VERNON HILLS, Ill., July 27 /PRNewswire-FirstCall/ -- Zebra Technologies Corporation today announced net sales for the quarter that ended July 2, 2005, were a record $176,614,000, up 8.5% from $162,830,000 for the same period in 2004. Net income for the second quarter was $26,763,000 versus $29,428,000, with corresponding diluted earnings per share of $0.37 versus $0.41. Per-share figures have been adjusted for a three-for-two stock split paid on August 25, 2004, in the form of a 50% stock dividend.
"These financial results did not meet expectations and reflect weakness in sales to retail accounts in our two largest territories, a business slowdown in parts of Europe, and higher operating expenses," stated Edward Kaplan, Zebra's chairman and chief executive officer. "These circumstances mask significant progress and growth in several areas of our business. Shipments to customers other than retail remained firm, and the company benefited from strong growth in emerging Latin America, Asia Pacific and Eastern Europe regions. Zebra's financial strength and leading position in fundamentally healthy markets with long-term favorable growth prospects keep us optimistic about our ability to build value in the company for all of its stockholders."
Discussion and Analysis
For the second quarter of 2005:
-- High growth in the company's Latin America and Asia Pacific territories
to record levels paced quarterly sales, which were moderated by slower
growth in North America and the Europe, Middle East and Africa (EMEA)
region, the company's two largest territories. Quarterly sales growth
was affected by a slowdown in shipments of mobile printers, compared
with large shipments to major retail customers in North America and
EMEA a year ago. In addition, deteriorating economic conditions reduced
sales growth for the EMEA territory.
-- Gross profit margin of 50.6% versus 51.9% was affected by unfavorable
foreign exchange movements, higher distribution and freight expenses,
and less efficient overhead absorption.
-- Higher legal expenses and ongoing investments in personnel to support
geographic expansion contributed to operating expense growth of 25.7%.
For the first six months of 2005, net sales were $347,342,000, an increase of 9.6% over $317,004,000 for the first half of 2004. First-half net income was $53,870,000, or $0.74 per diluted share, compared with $57,362,000, or $0.79 per diluted share, for the same period a year ago.
At July 2, 2005, Zebra had $573,810,000 in cash, investments and marketable securities, and no long-term debt. Inventories totaled $63,569,000. Accounts receivable were $104,999,000.
Third Quarter Outlook
Zebra also announced its financial forecast for the third quarter of 2005. Net sales are expected within a range of $170,000,000 and $180,000,000. Earnings are expected within a range of $0.35 and $0.39 per diluted share.
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 third quarter of 2005 stated in the paragraph directly above. Actual results may differ from those expressed or implied in the company's forward-looking statements. These statements represent estimates only as of the date they were made. We may elect to update forward-looking statements but expressly disclaim any obligation to do so, even if our estimates change.
These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in general industry and market conditions, of general domestic and international economic conditions, and other factors. Generally, market acceptance of the company's products and product lines and competitors' product offerings, as well as the speed of adoption of the company's printing technologies and competing technologies could also have an effect on the accuracy of our estimates and forward-looking statements. When used in this release and documents referenced, the words "anticipate," "believe," "estimate," and "expect" and similar expressions, as they relate to the company or its management are intended to identify such forward-looking statements, but are not the exclusive means of identifying these statements. Descriptions of the risks, uncertainties and other factors that could affect the company's future operations and results can be found in Zebra's filings with the Securities and Exchange Commission. In particular, readers are referred to Zebra's Form 10-K for the year ended December 31, 2004, and Form 10-Q reports.
Zebra Technologies Corporation delivers innovative and reliable on-demand printing solutions for business improvement and security applications in 90 countries around the world. More than 90 percent of Fortune 500 companies use Zebra-brand printers. A broad range of applications benefit from Zebra-brand thermal bar code, "smart" label, receipt, and card printers, resulting in enhanced security, increased productivity, improved quality, lower costs, and better customer service. The company has sold more than four million printers, including RFID printer/encoders and wireless mobile solutions, and also offers software, connectivity solutions and printing supplies. Information about Zebra bar code, card and RFID products can be found at http://www.zebra.com/ .
Investors are invited to listen to a live Internet broadcast of Zebra's conference call discussing the company's financial results for the second quarter of 2005. The conference call will be held at 11:00 AM Eastern Time today. To listen to the call, visit the company's Web site at http://www.zebra.com/ .
For Information, Contact:
Charles R. Whitchurch
Chief Financial Officer
Phone: 847.634.6700
Fax: 847.821.2545
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
July 2, December 31,
2005 2004
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $10,098 $17,983
Investments and marketable securities 563,712 540,010
Accounts receivable, net 104,999 96,881
Inventories 63,569 59,255
Deferred income taxes 8,747 6,625
Prepaid expenses 5,358 3,884
Total current assets 756,483 724,638
Property and equipment at cost, less
accumulated depreciation and amortization 47,564 46,283
Goodwill 69,095 61,793
Other intangibles 14,809 6,517
Other assets 30,912 22,991
Total assets $918,863 $862,222
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $21,674 $24,130
Accrued liabilities 27,501 29,248
Current portion of obligation
under capital lease 55 54
Income taxes payable 1,969 6,144
Total current liabilities 51,199 59,576
Obligation under capital lease,
less current portion 89 117
Deferred income taxes 3,468 417
Deferred rent 569 564
Other long-term liabilities 4,883 3,894
Total liabilities 60,208 64,568
Stockholders' equity:
Preferred stock - -
Class A Common Stock 721 718
Additional paid-in capital 92,877 84,180
Retained earnings 760,359 706,489
Accumulated other comprehensive income 4,698 6,267
Total stockholders' equity 858,655 797,654
Total liabilities and
stockholders' equity $918,863 $862,222
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Net sales $176,614 $162,830 $347,342 $317,004
Cost of sales 87,266 78,315 170,629 151,886
Gross profit 89,348 84,515 176,713 165,118
Operating expenses:
Selling and
marketing 22,554 18,023 43,621 35,231
Research and
development 12,054 9,233 22,721 18,129
General and
administrative 16,810 12,562 31,757 25,324
Amortization of
intangible assets 387 626 1,034 1,275
Acquired in-process
technology - - - 22
Exit costs 141 876 1,658 1,238
Total operating
expenses 51,946 41,320 100,791 81,219
Operating income 37,402 43,195 75,922 83,899
Other income (expense):
Investment incom 3,072 2,091 6,349 5,163
Interest expense (27) (6) (31) (32)
Foreign exchange
gains (losses) 812 413 865 (244)
Other, net (243) (537) (545) (836)
Total other income 3,614 1,961 6,638 4,051
Income before income
taxes 41,016 45,156 82,560 87,950
Income taxes 14,253 15,728 28,690 30,588
Net income $26,763 $29,428 $53,870 $57,362
Basic earnings
per share $0.37 $0.41 $0.75 $0.80
Diluted earnings
per share $0.37 $0.41 $0.74 $0.79
Basic weighted average
shares outstanding 72,013 71,559 71,939 71,397
Diluted weighted
average and
equivalent shares
outstanding 72,714 72,554 72,706 72,403
Note: Share and per-share figures for 2004 were adjusted for a three-for-
two stock split paid in the form of a 50% stock dividend on
August 25, 2004.
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
July 2, July 3,
2005 2004
Cash flows from operating activities:
Net income $53,870 $57,362
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,399 6,080
Tax benefit from exercise
of stock options 2,100 5,516
Acquired in-process technology - 22
Deferred income taxes 859 (685)
Changes in assets and liabilities,
net of businesses acquired:
Accounts receivable, net (12,124) (12,496)
Inventories (5,342) (4,527)
Other assets (16,612) (3,105)
Accounts payable (1,655) 398
Accrued liabilities (1,291) (2,152)
Income taxes payable (3,831) 1,767
Other operating activities 1,532 (807)
Net cash provided by operating
activities 23,905 47,373
Cash flows from investing activities:
Purchases of property and equipment (6,607) (7,737)
Acquisition of assets of Retail
Systems International, Inc. (7,655) -
Purchases of investments and
marketable securities (509,112) (709,560)
Maturities of investments and
marketable securities 313,076 475,442
Sales of investments and
marketable securities 172,334 178,143
Net cash used in investing activities (37,964) (63,712)
Cash flows from financing activities:
Proceeds from exercise of stock
options and stock purchase plan purchases 6,600 11,432
Payments for obligation under capital lease (27) (8)
Net cash provided by financing activities 6,573 11,424
Effect of exchange rate changes on cash (399) 36
Net decrease in cash and cash equivalents (7,885) (4,879)
Cash and cash equivalents at beginning of period 17,983 14,266
Cash and cash equivalents at end of period $10,098 $9,387
Supplemental disclosures of cash flow information:
Interest paid $31 $32
Income taxes paid 31,104 23,929
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
Three Months Ended
July 2, July 3, Percent Percent of
2005 2004 Change Total Sales
Hardware $135,915 $127,167 6.9 77.0
Supplies 33,071 28,273 17.0 18.7
Service and software 6,648 6,283 5.8 3.8
Shipping and handling 1,378 1,095 25.8 0.7
Cash flow from
hedging activities (398) 12 NM (0.2)
Total sales $176,614 $162,830 8.5 100.0
Sales by Geographic Region
Three Months Ended
July 2, July 3, Percent Percent of
2005 2004 Change Total Sales
Europe, Middle East
and Africa $58,271 $53,156 9.6 33.0
Latin America 12,897 9,452 36.4 7.3
Asia-Pacific 15,665 12,039 30.1 8.9
Total international 86,833 74,647 16.3 49.2
North America 89,781 88,183 1.8 50.8
Total sales $176,614 $162,830 8.5 100.0
Sales by Product Category
Six Months Ended
July 2, July 3, Percent Percent of
2005 2004 Change Total Sales
Hardware $269,386 $245,645 9.7 77.6
Supplies 63,019 56,947 10.7 18.1
Service and software 12,728 12,824 (0.7) 3.7
Shipping and handling 2,880 2,219 29.8 0.8
Cash flow from hedging
activities (671) (631) NM (0.2)
Total sales $347,342 $317,004 9.6 100.0
Sales by Geographic Region
Six Months Ended
July 2, July 3, Percent Percent of
2005 2004 Change Total Sales
Europe, Middle East
and Africa $118,851 $105,608 12.5 34.2
Latin America 23,023 17,891 28.7 6.6
Asia-Pacific 28,124 24,189 16.3 8.1
Total international 169,998 147,688 15.1 48.9
North America 177,344 169,316 4.7 51.1
Total sales $347,342 $317,004 9.6 100.0