Exhibit 99.1
CONTACT: | Investors: | Media: | ||
Douglas A. Fox, CFA | Tim Dreyer | |||
Vice President, Investor Relations | Manager, Public Relations | |||
+1 847 793 6735 | +1 847 793 5677 | |||
dfox@zebra.com | tdreyer@zebra.com |
FOR IMMEDIATE RELEASE
Zebra Technologies Announces 2008 Third Quarter Financial Results
Vernon Hills, IL, October 29, 2008—Zebra Technologies Corporation (NASDAQ: ZBRA) today announced net sales of $244,073,000 for the third quarter of 2008, up 12.4% from $217,218,000 for the third quarter of 2007. Net income for the period was $25,770,000, or $0.40 per diluted share, including exit costs and integration expenses of $4,304,000 which reduced earnings by $0.04 per diluted share. Results also include four one-time items that had a combined positive impact of $0.03 per diluted share. For the third quarter of 2007, net income was $26,961,000, or $0.39 per diluted share.
“Zebra delivered more solutions that improve our customers’ business processes and controlled costs during this challenging time to extend industry leadership and deliver solid financial results,” stated Anders Gustafsson, Zebra’s chief executive officer. “Looking ahead, we will continue to focus on growth and profitability. We are managing costs by streamlining operations and maintaining investments in our new ERP and global supply chain transformation projects, which will deliver long-term benefits. At the same time, we are taking advantage of our strong financial condition to develop new solutions to meet more customer needs with a quick ROI. We will also continue to place more Zebra sales representatives in underserved geographic territories to extend global reach. In this way, Zebra remains well positioned to accelerate growth and build greater stockholder value as business conditions improve. “
Discussion and Analysis
For the third quarter of 2008 compared with the third quarter of 2007:
• | Consolidated sales growth of 12.4% resulted from 3.5% growth in the company’s Specialty Printing Group (SPG) and $25,621,000 in sales from the company’s Enterprise Solutions |
Group (ESG). International sales increased 18.8%, with record sales in Asia Pacific and continued weakness in the Europe, Middle East and Africa region. North American sales increased 5.5%. |
• | Gross profit margin of 48.3% was comparable to gross profit margin of 48.2% a year ago. |
• | Operating expenses increased principally from acquisition-related additions of personnel and other expenses. The expenses were offset by a non-taxable $5,302,000 reduction in operating expenses for the settlement of Zebra’s claim against the escrow in its acquisition of WhereNet Corp., and a $1,121,000 gain on the sale/leaseback of the company’s facility in Camarillo, CA, recognized as a reduction in general and administrative expenses. |
• | Operating expenses were also affected by a $1,783,000 increase in the amortization of intangible assets from the acquisitions of Navis and Multispectral Solutions; $2,570,000 in exit costs related to the company’s previously announced initiative to transfer final assembly of thermal printers to a third party; and $1,734,000 in expenses for integrating operations in ESG. |
• | The company recorded a loss on investments of $5,140,000, which included write-downs of $4,374,000 for losses on securities and $2,897,000 on a long-term investment. |
• | The provision for income taxes of $9,205,000 includes a $2,600,000 reduction because the WhereNet escrow settlement was not taxable. |
For the first nine months of 2008, the company had net sales of $744,132,000, up 17.2% from $634,706,000 for the same period a year ago. Year-to-date net income totaled $78,940,000, or $1.20 per diluted share, including $12,218,000 in exit costs and integration expenses which reduced earnings by $0.12 per diluted share.
At September 27, 2008, Zebra had $246,857,000 in cash and investments, and no long-term debt. Net inventories were $106,261,000, and accounts receivable, net, were $171,928,000.
During the third quarter of 2008, the company repurchased 1,890,100 shares of Zebra Technologies Class A Common Stock to complete an authorization to purchase up to 3,000,000 shares. Zebra’s Board of Directors has authorized the purchase of an additional 5,000,000 shares of Zebra stock.
Fourth Quarter Outlook
Zebra announced its financial forecast for the fourth quarter of 2008. Net sales are expected within a range of $225,000,000 to $241,000,000. Earnings are expected between $0.30 and $0.38 per diluted
share. This outlook includes approximately $2,800,000 in expenses related to exit costs and integration expenses.
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 third 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 fourth quarter of 2008 stated in the paragraph above captioned “Fourth Quarter Outlook.” 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 customer acceptance of Zebra’s hardware and software products and competitors’ product offerings, and the potential effects of technological changes. These factors also include the current credit crisis, capital markets volatility, and disruptions and overall worldwide deteriorating economic conditions that have been widely reported, as they may have adverse effects on Zebra, its suppliers and its customers. Profits and profitability will be affected by Zebra’s ability to control manufacturing and operating costs, including the effect of Zebra’s activities to transfer final assembly of its printers to a third-party manufacturer. 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. 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 its customers identify, track and manage assets, transactions and people systems and solutions that improve business processes. 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)
September 27, 2008 | December 31, 2007 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 46,877 | $ | 38,211 | ||||
Restricted cash | 1,763 | 2,497 | ||||||
Investments and marketable securities | 81,646 | 98,438 | ||||||
Accounts receivable, net | 171,928 | 150,775 | ||||||
Inventories, net | 106,261 | 85,038 | ||||||
Deferred income taxes | 14,953 | 14,772 | ||||||
Prepaid expenses and other current assets | 12,910 | 31,101 | ||||||
Total current assets | 436,338 | 420,832 | ||||||
Property and equipment at cost, less accumulated depreciation and amortization | 70,700 | 67,686 | ||||||
Long-term deferred income taxes | 29,688 | 28,407 | ||||||
Goodwill | 264,647 | 246,510 | ||||||
Other intangibles, net | 114,615 | 119,424 | ||||||
Long-term investments and marketable securities | 116,571 | 142,033 | ||||||
Other assets | 5,269 | 9,386 | ||||||
Total assets | $ | 1,037,828 | $ | 1,034,278 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 46,744 | $ | 42,351 | ||||
Accrued liabilities | 63,064 | 69,437 | ||||||
Deferred revenue | 21,906 | 9,633 | ||||||
Income taxes payable | 2,594 | 751 | ||||||
Total current liabilities | 134,308 | 122,172 | ||||||
Deferred rent | 5,143 | 961 | ||||||
Other long-term liabilities | 9,251 | 8,452 | ||||||
Total liabilities | 148,702 | 131,585 | ||||||
Stockholders’ equity: | ||||||||
Preferred Stock | — | — | ||||||
Class A Common Stock | 722 | 722 | ||||||
Additional paid-in capital | 143,727 | 141,522 | ||||||
Treasury stock | (299,757 | ) | (205,058 | ) | ||||
Retained earnings | 1,039,452 | 960,512 | ||||||
Accumulated other comprehensive income | 4,982 | 4,995 | ||||||
Total stockholders’ equity | 889,126 | 902,693 | ||||||
Total liabilities and stockholders’ equity | $ | 1,037,828 | $ | 1,034,278 | ||||
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2008 | September 29, 2007 | September 27, 2008 | September 29, 2007 | |||||||||||||
Net sales | $ | 244,073 | $ | 217,218 | $ | 744,132 | $ | 634,706 | ||||||||
Cost of sales | 126,287 | 112,590 | 375,716 | 330,886 | ||||||||||||
Gross profit | 117,786 | 104,628 | 368,416 | 303,820 | ||||||||||||
Operating expenses (income): | ||||||||||||||||
Selling and marketing | 33,148 | 29,080 | 98,331 | 86,313 | ||||||||||||
Research and development | 21,711 | 13,904 | 64,467 | 41,958 | ||||||||||||
General and administrative | 18,534 | 21,694 | 67,795 | 59,502 | ||||||||||||
Amortization of intangible assets | 4,711 | 2,928 | 13,904 | 7,871 | ||||||||||||
Claim settlement | (5,302 | ) | — | (5,302 | ) | — | ||||||||||
Exit costs | 2,570 | — | 10,484 | — | ||||||||||||
Integration expenses | 1,734 | — | 1,734 | — | ||||||||||||
Acquired in-process research and development | — | — | — | 1,853 | ||||||||||||
Total operating expenses | 77,106 | 67,606 | 251,413 | 197,497 | ||||||||||||
Operating income | 40,680 | 37,022 | 117,003 | 106,323 | ||||||||||||
Other income (expense): | ||||||||||||||||
Investment income (loss) | (5,140 | ) | 4,393 | (14 | ) | 15,421 | ||||||||||
Foreign exchange loss | 247 | (23 | ) | 878 | (30 | ) | ||||||||||
Other, net | (185 | ) | (230 | ) | (1,089 | ) | (530 | ) | ||||||||
Total other income (expense) | (5,078 | ) | 4,140 | (225 | ) | 14,861 | ||||||||||
Income before income taxes | 35,602 | 41,162 | 116,778 | 121,184 | ||||||||||||
Income taxes | 9,832 | 14,201 | 37,838 | 41,874 | ||||||||||||
Net income | $ | 25,770 | $ | 26,961 | $ | 78,940 | $ | 79,310 | ||||||||
Basic earnings per share | $ | 0.40 | $ | 0.39 | $ | 1.21 | $ | 1.15 | ||||||||
Diluted earnings per share | $ | 0.40 | $ | 0.39 | $ | 1.20 | $ | 1.15 | ||||||||
Basic weighted average shares outstanding | 64,328 | 68,580 | 65,190 | 68,814 | ||||||||||||
Diluted weighted average and equivalent shares outstanding | 64,653 | 69,005 | 65,550 | 69,259 |
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended | ||||||||
September 27, 2008 | September 29, 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 78,940 | $ | 79,310 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 28,418 | 19,184 | ||||||
Stock-based compensation | 10,780 | 11,333 | ||||||
Excess tax benefit from share-based compensation | (187 | ) | (797 | ) | ||||
Gain on sale of asset | (1,121 | ) | — | |||||
Acquired in-process research and development | — | 1,853 | ||||||
Deferred income taxes | (4,624 | ) | (4,862 | ) | ||||
Changes in assets and liabilities, net of effects of acquisitions: | ||||||||
Accounts receivable, net | (29,654 | ) | (1,050 | ) | ||||
Inventories | (22,575 | ) | 257 | |||||
Other assets | 930 | 111 | ||||||
Accounts payable | 7,573 | (6,016 | ) | |||||
Accrued liabilities | (6,009 | ) | 12,190 | |||||
Deferred revenue | 13,279 | 1,788 | ||||||
Income taxes payable | 2,295 | (1,614 | ) | |||||
Other operating activities | 2,461 | (2,001 | ) | |||||
Net cash provided by operating activities | 80,506 | 109,686 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (28,534 | ) | (15,702 | ) | ||||
Proceeds from sale of assets | 14,796 | — | ||||||
Acquisition of businesses acquired, net of cash acquired | (18,570 | ) | (141,277 | ) | ||||
Acquisition of intangible assets | (1,100 | ) | (2,800 | ) | ||||
Purchases of investments and marketable securities | (502,699 | ) | (645,843 | ) | ||||
Maturities of investments and marketable securities | 388,362 | 538,025 | ||||||
Sales of investments and marketable securities | 178,104 | 190,393 | ||||||
Net cash used in investing activities | 30,359 | (77,204 | ) | |||||
Cash flows from financing activities: | ||||||||
Purchase of treasury stock | (107,504 | ) | (48,913 | ) | ||||
Proceeds from exercise of stock options and stock purchase plan purchases | 4,343 | 7,593 | ||||||
Excess tax benefit from share-based compensation | 187 | 797 | ||||||
Net cash provided by (used in) financing activities | (102,974 | ) | (40,523 | ) | ||||
Effect of exchange rate changes on cash | 775 | (79 | ) | |||||
Net increase in cash and cash equivalents | 8,666 | (8,120 | ) | |||||
Cash and cash equivalents at beginning of period | 38,211 | 39,648 | ||||||
Cash and cash equivalents at end of period | $ | 46,877 | $ | 31,528 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Income taxes paid | $ | 40,682 | $ | 30,101 |
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
Three Months Ended | |||||||||||||
Sept. 27, 2008 | Sept. 29, 2007 | Percent Change | Percent of Total Sales | ||||||||||
Hardware | $ | 175,663 | $ | 164,756 | 6.6 | 72.0 | |||||||
Supplies | 45,530 | 41,731 | 9.1 | 18.7 | |||||||||
Service and software | 26,260 | 9,728 | 169.9 | 10.8 | |||||||||
Shipping and handling | 1,710 | 1,708 | 0.1 | 0.6 | |||||||||
Cash flow from hedging activities | (5,090 | ) | (705 | ) | NM | (2.1 | ) | ||||||
Total sales | $ | 244,073 | $ | 217,218 | 12.4 | 100.0 | |||||||
Sales by Geographic Region | |||||||||||||
Three Months Ended | |||||||||||||
Sept. 27, 2008 | Sept. 29, 2007 | Percent Change | Percent of Total Sales | ||||||||||
Europe, Middle East and Africa | $ | 85,381 | $ | 74,200 | 15.1 | 35.0 | |||||||
Latin America | 21,268 | 16,703 | 27.3 | 8.7 | |||||||||
Asia-Pacific | 26,560 | 21,221 | 25.2 | 10.9 | |||||||||
Total international | 133,209 | 112,124 | 18.8 | 54.6 | |||||||||
North America | 110,864 | 105,094 | 5.5 | 45.4 | |||||||||
Total sales | $ | 244,073 | $ | 217,218 | 12.4 | 100.0 | |||||||
Sales by Product Category | |||||||||||||
Nine Months Ended | |||||||||||||
Sept. 27, 2008 | Sept. 29, 2007 | Percent Change | Percent of Total Sales | ||||||||||
Hardware | $ | 541,483 | $ | 482,640 | 12.2 | 72.8 | |||||||
Supplies | 131,236 | 120,098 | 9.3 | 17.6 | |||||||||
Service and software | 78,955 | 28,681 | 175.3 | 10.6 | |||||||||
Shipping and handling | 5,344 | 5,082 | 5.2 | 0.7 | |||||||||
Cash flow from hedging activities | (12,886 | ) | (1,795 | ) | NM | (1.7 | ) | ||||||
Total sales | $ | 744,132 | $ | 634,706 | 17.2 | 100.0 | |||||||
Sales by Geographic Region | |||||||||||||
Nine Months Ended | |||||||||||||
Sept. 27, 2008 | Sept. 29, 2007 | Percent Change | Percent of Total Sales | ||||||||||
Europe, Middle East and Africa | $ | 276,538 | $ | 226,330 | 22.2 | 37.2 | |||||||
Latin America | 58,618 | 44,638 | 31.3 | 7.9 | |||||||||
Asia-Pacific | 76,694 | 55,771 | 37.5 | 10.3 | |||||||||
Total international | 411,850 | 326,739 | 26.0 | 55.4 | |||||||||
North America | 332,282 | 307,967 | 7.9 | 44.6 | |||||||||
Total sales | $ | 744,132 | $ | 634,706 | 17.2 | 100.0 |
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
Sept. 27, 2008 | Sept. 29, 2007 | Sept. 27, 2008 | Sept. 29, 2007 | |||||||||
Sales | ||||||||||||
Specialty Printing | $ | 218,452 | $ | 211,117 | $ | 671,965 | $ | 615,806 | ||||
Enterprise Solutions | 25,621 | 6,101 | 72,167 | 18,900 | ||||||||
Total | $ | 244,073 | $ | 217,218 | $ | 744,132 | $ | 634,706 | ||||
Cost of sales | ||||||||||||
Specialty Printing | 114,999 | 108,939 | 341,149 | 318,893 | ||||||||
Enterprise Solutions | 11,288 | 3,651 | 34,567 | 11,993 | ||||||||
Total | 126,287 | 112,590 | 375,716 | 330,886 | ||||||||
Gross profit | 117,786 | 104,628 | 368,416 | 303,820 | ||||||||
Operating expenses | ||||||||||||
Specialty Printing | 48,959 | 45,118 | 155,153 | 137,063 | ||||||||
Enterprise Solutions | 15,970 | 6,153 | 53,940 | 17,160 | ||||||||
Administrative and other | 12,177 | 16,335 | 42,320 | 43,274 | ||||||||
Total | 77,106 | 67,606 | 251,413 | 197,497 | ||||||||
Operating income | $ | 40,680 | $ | 37,022 | $ | 117,003 | $ | 106,323 | ||||
ZEBRA TECHNOLOGIES CORPORATION PRINTER UNITS and AVERAGE UNIT PRICES (Unaudited) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
Sept. 27, 2008 | Sept. 29, 2007 | Sept. 27, 2008 | Sept. 29, 2007 | |||||||||
Total Printers Shipped | 241,717 | 228,313 | 722,576 | 684,642 | ||||||||
Average Unit Prices | $ | 596 | $ | 585 | $ | 613 | $ | 575 |