Zebra Technologies Announces Record Sales for the 2014 Second Quarter

Acquisition expenses of $ 20.4 million related to the pending acquisition of the Enterprise Business of Motorola Solutions

Lincolnshire, Ill., August 5, 2014─Zebra Technologies Corporation (NASDAQ: ZBRA) today reported record 2014 second quarter net sales of $288,421,000, up 13.9% from $253,160,000 for the second quarter of 2013. Diluted earnings per share of $0.54 for the second quarter of 2014 include $20,364,000 in acquisition expenses related to the pending acquisition of the Enterprise business of Motorola Solutions, which was announced on April 15, 2014. Diluted earnings per share for the second quarter of 2013 were $0.60 and include $618,000 of acquisition expenses.

For the second quarter of 2014, non-GAAP net income was $43,265,000, or $0.84 per diluted share, up 35.5% from $31,959,000, or $0.62 per diluted share, for the second quarter of 2013.

Summary Financial Performance (Unaudited)





Net sales (in 000s)

      $ 288,421

     $ 253,160


Gross margin (%)



               1.5 pts.





GAAP net income (in 000s)

      $  27,557

     $   30,566


GAAP Diluted EPS

      $  0.54

     $   0.60





Non-GAAP net income (in 000s)

     $   $ 43,265

     $   $31,959

     $   35.4%

Non-GAAP Diluted EPS

     $   0.84

     $   0.62

     $   35.5%

(1) A Reconciliation of Non-GAAP financial information to GAAP information is available in the financial tables in this release.

“Zebra continued to extend its industry leadership, with effective execution on a proven business strategy,” stated Anders Gustafsson, Zebra’s chief executive officer. “Our singular focus of delivering products and solutions that deliver increasing levels of visibility into the operations of our customers is driving more business and greater opportunities for growth. During the second quarter, we made good progress on integration planning for the pending acquisition of Motorola’s Enterprise business. We remain enthusiastic about the compelling strategy supporting the transaction. The combination of the businesses will make Zebra the industry leader in Asset Enterprise Intelligence, and position the company to increasingly benefit from important trends in mobility, cloud computing and data analytics.”

As of June 28, 2014, Zebra had $528,581,000 in cash and investments, and no long-term debt. Net inventories were $126,103,000, and net accounts receivable were $165,426,000.

Discussion and Analysis – Second Quarter

  • Net sales growth of 13.9% from the comparable quarter a year ago resulted from sales growth across all product categories, with notable increases in supplies, services, and tabletop, desktop and mobile printers. The increase in service revenue was modestly affected by the December 2013 acquisition of Hart Systems LLC, which also contributed to growth in North American sales. Performance in North American sales also reflects an increase in shipments of large enterprise deals. The Europe, Middle East and Africa region benefited from improved business activity, with notable sales to retail customers. Movement in foreign currency, net of hedges, increased sales by $3,523,000.

  • Gross margin of 49.3%, versus 47.8% in 2013, reflects higher sales across all regions and product volumes across all product categories, lower product costs, and a reduction in freight costs. Favourable movements in foreign currency, net of hedges, increased second quarter gross profit by $1,867,000
  • Operating expenses for the second quarter increased 28.9%, primarily as a result of increased compensation, acquisition and amortization costs as a result of the December 2013 acquisition of Hart Systems LLC. Acquisition costs consist of transactions costs and integration activities related to the pending acquisition of the Enterprise business of Motorola Solutions, which was announced in April 2014.
  • During the second quarter, Zebra entered into forward interest rate swaps to hedge potential movements in interest rates associated with the anticipated debt funding for the acquisition of Motorola’s Enterprise business. A decline in interest rates resulted in a $2,433,000 loss in the value of the hedging instruments for the quarter.
  • Effective income tax rate of 11.1% reflects the effect of acquisition costs on income primarily in the U.S. These higher costs are resulting in a higher than normal percentage of income generated from jurisdictions with lower effective income tax rates.

Third Quarter Outlook
Zebra announced its financial forecast for the third quarter of 2014. Net sales are expected within a range of $285,000,000 to $295,000,000. Non-GAAP earnings per share are expected within a range of $0.81 to $0.91, excluding certain expenses including those associated with the acquisition of Motorola’s Enterprise business, and assuming an income tax rate of 20.0%.

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 second quarter of 2014. The conference call will be held at 9:00 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 third quarter of 2013 stated in the paragraph above captioned “Third 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 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.

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About Zebra Technologies
A global leader in enterprise asset intelligence, Zebra Technologies Corporation (NASDAQ: ZBRA) offers solutions that give a virtual voice to an organisation's assets, people and transactions, enabling organisations to unlock greater business value. The company’s extensive portfolio of innovative and reliable marking and printing products, RFID and real-time location solutions, illuminates mission-critical information that 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,” “Non-GAAP net income” and “Non-GAAP earnings per share” in addition 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. Reconciliations of Operating Income to EBITDA, EBITDA to Adjusted EBITDA, and GAAP net income to Non-GAAP net income 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.

For Zebra Technologies
Douglas A. Fox, CFA
Vice President, Investor Relations and Treasurer
+1 847 793 6735

Robb Kristopher
Director, Corporate Communications and Public Relations
+ 1 847 793 5514