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Zebra Technologies Announces Record Sales and Earnings for the 2013 Fourth Quarter and Full Year

Quarterly EPS up 20% and sales up 12% on broad-based business momentum; Annual sales exceed $1 billion for first time

LINCOLNSHIRE, Ill., Feb. 19, 2014 /PRNewswire/ -- Zebra Technologies Corporation (NASDAQ: ZBRA) today announced 2013 fourth quarter diluted earnings per share of a record $0.82, including exit, restructuring and acquisition costs that reduced earnings by $0.09 per share. Earnings per share for the fourth quarter of 2012 totaled $0.68. Net sales for the quarter ended December 31, 2013, increased 12.4% to a record $284,539,000 from $253,179,000 for the fourth quarter of 2012.

Summary Financial Performance (Unaudited)


4Q13

4Q12

Change

Net sales (in 000s)

$     284,539

$     253,179

12.4%

Gross margin (%)

49.6

49.2

0.4 pts.

Operating margin (%)

17.3

17.5

(0.2) pts.

Income from continuing

   operations (in 000s)

$       41,525

$       34,799

19.3%

Income (loss) from discontinued

   operations, net of tax (in 000s)

$            125

$            191

(34.6%)

Net income (in 000s)

$       41,650

$       34,990

19.0%

Diluted earnings per share:




Income from continuing operations

$          0.82

$          0.68

20.6%

Income from discontinued operations

$          0.00

$          0.00

N/M

Net income

$          0.82

$          0.68

20.6%

"Effective execution of a proven growth strategy and an improving business environment led to strong performance across the breadth of Zebra's solutions, geographic regions and industries served," stated Anders Gustafsson, Zebra's chief executive officer. "Zebra is well positioned for further growth as the brand of choice for helping companies around the world gain greater visibility into their extended value chains. The success of our actions is generating an improved business pipeline with customers in retail, healthcare and manufacturing. We are expanding into new markets by extending our reach in emerging geographic regions and entering new industries, with a stream of innovative products and solutions that address critical business needs."

For the full year, earnings from continuing operations for 2013 totaled $2.63 per share, including acquisition and exit and restructuring costs that reduced earnings by $0.17 per share. For 2012, earnings from continuing operations were $2.35 per share, including acquisition, exit and restructuring costs and an asset impairment charge that reduced earnings by $0.23 per share. Net sales increased 4.2% to a record $1,038,159,000 for 2013 from $996,168,000 for 2012.

As of December 31, 2013, Zebra had $415,795,000 in cash and investments, and no long-term debt. Net inventories were $121,023,000, and net accounts receivable were $176,917,000.

Discussion and Analysis – Fourth Quarter

  • Net sales growth of 12.4% included sales growth in North America, Asia Pacific and the Europe, Middle East and Africa regions. The higher sales occurred across all product and service categories.
  • The operations of Hart Systems, which the company acquired in December 2013, had no material effect on 2013 fourth quarter financial results.
  • Gross profit increased 13.3% for the fourth quarter of 2013 over the same period of the prior year. Gross profit was 49.6% of sales for the 2013 fourth quarter and 49.2% for the prior-year period. The increase is primarily due to higher volumes.
  • Operating expenses increased by 14.4%, principally from increased expenses for compensation, outside professional services, information systems, and depreciation. The increase in amortization expense is related to the acquisition of certain patent rights in December 2012. Higher acquisition costs relate to increased activity in investigated and completed mergers and acquisitions during the period. Exit and restructuring costs in 2013 relate to the restructuring of the location solutions business management structure.
  • The effective income tax rate for 2013 reflects the effect of a higher proportion of income generated in jurisdictions with lower tax rates.

Stock Purchase Update
During the fourth quarter of 2013, Zebra returned $4,643,000 to shareholders through the repurchase of 88,100 shares of Zebra Technologies Corporation Class A Common Stock at a weighted average price of $52.70 per share. At December 31, 2013, the company had 665,475 shares remaining in its stock buyback authorization, and 50,349,546 shares of common stock were outstanding.

First Quarter Outlook
Zebra announced its financial forecast for the first quarter of 2014. Net sales are expected within a range of $276,000,000 to $286,000,000. Diluted earnings per share are expected within a range of $0.77 to $0.87.

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 fourth 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 first quarter of 2014 stated in the paragraph above captioned "First 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 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 the Zebra's latest Form 10-K which is on file with the Securities and Exchange Commission.

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

[email protected]

[email protected]

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)






December 31,

2013


December 31,

2012

ASSETS




Current assets:




Cash and cash equivalents

$         62,827


$         64,740

Investments and marketable securities

350,380


324,140

Accounts receivable, net

176,917


168,732

Inventories, net

121,023


123,357

Deferred income taxes

19,810


13,484

Income taxes receivable

7,622


-

Prepaid expenses and other current assets

15,524


16,410

Total current assets

754,103


710,863





Property and equipment at cost, less accumulated depreciation and amortization

109,588


101,349

Long-term deferred income taxes

-


2,602

Goodwill

155,800


94,942

Other intangibles, net

68,968


39,151

Long-term investments and marketable securities

2,588


5,195

Other assets

28,765


13,646

                       Total assets

$    1,119,812


$       967,748





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$         34,688


$         23,045

Accrued liabilities

61,962


57,234

Deferred revenue

15,506


13,326

Income taxes payable

6,898


1,609

Total current liabilities

119,054


95,214

Long-term deferred tax liability

25,492


-

Deferred rent

1,131


1,303

Other long-term liabilities

15,477


14,229

                      Total liabilities

161,154


110,746





Stockholders' equity:




Class A Common Stock

722


722

Additional paid-in capital

143,295


139,523

Treasury stock

(678,456)


(641,438)

Retained earnings

1,502,878


1,368,520

Accumulated other comprehensive loss

(9,781)


(10,325)

                      Total stockholders' equity

958,658


857,002

                      Total liabilities and stockholders' equity

$    1,119,812


$       967,748

    

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)






Three Months Ended


Year Ended


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2012

Net sales:








  Net sales of tangible products

$     269,583


$     241,257


$     984,532


$     948,227

  Revenue from services and software

14,956


11,922


53,627


47,941

Total net sales

284,539


253,179


1,038,159


996,168









Cost of sales:








  Cost of sales of tangible products

136,547


121,869


507,513


479,633

  Cost of services and software

6,964


6,850


27,036


24,891

Total cost of sales

143,511


128,719


534,549


504,524









Gross profit

141,028


124,460


503,610


491,644









Operating expenses:








   Selling and marketing

36,280


33,313


138,020


129,906

   Research and development

23,712


22,605


91,147


87,364

   General and administrative

24,434


20,964


96,216


92,167

   Amortization of intangible assets

1,826


1,463


7,383


4,673

   Acquisition costs

3,322


1,037


4,690


3,109

   Exit and restructuring costs

2,375


960


5,890


960

   Asset impairment charge

0


0


0


9,114

Total operating expenses

91,949


80,342


343,346


327,293









Operating income

49,079


44,118


160,264


164,351









Other income (expense):








   Investment income

666


526


2,366


2,485

   Foreign exchange loss

209


(5)


(524)


(941)

   Other, net

252


(577)


1,721


(1,721)

Total other income (expense)

1,127


(56)


3,563


(177)









Income from continuing operations before income taxes

50,206


44,062


163,827


164,174

Income taxes

8,681


9,263


29,602


42,277









Income from continuing operations

41,525


34,799


134,225


121,897

Income from discontinued operations, net of tax

125


191


133


1,007

Net income

$       41,650


$       34,990


$     134,358


$     122,904









Basic earnings per share:








   Income from continuing operations

$          0.83


$          0.69


$          2.65


$          2.36

   Income from discontinued operations

0.00


0.00


0.00


0.02

      Net income

$          0.83


$          0.69


$          2.65


$          2.38

Diluted earnings per share:








   Income from continuing operations

$          0.82


$          0.68


$          2.63


$          2.35

   Income from discontinued operations

0.00


0.00


0.00


0.02

      Net income

$          0.82


$          0.68


$          2.63


$          2.37









Basic weighted average shares outstanding

50,289


50,968


50,693


51,566

Diluted weighted average and equivalent shares outstanding

50,666


51,262


51,063


51,843

    

    

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)






Three Months Ended


Year Ended


December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2012









Net income

$       41,650


$       34,990


$     134,358


$     122,904









Other comprehensive income (loss):








   Unrealized gains (losses) on hedging transactions, net of income taxes

(228)


(1,048)


118


(7,241)

   Unrealized holding gains (losses) on investments, net of income taxes

50


(30)


(456)


887

   Foreign currency translation adjustment

382


42


882


242









Comprehensive income

$       41,854


$       33,954


$     134,902


$     116,792

    

    

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)




Year Ended


December 31, 2013


December 31, 2012

Cash flows from operating activities:




        Net income

$  134,358


$  122,904

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







                Depreciation and amortization

32,110


26,177

                Share-based compensation

13,109


14,727

                Asset impairment charge

-


9,114

                Excess tax benefit from share-based compensation

(4,277)


(1,578)

                Loss on sale of property and equipment

224


311

                Gain on sale of business

(201)


(930)

                Deferred income taxes

7,929


8,067

                Changes in assets and liabilities:




                        Accounts receivable, net

(6,488)


(8,647)

                        Inventories, net

2,743


11,530

                        Other assets

(342)


7,304

                        Accounts payable

7,544


(14,605)

                        Accrued liabilities

6,220


(4,193)

                        Deferred revenue

2,133


4,351

                        Income taxes

(242)


16,335

                        Other operating activities

(54)


(7,536)

                                Net cash provided by operating activities

194,766


183,331





Cash flows from investing activities:




        Purchases of property and equipment

(20,211)


(22,443)

        Proceeds from the sale of business

-


27,580

        Acquisition of business, net of cash acquired

(95,328)


(59,876)

        Acquisition of intangible assets

(1,500)


(3,500)

        Purchase of long-term equity investment

(12,021)


(9,125)

        Purchases of investments and marketable securities

(410,283)


(347,609)

        Maturities of investments and marketable securities

49,453


145,028

        Proceeds from sales of investments and marketable securities

336,741


164,410

                                Net cash used in investing activities

(153,149)


(105,535)





Cash flows from financing activities:




        Purchase of treasury stock

(63,102)


(54,373)

        Proceeds from exercise of stock options and stock purchase plan purchases

14,652


3,361

        Excess tax benefit from share-based compensation

4,277


1,578

                                Net cash used in financing activities

(44,173)


(49,434)





Effect of exchange rate changes on cash

643


(40)





Net increase (decrease) in cash and cash equivalents

(1,913)


28,322

Cash and cash equivalents at beginning of period

64,740


36,418

Cash and cash equivalents at end of period

$     62,827


$   64,740





Supplemental disclosures of cash flow information:




 Income taxes paid

$     18,418


$   20,059

    

    

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)


SALES BY PRODUCT CATEGORY








Three Months Ended







December 31,


December 31,


Percent


Percent of


Percent of

Product Category

2013


2012


Change


Net Sales – 2013


Net Sales – 2012

Hardware

$   202,772


$    182,267


11.2


71.2


72.0

Supplies

65,327


57,607


13.4


23.0


22.8

Service and software

14,956


11,922


25.4


5.3


4.7

   Subtotal products

283,055


251,796


12.4


99.5


99.5

Shipping and handling

1,484


1,383


7.3


0.5


0.5

   Total net sales

$   284,539


$    253,179


12.4


100.0


100.0









Year Ended







December 31,


December 31,


Percent


Percent of


Percent of

Product Category

2013


2012


Change


Net Sales – 2013


Net Sales – 2012

Hardware

$   735,123


$    730,489


0.6


70.8


73.4

Supplies

243,965


212,499


14.8


23.5


21.3

Service and software

53,627


47,941


11.9


5.2


4.8

   Subtotal products

1,032,715


990,929


4.2


99.5


99.5

Shipping and handling

5,444


5,239


3.9


0.5


0.5

   Total net sales

$ 1,038,159


$    996,168


4.2


100.0


100.0








SALES BY GEOGRAPHIC REGION









Three Months Ended







December 31,


December 31,


Percent


Percent of


Percent of

Geographic Region

2013


2012


Change


Net Sales – 2013


Net Sales - 2012

Europe, Middle East and Africa

$     88,660


$     83,355


6.4


31.2


32.9

Latin America

25,335


26,255


(3.5)


8.9


10.4

Asia-Pacific

40,936


31,665


29.3


14.4


12.5

   Total International

154,931


141,275


9.7


54.5


55.8

North America

129,608


111,904


15.8


45.5


44.2

   Total net sales

$   284,539


$   253,179


12.4


100.0


100.0









Year Ended







December 31,


December 31,


Percent


Percent of


Percent of

Geographic Region

2013


2012


Change


Net Sales - 2013


Net Sales - 2012

Europe, Middle East and Africa

$   326,470


$   322,970


1.1


31.4


32.4

Latin America

99,041


100,101


(1.1)


9.5


10.0

Asia-Pacific

152,740


137,577


11.0


14.7


13.8

   Total International

578,251


560,648


3.1


55.6


56.2

North America

459,908


435,520


5.6


44.4


43.8

   Total net sales

$ 1,038,159


$   996,168


4.2


100.0


100.0

 

    

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

PRINTER UNITS and AVERAGE UNIT PRICES

(Unaudited)




Three Months Ended


December 31,


December 31,


Percent


2013


2012


Change

Total printers shipped

368,204


321,314


14.6

Average selling price of printers shipped

$462


$477


(3.1)








Year Ended


December 31,


December 31,


Percent


2013


2012


Change

Total printers shipped

1,321,624


1,260,141


4.9

Average selling price of printers shipped

$469


$485


(3.3)

SOURCE Zebra Technologies Corporation

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