VERNON HILLS, Ill., April 26 /PRNewswire-FirstCall/ -- Zebra Technologies Corporation (Nasdaq: ZBRA) today announced that net sales for the quarter ended April 1, 2006, were $175,814,000, a 3.0% increase over the $170,727,000 recorded for the first quarter of 2005. Quarterly net income was $26,091,000, or $0.37 per diluted share, compared with $25,819,000, or $0.36 per diluted share, for the same period a year ago. Financial results for 2006 include the cumulative effect of a change in accounting for the adoption of SFAS 123(R), Share-Based Payments. Results for 2005 have been restated to reflect this adoption as well.
"Zebra's ability to build greater stockholder value remains firmly intact," stated Edward Kaplan, Zebra's chairman and chief executive officer. "Robust growth in international territories is the direct result of more Zebra representatives working with a greater number of channel partners. Our expansion activities in China, Eastern Europe and Latin America are extending Zebra's global reach and enabling us to pursue more business opportunities in these developing market economies. New mobile, tabletop, card and photo printers are receiving excellent customer acceptance and broadening the range of specialty printing applications we serve. Our stronger channel partnerships and alliance relationships are yielding additional large business opportunities that we are now converting into a firm order stream in field force automation, supply chain management, route accounting, and retail."
Discussion and Analysis For the first quarter of 2006 compared with the first quarter of 2005: -- All three of the company's international territories experienced sales growth, with the Europe, Middle East and Africa region achieving record sales in local currencies. Nearly all printer product lines contributed to 12.5% unit volume growth, offset by lower average unit prices. Sales of supplies increased 14.6% for the quarter. Unfavorable foreign currency movements reduced first quarter sales by $5,405,000. -- Gross profit margin declined to 47.0% from 51.0%. During the quarter, unfavorable currency movements reduced first quarter gross profit by $4,855,000. The decline in gross margin also was due to a number of factors including: temporary capacity constraints in label manufacturing, new products currently undergoing ramp up and cost reduction, expediting costs for manufacturing materials to meet increased demand, mix shifts toward lower margin products, increases in material costs related to RoHS compliance, and various pricing actions focused on increasing market share. -- Operating expenses were affected by higher employee-related costs related to increased staffing in global sales and marketing and product development, offset by lower expenditures on legal activities, market development funds, consulting services, and audit and tax service fees.
At April 1, 2006, Zebra had $569,523,000 in cash and investments, and no long-term debt. Inventories totaled $66,605,000. Accounts receivable increased to $116,415,000 from $111,551,000, primarily due to the timing of shipments.
Second Quarter Outlook
Zebra also announced upward sequential guidance in its financial forecast for the second 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, compared with $0.35 per diluted share for the second quarter of 2005.
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 second 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. We may elect to update forward-looking statements but expressly disclaim any obligation to do so, even if our estimates change.
These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in general industry and market conditions, of general domestic and international economic conditions, and other factors. These factors include market acceptance of Zebra's printer and software products and competitors' product offerings and the potential effects of technological changes. They also include the effect of market conditions in North America and other geographic regions on our financial results. Profits and profitability will be affected by our 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. Also, beginning July 1, 2006, Zebra's product shipments into the European Union must conform with the RoHS Directive, or "the restriction of the use of certain hazardous substances in electrical and electronic equipment." This Directive will ban the placing in the EU market of new electrical and electronic equipment containing more than agreed levels of certain substances beginning July 1, 2006. Zebra's ability to meet this Directive will affect its results in the second and third quarters of 2006. 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.
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 first 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 http://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) April 1, December 31, 2006 2005 ASSETS (Unaudited) (Restated) Current assets: Cash and cash equivalents $17,543 $25,621 Investments and marketable securities 198,762 518,618 Accounts receivable, net 116,415 111,551 Inventories, net 66,605 63,638 Deferred income taxes 8,097 8,188 Prepaid expenses 5,497 5,098 Total current assets 412,919 732,714 Property and equipment at cost, less accumulated depreciation and amortization 51,610 49,643 Long-term deferred income taxes 6,220 6,216 Goodwill 69,097 69,097 Other intangibles, net 18,555 19,002 Long-term investments and marketable securities 353,218 - Other assets 40,857 41,743 Total assets $952,476 $918,415 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $22,860 $24,885 Accrued liabilities 28,109 28,928 Income taxes payable 7,027 535 Total current liabilities 57,996 54,348 Deferred rent 572 574 Other long-term liabilities 5,898 5,521 Total liabilities 64,466 60,443 Stockholders' equity: Preferred Stock - - Class A Common Stock 722 722 Additional paid-in capital 135,140 139,433 Treasury stock (52,060) (64,013) Retained earnings 805,544 779,453 Accumulated other comprehensive income (loss) (1,336) 2,377 Total stockholders' equity 888,010 857,972 Total liabilities and stockholders' equity $952,476 $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 April 1, 2006 April 2, 2005 (Restated) Net sales $175,814 $170,727 Cost of sales 93,116 83,599 Gross profit 82,698 87,128 Operating expenses: Selling and marketing 22,109 21,564 Research and development 12,035 11,052 General and administrative 14,649 15,802 Amortization of intangible assets 747 647 Exit costs - 1,517 Total operating expenses 49,540 50,582 Operating income 33,158 36,546 Other income (expense): Investment income 5,207 3,277 Interest expense (218) (3) Foreign exchange gains (loss) 110 53 Other, net (448) (304) Total other income 4,651 3,023 Income before income taxes and cumulative effect of accounting change 37,809 39,569 Income taxes 13,037 13,750 Income before cumulative effect of accounting change 24,772 25,819 Cumulative effect of accounting change (net of tax) 1,319 - Net income $26,091 $25,819 Basic earnings per share before cumulative effect of accounting change $0.35 $0.36 Diluted earnings per share before cumulative effect of accounting change $0.35 $0.36 Basic earnings per share $0.37 $0.36 Diluted earnings per share $0.37 $0.36 Basic weighted average shares outstanding 70,566 71,873 Diluted weighted average and equivalent shares outstanding 71,119 72,649 Note: Figures for the three months ended April 2, 2005, were restated for the adoption of SFAS 123 (R), Share-Based Payments, using the modified retrospective approach.
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