UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 29, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-19406
Zebra Technologies Corporation
(Exact name of registrant as specified in its charter)
Delaware | 36-2675536 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
475 Half Day Road, Suite 500, Lincolnshire, IL 60069
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (847) 634-6700
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 26, 2013, there were 50,768,805 shares of Class A Common Stock, $.01 par value, outstanding.
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
QUARTER ENDED JUNE 29, 2013
INDEX
PAGE | ||||||
Item 1. |
||||||
Consolidated Balance Sheets as of June 29, 2013 (unaudited) and December 31, 2012 |
3 | |||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
22 | ||||
Item 3. |
29 | |||||
Item 4. |
30 | |||||
Item 1. |
31 | |||||
Item 1A. |
31 | |||||
Item 2. |
31 | |||||
Item 6. |
32 | |||||
33 |
2
PART I - FINANCIAL INFORMATION
Item 1. | Consolidated Financial Statements |
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 29, 2013 |
December 31, 2012 |
|||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 55,886 | $ | 64,740 | ||||
Investments and marketable securities |
389,799 | 324,140 | ||||||
Accounts receivable, net |
170,856 | 168,732 | ||||||
Inventories, net |
109,149 | 123,357 | ||||||
Deferred income taxes |
13,190 | 13,484 | ||||||
Income taxes receivable |
7,481 | 0 | ||||||
Prepaid expenses and other current assets |
16,246 | 16,410 | ||||||
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Total current assets |
762,607 | 710,863 | ||||||
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Property and equipment at cost, less accumulated depreciation and amortization |
101,737 | 101,349 | ||||||
Long-term deferred income taxes |
0 | 2,602 | ||||||
Goodwill |
94,942 | 94,942 | ||||||
Other intangibles, net |
35,425 | 39,151 | ||||||
Long-term investments and marketable securities |
8,353 | 5,195 | ||||||
Other assets |
15,491 | 13,646 | ||||||
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Total assets |
$ | 1,018,555 | $ | 967,748 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 31,945 | $ | 23,045 | ||||
Accrued liabilities |
50,584 | 57,234 | ||||||
Deferred revenue |
12,416 | 13,326 | ||||||
Income taxes payable |
6,870 | 1,609 | ||||||
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|
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Total current liabilities |
101,815 | 95,214 | ||||||
Long-term deferred tax liability |
1,544 | 0 | ||||||
Deferred rent |
1,332 | 1,303 | ||||||
Other long-term liabilities |
17,285 | 14,229 | ||||||
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Total liabilities |
121,976 | 110,746 | ||||||
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Stockholders equity: |
||||||||
Preferred Stock |
0 | 0 | ||||||
Class A Common Stock |
722 | 722 | ||||||
Additional paid-in capital |
137,342 | 139,523 | ||||||
Treasury stock |
(654,518 | ) | (641,438 | ) | ||||
Retained earnings |
1,422,628 | 1,368,520 | ||||||
Accumulated other comprehensive loss |
(9,595 | ) | (10,325 | ) | ||||
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Total stockholders equity |
896,579 | 857,002 | ||||||
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Total liabilities and stockholders equity |
$ | 1,018,555 | $ | 967,748 | ||||
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|
See accompanying notes to consolidated financial statements.
3
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 |
June 30, 2012 |
June 29, 2013 |
June 30, 2012 |
|||||||||||||
Net sales: |
||||||||||||||||
Net sales of tangible products |
$ | 239,909 | $ | 234,708 | $ | 465,030 | $ | 467,184 | ||||||||
Revenue from services and software |
13,251 | 12,369 | 25,067 | 23,768 | ||||||||||||
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Total net sales |
253,160 | 247,077 | 490,097 | 490,952 | ||||||||||||
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Cost of sales: |
||||||||||||||||
Cost of sales of tangible products |
125,664 | 119,980 | 242,775 | 239,013 | ||||||||||||
Cost of services and software |
6,589 | 6,720 | 13,350 | 11,679 | ||||||||||||
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Total cost of sales |
132,253 | 126,700 | 256,125 | 250,692 | ||||||||||||
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Gross profit |
120,907 | 120,377 | 233,972 | 240,260 | ||||||||||||
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Operating expenses: |
||||||||||||||||
Selling and marketing |
33,830 | 32,158 | 67,345 | 64,272 | ||||||||||||
Research and development |
23,201 | 22,336 | 45,059 | 42,752 | ||||||||||||
General and administrative |
24,053 | 24,402 | 49,329 | 48,722 | ||||||||||||
Amortization of intangible assets |
1,863 | 770 | 3,726 | 1,540 | ||||||||||||
Acquisition costs |
618 | 1,252 | 1,100 | 1,506 | ||||||||||||
Exit and restructuring costs |
1,101 | 0 | 2,996 | 0 | ||||||||||||
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Total operating expenses |
84,666 | 80,918 | 169,555 | 158,792 | ||||||||||||
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Operating income |
36,241 | 39,459 | 64,417 | 81,468 | ||||||||||||
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Other income (expense): |
||||||||||||||||
Investment income |
473 | 826 | 1,150 | 1,418 | ||||||||||||
Foreign exchange loss |
(462 | ) | (80 | ) | (560 | ) | (422 | ) | ||||||||
Other, net |
1,464 | (486 | ) | 1,473 | (850 | ) | ||||||||||
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Total other income |
1,475 | 260 | 2,063 | 146 | ||||||||||||
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Income from continuing operations before income taxes |
37,716 | 39,719 | 66,480 | 81,614 | ||||||||||||
Income taxes |
7,158 | 9,366 | 12,380 | 21,097 | ||||||||||||
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Income from continuing operations |
30,558 | 30,353 | 54,100 | 60,517 | ||||||||||||
Income from discontinued operations, net of tax |
8 | 300 | 8 | 300 | ||||||||||||
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Net income |
$ | 30,566 | $ | 30,653 | $ | 54,108 | $ | 60,817 | ||||||||
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Basic earnings per share: |
||||||||||||||||
Income from continuing operations |
$ | 0.60 | $ | 0.58 | $ | 1.06 | $ | 1.16 | ||||||||
Income from discontinued operations |
0.00 | 0.01 | 0.00 | 0.01 | ||||||||||||
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Net income |
$ | 0.60 | $ | 0.59 | $ | 1.06 | $ | 1.17 | ||||||||
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Diluted earnings per share: |
||||||||||||||||
Income from continuing operations |
$ | 0.60 | $ | 0.58 | $ | 1.05 | $ | 1.16 | ||||||||
Income from discontinued operations |
0.00 | 0.01 | 0.00 | 0.01 | ||||||||||||
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Net income |
$ | 0.60 | $ | 0.59 | $ | 1.05 | $ | 1.17 | ||||||||
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Basic weighted average shares outstanding |
50,900 | 51,771 | 50,929 | 51,881 | ||||||||||||
Diluted weighted average and equivalent shares outstanding |
51,283 | 52,030 | 51,310 | 52,156 |
See accompanying notes to consolidated financial statements.
4
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 |
June 30, 2012 |
June 29, 2013 |
June 30, 2012 |
|||||||||||||
Net income |
$ | 30,566 | $ | 30,653 | $ | 54,108 | $ | 60,817 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Unrealized gains (losses) on hedging transactions, net of income taxes |
(391 | ) | 2,400 | 1,352 | (2,246 | ) | ||||||||||
Unrealized holding gains (losses) on investments, net of income taxes |
(867 | ) | (46 | ) | (939 | ) | 524 | |||||||||
Foreign currency translation adjustment |
223 | 105 | 317 | 188 | ||||||||||||
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Comprehensive income |
$ | 29,531 | $ | 33,112 | $ | 54,838 | $ | 59,283 | ||||||||
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See accompanying notes to consolidated financial statements.
5
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended | ||||||||
June 29, 2013 |
June 30, 2012 |
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Cash flows from operating activities: |
||||||||
Net income |
$ | 54,108 | $ | 60,817 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
15,412 | 11,964 | ||||||
Share-based compensation |
6,504 | 8,045 | ||||||
Excess tax benefit from share-based compensation |
(3,727 | ) | (1,358 | ) | ||||
Loss on sale of property and equipment |
182 | 147 | ||||||
Gain on sale of business |
0 | (613 | ) | |||||
Deferred income taxes |
4,439 | 367 | ||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable, net |
(1,976 | ) | (657 | ) | ||||
Inventories, net |
14,190 | 16,599 | ||||||
Other assets |
1,313 | 527 | ||||||
Accounts payable |
3,263 | (9,594 | ) | |||||
Accrued liabilities |
(6,094 | ) | (11,422 | ) | ||||
Deferred revenue |
1,585 | 1,460 | ||||||
Income taxes |
476 | 10,714 | ||||||
Other operating activities |
1,381 | (2,341 | ) | |||||
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Net cash provided by operating activities |
91,056 | 84,655 | ||||||
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Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(8,547 | ) | (10,599 | ) | ||||
Proceeds from the sale of business |
0 | 13,790 | ||||||
Acquisition of intangible assets |
(500 | ) | 0 | |||||
Purchase of long-term equity investment |
(604 | ) | (5,000 | ) | ||||
Purchases of investments and marketable securities |
(231,174 | ) | (313,863 | ) | ||||
Maturities of investments and marketable securities |
19,188 | 228,105 | ||||||
Proceeds from sales of investments and marketable securities |
142,230 | 95,106 | ||||||
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Net cash provided by (used in) investing activities |
(79,407 | ) | 7,539 | |||||
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Cash flows from financing activities: |
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Purchase of treasury stock |
(28,563 | ) | (24,645 | ) | ||||
Proceeds from exercise of stock options and stock purchase plan purchases |
4,104 | 142 | ||||||
Excess tax benefit from share-based compensation |
3,727 | 1,358 | ||||||
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Net cash used in financing activities |
(20,732 | ) | (23,145 | ) | ||||
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Effect of exchange rate changes on cash |
229 | (99 | ) | |||||
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Net increase (decrease) in cash and cash equivalents |
(8,854 | ) | 68,950 | |||||
Cash and cash equivalents at beginning of period |
64,740 | 36,418 | ||||||
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Cash and cash equivalents at end of period |
$ | 55,886 | $ | 105,368 | ||||
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Supplemental disclosures of cash flow information: |
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Income taxes paid |
$ | 5,346 | $ | 13,479 |
See accompanying notes to consolidated financial statements.
6
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Basis of Presentation
Management prepared these unaudited interim consolidated financial statements for Zebra Technologies Corporation and subsidiaries (Zebra) according to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. These financial statements do not include all of the information and footnotes required by United States generally accepted accounting principles (GAAP) for complete financial statements. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in Zebras Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
The consolidated balance sheet as of December 31, 2012, included in this Form 10-Q is taken from the audited consolidated balance sheet in our Form 10-K. These interim financial statements include all adjustments (of a normal, recurring nature) necessary to present fairly Zebras consolidated financial position as of June 29, 2013, the consolidated statements of earnings for the three and six months ended June 29, 2013 and June 30, 2012, and consolidated statements of comprehensive income for the three and six months ended June 29, 2013 and June 30, 2012, and the consolidated statements of cash flows for the six months ended June 29, 2013 and June 30, 2012. These results, however, are not necessarily indicative of results for the full year.
Note 2 Fair Value Measurements
Financial assets and liabilities are to be measured using inputs from three levels of the fair value hierarchy. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Zebra uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in the assessment of fair value. Included in our investment portfolio at June 29, 2013, is an auction rate security which is classified as available for sale and is reflected at fair value. Due to events in credit markets, however, the auction event for the instrument held by Zebra is failed. Therefore, the fair value of this security is estimated utilizing broker quotations, discounted cash flow analysis or other types of valuation adjustment methodologies at June 29, 2013. These analyses consider, among other items, the collateral underlying the security instruments, the creditworthiness of the counterparty, the timing of expected future cash flows, estimates of the next time the security is expected to have a successful auction, and Zebras intent and ability to hold such securities until credit markets improve. The security was also compared, when possible, to other securities with similar characteristics.
The decline in the market value of our auction rate security discussed above is considered temporary and has been recorded in accumulated other comprehensive income loss on Zebras balance sheet. Since Zebra has the intent and ability to hold this auction rate security until it is sold at auction, redeemed at carrying value or reaches maturity, we have classified it as a long-term investment on the balance sheet.
7
Financial assets and liabilities carried at fair value as of June 29, 2013, are classified below (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
U.S. Government and agency securities |
$ | 100,262 | $ | 0 | $ | 0 | $ | 100,262 | ||||||||
Obligations of government-sponsored enterprises (1) |
0 | 13,914 | 0 | 13,914 | ||||||||||||
State and municipal bonds |
0 | 108,963 | 0 | 108,963 | ||||||||||||
Corporate securities |
0 | 161,447 | 2,588 | 164,035 | ||||||||||||
Other investments |
0 | 10,978 | 0 | 10,978 | ||||||||||||
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Investments subtotal |
100,262 | 295,302 | 2,588 | 398,152 | ||||||||||||
Money market investments related to the deferred compensation plan |
4,103 | 0 | 0 | 4,103 | ||||||||||||
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Total assets at fair value |
$ | 104,365 | $ | 295,302 | $ | 2,588 | $ | 402,255 | ||||||||
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Liabilities: |
||||||||||||||||
Forward contracts (2) |
$ | 669 | $ | (312 | ) | $ | 0 | $ | 357 | |||||||
Liabilities related to the deferred compensation plan |
4,103 | 0 | 0 | 4,103 | ||||||||||||
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Total liabilities at fair value |
$ | 4,772 | $ | (312 | ) | $ | 0 | $ | 4,460 | |||||||
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Financial assets and liabilities carried at fair value as of December 31, 2012, are classified below (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
U.S. Government and agency securities |
$ | 83,532 | $ | 0 | $ | 0 | $ | 83,532 | ||||||||
Obligations of government-sponsored enterprises (1) |
0 | 4,840 | 0 | 4,840 | ||||||||||||
State and municipal bonds |
0 | 96,516 | 0 | 96,516 | ||||||||||||
Corporate securities |
0 | 128,368 | 2,588 | 130,956 | ||||||||||||
Other investments |
0 | 13,491 | 0 | 13,491 | ||||||||||||
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Investments subtotal |
83,532 | 243,215 | 2,588 | 329,335 | ||||||||||||
Money market investments related to the deferred compensation plan |
3,553 | 0 | 0 | 3,553 | ||||||||||||
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Total assets at fair value |
$ | 87,085 | $ | 243,215 | $ | 2,588 | $ | 332,888 | ||||||||
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Liabilities: |
||||||||||||||||
Forward contracts (2) |
$ | 1,174 | $ | 871 | $ | 0 | $ | 2,045 | ||||||||
Liabilities related to the deferred compensation plan |
3,553 | 0 | 0 | 3,553 | ||||||||||||
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Total liabilities at fair value |
$ | 4,727 | $ | 871 | $ | 0 | $ | 5,598 | ||||||||
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1) | Includes investments in notes issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Farm Credit Banks and the Federal Home Loan Bank. |
2) | The fair value of forward contracts are calculated as follows: |
a. | Fair value of a collar or put option contract associated with forecasted sales hedges are calculated using bid and ask rates for similar contracts. |
b. | Fair value of regular forward contracts associated with forecasted sales hedges are calculated using the period-end exchange rate adjusted for current forward points. |
c. | Fair value of balance sheet hedges are calculated at the period end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at period end. If this is the case, the fair value is calculated at the rate at which the hedge is being settled. |
8
The following table presents Zebras activity for assets measured at fair value on a recurring basis using significant unobservable inputs, Level 3, for the following periods (in thousands):
Six Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Balance at beginning of the year |
$ | 2,588 | $ | 2,588 | ||||
Transfers to Level 3 |
0 | 0 | ||||||
Total losses (realized or unrealized): |
||||||||
Included in earnings |
0 | 0 | ||||||
Included in other comprehensive income (loss) |
0 | 0 | ||||||
Purchases and settlements (net) |
0 | 0 | ||||||
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|
|||||
Balance at end of period |
$ | 2,588 | $ | 2,588 | ||||
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Total gains and (losses) for the period included in earnings attributable to the change in unrealized losses relating to assets still held at end of period |
$ | 0 | $ | 0 | ||||
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The following is a summary of short-term and long-term investments (in thousands):
As of June 29, 2013 | ||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
|||||||||||||
U.S. Government and agency securities |
$ | 100,275 | $ | 22 | $ | (35 | ) | $ | 100,262 | |||||||
Obligations of government-sponsored enterprises |
13,905 | 9 | 0 | 13,914 | ||||||||||||
State and municipal bonds |
109,106 | 102 | (245 | ) | 108,963 | |||||||||||
Corporate securities |
164,747 | 346 | (1,058 | ) | 164,035 | |||||||||||
Other investments |
10,964 | 19 | (5 | ) | 10,978 | |||||||||||
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|
|||||||||
Total investments |
$ | 398,997 | $ | 498 | $ | (1,343 | ) | $ | 398,152 | |||||||
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As of December 31, 2012 | ||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
|||||||||||||
U.S. Government and agency securities |
$ | 83,499 | $ | 33 | $ | 0 | $ | 83,532 | ||||||||
Obligations of government-sponsored enterprises |
4,830 | 10 | 0 | 4,840 | ||||||||||||
State and municipal bonds |
96,383 | 161 | (28 | ) | 96,516 | |||||||||||
Corporate securities |
130,634 | 790 | (468 | ) | 130,956 | |||||||||||
Other investments |
13,450 | 44 | (3 | ) | 13,491 | |||||||||||
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|||||||||
Total investments |
$ | 328,796 | $ | 1,038 | $ | (499 | ) | $ | 329,335 | |||||||
|
|
|
|
|
|
|
|
The maturity dates of investments are as follows (in thousands):
As of June 29, 2013 | ||||||||
Amortized Cost |
Estimated Fair Value |
|||||||
Less than 1 year |
$ | 143,924 | $ | 144,074 | ||||
1 to 5 years |
246,137 | 245,725 | ||||||
6 to 10 years |
8,936 | 8,353 | ||||||
Thereafter |
0 | 0 | ||||||
|
|
|
|
|||||
Total |
$ | 398,997 | $ | 398,152 | ||||
|
|
|
|
The carrying value for Zebras financial instruments classified as current assets (other than short-term investments) and current liabilities approximate fair value due to their short maturities.
9
Note 3 Investments and Marketable Securities
Investments in marketable debt securities are classified based on intent and ability to sell the investment securities. Zebras available-for-sale securities are used to fund further acquisitions and other operating needs and therefore may be sold prior to maturity. Investments in marketable debt securities for which Zebra intends to sell within the next year are classified as current and those that we intend to hold in excess of one-year are classified as non-current.
Changes in the market value of available-for-sale securities are reflected in the accumulated other comprehensive income caption of stockholders equity in the balance sheet, until we dispose of the securities. Once these securities are disposed of, either by sale or maturity, the accumulated changes in market value are transferred to investment income. On the statement of cash flows, changes in the balances of available-for-sale securities are shown as purchases, sales and maturities of investments and marketable securities under investing activities.
Changes in market value of trading securities would be recorded in investment income as they occur, and the related statement of cash flows would include changes in the balances of trading securities as operating cash flows.
Included in Zebras cash and investments and marketable securities are amounts held by foreign subsidiaries which are generally invested in U.S. dollar-denominated holdings. Zebra had foreign cash and investments of $206,001,000 as of June 29, 2013, and $173,483,000 as of December 31, 2012. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation, however, Zebra does not see a need to repatriate these funds.
Note 4 Accounts Receivable
The components of accounts receivable are as follows (in thousands):
As of | ||||||||
June 29, 2013 | December 31, 2012 | |||||||
Accounts receivable, gross |
$ | 171,841 | $ | 169,401 | ||||
Accounts receivable reserves |
(985 | ) | (669 | ) | ||||
|
|
|
|
|||||
Accounts receivable, net |
$ | 170,856 | $ | 168,732 | ||||
|
|
|
|
Note 5 Inventories
The components of inventories are as follows (in thousands):
As of | ||||||||
June 29, 2013 | December 31, 2012 | |||||||
Raw material |
$ | 34,173 | $ | 31,350 | ||||
Work in process |
948 | 921 | ||||||
Deferred costs of long-term contracts |
409 | 604 | ||||||
Finished goods |
87,191 | 104,137 | ||||||
|
|
|
|
|||||
Inventories, gross |
122,721 | 137,012 | ||||||
Inventory reserves |
(13,572 | ) | (13,655 | ) | ||||
|
|
|
|
|||||
Inventories, net |
$ | 109,149 | $ | 123,357 | ||||
|
|
|
|
10
Note 6 - Goodwill and Other Intangible Assets
Intangible assets are as follows (in thousands):
As of June 29, 2013 | ||||||||||||
Gross Amount |
Accumulated Amortization |
Net Amount |
||||||||||
Current technology |
$ | 18,978 | $ | (13,226 | ) | $ | 5,752 | |||||
Patent and patent rights |
29,569 | (16,302 | ) | 13,267 | ||||||||
Customer relationships |
20,493 | (4,087 | ) | 16,406 | ||||||||
|
|
|
|
|
|
|||||||
Other intangibles, net |
$ | 69,040 | $ | (33,615 | ) | $ | 35,425 | |||||
|
|
|
|
|
|
|||||||
Amortization expense for the six months ended June 29, 2013 |
|
$ | 3,726 | |||||||||
|
|
|||||||||||
As of December 31, 2012 | ||||||||||||
Gross Amount |
Accumulated Amortization |
Net Amount |
||||||||||
Current technology |
$ | 18,978 | $ | (12,391 | ) | $ | 6,587 | |||||
Patent and patent rights |
29,569 | (14,618 | ) | 14,951 | ||||||||
Customer relationships |
20,493 | (2,880 | ) | 17,613 | ||||||||
|
|
|
|
|
|
|||||||
Other intangibles, net |
$ | 69,040 | $ | (29,889 | ) | $ | 39,151 | |||||
|
|
|
|
|
|
|||||||
Amortization expense for the six months ended June 30, 2012 |
|
$ | 1,540 | |||||||||
|
|
Zebra has $94,942,000 of goodwill recorded as of June 29, 2013 and December 31, 2012.
We test goodwill for impairment on an annual basis or more frequently if we believe indicators of impairment exist. We performed our assessment in accordance with Accounting Standards update (ASU) 2011-08, which allows for the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether the fair value needs to be reassessed. We performed our qualitative assessment in June 2013 and determined that our goodwill was not impaired as of the end of May 2013.
Note 7 Costs Associated with Exit and Restructuring Activities
In December 2012, we began a plan, 2012 restructuring plan, to restructure our Location Solutions business management structure. We also announced a project to further optimize our manufacturing operations, which includes the consolidation and relocation of support functions.
During the third quarter of 2012, the Location Solutions revenue decreased from our previous business plans. The Locations Solutions 2012 restructuring plan was initiated as expected revenue increases failed to be realized due to slower than anticipated growth in the automotive and process manufacturing industries, weakness in the government sector, and lack of near term improvement related to Location Solutions.
In the second quarter of 2013 management determined that additional restructuring actions would be required to meet our financial goals for the Location Solutions business.
During 2007, Zebra began a plan to outsource printer manufacturing which was completed during 2010. During the fourth quarter of 2012, we determined that further supply chain cost reductions were possible by moving certain supply chain support operations closer to our contract printer manufacturer.
The costs below incurred for the year ended December 31, 2012, represent the costs related to the restructuring of our Location Solutions business management structure. Costs incurred for 2013 and costs expected to be incurred relate to the following: restructuring of Zebras manufacturing operations, relocation of a significant portion of Zebras supply chain operations from the U.S. to China, consolidating activities domestically, restructuring of our sales operations and corporate restructuring as well as an amendment to the Location Solutions 2012 restructuring plan adding additional restructuring charges to be incurred.
11
There were no exit and restructuring costs for 2012, exit and restructuring costs for 2013 are as follows:
Three Months Ended June 29, 2013 |
Six Months Ended June 29, 2013 |
|||||||
Severance, stay bonuses, and other employee-related expenses |
$ | 1,036 | $ | 2,898 | ||||
Professional services |
54 | 66 | ||||||
Relocation and transition costs |
11 | 32 | ||||||
|
|
|
|
|||||
Total |
$ | 1,101 | $ | 2,996 | ||||
|
|
|
|
As of June 29, 2013, we have incurred the following exit and restructuring costs related to the Location Solutions business management structure and manufacturing operations relocation and restructuring (in thousands):
Type of Cost |
Cost incurred through December 31, 2012 |
Costs incurred for the six months ended June 29, 2013 |
Total costs incurred as of June 29, 2013 |
Additional costs expected to be incurred |
Total costs expected to be incurred |
|||||||||||||||
Severance, stay bonuses, and other employee-related expenses |
$ | 960 | $ | 2,898 | $ | 3,858 | $ | 2,702 | $ | 6,560 | ||||||||||
Professional services |
0 | 66 | 66 | 244 | 310 | |||||||||||||||
Relocation and transition costs |
0 | 32 | 32 | 748 | 780 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 960 | $ | 2,996 | $ | 3,956 | $ | 3,694 | $ | 7,650 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Liabilities and expenses below relate to the 2011 and 2012 exit and restructuring plans (in thousands):
Six Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Balance at beginning of period |
$ | 967 | $ | 1,048 | ||||
Charged to earnings |
2,996 | 0 | ||||||
Cash paid |
(3,175 | ) | (380 | ) | ||||
|
|
|
|
|||||
Balance at the end of period |
$ | 788 | $ | 668 | ||||
|
|
|
|
Liabilities related to exit and restructuring activities are included in the accrued liabilities line item on the balance sheet. All exit costs are included in operating expenses under the line item exit and restructuring costs.
Note 8 Derivative Instruments
Portions of our operations are subject to fluctuations in currency values. We manage these risks using derivative financial instruments. We conduct business on a multinational basis in a wide variety of foreign currencies. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. Our objective is to preserve the economic value of non-functional currency denominated cash flows. We attempt to hedge transaction exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign exchange forward and option contracts with third parties.
Credit and Market risk
Financial instruments, including derivatives, expose us to counterparty credit risk for nonperformance and to market risk related to interest and currency exchange rates. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. Our counterparties in derivative transactions are commercial banks with significant experience using derivative instruments. We monitor the impact of market risk on the fair value and cash flows of our derivative and other financial instruments considering reasonably possible changes in interest rates and currency exchange rates and restrict the use of derivative
12
financial instruments to hedging activities. We continually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer.
Fair Value of Derivative Instruments
Zebra has determined that derivative instruments for hedges that have traded but have not settled are considered Level 1 in the fair value hierarchy, and hedges that have not traded are considered Level 2 in the fair value hierarchy. Derivative instruments are used to manage risk and are not used for trading or other speculative purposes, nor do we use leveraged derivative financial instruments. Our foreign currency exchange contracts are valued using broker quotations or market transactions, in either the listed or over-the-counter markets.
Hedging of Net Assets
We use forward contracts to manage exposure related to our pound and euro denominated net assets. Forward contracts typically mature within three months after execution of the contracts. We record gains and losses on these contracts in income each quarter along with the transaction gains and losses related to our net asset positions, which would ordinarily offset each other.
Summary financial information related to these activities included in our consolidated statement of earnings as other income (expense) is as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Change in gains (losses) from foreign exchange derivatives |
$ | (862 | ) | $ | 3,476 | $ | 719 | $ | 1,441 | |||||||
Gain (loss) on net foreign currency assets |
400 | (3,556 | ) | (1,279 | ) | (1,863 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Foreign exchange loss |
$ | (462 | ) | $ | (80 | ) | $ | (560 | ) | $ | (422 | ) | ||||
|
|
|
|
|
|
|
|
As of | ||||||||
June 29, 2013 | December 31, 2012 | |||||||
Notional balance of outstanding contracts: |
||||||||
Pound/US dollar |
£ | 666 | £ | 3,810 | ||||
Euro/US dollar |
| 39,544 | | 37,598 | ||||
Net fair value of outstanding contracts |
$ | (170 | ) | $ | 18 |
Hedging of Anticipated Sales
We manage the exchange rate risk of anticipated euro-denominated sales using purchased options, forward contracts, and participating forwards. We designate these contracts as cash flow hedges which mature within twelve months after the execution of the contracts. Gains and losses on these contracts are deferred in accumulated other comprehensive income until the contracts are settled and the hedged sales are realized. The deferred gains or losses are then reported as an increase or decrease to sales.
Summary financial information related to the cash flow hedges included in accumulated other comprehensive loss is as follows (in thousands):
As of | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Unrealized gains (losses) on hedging transactions: |
||||||||
Gross |
$ | 1,760 | $ | (3,338 | ) | |||
Income tax expense (benefit) |
408 | (1,092 | ) | |||||
|
|
|
|
|||||
Net |
$ | 1,352 | $ | (2,246 | ) | |||
|
|
|
|
Summary financial information related to the cash flow hedges of future revenues follows (in thousands, except percentages):
As of | ||||||||
June 29, 2013 | December 31, 2012 | |||||||
Notional balance of outstanding contracts versus the dollar |
| 87,660 | | 88,680 | ||||
Hedge effectiveness |
100 | % | 100 | % |
13
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Net gains (losses) included in net sales |
$ | (900 | ) | $ | 1,492 | $ | (1,947 | ) | $ | 2,649 |
Forward Contracts
We record our forward contracts at fair value on our consolidated balance sheet as either short-term other assets or other liabilities, depending upon the fair value calculation as detailed in Note 2 of Zebras financial statements. The amounts recorded on our consolidated balance sheet are as follows (in thousands):
As of | ||||||||
June 29, 2013 | December 31, 2012 | |||||||
Liabilities: |
||||||||
Accrued liabilities |
$ | 357 | $ | 2,045 | ||||
|
|
|
|
|||||
Total |
$ | 357 | $ | 2,045 | ||||
|
|
|
|
Note 9 Warranty
In general, Zebra provides warranty coverage of one year on printers against defects in material and workmanship. Printheads are warranted for six months and batteries are warranted for one year. Battery based products, such as location tags, are covered by a 90-day warranty. A provision for warranty expense is recorded at the time of sale and adjusted quarterly based on historical warranty experience.
The following table is a summary of Zebras accrued warranty obligation (in thousands):
Six Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Balance at the beginning of the year |
$ | 4,252 | $ | 4,613 | ||||
Warranty expense |
3,615 | 3,279 | ||||||
Warranty payments |
(3,564 | ) | (3,612 | ) | ||||
|
|
|
|
|||||
Balance at the end of the period |
$ | 4,303 | $ | 4,280 | ||||
|
|
|
|
Note 10 Contingencies
We are subject to a variety of investigations, claims, suits and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort and breach of contract matters. We currently believe that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on our business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and managements view of these matters and their potential effects may change in the future.
Note 11 Stockholders Equity
Share count and par value data related to stockholders equity are as follows:
As of | ||||||||
June 29, 2013 | December 31, 2012 | |||||||
Preferred Stock |
||||||||
Par value per share |
$ | 0.01 | $ | 0.01 | ||||
Shares authorized |
10,000,000 | 10,000,000 | ||||||
Shares outstanding |
0 | 0 | ||||||
Common Stock - Class A |
||||||||
Par value per share |
$ | 0.01 | $ | 0.01 | ||||
Shares authorized |
150,000,000 | 150,000,000 | ||||||
Shares issued |
72,151,857 | 72,151,857 | ||||||
Shares outstanding |
50,782,000 | 50,908,267 | ||||||
Treasury stock |
||||||||
Shares held |
21,369,857 | 21,243,590 |
14
During the six month period ended June 29, 2013, Zebra purchased 627,042 shares of common stock for $28,563,000 under a board-authorized share repurchase plan. For the six month period ended June 30, 2012, we purchased 673,863 shares of common stock for $24,645,000.
A roll forward of Class A common shares outstanding is as follows:
Six Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Balance at the beginning of the year |
50,908,267 | 52,095,166 | ||||||
Repurchases |
(627,042 | ) | (673,863 | ) | ||||
Stock option and ESPP issuances |
431,973 | 98,315 | ||||||
Restricted share issuances |
238,325 | 231,243 | ||||||
Restricted share forfeitures |
(5,008 | ) | (5,655 | ) | ||||
Shares withheld for tax obligations |
(164,515 | ) | (61,780 | ) | ||||
|
|
|
|
|||||
Balance at the end of the period |
50,782,000 | 51,683,426 | ||||||
|
|
|
|
Note 12 Earnings Per Share
Earnings per share were computed as follows (in thousands, except per share amounts):
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Weighted average shares: |
||||||||||||||||
Weighted average common shares outstanding |
50,900 | 51,771 | 50,929 | 51,881 | ||||||||||||
Effect of dilutive securities outstanding |
383 | 259 | 381 | 275 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted average shares outstanding |
51,283 | 52,030 | 51,310 | 52,156 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings (loss): |
||||||||||||||||
Income from continuing operations |
$ | 30,558 | $ | 30,353 | $ | 54,100 | $ | 60,517 | ||||||||
Income from discontinued operations |
8 | 300 | 8 | 300 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 30,566 | $ | 30,653 | $ | 54,108 | $ | 60,817 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic per share amounts: |
||||||||||||||||
Income from continuing operations |
$ | 0.60 | $ | 0.58 | $ | 1.06 | $ | 1.16 | ||||||||
Income from discontinued operations |
0.00 | 0.01 | 0.00 | 0.01 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 0.60 | $ | 0.59 | $ | 1.06 | $ | 1.17 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted per share amounts: |
||||||||||||||||
Income from continuing operations |
$ | 0.60 | $ | 0.58 | $ | 1.05 | $ | 1.16 | ||||||||
Income from discontinued operations |
0.00 | 0.01 | 0.00 | 0.01 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 0.60 | $ | 0.59 | $ | 1.05 | $ | 1.17 | ||||||||
|
|
|
|
|
|
|
|
Potentially dilutive securities excluded from the earnings per share calculation consist of stock options and stock appreciation rights (SARs) with an exercise price greater than the average market closing price of the Class A common stock. These excluded options and SARs were as follows:
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Potentially dilutive shares |
899,000 | 2,183,000 | 905,000 | 1,799,000 |
15
Note 13 Share-Based Compensation
Zebra has a share-based compensation plan and a stock purchase plan. Zebra recognizes compensation costs using the straight-line method over the vesting period of up to five years.
The compensation expense and the related tax benefit for share-based payments were included in the Consolidated Statement of Earnings as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Cost of sales |
$ | 276 | $ | 298 | $ | 460 | $ | 533 | ||||||||
Selling and marketing |
541 | 399 | 1,006 | 760 | ||||||||||||
Research and development |
459 | 434 | 784 | 822 | ||||||||||||
General and administrative |
3,082 | 3,114 | 4,254 | 5,930 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total compensation |
$ | 4,358 | $ | 4,245 | $ | 6,504 | $ | 8,045 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income tax benefit |
$ | 1,523 | $ | 1,766 | $ | 2,253 | $ | 2,786 | ||||||||
|
|
|
|
|
|
|
|
Cash flows resulting from the tax benefits of tax deductions in excess of the compensation cost recognized (excess tax benefits) are classified as financing cash flows in the statement of cash flows. The tax benefits classified as financing cash flows for the six months ended June 29, 2013 was $3,727,000 and for the six months ended June 30, 2012 was $1,358,000.
The fair value of share-based compensation is estimated on the date of grant using a binomial model. Volatility is based on an average of the implied volatility in the open market and the annualized volatility of Zebra stock prices over our entire stock history. Stock option grants in the table below include both stock options, all of which were non-qualified, and stock appreciation rights (SAR) of which all will be settled in Zebra stock. Restricted stock grants are valued at the market closing price on the date of the grant. The following table shows the weighted-average assumptions used for grants of SARs as well as the fair value of the grants based on those assumptions:
Six Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Expected dividend yield |
0 | % | 0 | % | ||||
Forfeiture rate |
10.31 | % | 10.21 | % | ||||
Volatility |
32.00 | % | 35.90 | % | ||||
Risk free interest rate |
.82 | % | .94 | % | ||||
Range of interest rates |
0.02% - 1.78 | % | 0.07% - 1.95 | % | ||||
Expected weighted-average life |
5.42 years | 5.48 years | ||||||
Fair value of stock appreciation rights (SARs) granted |
$ | 4,443,000 | $ | 5,490,000 | ||||
Weighted-average grant date fair value of SARs granted |
$ | 13.83 | $ | 12.84 |
Stock option activity was as follows:
Six Months Ended June 29, 2013 | ||||||||
Options |
Shares |
Weighted-Average Exercise Price |
||||||
Outstanding at beginning of year |
1,531,844 | $ | 41.69 | |||||
Exercised |
(309,393 | ) | 37.53 | |||||
Expired |
(11,998 | ) | 47.69 | |||||
|
|
|
|
|||||
Outstanding at end of period |
1,210,453 | $ | 42.69 | |||||
|
|
|
|
|||||
Exercisable at end of period |
1,210,453 | $ | 42.69 | |||||
|
|
|
|
|||||
Intrinsic value of exercised options |
$ | 2,355,000 | ||||||
|
|
The following table summarizes information about stock options outstanding at June 29, 2013:
Outstanding | Exercisable | |||||||
Aggregate intrinsic value |
$ | 4,074,000 | $ | 4,074,000 | ||||
Weighted-average remaining contractual term |
2.8 years | 2.8 years |
16
SAR activity was as follows:
Six Months Ended June 29, 2013 | ||||||||
SARs |
Shares | Weighted-Average Exercise Price |
||||||
Outstanding at beginning of year |
1,535,804 | $ | 31.66 | |||||
Granted |
321,222 | 46.05 | ||||||
Exercised |
(276,879 | ) | 25.51 | |||||
Forfeited |
(52,532 | ) | 35.79 | |||||
Expired |
(2,580 | ) | 33.84 | |||||
|
|
|
|
|||||
Outstanding at end of period |
1,525,035 | $ | 35.66 | |||||
|
|
|
|
|||||
Exercisable at end of period |
610,231 | $ | 29.70 | |||||
|
|
|
|
|||||
Intrinsic value of exercised SARs |
$ | 5,585,000 | ||||||
|
|
The terms of the SARs are established under either the 2006 Incentive Compensation Plan or the 2011 Long-term Incentive Plan (the Plans) and the applicable SAR agreement. Once vested, a SAR entitles the holder to receive a payment equal to the difference between the per-share grant price of the SAR and the fair market value of a share of Zebra stock on the date the SAR is exercised, multiplied by the number of SARs exercised. Exercised SARs are settled in whole shares of Zebra stock, and any fraction of a share is settled in cash. The SARs granted typically vest annually in four equal amounts on each of the first four anniversaries of the grant date, with some SARs vesting over a period of five years. All SARs expire 10 years after the grant date.
The following table summarizes information about SARs outstanding at June 29, 2013:
Outstanding | Exercisable | |||||||
Aggregate intrinsic value |
$ | 14,203,000 | $ | 9,148,000 | ||||
Weighted-average remaining contractual term |
8.0 years | 7.0 years |
Time vested restricted stock award activity was as follows:
Six Months Ended June 29, 2013 | ||||||||
Restricted Stock Awards |
Shares |
Weighted-Average Grant Date Fair Value |
||||||
Outstanding at beginning of year |
444,362 | $ | 35.43 | |||||
Granted |
163,989 | 46.07 | ||||||
Released |
(156,126 | ) | 30.80 | |||||
Forfeited |
(4,149 | ) | 36.52 | |||||
|
|
|
|
|||||
Outstanding at end of period |
448,076 | $ | 40.92 | |||||
|
|
|
|
The terms of Zebras restricted stock grants are defined in the Plans and the applicable award agreements. Restricted stock grants consist of time vested restricted stock awards (RSAs) and performance share awards (PSAs). Zebras restricted stock awards are expensed over the vesting period of the related award, typically three to five years. Compensation cost is calculated as the market date fair value on the grant date multiplied by the number of shares granted.
Performance share award activity granted under the Plans, are as follows:
Six Months Ended June 29, 2013 | ||||||||
Performance Share Awards |
Shares |
Weighted-Average Grant Date Fair Value |
||||||
Outstanding at beginning of year |
265,829 | $ | 33.55 | |||||
Granted |
187,794 | 35.17 | ||||||
Released |
(253,484 | ) | 27.90 | |||||
Forfeited |
(859 | ) | 38.79 | |||||
|
|
|
|
|||||
Outstanding at end of period |
199,280 | $ | 42.25 | |||||
|
|
|
|
17
As of | ||||
June 29, 2013 | ||||
Awards granted under Zebras equity-based compensation plans: |
||||
Unearned compensation costs related to awards granted |
$ | 23,264,000 | ||
Period expected to be recognized over |
2.8 years |
The fair value of the purchase rights issued under the stock purchase plan is estimated using the following weighted-average assumptions for purchase rights granted. Expected lives of three months to one year have been used along with these assumptions.
Six Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Fair market value |
$ | 40.94 | $ | 35.20 | ||||
Option price |
$ | 38.89 | $ | 33.44 | ||||
Expected dividend yield |
0 | % | 0 | % | ||||
Expected volatility |
18 | % | 22 | % | ||||
Risk free interest rate |
0.06 | % | 0.04 | % |
Note 14 Income Taxes
Zebra has identified, evaluated, and measured the amount of income tax benefits to be recognized for all of our income tax positions. Included in deferred tax assets are amounts related to federal and state net operating losses acquired as part of our acquisition of WhereNet Corp in 2007. We intend to utilize these net operating loss carryforwards to offset future income taxes.
Zebra earns a significant amount of its operating income outside of the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. We do not intend to repatriate funds, however, should we require more capital in the U.S. than is generated by our operations locally, we could elect to repatriate funds held in foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. Repatriation would result in higher effective tax rates. Borrowing in the U.S. would result in increased interest expense.
An audit of U.S. federal tax returns for years 2008 through 2010 was completed in 2012. The tax years 2009 through 2011 remain open to examination by multiple state taxing jurisdictions. Tax authorities in the United Kingdom have completed income tax audits for tax years through 2011.
Zebras continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. For the six months ended June 29, 2013 and June 30, 2012, we did not accrue any interest or penalties into income tax expense.
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Effective tax rate |
19.0 | % | 23.6 | % | 18.6 | % | 25.8 | % |
The effective income tax rate for the first six months of 2013 was 18.6%, compared with 25.8% for the first six months of 2012. The 2013 effective rate reflects higher profits in lower-rate international jurisdictions and reinstatement of the US R&D tax credit during the first quarter of 2013 retroactive to January 2012 which resulted in a one-time credit of approximately $400,000, or a reduction to the effective tax rate of 0.6%.
Note 15 Other Comprehensive Income
Stockholders equity includes certain items classified as accumulated other comprehensive income (AOCI), including:
| Unrealized gains (losses) on hedging transactions relate to derivative instruments used to hedge the currency exchange rates for forecasted euro sales. These hedges are designated as cash flow hedges, and we have deferred income statement recognition of gains and losses until the hedged transaction occurs. See Note 8 for more details. |
| Unrealized gains (losses) on investments are deferred from income statement recognition until the gains or losses are realized. |
| Foreign currency translation adjustment relates to our non-U.S. subsidiary companies that have designated a functional currency other than the U.S. dollar. We are required to translate the subsidiary functional currency financial statements to dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of other comprehensive income. |
18
The components of other comprehensive income for the three months ended June 29, 2013 are as follows (in thousands):
As
of March 30, 2013 |
Gain (Loss) recognized in OCI |
Gain (Loss) reclassified from AOCI to income |
Three months ended June 29, 2013 |
As
of June 29, 2013 |
||||||||||||||||
Unrealized gains (losses) on hedging transactions: |
||||||||||||||||||||
Gross |
$ | (311 | ) | $ | 366 | $ | (876 | ) (1) | $ | (510 | ) | $ | (821 | ) | ||||||
Income tax (benefit) |
(72 | ) | 100 | (219 | ) | (119 | ) | (191 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
(239 | ) | 266 | (657 | ) | (391 | ) | (630 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Unrealized gains (losses) on investments: |
||||||||||||||||||||
Gross |
432 | (1,371 | ) | 95 | (2) | (1,276 | ) | (844 | ) | |||||||||||
Income tax (benefit) |
126 | (436 | ) | 27 | (409 | ) | (283 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
306 | (935 | ) | 68 | (867 | ) | (561 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments |
(8,627 | ) | 114 | 109 | (3) | 223 | (8,404 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total accumulated other comprehensive loss |
$ | (8,560 | ) | $ | (555 | ) | $ | (480 | ) | $ | (1,035 | ) | $ | (9,595 | ) | |||||
|
|
|
|
|
|
|
|
|
|
As
of March 30, 2012 |
Gain (Loss) recognized in OCI |
Gain (Loss) reclassified from AOCI to income |
Three months ended June 30, 2012 |
As
of June 30, 2012 |
||||||||||||||||
Unrealized gains (losses) on hedging transactions: |
||||||||||||||||||||
Gross |
$ | 817 | $ | 1,722 | $ | 1,478 | (1) | $ | 3,200 | $ | 4,017 | |||||||||
Income tax (benefit) |
204 | 430 | 370 | 800 | 1,004 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
613 | 1,292 | 1,108 | 2,400 | 3,013 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Unrealized gains (losses) on investments: |
||||||||||||||||||||
Gross |
71 | (238 | ) | 167 | (2) | (71 | ) | 0 | ||||||||||||
Income tax (benefit) |
10 | (86 | ) | 61 | (25 | ) | (15 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
61 | (152 | ) | 106 | (46 | ) | 15 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments |
(8,880 | ) | 105 | 0 | (3) | 105 | (8,775 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total accumulated other comprehensive loss |
$ | (8,206 | ) | $ | 1,245 | $ | 1,214 | $ | 2,459 | $ | (5,747 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Transfer of unrealized gains and (losses) from AOCI to income on hedging transactions are included in net sales of tangible products. |
(2) | Transfer of unrealized gains and (losses) from AOCI to income on investments are included in investment income. |
(3) | Transfer of foreign currency translation gains and (losses) from AOCI to income, are included in foreign exchange. |
19
The components of other comprehensive income for the six months ended June 29, 2013 are as follows (in thousands):
As of December 31, 2012 |
Gain (Loss) recognized in OCI |
Gain
(Loss) reclassified from AOCI to income |
Six months ended June 29, 2013 |
As
of June 29, 2013 |
||||||||||||||||
Unrealized gains (losses) on hedging transactions: |
||||||||||||||||||||
Gross |
$ | (2,581 | ) | $ | 3,658 | $ | (1,898 | ) (1) | $ | 1,760 | $ | (821 | ) | |||||||
Income tax (benefit) |
(599 | ) | 882 | (474 | ) | 408 | (191 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
(1,982 | ) | 2,776 | (1,424 | ) | 1,352 | (630 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Unrealized gains (losses) on investments: |
||||||||||||||||||||
Gross |
540 | (1,658 | ) | 274 | (2) | (1,384 | ) | (844 | ) | |||||||||||
Income tax (benefit) |
162 | (530 | ) | 85 | (445 | ) | (283 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
378 | (1,128 | ) | 189 | (939 | ) | (561 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments |
(8,721 | ) | 208 | 109 | (3) | 317 | (8,404 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total accumulated other comprehensive loss |
$ | (10,325 | ) | $ | 1,856 | $ | (1,126 | ) | $ | 730 | $ | (9,595 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
As of December 31, 2011 |
Gain
(Loss) recognized in OCI |
Gain
(Loss) reclassified from AOCI to income |
Six months ended June 30, 2012 |
As
of June 30, 2012 |
||||||||||||||||
Unrealized gains (losses) on hedging transactions: |
||||||||||||||||||||
Gross |
$ | 7,355 | $ | (5,973 | ) | $ | 2,635 | (1) | $ | (3,338 | ) | $ | 4,017 | |||||||
Income tax (benefit) |
2,096 | (1,751 | ) | 659 | (1,092 | ) | 1,004 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
5,259 | (4,222 | ) | 1,976 | (2,246 | ) | 3,013 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Unrealized gains (losses) on investments: |
||||||||||||||||||||
Gross |
(797 | ) | 646 | 151 | (2) | 797 | 0 | |||||||||||||
Income tax (benefit) |
(288 | ) | 213 | 60 | 273 | (15 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net |
(509 | ) | 433 | 91 | 524 | 15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments |
(8,963 | ) | 188 | 0 | (3) | 188 | (8,775 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total accumulated other comprehensive loss |
$ | (4,213 | ) | $ | (3,601 | ) | $ | 2,067 | $ | (1,534 | ) | $ | (5,747 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
(1) | Transfer of unrealized gains and (losses) from AOCI to income on hedging transactions are included in net sales of tangible products. |
(2) | Transfer of unrealized gains and (losses) from AOCI to income on investments are included in investment income. |
(3) | Transfer of foreign currency translation gains and (losses) from AOCI to income, are included in foreign exchange. |
20
Note 16 New Accounting Pronouncements
In February 2013, the FASB issued update 2013-02, ASC 220, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This updated guidance sets requirements for presentation for significant items reclassified to net income in their entirety during the period and for items not reclassified to net income in their entirety during period. This standard is effective for annual and interim periods beginning after December 15, 2012. The adoption of this standard includes additional disclosures in the notes to the consolidated financial statements.
21
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Results of Operations: Second Quarter of 2013 versus Second Quarter of 2012
Consolidated Results of Operations
(Amounts in thousands, except percentages):
Three Months Ended | ||||||||||||||||||||
June 29, 2013 | June 30, 2012 | Percent Change |
Percent of Net Sales - 2013 |
Percent of Net Sales - 2012 |
||||||||||||||||
Net sales |
||||||||||||||||||||
Net sales of tangible products |
$ | 239,909 | $ | 234,708 | 2.2 | 94.8 | 95.0 | |||||||||||||
Revenue from services & software |
13,251 | 12,369 | 7.1 | 5.2 | 5.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total net sales |
253,160 | 247,077 | 2.5 | 100.0 | 100.0 | |||||||||||||||
Cost of Sales |
||||||||||||||||||||
Cost of sales of tangible products |
125,664 | 119,980 | 4.7 | 49.6 | 48.6 | |||||||||||||||
Cost of services & software |
6,589 | 6,720 | (1.9 | ) | 2.6 | 2.7 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total cost of sales |
132,253 | 126,700 | 4.4 | 52.2 | 51.3 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
120,907 | 120,377 | 0.4 | 47.8 | 48.7 | |||||||||||||||
Operating expenses |
84,666 | 80,918 | 4.6 | 33.5 | 32.8 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
36,241 | 39,459 | (8.2 | ) | 14.3 | 15.9 | ||||||||||||||
Other income |
1,475 | 260 | N/M | 0.6 | 0.1 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income from continuing operations before income taxes |
37,716 | 39,719 | (5.0 | ) | 14.9 | 16.0 | ||||||||||||||
Income taxes |
7,158 | 9,366 | (23.6 | ) | 2.8 | 3.8 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income from continuing operations |
30,558 | 30,353 | 0.7 | 12.1 | 12.2 | |||||||||||||||
Income from discontinued operations, net of tax |
8 | 300 | N/M | 0.0 | 0.2 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 30,566 | $ | 30,653 | (0.3 | ) | 12.1 | 12.4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Diluted earnings per share: |
||||||||||||||||||||
Income from continuing operations |
$ | 0.60 | $ | 0.58 | 3.4 | |||||||||||||||
Income from discontinued operations |
0.00 | 0.01 | N/M | |||||||||||||||||
|
|
|
|
|||||||||||||||||
Net income |
$ | 0.60 | $ | 0.59 | 1.7 | |||||||||||||||
|
|
|
|
Consolidated Results of Operations Second quarter
Sales
Net sales for the second quarter of 2013 increased 2.5% compared with the corresponding quarter in 2012. The increase was due to growth in supplies sales, both from the July 2012 LaserBand acquisition and organic growth of Zebras label and wristband business. Service and software revenue increased 7.1% compared to the same quarter last year as a result of increased sales in service contracts for mobile and tabletop printers, while hardware revenue declined 2.7%.
Sales by product category were as follows (amounts in thousands, except percentages):
Three Months Ended | ||||||||||||||||||||
Product Category |
June 29, 2013 | June 30, 2012 | Percent Change |
Percent
of Net Sales 2013 |
Percent
of Net Sales 2012 |
|||||||||||||||
Hardware |
$ | 178,938 | $ | 183,973 | (2.7 | ) | 70.8 | 74.5 | ||||||||||||
Supplies |
59,618 | 49,508 | 20.4 | 23.5 | 20.0 | |||||||||||||||
Service and software |
13,251 | 12,369 | 7.1 | 5.2 | 5.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Subtotal products |
251,807 | 245,850 | 2.4 | 99.5 | 99.5 | |||||||||||||||
Shipping and handling |
1,353 | 1,227 | 10.3 | 0.5 | 0.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total net sales |
$ | 253,160 | $ | 247,077 | 2.5 | 100.0 | 100.0 | |||||||||||||
|
|
|
|
|
|
|
|
22
Sales increases in Europe, Middle East and Africa (EMEA), Asia Pacific and North America were partially offset by decreased sales in Latin America. Sales growth include increases in desktop and tabletop printers in Europe and Latin America. Increases in supplies sales had a significant impact on sales in North America, Asia Pacific, and EMEA. Favorable movement in foreign currency increased sales by $736,000, net of hedges.
Sales to customers by geographic region were as follows (in thousands, except percentages):
Three Months Ended | ||||||||||||||||||||
Geographic Region |
June 29, 2013 | June 30, 2012 | Percent Change |
Percent
of Net Sales 2013 |
Percent of Net Sales 2012 |
|||||||||||||||
Europe, Middle East and Africa |
$ | 80,913 | $ | 77,857 | 3.9 | 32.0 | 31.5 | |||||||||||||
Latin America |
24,322 | 25,371 | (4.1 | ) | 9.6 | 10.3 | ||||||||||||||
Asia-Pacific |
36,973 | 35,921 | 2.9 | 14.6 | 14.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total International |
142,208 | 139,149 | 2.2 | 56.2 | 56.3 | |||||||||||||||
North America |
110,952 | 107,928 | 2.8 | 43.8 | 43.7 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total net sales |
$ | 253,160 | $ | 247,077 | 2.5 | 100.0 | 100.0 | |||||||||||||
|
|
|
|
|
|
|
|
Gross Profit
Gross profit of 47.8%, versus 48.7% in 2012, reflects changes in product mix, special one-time pricing on large transactions, lower average selling price and higher costs for freight-in. Favorable movements in foreign currency increased second quarter gross profit by $1,079,000.
Printer unit volumes and average selling price information is summarized below:
Three Months Ended | ||||||||||||
June 29, 2013 | June 30, 2012 | Percent Change | ||||||||||
Total printers shipped |
328,392 | 330,186 | (0.5 | ) | ||||||||
Average selling price of printers shipped |
$ | 462 | $ | 471 | (1.9 | ) |
For the second quarter of 2013, unit volumes decreased compared to the second quarter of 2012, with notable volume decreases in desktop and mobile printers, offset by volume increases in tabletop, kiosk, and card printers. The decrease in average selling price included promotions on end of life inventory, special one-time pricing on large transactions and a change in product mix towards lower priced products.
Operating Expenses
Operating expenses for the second quarter increased 4.6% principally related to product development and sales and marketing activities supporting Zebras entry to serve customers in the sports industry, as well as increased amortization and exit and restructuring costs. Amortization increases resulted from intangible assets acquired as part of our July 2012 LaserBand acquisition.
Operating expenses are summarized below (in thousands, except percentages):
Three Months Ended | ||||||||||||||||||||
Operating Expenses |
June 29, 2013 | June 30, 2012 | Percent Change |
Percent of Net Sales 2013 |
Percent of Net Sales 2012 |
|||||||||||||||
Selling and marketing |
$ | 33,830 | $ | 32,158 | 5.2 | 13.5 | 13.0 | |||||||||||||
Research and development |
23,201 | 22,336 | 3.9 | 9.2 | 9.0 | |||||||||||||||
General and administrative |
24,053 | 24,402 | (1.4 | ) | 9.5 | 10.0 | ||||||||||||||
Amortization of intangible assets |
1,863 | 770 | N/M | 0.7 | 0.3 | |||||||||||||||
Acquisition costs |
618 | 1,252 | (50.6 | ) | 0.2 | 0.5 | ||||||||||||||
Exit and restructuring costs |
1,101 | 0 | N/M | 0.4 | N/M | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
$ | 84,666 | $ | 80,918 | 4.6 | 33.5 | 32.8 | |||||||||||||
|
|
|
|
|
|
|
|
23
Exit and restructuring costs
During the third quarter of 2012, the Location Solutions revenue decreased from our previous business plans. The Locations Solutions 2012 restructuring plan was initiated as expected revenue increases failed to be realized due to slower than anticipated growth in the automotive and process manufacturing industries, weakness in the government sector, and lack of near term improvement related to Location Solutions.
In the second quarter of 2013 management determined that additional restructuring actions would be required to meet our financial goals for the Location Solutions business. We anticipate that the results of our restructuring actions will reduce costs of the Location Solutions business by $4,000,000 per year. These savings should be fully realized by the fourth quarter of 2013. The savings from the Location Solutions restructuring plan will primarily benefit cost of goods sold and selling and marketing costs.
During 2007, Zebra began a plan to outsource printer manufacturing which was completed during 2010. During the fourth quarter of 2012, we determined that further supply chain cost reductions were possible by moving certain supply chain support operations closer to our contract printer manufacturer. We anticipate these actions will generate $2,600,000 in savings to our cost of goods sold. These actions should be completed by the end of 2013.
Other Income (Expense)
Investment income is down due to a lower yield compared with 2012. The increase in other income is the result of a net $1,557,000 favorable litigation settlement, which is related to an investment loss that was recorded in prior years.
Our non-operating income and expense items are summarized in the following table (in thousands):
Three Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Investment income |
$ | 473 | $ | 826 | ||||
Foreign exchange loss |
(462 | ) | (80 | ) | ||||
Other, net |
1,464 | (486 | ) | |||||
|
|
|
|
|||||
Total other income |
$ | 1,475 | $ | 260 | ||||
|
|
|
|
Income Taxes
The effective income tax rate for the second quarter of 2013 was 19.0%, compared with 23.6% for the second quarter of 2012. The 2013 effective rate reflects higher profits in lower-rate international jurisdictions.
24
Results of Operations: Six months ended June 29, 2013 versus six months ended June 30, 2012
Consolidated Results of Operations
(Amounts in thousands, except percentages):
Six Months Ended | ||||||||||||||||||||
June 29, 2013 | June 30, 2012 | Percent Change |
Percent of Net Sales - 2013 |
Percent of Net Sales - 2012 |
||||||||||||||||
Net sales |
||||||||||||||||||||
Net sales of tangible products |
$ | 465,030 | $ | 467,184 | (0.5 | ) | 94.9 | 95.2 | ||||||||||||
Revenue from services & software |
25,067 | 23,768 | 5.5 | 5.1 | 4.8 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total net sales |
490,097 | 490,952 | (0.2 | ) | 100.0 | 100.0 | ||||||||||||||
Cost of Sales |
||||||||||||||||||||
Cost of sales of tangible products |
242,775 | 239,013 | 1.6 | 49.6 | 48.7 | |||||||||||||||
Cost of services & software |
13,350 | 11,679 | 14.3 | 2.7 | 2.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total cost of sales |
256,125 | 250,692 | 2.2 | 52.3 | 51.1 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
233,972 | 240,260 | (2.6 | ) | 47.7 | 48.9 | ||||||||||||||
Operating expenses |
169,555 | 158,792 | 6.8 | 34.6 | 32.3 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
64,417 | 81,468 | (20.9 | ) | 13.1 | 16.6 | ||||||||||||||
Other income |
2,063 | 146 | N/M | 0.4 | 0.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income from continuing operations before income taxes |
66,480 | 81,614 | (18.5 | ) | 13.5 | 16.6 | ||||||||||||||
Income taxes |
12,380 | 21,097 | (41.3 | ) | 2.5 | 4.3 | ||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||
Income from continuing operations |
54,100 | 60,517 | (10.6 | ) | 11.0 | 12.3 | ||||||||||||||
Income from discontinued operations, net of tax |
8 | 300 | (97.3 | ) | 0.0 | 0.1 | ||||||||||||||
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|
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Net Income |
$ | 54,108 | $ | 60,817 | (11.0 | ) | 11.0 | 12.4 | ||||||||||||
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Diluted earnings per share |
||||||||||||||||||||
Income from continuing operations |
$ | 1.05 | $ | 1.16 | (9.5 | ) | ||||||||||||||
Income from discontinued operations |
0.00 | 0.01 | N/M | |||||||||||||||||
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Net income |
$ | 1.05 | $ | 1.17 | (10.3 | ) | ||||||||||||||
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|
|
Consolidated Results of Operations Year to date
Sales
Net sales for the first six months of 2013, compared with the same 2012 period, declined 0.2% primarily due to economic conditions centered around Europe. The decrease in sales was attributable to 5.4% decline in hardware sales offset by a 17.4% growth in supplies which include labels and wristbands. These increases are the result of the LaserBand acquisition in July 2012 plus organic growth in supplies. Favorable movement in foreign currency increased sales by $650,000.
Sales by product category were as follows (amounts in thousands, except percentages):
Six Months Ended | ||||||||||||||||||||
Product Category |
June 29, 2013 | June 30, 2012 | Percent Change |
Percent of Net Sales - 2013 |
Percent of Net Sales - 2012 |
|||||||||||||||
Hardware |
$ | 345,630 | $ | 365,169 | (5.4 | ) | 70.6 | 74.4 | ||||||||||||
Supplies |
116,741 | 99,470 | 17.4 | 23.8 | 20.3 | |||||||||||||||
Service and software |
25,067 | 23,768 | 5.5 | 5.1 | 4.8 | |||||||||||||||
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Subtotal products |
487,438 | 488,407 | (0.2 | ) | 99.5 | 99.5 | ||||||||||||||
Shipping and handling |
2,659 | 2,545 | 4.5 | 0.5 | 0.5 | |||||||||||||||
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Total net sales |
$ | 490,097 | $ | 490,952 | (0.2 | ) | 100.0 | 100.0 | ||||||||||||
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25
Europe, Middle East and Africa (EMEA) experienced a stronger second quarter during 2013 partially offsetting weakness in the first quarter which contributed to the overall decline in EMEA sales for the six months ended in 2013. Sales in Latin America, Asia Pacific and North America were relatively flat.
Sales to customers by geographic region were as follows (in thousands, except percentages):
Six Months Ended | ||||||||||||||||||||
Geographic Region |
June 29, 2013 | June 30, 2012 | Percent Change |
Percent of Net Sales - 2013 |
Percent of Net Sales - 2012 |
|||||||||||||||
Europe, Middle East and Africa |
$ | 158,586 | $ | 163,978 | (3.3 | ) | 32.4 | 33.4 | ||||||||||||
Latin America |
47,454 | 47,658 | (0.4 | ) | 9.7 | 9.7 | ||||||||||||||
Asia-Pacific |
69,882 | 69,069 | 1.2 | 14.3 | 14.1 | |||||||||||||||
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Total International |
275,922 | 280,705 | (1.7 | ) | 56.4 | 57.2 | ||||||||||||||
North America |
214,175 | 210,247 | 1.9 | 43.6 | 42.8 | |||||||||||||||
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|
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Total net sales |
$ | 490,097 | $ | 490,952 | (0.2 | ) | 100.0 | 100.0 | ||||||||||||
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Gross Profit
Gross profit decreased 2.6% due to unfavorable movements in product mix, special one-time pricing on large transactions, lower average selling price and higher freight-in costs, decreasing gross profit to 47.7% compared to same quarter last year of 48.9%. Favorable movements in foreign currency increased gross profit by $1,157,000.
Printer unit volumes and average selling price information is summarized below:
Six Months Ended | ||||||||||||
June 29, 2013 | June 30, 2012 | Percent Change | ||||||||||
Total printers shipped |
628,025 | 627,855 | N/M | |||||||||
Average selling price of printers shipped |
$ | 466 | $ | 486 | (4.1 | ) |
For the first six months of 2013, unit volumes increased compared to the same period of 2012, with notable volume increases in desktop and card printers. The decrease in average selling price is a result of a change in product mix, special one-time pricing on large transactions and promotions on end of life inventory.
Operating Expenses
Operating expenses for the six month period increased 6.8%. Expenses in several operating expense categories were offset by lower acquisition costs. These increases are principally related to activities supporting Zebras entry into the sports industry, amortization expense, outside professional services and exit and restructuring costs. Amortization expense increases resulted from intangible assets acquired in our LaserBand acquisition made in the second half of 2012. We incurred $1.4 million in increased legal fees primarily related to the enforcement of our patent rights.
Operating expenses are summarized below (in thousands, except percentages):
Six Months Ended | ||||||||||||||||||||
Operating Expenses |
June 29, 2013 | June 30, 2012 | Percent Change |
Percent of Net Sales 2013 |
Percent of Net Sales 2012 |
|||||||||||||||
Selling and marketing |
$ | 67,345 | $ | 64,272 | 4.8 | 13.7 | 13.1 | |||||||||||||
Research and development |
45,059 | 42,752 | 5.4 | 9.2 | 8.7 | |||||||||||||||
General and administrative |
49,329 | 48,722 | 1.2 | 10.1 | 9.9 | |||||||||||||||
Amortization of intangible assets |
3,726 | 1,540 | N/M | 0.8 | 0.3 | |||||||||||||||
Acquisition costs |
1,100 | 1,506 | (27.0 | ) | 0.2 | 0.3 | ||||||||||||||
Exit and restructuring costs |
2,996 | 0 | N/M | 0.6 | 0.0 | |||||||||||||||
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Total operating expenses |
$ | 169,555 | $ | 158,792 | 6.8 | 34.6 | 32.3 | |||||||||||||
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26
Exit and restructuring costs
During the third quarter of 2012, the Location Solutions revenue decreased from our previous business plans. The Locations Solutions 2012 restructuring plan was initiated as expected revenue increases failed to be realized due to slower than anticipated growth in the automotive and process manufacturing industries, weakness in the government sector, and lack of near term improvement related to Location Solutions.
In the second quarter of 2013 management determined that additional restructuring actions would be required to meet our financial goals for the Location Solutions business. We anticipate that the results of our restructuring actions will reduce costs of the Location Solutions business by $4,000,000 per year. These savings should be fully realized by the fourth quarter of 2013. The savings from the Location Solutions restructuring plan will primarily benefit cost of goods sold and selling and marketing costs.
During 2007, Zebra began a plan to outsource printer manufacturing which was completed during 2010. During the fourth quarter of 2012, we determined that further supply chain cost reductions were possible by moving certain supply chain support operations closer to our contract printer manufacturer. We anticipate these actions will generate $2,600,000 in savings to our cost of goods sold. These actions should be completed by the end of 2013.
Other Income (Expense)
Investment income decreased due to a lower yield compared with 2012. The increase in other income is the result of a net $1,557,000 favorable litigation settlement associated with an investment loss that was recorded in prior years.
Zebras non-operating income and expense items are summarized in the following table (in thousands):
Six Months Ended | ||||||||
June 29, 2013 | June 30, 2012 | |||||||
Investment income |
$ | 1,150 | $ | 1,418 | ||||
Foreign exchange loss |
(560 | ) | (422 | ) | ||||
Other, net |
1,473 | (850 | ) | |||||
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Total other income |
$ | 2,063 | $ | 146 | ||||
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Income Taxes
The effective income tax rate for the first six months of 2013 was 18.6%, compared with 25.8% for the first six months of 2012. The 2013 effective rate reflects higher profits in lower-rate international jurisdictions and reinstatement of the US R&D tax credit during the first quarter of 2013 retroactive to January 2012 which resulted in a one-time credit of approximately $400,000, or a reduction to the effective tax rate of 0.6%.
Liquidity and Capital Resources
(Amounts in thousands, except percentages):
Six Months Ended | ||||||||
Rate of Return Analysis: |
June 29, 2013 | June 30, 2012 | ||||||
Average cash and marketable securities balances |
$ | 424,057 | $ | 356,759 | ||||
Annualized rate of return |
0.5 | % | 0.8 | % |
Average cash and marketable securities balances for the first six months of 2013 increased compared to 2012 as a result of increased cash and marketable securities in 2013 versus comparable levels in 2012.
As of June 29, 2013, Zebra had $454,038,000 in cash and investments and marketable securities, compared with $394,075,000 at December 31, 2012. Factors affecting cash and investment balances during the first six months of 2013 include the following (changes below include the impact of foreign currency):
| Inventories decreased $14,190,000 due to a decrease in finished goods. |
| Accrued liabilities decreased $6,094,000 due to the timing of annual bonus payments and regular payroll. |
| Purchases of treasury shares totaled $28,563,000. |
Management believes that existing capital resources and funds generated from operations are sufficient to finance anticipated capital requirements.
Zebra earns a significant amount of its operating income outside of the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. Zebra does not intend to repatriate funds, however, should Zebra require more capital in the U.S. than is generated by our operations locally, Zebra could elect to repatriate funds held in foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. Repatriation would result in higher effective tax rates. Borrowing in the U.S. would result in increased interest expense.
Significant Customer
Our net sales to significant customers as a percentage of total net sales were as follows:
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Customer A |
15.7 | % | 20.8 | % | 16.1 | % | 21.1 | % | ||||||||
Customer B |
14.2 | % | 10.6 | % | 13.1 | % | 10.8 | % | ||||||||
Customer C |
12.2 | % | 9.9 | % | 12.0 | % | 9.7 | % |
No other customer accounted for 10% or more of total net sales during these periods. The customers disclosed above are distributors (i.e. not end users) of Zebras products.
27
Safe Harbor
Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors which could cause actual results to differ materially from those expressed or implied in such forward looking statements. These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in Zebras industry, market conditions, general domestic and international economic conditions, and other factors. These factors include:
| Market acceptance of Zebras printer and software products and competitors product offerings and the potential effects of technological changes, |
| The effect of global market conditions, including North America, Latin America, Asia Pacific, Europe, Middle East and Africa and other regions in which we do business, |
| Our ability to control manufacturing and operating costs, |
| The availability of credit and the volatility of capital markets, which may affect our suppliers and customers, |
| Success of acquisitions and their integration, |
| Interest rate and financial market conditions because of our large investment portfolio, |
| The effect of natural disaster on our business, |
| Foreign exchange rates due to the large percentage of our international sales and operations, and |
| The outcome of litigation in which Zebra is involved, particularly litigation or claims related to infringement of third-party intellectual property rights. |
When used in this document and documents referenced, the words anticipate, believe, estimate, will and expect and similar expressions as they relate to Zebra or its management are intended to identify such forward-looking statements. We encourage readers of this report to review Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012, for a further discussion of issues that could affect Zebras future results. 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 report.
28
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
There were no material changes in Zebras market risk during the quarter ended June 29, 2013. For additional information on market risk, refer to the Quantitative and Qualitative Disclosures About Market Risk section of our Form 10-K for the year ended December 31, 2012.
In the normal course of business, portions of Zebras operations are subject to fluctuations in currency values. We manage these risks using derivative financial instruments. See Note 8 to the Consolidated Financial Statements included in this report for further discussion of derivative instruments.
29
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this Form 10-Q. The evaluation was conducted under the supervision of our Disclosure Committee, and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and (ii) information required to be disclosed by us in our reports that we file or furnish under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter covered by this report, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Zebra have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
30
Item 1. | Legal Proceedings |
See Note 10 to the Consolidated Financial Statements included in this report.
Item 1A. | Risk Factors |
In addition to the other information included in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012, and the factors identified under Safe Harbor at the end of Item 2 of Part I of this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, cash flows or results of operations. The risks described in our Annual Report on Form 10-K are not the only risks facing Zebra. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, cash flows and/or results of operations.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Treasury Shares
During the second quarter of 2013, Zebra purchased 539,788 shares of Zebras Class A Common Stock at a weighted average share price of $45.71 per share, as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
Period |
Total number of shares purchased |
Average price paid per share |
Total number of shares purchased as part of publicly announced programs |
Maximum number of shares that may yet be purchased under the program |
||||||||||||
April 2013 (March 31 April 27) |
100,900 | $ | 44.92 | 100,900 | 1,834,182 | |||||||||||
May 2013 (April 28 May 25) |
261,009 | $ | 46.30 | 261,009 | 1,573,173 | |||||||||||
June 2013 (May 26 June 29) |
177,879 | $ | 45.30 | 177,879 | 1,395,294 |
(1) | On November 4, 2011, Zebras Board authorized the purchase of up to an additional 3,000,000 shares under our stock repurchase program. This authorization does not have an expiration date. |
(2) | During the second quarter, Zebra acquired 158,664 shares of Zebra Class A Common Stock through the withholding of shares necessary to satisfy tax withholding obligations upon the vesting of restricted stock awards. These shares were acquired at an average price of $46.07 per share. |
31
Item 6. | Exhibits |
31.1 | Rule 13a-14(a)/15d-14(a) Certification | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 | The following financial information from Zebra Technologies Corporation Quarterly Report on Form 10-Q, for the quarter ended June 29, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the consolidated balance sheets; (ii) the consolidated statements of earnings; (iii) the consolidated statements of comprehensive income, (iv) the consolidated statements of cash flows; and (v) notes to consolidated financial statements. |
32
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ZEBRA TECHNOLOGIES CORPORATION | ||||||
Date: August 6, 2013 | By: | /s/ Anders Gustafsson | ||||
Anders Gustafsson | ||||||
Chief Executive Officer | ||||||
Date: August 6, 2013 | By: | /s/ Michael C. Smiley | ||||
Michael C. Smiley | ||||||
Chief Financial Officer |
33
Exhibit 31.1
CERTIFICATION
I, Anders Gustafsson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Zebra Technologies Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d) Disclosed in this quarterly report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 6, 2013 | By: | /s/Anders Gustafsson | ||
Anders Gustafsson | ||||
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Michael C. Smiley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Zebra Technologies Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d) Disclosed in this quarterly report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 6, 2013 | By: | /s/ Michael C. Smiley | ||
Michael C. Smiley | ||||
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Zebra Technologies Corporation (Zebra) on Form 10-Q for the period that ended June 29, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Anders Gustafsson, Chief Executive Officer of Zebra, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Zebra. |
A signed original of this written statement required by Section 906, or another document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Zebra and will be retained by Zebra and furnished to the Securities and Exchange Commission or its staff upon request.
Date: August 6, 2013 | By: | /s/Anders Gustafsson | ||
Anders Gustafsson | ||||
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Zebra Technologies Corporation (Zebra) on Form 10-Q for the period that ended June 29, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Michael C. Smiley, Chief Financial Officer of Zebra, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Zebra. |
A signed original of this written statement required by Section 906, or another document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Zebra and will be retained by Zebra and furnished to the Securities and Exchange Commission or its staff upon request.
Date: August 6, 2013 | By: | /s/ Michael C. Smiley | ||
Michael C. Smiley | ||||
Chief Financial Officer |
Earnings Per Share
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Note 12 – Earnings Per Share Earnings per share were computed as follows (in thousands, except per share amounts):
Potentially dilutive securities excluded from the earnings per share calculation consist of stock options and stock appreciation rights (SARs) with an exercise price greater than the average market closing price of the Class A common stock. These excluded options and SARs were as follows:
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Stockholders' Equity - Additional Information (Detail) (USD $)
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6 Months Ended | |
---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
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Equity [Abstract] | ||
Shares purchased under share repurchase plan, shares | 627,042 | 673,863 |
Shares purchased under share repurchase plan, value | $ 28,563,000 | $ 24,645,000 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
|
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net income | $ 30,566 | $ 30,653 | $ 54,108 | $ 60,817 |
Other comprehensive income (loss): | ||||
Unrealized gains (losses) on hedging transactions, net of income taxes | (391) | 2,400 | 1,352 | (2,246) |
Unrealized holding gains (losses) on investments, net of income taxes | (867) | (46) | (939) | 524 |
Foreign currency translation adjustment | 223 | 105 | 317 | 188 |
Comprehensive income | $ 29,531 | $ 33,112 | $ 54,838 | $ 59,283 |
Inventories
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Note 5 – Inventories The components of inventories are as follows (in thousands):
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Inventories (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventories | The components of inventories are as follows (in thousands):
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Income Taxes - Additional Information (Detail) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
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Income Taxes [Line Items] | ||||
Effective tax rate | 19.00% | 23.60% | 18.60% | 25.80% |
US R&D tax credit, amount | $ 400,000 | |||
US R&D tax credit reduction in tax rate, percentage | 0.60% | |||
Minimum [Member]
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Income Taxes [Line Items] | ||||
Open tax years by major tax jurisdiction | 2009 | |||
Maximum [Member]
|
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Income Taxes [Line Items] | ||||
Open tax years by major tax jurisdiction | 2011 |
Earnings Per Share - Potentially Dilutive Securities Excluded from Earnings Per Share Calculation (Detail)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
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Earnings Per Share [Abstract] | ||||
Potentially dilutive shares | 899,000 | 2,183,000 | 905,000 | 1,799,000 |
Share-Based Compensation
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Note 13 – Share-Based Compensation Zebra has a share-based compensation plan and a stock purchase plan. Zebra recognizes compensation costs using the straight-line method over the vesting period of up to five years. The compensation expense and the related tax benefit for share-based payments were included in the Consolidated Statement of Earnings as follows (in thousands):
Cash flows resulting from the tax benefits of tax deductions in excess of the compensation cost recognized (excess tax benefits) are classified as financing cash flows in the statement of cash flows. The tax benefits classified as financing cash flows for the six months ended June 29, 2013 was $3,727,000 and for the six months ended June 30, 2012 was $1,358,000. The fair value of share-based compensation is estimated on the date of grant using a binomial model. Volatility is based on an average of the implied volatility in the open market and the annualized volatility of Zebra stock prices over our entire stock history. Stock option grants in the table below include both stock options, all of which were non-qualified, and stock appreciation rights (SAR) of which all will be settled in Zebra stock. Restricted stock grants are valued at the market closing price on the date of the grant. The following table shows the weighted-average assumptions used for grants of SARs as well as the fair value of the grants based on those assumptions:
Stock option activity was as follows:
The following table summarizes information about stock options outstanding at June 29, 2013:
SAR activity was as follows:
The terms of the SARs are established under either the 2006 Incentive Compensation Plan or the 2011 Long-term Incentive Plan (the “Plans”) and the applicable SAR agreement. Once vested, a SAR entitles the holder to receive a payment equal to the difference between the per-share grant price of the SAR and the fair market value of a share of Zebra stock on the date the SAR is exercised, multiplied by the number of SARs exercised. Exercised SARs are settled in whole shares of Zebra stock, and any fraction of a share is settled in cash. The SARs granted typically vest annually in four equal amounts on each of the first four anniversaries of the grant date, with some SARs vesting over a period of five years. All SARs expire 10 years after the grant date. The following table summarizes information about SARs outstanding at June 29, 2013:
Time vested restricted stock award activity was as follows:
The terms of Zebra’s restricted stock grants are defined in the Plans and the applicable award agreements. Restricted stock grants consist of time vested restricted stock awards (RSAs) and performance share awards (PSAs). Zebra’s restricted stock awards are expensed over the vesting period of the related award, typically three to five years. Compensation cost is calculated as the market date fair value on the grant date multiplied by the number of shares granted. Performance share award activity granted under the Plans, are as follows:
The fair value of the purchase rights issued under the stock purchase plan is estimated using the following weighted-average assumptions for purchase rights granted. Expected lives of three months to one year have been used along with these assumptions.
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Derivative Instruments - Financial Information Related to Cash Flow Hedges of Future Revenues (Detail) (Cash Flow Hedging [Member])
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 29, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Jun. 29, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Dec. 31, 2012
|
Jun. 29, 2013
Foreign Exchange Forward [Member]
EUR (€)
|
Dec. 31, 2012
Foreign Exchange Forward [Member]
EUR (€)
|
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Derivative [Line Items] | |||||||
Notional balance of outstanding contracts versus the dollar | € 87,660 | € 88,680 | |||||
Hedge effectiveness | 100.00% | 100.00% | 100.00% | ||||
Net gains (losses) included in net sales | $ (900) | $ 1,492 | $ (1,947) | $ 2,649 |
Investments and Marketable Securities - Additional Information (Detail) (USD $)
|
Jun. 29, 2013
|
Dec. 31, 2012
|
---|---|---|
Investments And Cash [Abstract] | ||
Foreign cash and investments | $ 206,001,000 | $ 173,483,000 |
Derivative Instruments (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Information Related to Hedging of Net Assets Included in Consolidated Statement of Earnings | Summary financial information related to these activities included in our consolidated statement of earnings as other income (expense) is as follows (in thousands):
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Financial Information Related to Cash Flow Hedges | Summary financial information related to the cash flow hedges included in accumulated other comprehensive loss is as follows (in thousands):
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Financial Information Related to Cash Flow Hedges of Future Revenues | Summary financial information related to the cash flow hedges of future revenues follows (in thousands, except percentages):
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Forward Contract Amounts Recorded in Consolidated Balance Sheet | The amounts recorded on our consolidated balance sheet are as follows (in thousands):
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Costs Associated with Exit and Restructuring Activities (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Summary of Exit and Restructuring Costs Incurred | There were no exit and restructuring costs for 2012, exit and restructuring costs for 2013 are as follows:
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Liabilities and Expenses Related to Exit and Restructuring Activities | Liabilities and expenses below relate to the 2011 and 2012 exit and restructuring plans (in thousands):
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Location Solution And Manufacturing Operations [Member]
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Summary of Exit and Restructuring Costs Incurred | As of June 29, 2013, we have incurred the following exit and restructuring costs related to the Location Solutions business management structure and manufacturing operations relocation and restructuring (in thousands):
|
Derivative Instruments - Financial Information Related to Hedging of Net Assets Included in Consolidated Statement of Earnings (Detail)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 29, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Jun. 29, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Dec. 31, 2012
USD ($)
|
Jun. 29, 2013
Foreign Exchange Forward [Member]
Euro/US Dollar [Member]
EUR (€)
|
Dec. 31, 2012
Foreign Exchange Forward [Member]
Euro/US Dollar [Member]
EUR (€)
|
Jun. 29, 2013
Foreign Exchange Forward [Member]
Pound/US Dollar [Member]
GBP (£)
|
Dec. 31, 2012
Foreign Exchange Forward [Member]
Pound/US Dollar [Member]
GBP (£)
|
|
Derivative [Line Items] | |||||||||
Change in gains (losses) from foreign exchange derivatives | $ (862) | $ 3,476 | $ 719 | $ 1,441 | |||||
Gain (loss) on net foreign currency assets | 400 | (3,556) | (1,279) | (1,863) | |||||
Foreign exchange loss | (462) | (80) | (560) | (422) | |||||
Notional balance of outstanding contracts versus the dollar | 39,544 | 37,598 | 666 | 3,810 | |||||
Net fair value of outstanding contracts | $ (170) | $ (170) | $ 18 |
Inventories - Components of Inventories (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
|
Dec. 31, 2012
|
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw material | $ 34,173 | $ 31,350 |
Work in process | 948 | 921 |
Deferred costs of long-term contracts | 409 | 604 |
Finished goods | 87,191 | 104,137 |
Inventories, gross | 122,721 | 137,012 |
Inventory reserves | (13,572) | (13,655) |
Inventories, net | $ 109,149 | $ 123,357 |
Derivative Instruments - Forward Contract Amounts Recorded in Consolidated Balance Sheet (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
|
Dec. 31, 2012
|
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Total Liabilities | $ 357 | $ 2,045 |
Accrued Liabilities [Member]
|
||
Derivatives, Fair Value [Line Items] | ||
Total Liabilities | $ 357 | $ 2,045 |
Share-Based Compensation (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Compensation Expense and Related Tax Benefit for Equity-Based Payments | The compensation expense and the related tax benefit for share-based payments were included in the Consolidated Statement of Earnings as follows (in thousands):
|
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Weighted-Average Assumptions Used for Grants of Stock Options and SARs | The following table shows the weighted-average assumptions used for grants of SARs as well as the fair value of the grants based on those assumptions:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity | Stock option activity was as follows:
|
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Summary of Outstanding and Exercisable Options | The following table summarizes information about stock options outstanding at June 29, 2013:
|
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Summary of SAR Activity | SAR activity was as follows:
|
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Summary of Restricted Stock Award Activity | Time vested restricted stock award activity was as follows:
|
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Summary of Performance Share Award Activity | Performance share award activity granted under the Plans, are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Awards Granted Under Equity-Based Compensation Plans |
|
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Weighted-Average Assumptions Used for Employee Purchase Rights Granted Under Stock Purchase Plan | The fair value of the purchase rights issued under the stock purchase plan is estimated using the following weighted-average assumptions for purchase rights granted. Expected lives of three months to one year have been used along with these assumptions.
|
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Stock Appreciation Rights (SARs) [Member]
|
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Summary of Outstanding and Exercisable Options | The following table summarizes information about SARs outstanding at June 29, 2013:
|
Share-Based Compensation - Summary of Performance Share Award Activity (Detail) (Performance Share Awards [Member], USD $)
|
6 Months Ended |
---|---|
Jun. 29, 2013
|
|
Performance Share Awards [Member]
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares, Outstanding at beginning of year | 265,829 |
Shares, Granted | 187,794 |
Shares, Released | (253,484) |
Shares, Forfeited | (859) |
Shares, Outstanding at end of period | 199,280 |
Weighted-Average Grant Date Fair Value, Outstanding at beginning of year | $ 33.55 |
Weighted-Average Grant Date Fair Value, Granted | $ 35.17 |
Weighted-Average Grant Date Fair Value, Released | $ 27.90 |
Weighted-Average Grant Date Fair Value, Forfeited | $ 38.79 |
Weighted-Average Grant Date Fair Value, Outstanding at end of period | $ 42.25 |
Share-Based Compensation - Summary of Restricted Stock Award Activity (Detail) (Restricted Stock Awards [Member], USD $)
|
6 Months Ended |
---|---|
Jun. 29, 2013
|
|
Restricted Stock Awards [Member]
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares, Outstanding at beginning of year | 444,362 |
Shares, Granted | 163,989 |
Shares, Released | (156,126) |
Shares, Forfeited | (4,149) |
Shares, Outstanding at end of period | 448,076 |
Weighted-Average Grant Date Fair Value, Outstanding at beginning of year | $ 35.43 |
Weighted-Average Grant Date Fair Value, Granted | $ 46.07 |
Weighted-Average Grant Date Fair Value, Released | $ 30.80 |
Weighted-Average Grant Date Fair Value, Forfeited | $ 36.52 |
Weighted-Average Grant Date Fair Value, Outstanding at end of period | $ 40.92 |
Costs Associated with Exit and Restructuring Activities - Exit and Restructuring Costs (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | 12 Months Ended | 18 Months Ended | ||
---|---|---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
Jun. 29, 2013
|
|
Restructuring And Related Activities [Abstract] | ||||||
Severance, stay bonuses, and other employee-related expenses | $ 1,036 | $ 2,898 | $ 960 | $ 3,858 | ||
Professional services | 54 | 66 | 0 | 66 | ||
Relocation and transition costs | 11 | 32 | 0 | 32 | ||
Total | $ 1,101 | $ 0 | $ 2,996 | $ 0 | $ 960 | $ 3,956 |
Goodwill and Other Intangible Assets (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Intangible Assets | Intangible assets are as follows (in thousands):
|
Basis of Presentation
|
6 Months Ended |
---|---|
Jun. 29, 2013
|
|
Accounting Policies [Abstract] | |
Basis of Presentation | Note 1 – Basis of Presentation Management prepared these unaudited interim consolidated financial statements for Zebra Technologies Corporation and subsidiaries (“Zebra”) according to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. These financial statements do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in Zebra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The consolidated balance sheet as of December 31, 2012, included in this Form 10-Q is taken from the audited consolidated balance sheet in our Form 10-K. These interim financial statements include all adjustments (of a normal, recurring nature) necessary to present fairly Zebra’s consolidated financial position as of June 29, 2013, the consolidated statements of earnings for the three and six months ended June 29, 2013 and June 30, 2012, and consolidated statements of comprehensive income for the three and six months ended June 29, 2013 and June 30, 2012, and the consolidated statements of cash flows for the six months ended June 29, 2013 and June 30, 2012. These results, however, are not necessarily indicative of results for the full year. |
Investments and Marketable Securities
|
6 Months Ended |
---|---|
Jun. 29, 2013
|
|
Investments Debt And Equity Securities [Abstract] | |
Investments and Marketable Securities | Note 3 – Investments and Marketable Securities Investments in marketable debt securities are classified based on intent and ability to sell the investment securities. Zebra’s available-for-sale securities are used to fund further acquisitions and other operating needs and therefore may be sold prior to maturity. Investments in marketable debt securities for which Zebra intends to sell within the next year are classified as current and those that we intend to hold in excess of one-year are classified as non-current. Changes in the market value of available-for-sale securities are reflected in the accumulated other comprehensive income caption of stockholders’ equity in the balance sheet, until we dispose of the securities. Once these securities are disposed of, either by sale or maturity, the accumulated changes in market value are transferred to investment income. On the statement of cash flows, changes in the balances of available-for-sale securities are shown as purchases, sales and maturities of investments and marketable securities under investing activities. Changes in market value of trading securities would be recorded in investment income as they occur, and the related statement of cash flows would include changes in the balances of trading securities as operating cash flows. Included in Zebra’s cash and investments and marketable securities are amounts held by foreign subsidiaries which are generally invested in U.S. dollar-denominated holdings. Zebra had foreign cash and investments of $206,001,000 as of June 29, 2013, and $173,483,000 as of December 31, 2012. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation, however, Zebra does not see a need to repatriate these funds. |
Goodwill and Other Intangible Assets
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
|
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Note 6 - Goodwill and Other Intangible Assets Intangible assets are as follows (in thousands):
Zebra has $94,942,000 of goodwill recorded as of June 29, 2013 and December 31, 2012. We test goodwill for impairment on an annual basis or more frequently if we believe indicators of impairment exist. We performed our assessment in accordance with Accounting Standards update (ASU) 2011-08, which allows for the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether the fair value needs to be reassessed. We performed our qualitative assessment in June 2013 and determined that our goodwill was not impaired as of the end of May 2013. |
Accounts Receivable
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 29, 2013
|
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Note 4 – Accounts Receivable The components of accounts receivable are as follows (in thousands):
|
Goodwill and Other Intangible Assets - Amortized Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
|
Finite-Lived Intangible Assets [Line Items] | |||||
Gross Amount | $ 69,040 | $ 69,040 | $ 69,040 | ||
Accumulated Amortization | (33,615) | (33,615) | (29,889) | ||
Net Amount | 35,425 | 35,425 | 39,151 | ||
Amortization expense | 1,863 | 770 | 3,726 | 1,540 | |
Current Technology [Member]
|
|||||
Finite-Lived Intangible Assets [Line Items] | |||||
Gross Amount | 18,978 | 18,978 | 18,978 | ||
Accumulated Amortization | (13,226) | (13,226) | (12,391) | ||
Net Amount | 5,752 | 5,752 | 6,587 | ||
Patent and Patent Rights [Member]
|
|||||
Finite-Lived Intangible Assets [Line Items] | |||||
Gross Amount | 29,569 | 29,569 | 29,569 | ||
Accumulated Amortization | (16,302) | (16,302) | (14,618) | ||
Net Amount | 13,267 | 13,267 | 14,951 | ||
Customer Relationships [Member]
|
|||||
Finite-Lived Intangible Assets [Line Items] | |||||
Gross Amount | 20,493 | 20,493 | 20,493 | ||
Accumulated Amortization | (4,087) | (4,087) | (2,880) | ||
Net Amount | $ 16,406 | $ 16,406 | $ 17,613 |
Warranty (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 29, 2013
|
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Guarantees [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accrued Warranty Obligation | The following table is a summary of Zebra’s accrued warranty obligation (in thousands):
|
Income Taxes (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 29, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Effective Tax Rate | For the six months ended June 29, 2013 and June 30, 2012, we did not accrue any interest or penalties into income tax expense.
|
Fair Value Measurements - Maturity Dates of Investments (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
|
Dec. 31, 2012
|
---|---|---|
Fair Value Measurements, Maturity Dates Of Investments [Line Items] | ||
Amortized Cost | $ 398,997 | $ 328,796 |
Estimated Fair Value | 398,152 | 329,335 |
Less Than 1 Year [Member]
|
||
Fair Value Measurements, Maturity Dates Of Investments [Line Items] | ||
Amortized Cost | 143,924 | |
Estimated Fair Value | 144,074 | |
1 to 5 Years [Member]
|
||
Fair Value Measurements, Maturity Dates Of Investments [Line Items] | ||
Amortized Cost | 246,137 | |
Estimated Fair Value | 245,725 | |
6 to 10 Years [Member]
|
||
Fair Value Measurements, Maturity Dates Of Investments [Line Items] | ||
Amortized Cost | 8,936 | |
Estimated Fair Value | 8,353 | |
Thereafter [Member]
|
||
Fair Value Measurements, Maturity Dates Of Investments [Line Items] | ||
Amortized Cost | 0 | |
Estimated Fair Value | $ 0 |
Earnings Per Share - Computation of Earnings Per Share (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
|
Weighted average shares: | ||||
Weighted average common shares outstanding | 50,900 | 51,771 | 50,929 | 51,881 |
Effect of dilutive securities outstanding | 383 | 259 | 381 | 275 |
Diluted weighted average shares outstanding | 51,283 | 52,030 | 51,310 | 52,156 |
Earnings (loss): | ||||
Income from continuing operations | $ 30,558 | $ 30,353 | $ 54,100 | $ 60,517 |
Income from discontinued operations | 8 | 300 | 8 | 300 |
Net income | $ 30,566 | $ 30,653 | $ 54,108 | $ 60,817 |
Basic per share amounts: | ||||
Income from continuing operations | $ 0.60 | $ 0.58 | $ 1.06 | $ 1.16 |
Income from discontinued operations | $ 0.00 | $ 0.01 | $ 0.00 | $ 0.01 |
Net income | $ 0.60 | $ 0.59 | $ 1.06 | $ 1.17 |
Diluted per share amounts: | ||||
Income from continuing operations | $ 0.60 | $ 0.58 | $ 1.05 | $ 1.16 |
Income from discontinued operations | $ 0.00 | $ 0.01 | $ 0.00 | $ 0.01 |
Net income | $ 0.60 | $ 0.59 | $ 1.05 | $ 1.17 |