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Zebra Technologies Announces First Quarter Financial Results for 2005
5 May 2005
Zebra Technologies Corporation (Nasdaq: ZBRA - News) today announced net sales for the quarter that ended April 2, 2005 increased 10.7% to $170,727,000 from $154,174,000 for the same period in 2004. Quarterly net income was $27,107,000, versus $27,934,000, and diluted earnings per share decreased to $0.37 from $0.39. Per-share figures have been adjusted for a three-for-two stock split paid on August 25, 2004, in the form of a 50% stock dividend.
"First quarter results were disappointing and did not meet company expectations for the first time in 15 quarters," stated Edward Kaplan, Zebra's chairman and chief executive officer. "Results were affected by an order slowdown, including some order deferrals, and distribution capacity constraints in Europe at the end of the quarter. These events overshadow general strength in our core markets and important progress and performance in a great number of areas. We strengthened our international infrastructure, introduced a new mobile printer platform, built out teams supporting vertical market applications, and advanced our strategic position in radio frequency identification technology. We remain very positive for many reasons toward further growth and stockholder value creation over the long term."
Discussion and Analysis
For the first quarter of 2005:
-- All major product lines and geographic territories contributed to the
10.7% quarterly sales growth, with record sales achieved in the
Europe, Middle East, and Africa (EMEA) region. Sales growth was
affected by constrained capacity in EMEA distribution. This constraint
was removed with the April opening of a new EMEA distribution center
in Heerenveen, Netherlands, which is designed to support expected
ongoing growth in the territory.
-- Gross profit of $87,365,000 includes total adjustments of $1,500,000
to the company's warranty reserve and inventory reserve. These
adjustments, which reduced gross profit margin by 0.9 percentage
points, reflect the recent discovery of a variance in product
specifications on an older, low-volume printer that is being
discontinued, and the company's decision to offer all users of this
product a replacement unit.
-- Research and development expenses include $1,071,000 for a write-off
of tooling and other materials related to product development.
-- Exit costs include $1,524,000 for additional reserves on a lease on a
vacant facility in Wokingham, United Kingdom. The company recently
reviewed the reserve on this lease, and because of a change in market
conditions for this type of real estate, felt it was necessary to make
the adjustment. Wokingham operations, which were acquired in the
merger with Eltron International in October 1998, were consolidated
into Zebra's High Wycombe facility in 1999.
-- Operating expense growth, which otherwise was consistent with
expectations, includes higher payroll and benefits expenses related to
increased staffing in global sales and marketing, and product
development. Higher legal expenses were largely related to ongoing
litigation and intellectual property activities.
-- Foreign exchange had a minimal effect on financial results.
At April 2, 2005, Zebra had $573,207,000 in cash, investments and marketable securities, and no long-term debt. Inventories totaled $63,901,000, up $4,646,000 over the 2004 year-end level. This increase was due to the accumulation of inventory for the opening of the Heerenveen facility. Accounts receivable increased to $101,078,000 from $96,881,000 over the same period, primarily due to the timing of shipments.
Stock Buyback Program
The company also announced today that Zebra's board of directors authorized the purchase of up to 1.7 million shares of Zebra common stock, which represent approximately 2.5% of total shares outstanding. These purchases would be made from time to time, in the open market or in private transactions. The current authorization terminates and replaces the company's prior authorization, which was announced in March 2000.
Second Quarter Outlook
Zebra also announced upward sequential guidance in its financial forecast for the second quarter of 2005. Net sales are expected within a 5% range of $177,000,000 and $187,000,000, which represents mid-point growth of 7% over 2005 first quarter sales and 12% growth over second quarter sales for 2004. Earnings are expected within a range of $0.43 and $0.48 per diluted share, compared with $0.41 per share for the same period a year ago.
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 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 factors include the actual shipment of deferred orders mentioned above, success in opening the new distribution facility in Heerenveen, Netherlands, and the integration of a newly acquired company. Generally, market acceptance of the company's products and product lines and competitors' product offerings, as well as the speed of adoption of the company's printing technologies and competing technologies could also have an effect on the accuracy of our 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.
Zebra Technologies Corporation delivers innovative and reliable on-demand printing solutions for business improvement and security applications in 90 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 first quarter of 2005. The conference call will be held at 11:00 Eastern Time today. To listen to the call, visit the company's Web site at http://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 2, December 31,
2005 2004
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $15,351 $17,983
Investments and marketable securities 557,856 540,010
Accounts receivable, net 101,078 96,881
Inventories 63,901 59,255
Deferred income taxes 7,384 6,625
Prepaid expenses 4,464 3,884
Total current assets 750,034 724,638
Property and equipment at cost, less
accumulated depreciation and amortization 46,722 46,283
Goodwill 70,182 61,793
Other intangibles 5,870 6,517
Other assets 28,258 22,991
Total assets $901,066 $862,222
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $23,174 $24,130
Accrued liabilities 26,355 29,248
Current portion of obligation under
capital lease 55 54
Income taxes payable 15,553 6,144
Total current liabilities 65,137 59,576
Obligation under capital lease, less
current portion 103 117
Deferred income taxes 1,156 417
Deferred rent 566 564
Other long-term liabilities 5,137 3,894
Total liabilities 72,099 64,568
Stockholders' equity:
Preferred stock - -
Class A Common Stock 720 718
Additional paid-in capital 89,242 84,180
Retained earnings 733,596 706,489
Accumulated other comprehensive income (loss) 5,409 6,267
Total stockholders' equity 828,967 797,654
Total liabilities and stockholders'
equity $901,066 $862,222
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
April 2, April 3,
2005 2004
Net sales $170,727 $154,174
Cost of sales 83,362 73,571
Gross profit 87,365 80,603
Operating expenses:
Selling and marketing 21,067 17,207
Research and development 10,668 8,896
General and administrative 14,946 12,763
Amortization of intangible assets 647 649
Acquired in-process technology - 22
Exit costs 1,517 363
Total operating expenses 48,845 39,900
Operating income 38,520 40,703
Other income (expense):
Investment income 3,277 3,073
Interest expense (3) (26)
Foreign exchange gain (loss) 53 (656)
Other, net (304) (299)
Total other income 3,023 2,092
Income before income taxes 41,543 42,795
Income taxes 14,436 14,861
Net income $27,107 $27,934
Basic earnings per share $0.38 $0.39
Diluted earnings per share $0.37 $0.39
Basic weighted average shares outstanding 71,873 71,250
Diluted weighted average and equivalent
shares outstanding 72,717 72,269
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)
Three Months Ended
April 2, April 3,
2005 2004
Cash flows from operating activities:
Net income $27,107 $27,934
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,093 3,050
Tax benefit from exercise of stock options 1,285 3,148
Acquired in-process technology - 22
Deferred income taxes (38) 1,089
Changes in assets and liabilities, net of
businesses acquired:
Accounts receivable, net (5,157) 1,097
Inventories (4,826) (4,712)
Other assets (5,311) (3,152)
Accounts payable (640) 3,527
Accrued liabilities (2,801) (4,879)
Income taxes payable 9,487 8,795
Other operating activities (368) 1,462
Net cash provided by operating activities 21,831 37,381
Cash flows from investing activities:
Purchases of property and equipment (2,586) (4,805)
Acquisition of assets of
Retail Systems International, Inc. (7,700) -
Purchases of investments and marketable
securities (254,856) (233,278)
Maturities of investments and marketable
securities 160,688 59,163
Sales of investments and marketable securities 76,322 137,426
Net cash used in investing activities (28,132) (41,494)
Cash flows from financing activities:
Proceeds from exercise of stock options and
stock purchase plan purchases 3,779 6,928
Payments for obligation under capital lease (13) (68)
Net cash provided by financing activities 3,766 6,860
Effect of exchange rate changes on cash (97) 299
Net increase (decrease) in cash and
cash equivalents (2,632) 3,046
Cash and cash equivalents at beginning of period 17,983 14,266
Cash and cash equivalents at end of period $15,351 $17,312
Supplemental disclosures of cash flow information:
Interest paid $3 $26
Income taxes paid 3,794 3,053
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
Three Months Ended
April 2, April 3, Percent Percent of
2005 2004 Change Total Sales
Hardware $133,470 $118,477 12.7 78.2
Supplies 29,948 28,674 4.4 17.5
Service and software 6,080 6,541 (7.0) 3.6
Shipping and handling 1,502 1,124 33.6 0.9
Cash flow from hedging
activities (273) (642) NM (0.2)
Total sales $170,727 $154,174 10.7 100.0
Sales by Geographic Region
Three Months Ended
April 2, April 3, Percent Percent of
2005 2004 Change Total Sales
Europe, Middle East
and Africa $60,580 $52,452 15.5 35.5
Latin America 10,127 8,439 20.0 5.9
Asia-Pacific 12,458 12,150 2.5 7.3
Total international 83,165 73,041 13.9 48.7
North America 87,562 81,133 7.9 51.3
Total sales $170,727 $154,174 10.7 100.0
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Source: Zebra Technologies Corporation
Source: PR Newswire
All trademarks and copyrighted information contained herein are the property of their respective owners.
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