Letter to Shareholders…
Zebra emerged from a very challenging year as a stronger, more responsive company. We took advantage of our financial strength during the downturn to extend industry leadership and position the company for accelerating sales and earnings growth as business conditions improve.
During 2009, Zebra balanced preserving near-term profitability with investing to sustain long-term growth, maximize investment returns and deliver strong free cash flow. We took advantage of the global economic downturn to take a hard look at our business, and we made structural changes that streamlined operations and lowered costs. At the same time, we introduced innovative products and solutions that meet more of our customers’ needs to identify, track and manage assets throughout the enterprise and across the supply chain. By focusing on those activities that produce the highest risk-adjusted returns, we also used more than $65 million in 2009 to buy back Zebra shares at attractive prices.
Sales declined for only the second time in the company’s history, down 17.7% for the year, as our diversity across products, geographies and industries moderated the impact of the recession. Earnings of $0.79 per share reflect a 13.1% reduction in operating expenses excluding impairment charges. With free cash flow of $81 million and year-end cash balance of $247 million and no debt, we maintained Zebra’s financial strength, a cornerstone to our long-term success.
This strength, along with our global industry leadership, gave us the confidence to maintain investments to provide better customer service and capture more business opportunities. During the year we also made significant advances in the following areas:
- We completed the outsourcing of our printer manufacturing to a global third-party electronics manufacturer as part of our global supply chain transformation. This transition has enabled us to improve responsiveness to customer demands and lower product costs.
- New products helped us serve customers better and expand the range of available business opportunities. We began shipping our first re-transfer card printer for photo-quality imaging in security, government and other personal identification applications. Sales of our new Xi4 high-performance printers kept Zebra as the supplier of choice for mission-critical printing solutions. Innovative new IQ color labels brought color printing to monochrome thermal labels, and new printer drivers for smart phones increased functionality and ease-of-use for mobile workers.
- Our Zebra Enterprise Solutions business unit achieved its goals of selling its solutions across its targeted industries, increasing sales through channel partners, and implementing container port system solutions around the world.
Accelerating Investment in 2010
In 2009, we maintained strong financial discipline to improve capital returns and extend global leadership in an industry with attractive global trends. The aggressive actions we took during the downturn have positioned Zebra for improving financial performance and the creation of greater shareholder value. I am confident that we are now well positioned to capture even more business opportunities as global economic conditions improve.
Going forward, we are focused on four strategic imperatives:
- Accelerating Zebra’s expansion in developing countries and drive innovation in new products in terms of performance, features and integration.
- Expanding our core business by forging stronger channel relationships, including alliances with global partners and independent software vendors.
- Developing lean, world-class operations through the expansion of our outsourcing initiatives, improved distribution and other IT initiatives.
- Building on our history of high-performance teamwork and collaboration.
For 2010, we are committing more resources in Asia Pacific, Europe, Latin America and the Middle East – key territories we have identified as having the highest potential for profitable growth. Adding new sales professionals supported by enhanced country-specific marketing is a proven high-return, low-risk activity to generate greater channel support and increased revenues.
Innovative, new products also remain vital to our long-term success. We remain committed to developing new generations of distinctly superior products and solutions that will build on our industry-leading brand and move Zebra further ahead of the competition. Our plan includes designing printers that meet regional requirements to better serve our customers in attractive territories.
Increasingly, our customers are turning to Zebra as a strategic partner to help them improve their business processes. Zebra is the global leader in an industry with attractive long-term growth prospects. We are unique in the breadth of asset tracking and supply chain solutions we offer. Our success has been and continues to be the result of the commitment of more than 2,000 employees around the world dedicated to meeting more of our customers’ needs. We will continue to focus on generating the highest risk-adjusted returns on our investments to drive greater shareholder value.
