Form 8-K ZEBRA TECHNOLOGIES CORP For: Aug 11

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 11, 2015

 

 

ZEBRA TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware		000-19406		36-2675536
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)
3 Overlook Point, Lincolnshire, Illinois				60069
(Address of Principal Executive Offices)				(Zip Code)

Registrant’s telephone number, including area code: 847-634-6700

 

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13c-4(c))

 

 

 

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Item 2.02.

Results of Operations and Financial Conditions.

The information contained in this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On August 11, 2015, we announced our results of operations and financial position as of and for the second quarter ended July 4, 2015. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits. The following Exhibit is being furnished herewith:

 

Exhibit Number		Description of Exhibits
99.1		Registrant’s Press Release dated August 11, 2015

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				ZEBRA TECHNOLOGIES CORPORATION
Date: August 11, 2015				By:		/s/ Jim Kaput
						Jim Kaput
						SVP, General Counsel

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EXHIBIT INDEX

 

Exhibit Number		Description of Exhibits
99.1		Registrant’s Press Release dated August 11, 2015

Exhibit 99.1

 

Zebra Technologies Announces

2015 Second Quarter Financial Results

Strong Sales Growth and Execution Drive Second Quarter Results

Lincolnshire, Ill., August 11, 2015—Zebra Technologies Corporation (NASDAQ: ZBRA) today reported that net sales for the three months ended July 4, 2015, were $889.8 million, compared with $288.4 million for the second quarter of 2014. The GAAP net loss for the second quarter was $76.3 million, or $1.50 per share, compared with GAAP net income of $27.6 million, or $0.54 per diluted share, for the second quarter of 2014.

Summary Financial Performance (Unaudited)

 

$ in millions except per share data		2Q15				2Q14				Change
GAAP net sales		$	889.8			$	288.4				208.5	%
Gross margin (%)			44.2				49.3				(5.1	)pts.
GAAP net (loss) income		$	(76.3	)		$	27.6				NM
GAAP (loss) earnings per share		$	(1.50	)		$	0.54				NM
Non-GAAP net income		$	53.3			$	47.0				13.5	%
Non-GAAP earnings per share		$	1.05			$	0.92				14.1	%
Adjusted EBITDA		$	131.5			$	67.0				96.5	%

Note: Reconciliations of GAAP to Non-GAAP financial results are available in the financial tables in this release.

Non-GAAP Financial Results (unaudited)

For the second quarter of 2015, non-GAAP net income was $53.3 million, or $1.05 per share, compared with $47.0 million, or $0.92 per diluted share, for the second quarter of 2014. Adjusted EBITDA for the second quarter of 2015 were $131.5 million, versus $67.0 million for the second quarter of 2014. The company’s calculation of non-GAAP results adjusts for certain items on a tax-effected basis, including stock-based compensation expense, acquisition and integration costs, exit and restructuring costs, purchase accounting adjustments, amortization of intangible assets, and foreign exchange gains or losses. Please refer to the tables included in this press release for reconciliations of GAAP to non-GAAP financial results.

“As we continue to execute our strategy as One Zebra, demand globally in mobile computing, scanning, and printing, bolstered top-line sales growth for the quarter,” stated Anders Gustafsson, Zebra’s chief executive officer. “With an industry-leading portfolio and close collaboration with channel partners and end users, we continue to differentiate ourselves with innovative solutions that help customers gain greater visibility into their operations and achieve higher levels of growth, efficiency and service.”

Discussion and Analysis – Second Quarter

 

•

Net sales of $889.8 million, including a reduction of $4.4 million for a purchase accounting adjustment related to service contracts acquired with the Enterprise business, increased 208.5% from the comparable quarter a year ago. The Enterprise business acquired from Motorola Solutions accounted for $573.4 million of sales in the quarter, excluding the purchase accounting adjustment noted above. Sales of legacy Zebra were $320.8 million, up 11.2% from $288.4 million in the second quarter of 2014. The effect of movements in foreign currency, net of hedges, reduced legacy Zebra sales by $9.7 million.

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•

Gross margin for the second quarter of 2015 of 44.2% includes an increase to costs of sales associated with purchase accounting adjustments, costs associated with the rebranding of Motorola product, as well as other costs not expected to recur. The purchase accounting adjustments and other cost factors negatively impacted gross margin percentage by approximately 1.1 percentage points. Compared to the 49.3% gross margin in the second quarter of 2014, gross margin percentage also reflects a change in mix associated with the sale of Enterprise products which generally have a lower gross margin than pre-transaction Zebra products and the impact of foreign currency movements, net of hedges.

 

•

Operating expenses for the second quarter of 2015 of $406.7 million, increased by $297.6 million from the prior year’s second quarter, primarily as a result of the Enterprise acquisition. Operating expenses for the second quarter of 2015 include $49.1 million in acquisition, integration, exit and restructuring costs, versus $20.7 million for the prior year, as well as $63.7 million in amortization of intangible assets, compared with $2.7 million for the second quarter of 2014.

 

•

The company incurred a foreign exchange gain of $11.3 million related to changes in the valuation of net monetary assets. In addition, a net forward interest rate swaps loss of $1.7 million reflects a change in interest rates. Investment income was $1.6 million.

 

•

Interest expense of $49.3 million is related to debt funding for the acquisition of the Enterprise business from Motorola Solutions, and includes $5.1 million in amortization of debt issuance cost and discount.

 

•

Debt repayments in the quarter were $80 million, bringing total year-to-date repayments to $130 million.

 

•

As of July 4, 2015, the company had cash of $204.9 million, accounts receivable of $631.1 million, inventories of $404.5 million, and long-term debt of $3.0 billion.

Third Quarter Outlook

The company expects net sales in the third quarter of 2015 to be within a range of $900 million to $930 million. This forecast reflects an expectation of year-over-year growth of 4% to 7% in constant currency, on an estimated historical basis. Non-GAAP diluted earnings are expected in the range of $1.10 and $1.35 per share. Adjusted EBITDA are forecast within a range of $135 million and $150 million.

Conference Call Notification

Investors are invited to listen to a live webcast of Zebra’s conference call regarding the company’s financial results for the second quarter of 2015. The conference call will be held at 8.30 A.M. 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 2015 stated in the paragraph above captioned “Third Quarter Outlook.” Similarly, statements herein that describe the transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of management’s beliefs, intentions, or goals are also forward-looking statements. When used in this release and documents referenced, the words “anticipate,” “believe,” “outlook,” 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.

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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 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 its debt, 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, 2014.

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.

Contact:

 

Investors:		Media:
Dean Lindroth		Therese Van Ryne
Vice President, Finance		Director, Global PR and Industry Analyst Relations
+ 1 847 793 5653		+ 1 847 370 2317
[email protected]		[email protected]

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

 

		July 4, 2015				December 31, 2014
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	204,918			$	393,950
Investments and marketable securities			—				24,385
Accounts receivable, net			631,067				670,402
Inventories, net			404,472				394,176
Deferred income taxes			98,993				122,772
Income tax receivable			92,366				12,988
Prepaid expenses and other current assets			67,304				53,377
Total Current assets		$	1,499,120			$	1,672,050
Property and equipment at cost, less accumulated depreciation and amortization			284,593				255,092
Goodwill			2,482,858				2,489,510
Other intangibles, net			898,004				1,029,293
Other long-term assets			95,005				93,121
Total Assets		$	5,259,580			$	5,539,066
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	281,771			$	326,524
Accrued liabilities			363,095				421,070
Deferred revenue			215,458				196,213
Current portion of long-term debt			—				4,209
Income taxes payable			13,110				4,518
Total Current liabilities		$	873,434			$	952,534
Long-term debt			3,040,361				3,156,490
Long-term deferred tax liability			199,072				199,853
Long-term deferred revenue			109,089				115,847
Other long-term liabilities			86,034				74,434
Total Liabilities		$	4,307,990			$	4,499,158
Stockholders’ Equity:
Preferred stock			—				—
Class A Common Stock			722				722
Additional paid-in capital			175,582				147,090
Treasury stock			(632,820	)			(634,664	)
Retained earnings			1,433,752				1,535,307
Accumulated other comprehensive loss			(25,646	)			(8,547	)
Total Stockholders’ Equity			951,590				1,039,908
Total Liabilities and Stockholders’ Equity		$	5,259,580			$	5,539,066

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)

 

		Three Months Ended								Six Months Ended
		July 4, 2015				June 28, 2014				July 4, 2015				June 28, 2014
Net sales
Net sales of tangible products		$	761,935			$	270,049			$	1,517,257			$	531,941
Revenue from services and software			127,839				18,372				265,701				44,748
Total net sales			889,774				288,421				1,782,958				576,689
Cost of sales
Cost of sales of tangible products			407,012				136,962				792,382				267,411
Cost of services and software			89,884				9,290				188,176				19,171
Total cost of sales			496,896				146,252				980,558				286,582
Gross profit			392,878				142,169				802,400				290,107
Operating expenses:
Selling and marketing			125,120				35,755				247,226				71,171
Research and development			99,087				23,710				195,504				46,567
General and administrative			69,659				26,321				135,795				54,712
Amortization of intangible assets			63,700				2,667				131,289				5,339
Acquisition and integration costs			31,166				20,364				57,497				25,291
Exit and restructuring costs			17,949				287				29,118				554
Total operating expenses			406,681				109,104				796,429				203,634
Operating (loss) income			(13,803	)			33,065				5,971				86,473
Other (expense) income:
Investment income			1,575				379				1,378				800
Foreign exchange income (loss)			11,252				43				(15,939	)			(249	)
Forward interest rate swaps (loss) gain			(1,653	)			(2,433	)			36				(2,433	)
Interest expense			(49,331	)			—				(100,296	)			—
Other, net			(707	)			(57	)			(1,980	)			(49	)
Total other (expenses)			(38,864	)			(2,068	)			(116,801	)			(1,931	)
(Loss) income from continuing operations before income taxes			(52,667	)			30,997				(110,830	)			84,542
Income tax expense (benefit)			23,591				3,440				(9,275	)			15,379
Net (loss) income		$	(76,258	)		$	27,557			$	(101,555	)		$	69,163
Basic (loss) earnings per share		$	(1.50	)		$	0.54			$	(2.00	)		$	1.37
Diluted (loss) earnings per share		$	(1.50	)		$	0.54			$	(2.00	)		$	1.35
Basic weighted average shares outstanding			50,917				50,606				50,798				50,509
Diluted weighted average and equivalent shares outstanding			50,917				51,278				50,798				51,129

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Amounts in thousands)

(Unaudited)

 

		Three months ended								Six months ended
		July 4, 2015				June 28, 2014				July 4, 2015				June 28, 2014
Net (loss) income		$	(76,258	)		$	27,557			$	(101,555	)		$	69,163
Unrealized (loss) gain on anticipated sales hedging transactions, net of tax			(4,642	)			776				(2,952	)			1,389
Unrealized gain (loss) on forward interest rate swaps hedging transactions, net of tax			3,164				—				(3,887	)			—
Unrealized holding (loss) gain on investments, net of taxes			—				348				(16	)			496
Foreign currency translation adjustment			(8,532	)			(29	)			(10,245	)			(196	)
Comprehensive (loss) income		$	(86,268	)		$	28,652			$	(118,655	)		$	70,852

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

		Six Months Ended
		July 4, 2015				June 28, 2014
Cash flows from operating activities:
Net (loss) income		$	(101,555	)		$	69,163
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			161,865				18,096
Amortization of debt issuance cost and discount			9,662				—
Share-based compensation			17,519				7,110
Excess tax benefit from share-based compensation			(11,115	)			(3,947	)
Deferred income taxes			18,487				2,979
Unrealized (gain) loss on forward interest rate swaps			(36	)			2,433
All other, net			584				49
Changes in assets and liabilities, net of businesses acquired:
Accounts receivable, net			48,081				11,359
Inventories, net			(22,755	)			(5,061	)
Other assets			(17,058	)			2,583
Accounts payable			(43,092	)			(5,336	)
Accrued liabilities			730				3,535
Deferred revenue			15,684				502
Income taxes			(60,800	)			4,706
Other operating activities			3,311				1,742
Net cash provided by operating activities			19,512				109,913
Cash flows from investing activities:
Purchases of property and equipment			(49,291	)			(7,962	)
Acquisition of businesses, net of cash acquired			(48,805	)			—
Proceeds from sale of long-term investments			1,748				—
Purchases of long-term investments			(168	)			(1,213	)
Purchases of investments and marketable securities			(739	)			(276,400	)
Maturities of investments and marketable securities			—				20,852
Proceeds from sales of investments and marketable securities			25,108				150,781
Net cash used in investing activities			(72,147	)			(113,942	)
Cash flows from financing activities:
Payment of debt			(130,000	)			—
Proceeds from exercise of stock options and stock purchase plan purchases			11,538				8,686
Taxes paid related to net share settlement of equity awards			(13,290	)			(975	)
Excess tax benefit from equity-based compensation			11,115				3,947
Net cash (used in) provided by financing activities			(120,637	)			11,658
Effect of exchange rate changes on cash			(15,760	)			(107	)
Net (decrease) increase in cash and cash equivalents			(189,032	)			7,522
Cash and cash equivalents at beginning of period			393,950				62,827
Cash and cash equivalents at end of period		$	204,918			$	70,349
Supplemental disclosures of cash flow information:
Income taxes paid, net			21,354				7,627
Interest paid			91,431				—

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)

SALES BY PRODUCT CATEGORY

 

		Three Months Ended
Product category		July 4, 2015				June 28, 2014				Percent Change				Percent of Net Sales 2015				Percent of Net Sales 2014
Hardware		$	694,702			$	204,770				239.3				78.0				71.0
Supplies			67,233				65,279				3.0				7.6				22.6
Service and software			127,839				18,372				595.8				14.4				6.4
Total net sales		$	889,774			$	288,421				208.5				100.0				100.0
		Six Months Ended
Product category		July 4, 2015				June 28, 2014				Percent Change				Percent of Net Sales 2015				Percent of Net Sales 2014
Hardware		$	1,382,772			$	403,158				243.0				77.6				69.9
Supplies			134,485				128,783				4.4				7.5				22.3
Service and software			265,701				44,748				493.8				14.9				7.8
Total net sales		$	1,782,958			$	576,689				209.2				100.0				100.0

SALES BY GEOGRAPHIC REGION

 

		Three Months Ended
Geographic region		July 4, 2015				June 28, 2014				Percent Change				Percent of Net Sales 2015				Percent of Net Sales 2014
Europe, Middle East and Africa		$	303,382			$	94,200				222.1				34.1				32.7
Latin America			55,161				25,204				118.9				6.2				8.7
Asia-Pacific			117,466				40,334				191.2				13.2				14.0
Total International			476,009				159,738				198.0				53.5				55.4
North America			413,765				128,683				221.5				46.5				44.6
Total net sales		$	889,774			$	288,421				208.5				100.0				100.0
		Six Months Ended
Geographic region		July 4, 2015				June 28, 2014				Percent Change				Percent of Net Sales 2015				Percent of Net Sales 2014
Europe, Middle East and Africa		$	593,926			$	185,639				219.9				33.3				32.2
Latin America			108,446				50,844				113.3				6.1				8.8
Asia-Pacific			223,849				78,301				185.9				12.6				13.6
Total International			926,221				314,784				194.2				52.0				54.6
North America			856,737				261,905				227.1				48.0				45.4
Total net sales		$	1,782,958			$	576,689				209.2				100.0				100.0

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(Amounts in thousands, except per-share data)

(Unaudited)

 

		Three Months Ended								Six Months Ended
		July 4, 2015				June 28, 2014				July 4, 2015				June 28, 2014
Net (loss) income		($	76,258	)		$	27,557			($	101,555	)		$	69,163
Income tax expense (benefit)			23,591				3,440				(9,275	)			15,379
Share-based compensation			8,723				4,144				17,519				7,110
Acquisition and integration costs			31,166				20,364				57,497				25,291
Exit and restructuring costs			17,949				287				29,118				554
Purchase accounting adjustments			5,338				—				11,763				—
Foreign exchange loss (gain)			(11,252	)			(43	)			15,939				249
Amortization of intangible assets			63,700				2,667				131,289				5,339
Non-cash interest expense			5,103				—				9,662				—
Forward interest rate swaps loss (gain)			1,653				2,433				(36	)			2,433
Tax effects			(16,383	)			(13,888	)			(36,147	)			(29,721	)
Total adjustments		$	129,588			$	19,404			$	227,329			$	26,634
Non-GAAP net income		$	53,330			$	46,961			$	125,774			$	95,797
GAAP (loss) earnings per share
Basic		$	(1.50	)		$	0.54			$	(2.00	)		$	1.37
Diluted		$	(1.50	)		$	0.54			$	(2.00	)		$	1.35
Non-GAAP earnings per share
Basic		$	1.05			$	0.93			$	2.48			$	1.90
Diluted		$	1.05			$	0.92			$	2.48			$	1.87
Basic weighted average shares outstanding			50,917				50,606				50,798				50,509
Diluted weighted average and equivalent shares outstanding			50,917				51,278				50,798				51,129

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATION

(Amounts in thousands, except per-share data)

(Unaudited)

 

		Three Months Ended								Six Months Ended
		July 4, 2015				June 28, 2014				July 4, 2015				June 28, 2014
Net (Loss) Income to EBITDA and Adjusted EBITDA
Net (loss) income		($	76,258	)		$	27,557			($	101,555	)		$	69,163
Income tax expense (benefit)			23,591				3,440				(9,275	)			15,379
Total other expense (income)			38,864				2,068				116,801				1,931
Operating (loss) income		$	(13,803	)		$	33,065			$	5,971			$	86,473
Depreciation			18,461				6,427				30,576				12,757
Amortization of intangible assets			63,700				2,667				131,289				5,339
EBITDA (Non-GAAP)		$	68,358			$	42,159			$	167,836			$	104,569
Acquisition and integration costs			31,166				20,364				57,497				25,291
Purchase accounting adjustments			5,338				—				11,763				—
Exit and restructuring costs			17,949				287				29,118				554
Share-based compensation			8,723				4,144				17,519				7,110
Adjusted EBITDA (Non-GAAP)		$	131,534			$	66,954			$	283,733			$	137,524

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