, IL, July 24, 2008—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 athttp://www.zebra.com.
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 28, 2008 | December 31, 2007 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
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, 2008 | June 30, 2007 | June 28, 2008 | June 30, 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, 2008 | June 30, 2007 | Percent Change | Percent of 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, 2008 | June 30, 2007 | Percent Change | Percent of 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, 2008 | June 30, 2007 | Percent Change | Percent of 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, 2008 | June 30, 2007 | Percent Change | Percent of 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, 2008 | June 30, 2007 | June 28, 2008 | June 30, 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, 2008 | June 30, 2007 | June 28, 2008 | June 30, 2007 | |||||||||
Total Printers Shipped | 238,458 | 226,542 | 480,859 | 456,329 | ||||||||
Average Unit Prices | $ | 630 | $ | 573 | $ | 622 | $ | 570 |