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Last updated on April 17, 2014 at 17:30 EDT

Zebra Technologies Announces Financial Results for the 2013 First Quarter

May 2, 2013

Temporary slowdown in North America prompts reduction in channel inventories; Sales rebound expected for second quarter

LINCOLNSHIRE, Ill., May 2, 2013 /PRNewswire/ — Zebra Technologies Corporation (NASDAQ: ZBRA) today announced 2013 first quarter diluted earnings of $0.46 per share, which includes exit, restructuring and acquisition costs that reduced earnings by $0.04 per share. Earnings for the first quarter of 2012 totaled $0.58 per share. Net sales for the quarter ended March 30, 2013, decreased 2.8% to $236,937,000 from $243,875,000 for the first quarter of 2012.

               Summary Financial Performance (Unaudited)
                ----------------------------------------

                    1Q13                         1Q12                     Change
                    ----                         ----                     ------

     Net
     sales
     (in
     000s)                 $236,937                     $243,875                  (2.8)%

     Gross
     margin
     (%)                       47.7                         49.2 (1.5) pts.

     Operating
     margin
     (%)                       11.9                         17.3 (5.4) pts.

     Net
     income
     (in
     000s)                  $23,542                      $30,164                 (22.0)%

     Diluted
     earnings
     per
     share:                   $0.46                        $0.58                 (20.7)%
     --------                 -----                        -----                 ------

“Entering the first quarter, we expected growth in North America for the full quarter to offset the anticipated decline in Europe. However, a slowdown in our North American business during the first half of the period caused some of our distribution channel partners to meaningfully reduce inventories,” stated Anders Gustafsson, Zebra’s chief executive officer. “During the quarter, our international operations performed largely as expected. Business activity in all regions has now increased, and the pipeline of opportunities has improved. We also made progress on developing new, incremental revenue streams with solutions such as mobile point-of-sale, location solutions and RFID that are emerging with important technology trends. We remain confident in Zebra’s continued ability to invest in those areas that deliver the highest risk-adjusted returns and increasing shareholder value.”

Mr. Gustafsson added, “Looking ahead, our focus remains on driving growth, but we are cognizant of the ongoing business climate worldwide. As a result, we will remain responsive to these challenges by optimizing our cost structure and allocation of resources, while maintaining investments in important, high-return business development opportunities.”

As of March 30, 2013, Zebra had $417,564,000 in cash and investments, and no long-term debt. Net inventories were $116,417,000, and net accounts receivable were $169,255,000.

Discussion and Analysis – First quarter

  • Net sales for the first quarter were affected by the ongoing challenged conditions in Europe and Asia, along with a slowdown in business during the first few weeks of the quarter in North America. Sales increases of 3.8% in Latin America and 0.9% in North America were offset by sales declines of 0.7% in Asia Pacific and 9.8% in the Europe, Middle East and Africa (EMEA) region. On a constant-currency basis, sales in EMEA declined 2.8%. Sales of supplies – thermal ribbons, labels, wristbands and receipts – increased by 14.3%.
  • Gross profit margin of 47.7%, versus 49.2% in 2012, reflects lower sales across Europe, Middle East and Africa (EMEA), and Asia Pacific regions in addition to unfavorable movements in product mix.
  • Operating expense growth of 9.0%, including $1,895,000 in exit and restructuring costs and $482,000 in acquisition costs. Higher selling and marketing, research and development, and general and administrative expenses generally relate to increased employee-related expenses. Amortization also increased over 2012 levels.

Stock Purchase Update
During the first quarter of 2013, Zebra returned $3.9 million to shareholders through the repurchase of 87,254 shares of Zebra Technologies Corporation Class A Common Stock at an average price of $44.56 per share. At March 30, 2013, the company had 1,935,082 shares remaining in its stock buyback authorization, and 51,017,867 shares of common stock were outstanding.

Second Quarter Outlook
Zebra announced its financial forecast for the second quarter of 2013. Net sales are expected within a range of $246,000,000 to $258,000,000. Diluted earnings per share are expected within a range of $0.58 to $0.67.

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 2013. 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.” 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 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 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, 2012.

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.

    Contact:

    Investors:                         Media:
    ----------                         ------

    Douglas A. Fox, CFA                Robb Kristopher

    Vice President, Investor Relations Director, Corporate Communications

    and Treasurer                      and Public Relations

    + 1 847 793 6735                   + 1 847 793 5514

    dfox@zebra.com                     rkristopher@zebra.com

                                                    ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                                                              CONSOLIDATED BALANCE SHEETS

                                                                 (Amounts in thousands)

                                                                                March 30,               December 31,

                                                                                                  2013                    2012
                                                                                                  ----                    ----

                                ASSETS                             (Unaudited)

    Current assets:

    Cash and cash equivalents                                                                  $49,592                 $64,740

    Investments and marketable
     securities                                                                                364,529                 324,140

    Accounts receivable, net                                                                   169,255                 168,732

    Inventories, net                                                                           116,417                 123,357

    Deferred income taxes                                                                       12,962                  13,484

    Prepaid expenses and other
     current assets                                                                             17,379                  16,410

    Total current assets                                                                       730,134                 710,863
                                                                                               -------                 -------

    Property and equipment at cost,
     less accumulated depreciation
     and amortization                                                                          101,054                 101,349

    Long-term deferred income taxes                                                              2,134                   2,602

    Goodwill                                                                                    94,942                  94,942

    Other intangibles, net                                                                      37,288                  39,151

    Long-term investments and
     marketable securities                                                                       3,443                   5,195

    Other assets                                                                                14,602                  13,646
                                                                                                ------                  ------

                                        Total assets                                          $983,597                $967,748
                                                                                              ========                ========

                                   LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

    Accounts payable                                                                           $20,141                 $23,045

    Accrued liabilities                                                                         43,932                  57,234

    Deferred revenue                                                                            13,445                  13,326

    Income taxes payable                                                                         2,374                   1,609
                                                                                                 -----                   -----

    Total current liabilities                                                                   79,892                  95,214

    Deferred rent                                                                                1,245                   1,303

    Other long-term liabilities                                                                 16,096                  14,229
                                                                                                ------                  ------

                                        Total liabilities                                       97,233                 110,746
                                                                                                ------                 -------

    Stockholders' equity:

    Preferred Stock                                                                                  -                       -

    Class A Common Stock                                                                           722                     722

    Additional paid-in capital                                                                 140,736                 139,523

    Treasury stock                                                                            (638,596)               (641,438)

    Retained earnings                                                                        1,392,062               1,368,520

    Accumulated other comprehensive
     loss                                                                                       (8,560)                (10,325)
                                                                                                ------                 -------

                                       Total stockholders' equity                              886,364                 857,002
                                                                                               -------                 -------

                                       Total liabilities and
                                        stockholders' equity                                  $983,597                $967,748
                                                                                              ========                ========

                            ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF EARNINGS

                             (Amounts in thousands, except per share data)

                                              (Unaudited)

                                          Three Months Ended
                                          ------------------

                                              March 30,                     March 31,

                                                           2013                          2012
                                                           ----                          ----

    Net sales:

      Net sales
       of
       tangible
       products                                        $225,121                      $232,476

      Revenue
       from
       services
       and
       software                                          11,816                        11,399
                                                         ------                        ------

    Total net
     sales                                              236,937                       243,875
                                                        -------                       -------

    Cost of sales

      Cost of
       sales of
       tangible
       products                                         117,111                       119,033

      Cost of
       services
       and
       software                                           6,761                         4,959
                                                          -----                         -----

    Total cost
     of sales                                           123,872                       123,992
                                                        -------                       -------

    Gross
     profit                                             113,065                       119,883
                                                        -------                       -------

    Operating expenses:

       Selling and
        marketing                                        33,515                        32,114

       Research
        and
        development                                      21,858                        20,416

       General and
        administrative                                   25,276                        24,320

        Amortization
        of
        intangible
        assets                                            1,863                           770

       Acquisition
        costs                                               482                           254

       Exit and
        restructuring
        costs                                             1,895                             -

    Total
     operating
     expenses                                            84,889                        77,874
                                                         ------                        ------

    Operating
     income                                              28,176                        42,009
                                                         ------                        ------

    Other income (expense):

       Investment
        income                                              677                           592

       Foreign
        exchange
        loss                                                (98)                         (342)

       Other, net                                             9                          (364)
                                                            ---                          ----

    Total other
     income
     (expense)                                              588                          (114)
                                                            ---                          ----

    Income
     before
     income
     taxes                                               28,764                        41,895

    Income
     taxes                                                5,222                        11,731
                                                          -----                        ------

    Net income                                          $23,542                       $30,164
                                                        =======                       =======

    Basic
     earnings
     per share                                            $0.46                         $0.58

    Diluted
     earnings
     per share                                            $0.46                         $0.58

    Basic
     weighted
     average
     shares
     outstanding                                         50,980                        51,998

    Diluted
     weighted
     average
     and
     equivalent
     shares
     outstanding                                         51,366                        52,301

                            ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                        (Amounts in thousands)

                                              (Unaudited)

                                             Three Months Ended
                                             ------------------

                                               March 30, 2013               March 31, 2012
                                               --------------               --------------

    Net income                                           $23,542                      $30,164

    Other comprehensive income (loss):

       Unrealized gains
        (loss) on
        hedging
        transactions,
        net of income
        taxes                                              1,743                       (4,646)

       Unrealized
        holding gains
        (loss) on
        investments,
        net of income
        taxes                                                (72)                         570

       Foreign currency
        translation
        adjustment                                            94                           83

    Comprehensive
     income                                              $25,307                      $26,171
                                                         =======                      =======

                                           ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       (Amounts in thousands)

                                                             (Unaudited)

                                                                        Three Months Ended
                                                                        ------------------

                                                                          March 30, 2013        March 31, 2012
                                                                          --------------        --------------

    Cash flows from operating activities:

            Net income                                                                 $23,542               $30,164

            Adjustments to reconcile net income to net cash provided
             by (used in)

            operating activities:

                    Depreciation and amortization                                        7,372                 5,959

                    Share-based compensation                                             2,146                 3,800

                    Excess tax benefit from share-
                     based compensation                                                   (358)                  (66)

                    Loss on sale of property and
                     equipment                                                             136                    83

                    Deferred income taxes                                                  990                  (391)

                    Changes in assets and liabilities:

                            Accounts receivable, net                                      (516)               (1,862)

                            Inventories, net                                             6,943                 7,169

                            Other assets                                                  (137)                9,395

                            Accounts payable                                            (7,119)               (3,378)

                            Accrued liabilities                                        (12,787)              (16,881)

                            Deferred revenue                                             1,618                 1,151

                            Income taxes                                                   649                 6,135

                            Other operating activities                                   1,685                (4,725)

                                    Net cash provided by operating
                                     activities                                         24,164                36,553
                                                                                        ------                ------

    Cash flows from investing activities:

            Purchases of property and
             equipment                                                                  (1,952)               (7,654)

            Proceeds from the sale of
             business                                                                        -                13,790

            Acquisition of intangible
             assets                                                                       (500)                    -

            Acquisition of long-term
             equity investment                                                            (604)                    -

            Purchases of investments and
             marketable securities                                                    (106,947)             (132,390)

            Maturities of investments and
             marketable securities                                                       3,144                81,189

            Proceeds from sales of
             investments and marketable
             securities                                                                 65,094                21,748

                                    Net cash used in investing
                                     activities                                        (41,765)              (23,317)
                                                                                       -------               -------

    Cash flows from financing activities:

            Purchase of treasury stock                                                  (3,888)               (9,775)

            Proceeds from exercise of
             stock options and stock
             purchase plan purchases                                                     5,913                 1,998

            Excess tax benefit from share-
             based compensation                                                            358                    66

                                    Net cash provided by (used in)
                                     financing activities                                2,383                (7,711)
                                                                                         -----                ------

    Effect of exchange rate
     changes on cash                                                                        70                     -
                                                                                           ---                   ---

    Net increase (decrease) in
     cash and cash equivalents                                                         (15,148)                5,525

    Cash and cash equivalents at
     beginning of period                                                                64,740                36,418
                                                                                        ------                ------

    Cash and cash equivalents at
     end of period                                                                     $49,592               $41,943
                                                                                       =======               =======

    Supplemental disclosures of cash flow information:

    Income taxes paid, net                                                              $2,271                $7,956

                                                                                                           ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                                                                                                                    SUPPLEMENTAL SALES INFORMATION

                                                                                                                        (Amounts in thousands)

                                                                                                                             (Unaudited)

                                                                     SALES BY PRODUCT CATEGORY

                                             Three Months Ended
                                             ------------------

                                                  March 30,                                  March 31,                                Percent                                   Percent of                                           Percent of

    Product Category                                              2013                                        2012                    Change                                 Net Sales - 2013                                     Net Sales - 2012
    ----------------                                              ----                                        ----                    ------                                 ----------------                                     ----------------

    Hardware                                                  $166,692                                    $181,196                               (8.0)                                                70.3                                                 74.3

    Supplies                                                    57,123                                      49,962                               14.3                                                 24.1                                                 20.5

    Service and software                                        11,816                                      11,399                                3.7                                                  5.0                                                  4.7
                                                                ------                                      ------                                                                                     ---                                                  ---

       Subtotal products                                       235,631                                     242,557                               (2.9)                                                99.4                                                 99.5

    Shipping and handling                                        1,306                                       1,318                               (0.9)                                                 0.6                                                  0.5

       Total net sales                                        $236,937                                    $243,875                               (2.8)                                               100.0                                                100.0
                                                              ========                                    ========                                                                                   =====                                                =====

                                                                   SALES BY GEOGRAPHIC REGION

                                             Three Months Ended
                                             ------------------

                                                  March 30,                                  March 31,                                Percent                                   Percent of                                           Percent of

    Geographic Region                                             2013                                        2012                    Change                                 Net Sales - 2013                                     Net Sales - 2012
    -----------------                                             ----                                        ----                    ------                                 ----------------                                     ----------------

    Europe, Middle East and Africa                             $77,673                                     $86,121                               (9.8)                                                32.8                                                 35.3

    Latin America                                               23,131                                      22,287                                3.8                                                  9.8                                                  9.1

    Asia-Pacific                                                32,909                                      33,148                               (0.7)                                                13.9                                                 13.6
                                                                ------                                      ------                                                                                    ----                                                 ----

       Total International                                     133,713                                     141,556                               (5.5)                                                56.5                                                 58.0

    North America                                              103,224                                     102,319                                0.9                                                 43.5                                                 42.0
                                                               -------                                     -------                                                                                    ----                                                 ----

       Total net sales                                        $236,937                                    $243,875                               (2.8)                                               100.0                                                100.0
                                                              ========                                    ========                                                                                   =====                                                =====

                  ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                       PRINTER UNITS and AVERAGE UNIT PRICES

                                    (Unaudited)

               Three Months Ended
               ------------------

              March 30,                          March 31,        Percent

                          2013                               2012 Change
                          ----                               ---- ------

     Total
     printers
     shipped           299,633                            297,669          0.7

     Average
     selling
     price
     of
     printers
     shipped              $469                               $503         (6.7)

SOURCE Zebra Technologies Corporation


Source: PR Newswire