Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact:
| Investors: Douglas A. Fox, CFA Vice President, Investor Relations and Treasurer + 1 847 793 6735 dfox@zebra.com |
Media: Robb Kristopher Director, Corporate Communications and Public Relations + 1 847 793 5514 rkristopher@zebra.com |
Zebra Technologies Announces Record Financial Results
for the 2014 First Quarter
Effective execution on a proven growth strategy in
an improving business environment leads to record results
Lincolnshire, Ill., May 6, 2014—Zebra Technologies Corporation (NASDAQ: ZBRA) today reported diluted earnings per share of $0.82, up 78.3% from $0.46 per share for the first quarter of 2013. Earnings per share for the first quarter of 2014 include the impact of $0.09 per share of approximately $4,927,000 in acquisition expenses. Financial results for the first quarter of 2013 included exit, acquisition and restructuring costs of $0.04 per share. Net income for the first quarter of 2014 was $41,606,000, an increase of 76.7% from $23,542,000 for the first quarter of 2013.
Net sales for the first quarter of 2014 increased 21.7% to a record $288,268,000 from $236,937,000 for the first quarter a year ago.
For the first quarter of 2014, Adjusted EBITDA was $67,605,000, up 78.3% from $37,924,000 for the first quarter of 2013.
| Summary Financial Performance (Unaudited) |
||||||||||||
| 1Q14 | 1Q13 | Change | ||||||||||
| Net sales (in 000s) |
$ | 288,268 | $ | 236,937 | 21.7 | % | ||||||
| Gross margin (%) |
51.3 | 47.7 | 3.6 | pts. | ||||||||
| Adjusted EBTIDA (in 000s)(1) |
$ | 67,605 | $ | 37,924 | 78.3 | % | ||||||
| Net income (in 000s) |
$ | 41,606 | $ | 23,542 | 76.7 | % | ||||||
| Diluted earnings per share |
$ | 0.82 | $ | 0.46 | 78.3 | % | ||||||
| (1) | A Reconciliation of Non-GAAP financial information to GAAP information is available in the financial tables in this release. |
“First quarter results reflect continued sharp execution of an effective business strategy in an improving business environment,” stated Anders Gustafsson, Zebra’s chief executive officer. “A steady stream of new innovative products and deeper engagements with customers in targeted industries are enabling Zebra to help more customers gain greater visibility into their extended value chains to improve critical business processes.”
Mr. Gustafsson added, “Our customers and channel partners are responding enthusiastically to our recently announced agreement to acquire the Enterprise business of Motorola Solutions. The acquisition will enable Zebra to play a greater strategic role in the important trends of mobility and enterprise asset intelligence and position Zebra for further success and value creation for our shareholders.”
As of March 29, 2014, Zebra had $468,155,000 in cash and investments, and no long-term debt. Net inventories were $119,373,000, and net accounts receivable were $181,618,000.
Discussion and Analysis – First Quarter
| • | Net sales growth of 21.7% from the comparable quarter a year ago included strong growth in all of the company’s geographic regions. North American sales, which increased 29.1%, include the effect of revenues from Hart Systems, which was acquired in December 2013. The company experienced broad strength across multiple product lines. The 123.2% increase in service and software revenue reflects the impact of the revenues from the Hart Systems acquisition in addition to organic growth. Movements in foreign exchange, net of hedges, increased sales by $3,168,000. |
| • | Gross profit margin of 51.3% versus 47.7%, reflects the impact of higher sales, a reduction in freight costs, and the positive contribution of the operations of Hart Systems. Net of hedges, movements in foreign currency increased gross profit by $2,254,000. |
| • | Operating expense growth of 11.4% primarily resulted from higher employee-related expenses and increased expenditures for outside professional services. Operating expenses for the first quarter of 2014 also include $4,927,000 in acquisition costs, compared with $482,000 for the first quarter of 2013. The increase in acquisition costs is principally associated with the company’s agreement to acquire the Enterprise business of Motorola Solutions, Inc. which was announced in April 2014. |
| • | The effective income tax rate of 22.3% for the first quarter of 2014 includes the impact of $3,700,000 of acquisition costs that are not deductible for income tax purposes. |
Second Quarter Outlook
Zebra announced its financial forecast for the second quarter of 2014. Net sales are expected within a range of $280,000,000 to $290,000,000, which primarily reflects the company’s typical seasonality in sales. Diluted earnings per share are expected within a range of $0.74 to $0.84.
Conference Call Notification
Investors are invited to listen to a live webcast of Zebra’s conference call discussing the company’s financial results for the first quarter of 2014. The conference call will be held at 11:00 AM Eastern Time today. To listen to the call, visit the company’s website at http://www.zebra.com.
Forward-looking Statement
This press release contains forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements regarding the company’s financial forecast for the second quarter of 2013 stated in the paragraph above captioned “Second Quarter Outlook.” Similarly, statements herein that describe the proposed transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of managements’ beliefs, intentions, or goals are also forward-looking statements. Actual results may differ from those expressed or implied in the company’s forward-looking statements. These statements represent estimates only as of the date they were made. Zebra undertakes no obligation, other than as may be required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this release.
These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in Zebra’s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include customer acceptance of Zebra’s hardware and software products and competitors’ product offerings, and the potential effects of technological changes. The continued uncertainty over future global economic conditions, the availability of credit, capital markets volatility, may have adverse effects on
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Zebra, its suppliers and its customers. In addition, a disruption in our ability to obtain products from vendors as a result of supply chain constraints, natural disasters or other circumstances could restrict sales and negatively affect customer relationships. Profits and profitability will be affected by Zebra’s ability to control manufacturing and operating costs. Because of a large investment portfolio, interest rates and financial market conditions will also have an impact on results. Foreign exchange rates will have an effect on financial results because of the large percentage of our international sales. The outcome of litigation in which Zebra may be involved is another factor. The success of integrating acquisitions, including Hart Systems, could also affect profitability, reported results and the company’s competitive position in it industry. These and other factors could have an adverse effect on Zebra’s sales, gross profit margins and results of operations and increase the volatility of our financial results. When used in this release and documents referenced, the words “anticipate,” “believe,” “estimate,” and “expect” and similar expressions, as they relate to the company or its management, are intended to identify such forward-looking statements, but are not the exclusive means of identifying these statements. Descriptions of the risks, uncertainties and other factors that could affect the company’s future operations and results can be found in Zebra’s filings with the Securities and Exchange Commission. In particular, readers are referred to Zebra’s Form 10-K for the year ended December 31, 2013.
About Zebra Technologies
A global leader respected for innovation and reliability, Zebra Technologies Corporation (NASDAQ: ZBRA) offers technologies that give a virtual voice to an organization’s assets, people and transactions, enabling organizations to unlock greater business value. The company’s extensive portfolio of marking and printing technologies, including RFID and real-time location solutions, illuminates mission-critical information to help customers take smarter business actions. For more information about Zebra’s solutions, visit http://www.zebra.com.
Use of Non-GAAP Financial Information
This press release contains certain non-GAAP financial measures, consisting of “EBITDA,” “Adjusted EBITDA,” and “Diluted Cash EPS” to measure our operating performance. Management presents these measures to focus on the on-going operations, and believes it is useful to investors because they enable them to perform meaningful comparisons of past and present operating results. The company believes that EBITDA and Adjusted EBITDA provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency to key measures used to evaluate the performance and liquidity of the Company. Reconciliations of Operating Income to EBITDA, EBITDA to Adjusted EBITDA, and Diluted EPS to Diluted cash EPS are included in the financial schedules contained in this press release. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
| March 29, 2014 |
December 31, 2013 |
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| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 51,424 | $ | 62,827 | ||||
| Investments and marketable securities |
414,143 | 350,380 | ||||||
| Accounts receivable, net |
181,618 | 176,917 | ||||||
| Inventories, net |
119,373 | 121,023 | ||||||
| Deferred income taxes |
19,810 | 19,810 | ||||||
| Income tax receivable |
768 | 7,622 | ||||||
| Prepaid expenses and other current assets |
13,879 | 15,524 | ||||||
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|
|
|
|
|||||
| Total current assets |
801,015 | 754,103 | ||||||
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|
|
|
|||||
| Property and equipment at cost, less accumulated depreciation and amortization |
107,511 | 109,588 | ||||||
| Goodwill |
155,800 | 155,800 | ||||||
| Other intangibles, net |
66,296 | 68,968 | ||||||
| Long-term investments and marketable securities |
2,588 | 2,588 | ||||||
| Other assets |
29,169 | 28,765 | ||||||
|
|
|
|
|
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| Total assets |
$ | 1,162,379 | $ | 1,119,812 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 34,637 | $ | 34,688 | ||||
| Accrued liabilities |
52,306 | 61,962 | ||||||
| Deferred revenue |
16,411 | 15,506 | ||||||
| Income taxes payable |
8,010 | 6,898 | ||||||
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|
|
|
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| Total current liabilities |
111,364 | 119,054 | ||||||
| Long-term deferred tax liability |
25,510 | 25,492 | ||||||
| Deferred rent |
1,050 | 1,131 | ||||||
| Other long-term liabilities |
15,515 | 15,477 | ||||||
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|
|
|||||
| Total liabilities |
153,439 | 161,154 | ||||||
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|
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| Stockholders’ equity: |
||||||||
| Class A Common Stock |
722 | 722 | ||||||
| Additional paid-in capital |
146,910 | 143,295 | ||||||
| Treasury stock |
(673,989 | ) | (678,456 | ) | ||||
| Retained earnings |
1,544,484 | 1,502,878 | ||||||
| Accumulated other comprehensive loss |
(9,187 | ) | (9,781 | ) | ||||
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|
|
|||||
| Total stockholders’ equity |
1,008,940 | 958,658 | ||||||
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|
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| Total liabilities and stockholders’ equity |
$ | 1,162,379 | $ | 1,119,812 | ||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||||
| March 29, 2014 |
March 30, 2013 |
|||||||
| Net sales: |
||||||||
| Net sales of tangible products |
$ | 261,892 | $ | 225,121 | ||||
| Revenue from services and software |
26,376 | 11,816 | ||||||
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|
|
|
|
|||||
| Total net sales |
288,268 | 236,937 | ||||||
|
|
|
|
|
|||||
| Cost of sales: |
||||||||
| Cost of sales of tangible products |
130,449 | 117,111 | ||||||
| Cost of services and software |
9,881 | 6,761 | ||||||
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|
|
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|
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| Total cost of sales |
140,330 | 123,872 | ||||||
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|
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| Gross profit |
147,938 | 113,065 | ||||||
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| Operating expenses: |
||||||||
| Selling and marketing |
35,416 | 33,515 | ||||||
| Research and development |
22,857 | 21,858 | ||||||
| General and administrative |
28,391 | 25,277 | ||||||
| Amortization of intangible assets |
2,672 | 1,863 | ||||||
| Acquisition costs |
4,927 | 482 | ||||||
| Exit and restructuring costs |
267 | 1,895 | ||||||
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|
|
|
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| Total operating expenses |
94,530 | 84,890 | ||||||
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| Operating income |
53,408 | 28,175 | ||||||
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| Other income (expense): |
||||||||
| Investment income |
421 | 677 | ||||||
| Foreign exchange loss |
(292 | ) | (98 | ) | ||||
| Other, net |
8 | 10 | ||||||
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| Total other income |
137 | 589 | ||||||
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| Income before income taxes |
53,545 | 28,764 | ||||||
| Income taxes |
11,939 | 5,222 | ||||||
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| Net income |
$ | 41,606 | $ | 23,542 | ||||
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| Basic earnings per share |
$ | 0.83 | $ | 0.46 | ||||
| Diluted earnings per share |
$ | 0.82 | $ | 0.46 | ||||
| Basic weighted average shares outstanding |
50,402 | 50,980 | ||||||
| Diluted weighted average and equivalent shares outstanding |
50,974 | 51,366 | ||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 29, 2014 |
March 30, 2013 |
|||||||
| Net income |
$ | 41,606 | $ | 23,542 | ||||
| Other comprehensive income (loss): |
||||||||
| Unrealized gains on hedging transactions, net of income taxes |
613 | 1,743 | ||||||
| Unrealized holding gains (losses) on investments, net of income taxes |
148 | (72 | ) | |||||
| Foreign currency translation adjustment |
(167 | ) | 94 | |||||
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| Comprehensive income |
$ | 42,200 | $ | 25,307 | ||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 29, 2014 |
March 30, 2013 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 41,606 | $ | 23,542 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
9,003 | 7,372 | ||||||
| Share-based compensation |
2,966 | 2,146 | ||||||
| Excess tax benefit from share-based compensation |
(395 | ) | (358 | ) | ||||
| Loss on sale of property and equipment |
12 | 136 | ||||||
| Deferred income taxes |
18 | 990 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable, net |
(4,793 | ) | (516 | ) | ||||
| Inventories, net |
1,663 | 6,943 | ||||||
| Other assets |
2,419 | (137 | ) | |||||
| Accounts payable |
(2,435 | ) | (7,119 | ) | ||||
| Accrued liabilities |
(9,670 | ) | (12,787 | ) | ||||
| Deferred revenue |
682 | 1,618 | ||||||
| Income taxes |
8,146 | 649 | ||||||
| Other operating activities |
533 | 1,685 | ||||||
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|
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| Net cash provided by operating activities |
49,755 | 24,164 | ||||||
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| Cash flows from investing activities: |
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| Purchases of property and equipment |
(2,374 | ) | (1,952 | ) | ||||
| Acquisition of intangible assets |
0 | (500 | ) | |||||
| Acquisition of long-term investment |
(405 | ) | (604 | ) | ||||
| Purchases of investments and marketable securities |
(151,817 | ) | (106,947 | ) | ||||
| Maturities of investments and marketable securities |
15,996 | 3,144 | ||||||
| Proceeds from sales of investments and marketable securities |
72,206 | 65,094 | ||||||
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| Net cash used in investing activities |
(66,394 | ) | (41,765 | ) | ||||
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| Cash flows from financing activities: |
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| Purchase of treasury stock |
0 | (3,888 | ) | |||||
| Proceeds from exercise of stock options and stock purchase plan purchases |
4,936 | 5,913 | ||||||
| Excess tax benefit from share-based compensation |
395 | 358 | ||||||
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| Net cash provided by financing activities |
5,331 | 2,383 | ||||||
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| Effect of exchange rate changes on cash |
(95 | ) | 70 | |||||
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| Net decrease in cash and cash equivalents |
(11,403 | ) | (15,148 | ) | ||||
| Cash and cash equivalents at beginning of period |
62,827 | 64,740 | ||||||
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| Cash and cash equivalents at end of period |
$ | 51,424 | $ | 49,592 | ||||
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| Supplemental disclosures of cash flow information: |
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| Income taxes paid, net |
$ | 3,304 | $ | 2,271 | ||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
SALES BY PRODUCT CATEGORY
| Three Months Ended | ||||||||||||||||||||
| March 29, | March 30, | Percent | Percent of | Percent of | ||||||||||||||||
| Product Category |
2014 | 2013 | Change | Net Sales - 2014 | Net Sales - 2013 | |||||||||||||||
| Hardware |
$ | 196,217 | $ | 166,692 | 17.7 | 68.1 | 70.3 | |||||||||||||
| Supplies |
63,504 | 57,123 | 11.2 | 22.0 | 24.1 | |||||||||||||||
| Service and software |
26,376 | 11,816 | 123.2 | 9.1 | 5.0 | |||||||||||||||
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| Subtotal products |
286,097 | 235,631 | 21.4 | 99.2 | 99.4 | |||||||||||||||
| Shipping and handling |
2,171 | 1,306 | 66.2 | 0.8 | 0.6 | |||||||||||||||
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| Total net sales |
$ | 288,268 | $ | 236,937 | 21.7 | 100.0 | 100.0 | |||||||||||||
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SALES BY GEOGRAPHIC REGION
| Three Months Ended | ||||||||||||||||||||
| March 29, | March 30, | Percent | Percent of | Percent of | ||||||||||||||||
| Geographic Region |
2014 | 2013 | Change | Net Sales – 2014 | Net Sales – 2013 | |||||||||||||||
| Europe, Middle East and Africa |
$ | 91,439 | $ | 77,673 | 17.7 | 31.7 | 32.8 | |||||||||||||
| Latin America |
25,640 | 23,131 | 10.8 | 8.9 | 9.8 | |||||||||||||||
| Asia-Pacific |
37,967 | 32,909 | 15.4 | 13.2 | 13.9 | |||||||||||||||
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| Total International |
155,046 | 133,713 | 16.0 | 53.8 | 56.5 | |||||||||||||||
| North America |
133,222 | 103,224 | 29.1 | 46.2 | 43.5 | |||||||||||||||
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| Total net sales |
$ | 288,268 | $ | 236,937 | 21.7 | 100.0 | 100.0 | |||||||||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATIONS
(Amounts in thousands, except per-share data)
(Unaudited)
| Three Months Ended | ||||||||
| Operating Income to EBITDA and Adjusted EBITDA | March 29, 2014 |
March 30, 2013 |
||||||
| Operating income (GAAP) |
$ | 53,408 | $ | 28,175 | ||||
| Depreciation |
6,331 | 5,509 | ||||||
| Amortization of intangible assets |
2,672 | 1,863 | ||||||
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| EBITDA (Non-GAAP) |
$ | 62,411 | $ | 35,547 | ||||
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| Acquisition costs |
$ | 4,927 | $ | 482 | ||||
| Exit and restructuring costs |
267 | 1,895 | ||||||
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| Adjusted EBITDA (Non-GAAP) |
$ | 67,605 | $ | 37,924 | ||||
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