Zebra Technologies (ZBRA) 8-K Results of Operations and Financial Condition

Zebra Technologies Corporation 475 Half Day Road, Suite 500 Lincolnshire, IL 60069 T: +1 847 634 6700 F: +1 847 913 8766 www.zebra.com

FOR IMMEDIATE RELEASE

Contact:
Investors:	Media:
Douglas A. Fox, CFA	Orlando De Bruce
Vice President, Investor Relations	Director, Global Public Relations
and Treasurer	+1 510 267 5052
+1 847 793 6735	odebruce@zebra.com
dfox@zebra.com

Zebra Technologies Announces 2010 First Quarter Financial Results

Strong sales growth and improvement in gross margin lead to better-than-expected earnings growth

Lincolnshire, IL, May 4, 2010—Zebra Technologies Corporation (NASDAQ: ZBRA) today announced

2010 first quarter net income of $24,733,000, or $0.42 per diluted share, including $1,816,000 in exit and

restructuring costs which lowered diluted earnings by $0.02 per share. Net sales for the period ended

April 3, 2010, were $226,431,000, up 17.6% from $192,609,000 for the first quarter of 2009. Net income

for the first quarter of 2009 was $9,352,000, or $0.16 per diluted share, including $2,296,000 in exit,

restructuring and integration costs which lowered diluted earnings by $0.02 per share.

Summary Financial Performance
	1Q10		1Q09		Change
Net sales (in thousands)	$	226,431	$	192,609	17.6	%
Gross margin (%)		47.4		44.6	2.8	pts.
Operating margin (%)		14.0		7.4	6.6	pts.
Net income (in thousands)	$	24,733	$	9,352	164.5	%
Diluted EPS	$	0.42	$	0.16	173.8	%

“Broad-based demand across geographies, products and industries led to Zebra’s strong first quarter

performance, as customers invested in Zebra solutions to improve asset management and visibility across

the supply chain,” stated Anders Gustafsson, Zebra’s chief executive officer. “During the quarter, we

hired more sales and marketing employees in high growth emerging regions to capture more business

opportunities. We also continued to develop innovative new products in terms of performance, features

and integration to distance Zebra further from the competition. These activities give us optimism about

Zebra’s future and our direction in building shareholder value.”

As of April 3, 2010, Zebra had $254,098,000 in cash and investments, and no long-term debt. Net

inventories were $81,565,000, and net accounts receivable were $145,642,000.

Discussion and Analysis

• Net sales, up 17.6% from the first quarter of 2009 benefited from improved business conditions in all

geographic regions, with the highest rates of growth occurring Latin America and Asia Pacific. An

improved product mix, with higher sales of high-performance and midrange tabletop printers and

aftermarket parts, contributed to the sales growth from a year ago.

• Gross margin of 47.4% versus 44.6% a year ago was principally driven by the improved product mix,

higher volumes, favorable foreign exchange rates, and benefits from outsourcing thermal printer

production to a third-party manufacturer. These factors were partially offset by higher freight costs

incurred to meet increased customer demand.

• Operating expenses increased 5.6% from the first quarter of 2009 substantially from increased selling

and marketing expenses related to higher compensation costs, outside commissions, advertising and

direct marketing, and travel and entertainment.

• The effective income tax rate for the first quarter of 2010 was 23.7%, compared with 32.0% for the

first quarter of 2009. The decline was a reduction related to prior years for taxes associated with

intercompany profit in ending inventories. This adjustment reduced income taxes by $2,764,000,

or the effective rate by 8.5 percentage points, and had a favorable impact on earnings of

$0.04 per diluted share.

Stock Purchase Update

During the first quarter of 2010, the company repurchased 750,000 shares of Zebra Technologies

Corporation Class A Common Stock. At April 3, 2010, Zebra had 1,449,286 shares remaining in the

company’s stock buyback authorization and 57,724,510 shares of common stock outstanding.

Second Quarter Outlook

Zebra announced its financial forecast for the first quarter of 2010. Net sales are expected within a range

of $219,000,000 and $233,000,000. Diluted earnings per share are expected within a range of $0.26 and

$0.34. This forecast includes expected exit and restructuring costs of $0.01 per diluted share.

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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 first quarter of 2010. 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 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 second quarter of 2010 stated in the paragraph above captioned “Second 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 undertakes no

obligation, other than as may be required by law, to publicly update or revise any forward-looking

statements, whether as a result of new information, future events, changed circumstances or any other

reason after the date of this release.

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. The widely reported uncertainty over future global economic conditions, the

availability of credit, capital markets volatility, may have adverse effects on Zebra, its suppliers and its

customers. In addition, a disruption in our ability to obtain products from vendors as a result of natural

disasters or other circumstances could restrict sales and negatively affect customer relationships. 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. 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

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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, 2009.

About Zebra Technologies

Zebra Technologies Corporation (NASDAQ: ZBRA) provides the broadest range of innovative

technology solutions to identify, track, and manage the deployment of critical assets for improved

business efficiency. Zebra’s products include reliable on-demand printers and state-of-the-art software

and hardware solutions utilizing a wide array of automatic identification technologies. By enabling

improvements in sourcing, visibility, security and accuracy, Zebra helps its customers to put the right

asset in the right place at the right time. Zebra serves more than 90 percent of Fortune 500 companies

worldwide. For more information about Zebra’s solutions, visit http://www.zebra.com.

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ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

	April 3, 2010			December 31, 2009
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	35,988		$	38,943
Restricted cash		1,598			1,725
Investments and marketable securities		136,565			114,064
Accounts receivable, net		145,642			150,992
Inventories, net		81,565			79,926
Deferred income taxes		10,561			10,792
Income taxes receivable		—			4,724
Prepaid expenses and other current assets		14,288			9,771
Total current assets		426,207			410,937
Property and equipment at cost, net of accumulated depreciation and amortization		77,951			77,589
Long-term deferred income taxes		32,643			35,842
Goodwill		152,288			153,225
Other intangibles, net		53,486			55,982
Long-term investments and marketable securities		79,947			91,989
Other assets		4,435			4,915
Total assets	$	826,957		$	830,479
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,870		$	28,137
Accrued liabilities		43,322			52,591
Deferred revenue		22,553			24,082
Income taxes payable		423			—
Total current liabilities		93,168			104,810
Deferred rent		3,702			4,108
Other long-term liabilities		9,168			9,432
Total liabilities		106,038			118,350
Stockholders’ equity:
Preferred Stock		—			—
Class A Common Stock		722			722
Additional paid-in capital		136,143			136,104
Treasury stock		(401,123	)		(385,831	)
Retained earnings		993,928			969,195
Accumulated other comprehensive loss		(8,751	)		(8,061	)
Total stockholders’ equity		720,919			712,129
Total liabilities and stockholders’ equity	$	826,957		$	830,479

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ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended
	April 3, 2010			April 4, 2009
Net sales:
Net sales of tangible products	$	202,084		$	166,684
Revenue from services and software		24,347			25,925
Total net sales		226,431			192,609
Cost of sales:
Cost of sales of tangible products		108,540			95,859
Cost of services and software		10,556			10,941
Total cost of sales		119,096			106,800
Gross profit		107,335			85,809
Operating expenses:
Selling and marketing		27,500			23,199
Research and development		23,072			22,149
General and administrative		20,869			21,357
Amortization of intangible assets		2,358			2,634
Exit, restructuring and integration costs		1,816			2,296
Total operating expenses		75,615			71,635
Operating income		31,720			14,174
Other income (expense):
Investment income		842			1,178
Foreign exchange gain (loss)		199			(1,284	)
Other, net		(349	)		(317	)
Total other income (expense)		692			(423	)
Income before income taxes		32,412			13,751
Income taxes		7,679			4,399
Net income	$	24,733		$	9,352
Basic earnings per share	$	0.43		$	0.16
Diluted earnings per share	$	0.42		$	0.16
Basic weighted average shares outstanding		58,016			60,266
Diluted weighted average and equivalent shares outstanding		58,265			60,332

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ZEBRA TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Three Months Ended
	April 3, 2010			April 4, 2009
Cash flows from operating activities:
Net income	$	24,733		$	9,352
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		7,814			7,953
Equity-based compensation		2,231			3,167
Excess tax benefit from equity-based compensation		(3	)		—
Gain on sale of assets		(82	)		—
Deferred income taxes		3,535			3,263
Changes in assets and liabilities:
Accounts receivable, net		3,990			13,018
Inventories, net		(1,780	)		(1,400	)
Other assets		224			(244	)
Accounts payable		870			(6,539	)
Accrued liabilities		(9,118	)		(23,946	)
Deferred revenue		(1,618	)		2,544
Income taxes		4,295			(8,055	)
Other operating activities		(4,917	)		(327	)
Net cash provided by (used in) operating activities		30,174			(1,214	)
Cash flows from investing activities:
Purchases of property and equipment		(5,818	)		(6,802	)
Acquisition of intangible assets		—			(425	)
Purchases of investments and marketable securities		(89,586	)		(57,473	)
Maturities of investments and marketable securities		61,144			72,401
Sales of investments and marketable securities		17,736			22,583
Net cash provided by (used in) investing activities		(16,524	)		30,284
Cash flows from financing activities:
Purchase of treasury stock		(20,823	)		(28,593	)
Proceeds from exercise of stock options and stock purchase plan purchases		4,191			1,168
Excess tax benefit from equity-based compensation		3			—
Net cash used in financing activities		(16,629	)		(27,425	)
Effect of exchange rate changes on cash		24			(213	)
Net increase (decrease) in cash and cash equivalents		(2,955	)		1,432
Cash and cash equivalents at beginning of period		38,943			33,267
Cash and cash equivalents at end of period	$	35,988		$	34,699
Supplemental disclosures of cash flow information:
Income taxes (refunded) paid		(454	)	$	8,302

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ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)

SALES BY PRODUCT CATEGORY

	Three Months Ended				Percent Change		Percent of Net Sales - 2010	Percent of Net Sales - 2009
Product Category	April 3, 2010		April 4, 2009
Hardware	$	160,030	$	127,235	25.8		70.7	66.1
Supplies		40,697		38,081	6.9		18.0	19.8
Service and software		24,347		25,925	(6.1	)	10.8	13.5
Shipping and handling		1,357		1,368	(0.8	)	0.5	0.6
Total net sales	$	226,431	$	192,609	17.6		100.0	100.0

SALES BY GEOGRAPHIC REGION

	Three Months Ended				Percent Change	Percent of Net Sales - 2010	Percent of Net Sales - 2009
Geographic Region	April 3, 2010		April 4, 2009
Europe, Middle East and Africa	$	83,544	$	74,620	12.0	36.9	38.7
Latin America		20,990		13,071	60.6	9.3	6.8
Asia-Pacific		25,347		19,409	30.6	11.2	10.0
Total International		129,881		107,100	21.3	57.4	55.5
North America		96,550		85,509	12.9	42.6	44.5
Total net sales	$	226,431	$	192,609	17.6	100.0	100.0

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ZEBRA TECHNOLOGIES CORPORATION

SUPPLEMENTAL SEGMENT INFORMATION

(Amounts in thousands)

(Unaudited)

	Three Months Ended
	April 3, 2010			April 4, 2009
Net sales:
Specialty Printing Group	$	207,928		$	170,768
Zebra Enterprise Solutions		18,503			21,841
Total	$	226,431		$	192,609
Cost of sales:
Specialty Printing Group	$	111,499		$	97,096
Zebra Enterprise Solutions		7,597			9,704
Total	$	119,096		$	106,800
Operating expenses:
Specialty Printing Group	$	41,986		$	39,673
Zebra Enterprise Solutions		16,317			15,496
Corporate and other		17,312			16,466
Total	$	75,615		$	71,635
Operating income (loss):
Specialty Printing Group	$	54,443		$	33,999
Zebra Enterprise Solutions		(5,411	)		(3,359	)
Corporate and other		(17,312	)		(16,466	)
Total	$	31,720		$	14,174

Corporate and other includes corporate administration costs or assets that support both reporting segments.

ZEBRA TECHNOLOGIES CORPORATION

PRINTER UNITS and AVERAGE UNIT PRICES

(Unaudited)

	Three Months Ended
	April 3, 2010		April 4, 2009
Total printers shipped		244,422		199,218
Average selling price of printers shipped	$	547	$	517

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