Exhibit 99.1
FOR IMMEDIATE RELEASE
Zebra Technologies Announces Record Sales for Second Quarter of 2006
Vernon Hills, IL, July 26, 2006—Zebra Technologies Corporation (NASDAQ: ZBRA) today announced that net income for the period ended July 1, 2006, advanced 8.8% to $27,672,000, or $0.39 per diluted share, on 6.1% growth in net sales to $187,421,000, a quarterly record. For the second quarter a year ago, the company reported net income of $25,446,000, or $0.35 per diluted share, on $176,614,000 in net sales. Results for 2005 were restated to reflect the adoption of SFAS 123(R), Share-Based Payments.
“Record shipments are the tangible result of a strategy to serve a wider range of printing solutions worldwide,” stated Edward Kaplan, Zebra’s chairman and chief executive officer. “Zebra’s extended global reach is translating into high growth in international regions. We are capturing more opportunities in healthcare, route accounting, retail and other vertical market applications. With a much more diversified business across products, channels and markets, we remain optimistic about our growth prospects and confident in our abilities to build greater stockholder value.”
Discussion and Analysis
For the second quarter of 2006 compared with the second quarter of 2005:
| • | Ongoing strength in international territories with notable growth in the company’s Europe, Middle East and Africa region of 16.8% helped drive improved sales growth. On a consolidated basis, nearly all printer product lines contributed to a 15.6% unit volume increase. Supplies sales increased 19.1%. |
| • | Gross profit margin declined to 47.8% from 50.5%. During the quarter, gross profit margin was affected by shifts in product mix, lower average unit prices, and unfavorable currency movements. |
| • | Operating income benefited from a $2,068,000, or 3.8%, decline in operating expenses. This decline was largely the result of lower legal expenses. |
For the first six months of 2006, the company had net sales of $363,235,000, up 4.6% from $347,342,000 for the first half of 2005. Net income was $53,763,000, or $0.76 per diluted share, compared with $51,264,000, or $0.71 per diluted share, a year ago.
At July 1, 2006, Zebra had $584,847,000 in cash and investments, and no long-term debt. Inventories increased to $77,369,000, primarily related to the implementation of the EU RoHS Directive to remove hazardous substances from electrical and electronic equipment. Accounts receivable were $115,693,000.
Third Quarter Outlook
Zebra also announced its financial forecast for the third quarter of 2006. Net sales are expected within a range of $180,000,000 and $190,000,000. Earnings are expected within a range of $0.34 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 2006 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. Zebra may elect to update forward-looking statements but expressly disclaims any obligation to do so, even if the company’s estimates change.
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These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in general and in Zebra’s industry and market conditions, of general domestic and international economic conditions, and other factors. These factors include market conditions in North America and other geographic regions and market acceptance of Zebra’s printer and software products and competitors’ product offerings and the potential effects of technological changes. Other factors include U.S. and foreign regulations that pertain to electrical and electronic equipment, including European directives relating to the collection, recycling, treatment and disposal of products and the reduction or elimination of certain specified materials in such products. Zebra’s failure to comply with these regulations may subject Zebra to penalties, prevent Zebra from selling its products in a certain country, or increase the cost of supplying the products. Profits and profitability will be affected by the company’s ability to control manufacturing and operating costs. Because of a large investment portfolio, interest rate 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 is involved, and particularly litigation or claims related to infringement of third party intellectual property rights, is another factor. These and other factors could have an adverse effect on Zebra’s revenues, 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, 2005, and the Risk Factors in Zebra’s Form 10-Q for the quarter ended April 1, 2006.
Zebra Technologies Corporation delivers innovative and reliable on-demand printing solutions for business improvement and security applications in 100 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 five 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 2006. The conference call will be held at 11:00 Eastern Time today. To listen to the call, visit the company’s Web site at 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 1, 2006 |
December 31, 2005 |
|||||||
| (Unaudited) | (Restated) | |||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 27,627 | $ | 25,621 | ||||
| Investments and marketable securities |
179,774 | 518,618 | ||||||
| Accounts receivable, net |
115,693 | 111,551 | ||||||
| Inventories, net |
77,369 | 63,638 | ||||||
| Deferred income taxes |
8,419 | 8,188 | ||||||
| Prepaid expenses |
6,015 | 5,098 | ||||||
| Total current assets |
414,897 | 732,714 | ||||||
| Property and equipment at cost, less accumulated depreciation and amortization |
54,684 | 49,643 | ||||||
| Long-term deferred income taxes |
8,459 | 6,216 | ||||||
| Goodwill |
69,097 | 69,097 | ||||||
| Other intangibles, net |
20,700 | 19,002 | ||||||
| Long-term investments and marketable securities |
377,446 | — | ||||||
| Other assets |
40,565 | 41,743 | ||||||
| Total assets |
$ | 985,848 | $ | 918,415 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 24,194 | $ | 24,885 | ||||
| Accrued liabilities |
32,690 | 28,928 | ||||||
| Income taxes payable |
1,326 | 535 | ||||||
| Total current liabilities |
58,210 | 54,348 | ||||||
| Deferred rent |
570 | 574 | ||||||
| Other long-term liabilities |
5,999 | 5,521 | ||||||
| Total liabilities |
64,779 | 60,443 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred Stock |
— | — | ||||||
| Class A Common Stock |
722 | 722 | ||||||
| Additional paid-in capital |
136,374 | 139,433 | ||||||
| Treasury stock |
(50,087 | ) | (64,013 | ) | ||||
| Retained earnings |
833,216 | 779,453 | ||||||
| Accumulated other comprehensive income |
844 | 2,377 | ||||||
| Total stockholders’ equity |
921,069 | 857,972 | ||||||
| Total liabilities and stockholders’ equity |
$ | 985,848 | $ | 918,415 | ||||
Note: Figures for December 31, 2005, were restated for the adoption of SFAS 123 (R), Share-Based Payments, using the modified retrospective approach.
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| July 1, 2006 | July 2, 2005 | July 1, 2006 | July 2, 2005 | |||||||||||||
| (Restated) | (Restated) | |||||||||||||||
| Net sales |
$ | 187,421 | $ | 176,614 | $ | 363,235 | $ | 347,342 | ||||||||
| Cost of sales |
97,895 | 87,467 | 191,011 | 171,066 | ||||||||||||
| Gross profit |
89,526 | 89,147 | 172,224 | 176,276 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling and marketing |
23,510 | 23,050 | 45,619 | 44,615 | ||||||||||||
| Research and development |
12,382 | 12,386 | 24,417 | 23,437 | ||||||||||||
| General and administrative |
15,081 | 17,800 | 29,730 | 33,603 | ||||||||||||
| Amortization of intangible assets |
723 | 387 | 1,470 | 1,034 | ||||||||||||
| Exit costs |
— | 141 | — | 1,658 | ||||||||||||
| Total operating expenses |
51,696 | 53,764 | 101,236 | 104,347 | ||||||||||||
| Operating income |
37,830 | 35,383 | 70,988 | 71,929 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Investment income |
4,987 | 3,072 | 10,194 | 6,349 | ||||||||||||
| Interest expense |
(13 | ) | (27 | ) | (231 | ) | (31 | ) | ||||||||
| Foreign exchange gains (loss) |
(380 | ) | 812 | (269 | ) | 865 | ||||||||||
| Other, net |
(177 | ) | (243 | ) | (626 | ) | (546 | ) | ||||||||
| Total other income |
4,417 | 3,614 | 9,068 | 6,637 | ||||||||||||
| Income before income taxes and cumulative effect of accounting change |
42,247 | 38,997 | 80,056 | 78,566 | ||||||||||||
| Income taxes |
14,575 | 13,551 | 27,612 | 27,302 | ||||||||||||
| Income before cumulative effect of accounting change |
27,672 | 25,446 | 52,444 | 51,264 | ||||||||||||
| Cumulative effect of accounting change |
— | — | 1,319 | — | ||||||||||||
| Net income |
$ | 27,672 | $ | 25,446 | $ | 53,763 | $ | 51,264 | ||||||||
| Basic earnings per share before cumulative effect of accounting change |
$ | 0.39 | $ | 0.35 | $ | 0.74 | $ | 0.71 | ||||||||
| Diluted earnings per share before cumulative effect of accounting change |
$ | 0.39 | $ | 0.35 | $ | 0.74 | $ | 0.71 | ||||||||
| Basic earnings per share |
$ | 0.39 | $ | 0.35 | $ | 0.76 | $ | 0.71 | ||||||||
| Diluted earnings per share |
$ | 0.39 | $ | 0.35 | $ | 0.76 | $ | 0.71 | ||||||||
| Basic weighted average shares outstanding |
70,781 | 72,013 | 70,661 | 71,939 | ||||||||||||
| Diluted weighted average and equivalent shares outstanding |
71,229 | 72,679 | 71,154 | 72,654 | ||||||||||||
Note: Figures for the three months and six months ended July 2, 2005, were restated for the adoption of SFAS 123 (R), Share-Based Payments, using the modified retrospective approach.
ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| Six Months Ended | ||||||||
| July 1, 2006 | July 2, 2005 | |||||||
| (Restated) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 53,763 | $ | 51,264 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
7,300 | 6,399 | ||||||
| Stock-based compensation |
3,485 | 3,994 | ||||||
| Excess tax benefit from share-based compensation |
(1,461 | ) | (1,411 | ) | ||||
| Cumulative effect of accounting change (net of tax) |
(1,319 | ) | — | |||||
| Deferred income taxes |
(2,419 | ) | 432 | |||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable, net |
(479 | ) | (12,124 | ) | ||||
| Inventories |
(12,729 | ) | (5,342 | ) | ||||
| Other assets |
2,387 | (8,358 | ) | |||||
| Accounts payable |
(2,358 | ) | (1,655 | ) | ||||
| Accrued liabilities |
3,261 | (1,291 | ) | |||||
| Income taxes payable |
1,107 | (2,692 | ) | |||||
| Other operating activities |
(2,259 | ) | 1,532 | |||||
| Net cash provided by operating activities |
48,279 | 30,748 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(10,446 | ) | (6,607 | ) | ||||
| Acquisition of assets of Retail Systems International, Inc. |
— | (7,655 | ) | |||||
| Acquisition of intangible assets |
(3,898 | ) | (8,254 | ) | ||||
| Purchases of investments and marketable securities |
(543,095 | ) | (509,112 | ) | ||||
| Maturities of investments and marketable securities |
345,300 | 313,076 | ||||||
| Sales of investments and marketable securities |
155,611 | 172,334 | ||||||
| Net cash used in investing activities |
(56,528 | ) | (46,218 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of stock options and stock purchase plan purchases |
8,126 | 6,600 | ||||||
| Excess tax benefit from share-based compensation |
1,461 | 1,411 | ||||||
| Payments for obligation under capital lease |
— | (27 | ) | |||||
| Net cash provided by financing activities |
9,587 | 7,984 | ||||||
| Effect of exchange rate changes on cash |
668 | (399 | ) | |||||
| Net increase (decrease) in cash and cash equivalents |
2,006 | (7,885 | ) | |||||
| Cash and cash equivalents at beginning of period |
25,621 | 17,983 | ||||||
| Cash and cash equivalents at end of period |
$ | 27,627 | $ | 10,098 | ||||
| Supplemental disclosures of cash flow information: |
||||||||
| Interest paid |
$ | 231 | $ | 331 | ||||
| Income taxes paid |
27,196 | 31,104 | ||||||
Note: Figures for the six months ended July 2, 2005, were restated for the adoption of SFAS 123 (R), Share-Based Payments, using the modified retrospective approach.
ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
Sales by Product Category
| Three Months Ended | Percent Change |
Percent of Total Sales |
||||||||||||
| July 1, 2006 |
July 2, 2005 |
|||||||||||||
| Hardware |
$ | 140,553 | $ | 135,916 | 3.4 | 75.0 | ||||||||
| Supplies |
39,404 | 33,091 | 19.1 | 21.0 | ||||||||||
| Service and software |
6,199 | 6,627 | (6.5 | ) | 3.3 | |||||||||
| Shipping and handling |
1,469 | 1,378 | 6.6 | 0.8 | ||||||||||
| Cash flow from hedging activities |
(204 | ) | (398 | ) | NM | (0.1 | ) | |||||||
| Total sales |
$ | 187,421 | $ | 176,614 | 6.1 | 100.0 | ||||||||
Sales by Product Category
| Six Months Ended | Percent Change |
Percent of Total Sales | ||||||||||
| July 1, 2006 |
July 2, 2005 |
|||||||||||
| Hardware |
$ | 274,022 | $ | 269,387 | 1.7 | 75.5 | ||||||
| Supplies |
73,729 | 63,040 | 17.0 | 20.3 | ||||||||
| Service and software |
12,430 | 12,706 | (2.2 | ) | 3.4 | |||||||
| Shipping and handling |
2,886 | 2,880 | 0.2 | 0.8 | ||||||||
| Cash flow from hedging activities |
168 | (671 | ) | NM | — | |||||||
| Total sales |
$ | 363,235 | $ | 347,342 | 4.6 | 100.0 | ||||||
Sales by Geographic Region
| Three Months Ended | Percent |
Percent of | |||||||||
| July 1, 2006 |
July 2, 2005 |
||||||||||
| Europe, Middle East and Africa |
$ | 68,047 | $ | 58,271 | 16.8 | 36.3 | |||||
| Latin America |
13,257 | 12,897 | 2.8 | 7.1 | |||||||
| Asia-Pacific |
14,944 | 15,665 | (4.6 | ) | 8.0 | ||||||
| Total international |
96,248 | 86,833 | 10.8 | 51.4 | |||||||
| North America |
91,173 | 89,781 | 1.6 | 48.6 | |||||||
| Total sales |
$ | 187,421 | $ | 176,614 | 6.1 | 100.0 | |||||
Sales by Geographic Region
| Six Months Ended | Percent Change |
Percent of Total Sales | ||||||||
| April 1, 2006 |
April 2, 2005 |
|||||||||
| Europe, Middle East and Africa |
$ | 128,728 | $ | 118,851 | 8.3 | 35.4 | ||||
| Latin America |
26,176 | 23,023 | 13.7 | 7.2 | ||||||
| Asia-Pacific |
30,170 | 28,124 | 7.3 | 8.3 | ||||||
| Total international |
185,074 | 169,998 | 8.9 | 50.9 | ||||||
| North America |
178,161 | 177,344 | 0.5 | 49.1 | ||||||
| Total sales |
$ | 363,235 | $ | 347,342 | 4.6 | 100.0 | ||||