Zebra Technologies Announces Record 2014 Third Quarter Financial Results
GAAP earnings of $0.29 per share includes impact of acquisition costs and other items; Non-GAAP earnings up 21% to a record $0.93 per share on 15% sales growth
Lincolnshire, Ill., November 4, 2014─Zebra Technologies Corporation (NASDAQ: ZBRA) today reported 15.1% growth in net sales to a record $303,272,000 for the third quarter of 2014, compared with $263,523,000 for the third quarter of 2013. Diluted earnings per share of $0.29 for the third quarter of 2014 include $35,326,000 of acquisition expenses related to the acquisition of the Enterprise business of Motorola Solutions, which was completed on October 27, 2014. Diluted earnings per share for the third quarter of 2013 were $0.76 and included $268,000 of acquisition expenses.
For the third quarter of 2014, non-GAAP net income was $48,036,000, or $0.93 per diluted share, up 22.9% from $39,088,000, or $0.77 per diluted share, for the third quarter of 2013.
Summary Financial Performance (Unaudited)
Net sales (in 000s)
Gross margin (%)
GAAP net income (in 000s) GAAP Diluted EPS
Non-GAAP net income (in 000s) Non-GAAP Diluted EPS
$ 38,600 $ 0.76
$ 39,088 $ 0.77
(1) A Reconciliation of Non-GAAP financial information to GAAP information is available in the financial tables in this release.
“Broad strength across virtually all dimensions of our business led to excellent results for the quarter,” stated Anders Gustafsson, Zebra’s chief executive officer. “A surge in large deals complemented record distribution sales, as more customers turned to Zebra for best-of-breed solutions that provide greater visibility into critical enterprise assets worldwide.”
Mr. Gustafsson added, “Favorable business momentum is continuing into the fourth quarter for Zebra and the Enterprise business that we acquired from Motorola Solutions on October 27. Together, no other company has the scale, focus and resources dedicated to enterprise asset intelligence. Zebra is now even better positioned to take advantage of important technology trends in mobility, cloud and the Internet of Things. We have great confidence in our future, and in our ability to create value for our customers, employees and shareholders over the long term.”
As of September 27, 2014, Zebra had $541,920,000 in cash and investments, and no long-term debt. Net inventories were $139,621,000, and net accounts receivable were $187,543,000.
Discussion and Analysis – Third Quarter
Net sales for Zebra increased 15.1% from the comparable quarter a year ago from sales growth in all geographic regions to new record levels. The sales growth was broad, across multiple products and customers in retail, manufacturing, transportation and logistics and healthcare, among other industries. Movement in foreign currency, net of hedges, increased sales by $2,862,000.
Gross margin of 50.0%, versus 48.8% in 2013, reflects higher sales volumes across all regions and product categories, lower product costs, and a reduction in freight costs. Favorable movements in foreign currency, net of hedges, increased second quarter gross profit by $1,668,000
Operating expenses for the third quarter increased 52.2%, including $35,326,000 in acquisition costs related to the acquisition of the Enterprise business of Motorola Solutions, which was announced in April 2014. Zebra completed the transaction on October 27, 2014.
The effective income tax rate was 39.8% for the quarter. During the third quarter, a change in the U.K. tax laws relating to deductibility of intercompany interest resulted in a reversal of the first and second quarter benefit of $5.9 million and an additional tax expense of $2.6 million for the current quarter.
Fourth Quarter Outlook
Zebra announced its financial forecast for the fourth quarter of 2014. For the pre-transaction Zebra, the company expects net sales within a range of $300,000,000 to $310,000,000 and proforma operating income of $55,000,000 to $63,000,000.
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 third 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.
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 fourth quarter of 2014 stated in the paragraph above captioned “Fourth Quarter Outlook.” Similarly, statements herein that describe the transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of managements’ beliefs, intentions, or goals are also 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. 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 the Enterprise business of Motorola Solutions, 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. 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.
About Zebra Technologies
Zebra (NASDAQ: ZBRA) makes businesses as smart and connected as the world we live in. Zebra tracking and visibility solutions transform the physical to digital, creating the data streams businesses need in order to simplify operations, know more about their business, and empower their mobile workforce. For more information, visit www.zebra.com/possibilities.
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. The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its ongoing operations and how management views the business. 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.
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