Business News
Zebra Technologies Announces 2008 Fourth Quarter and Full-Year Financial Results Including Non-Cash Asset Impairment Charges
Wednesday 18. February 2009 - Board authorizes three million share increase in stock buyback program
Zebra Technologies Corporation (NASDAQ:ZBRA) today announced net sales of $232,568,000 for the quarter ended December 31, 2008, versus $233,573,000 for the fourth quarter of 2007. Net loss for the period was $117,361,000, or $1.88 per basic and diluted share, compared with net income of $30,803,000, or $0.45 per diluted share, for the fourth quarter of 2007.
Included in the results for the fourth quarter of 2008 are the following significant items:
— Pretax non-cash impairment charges of $157,600,000, or $2.20 per basic
and diluted share after tax, for the write-down of assets related to
acquisitions and intellectual property because of changes in
valuations related to current economic conditions and the business
outlook.
— Pretax exit, restructuring and integration expenses of $7,791,000
which reduced earnings by $0.08 per basic and diluted share after tax.
For the full year, net sales increased 12.5% to a record $976,700,000 from $868,279,000 for 2007. Net loss totaled $38,421,000, or $0.60 per basic and diluted share, including the impairment charge and $20,009,000 in exit, restructuring and integration costs. For 2007, the company recorded net income of $110,113,000, or $1.60 per diluted share.
“Zebra performed well under increasingly challenging business conditions. Our financial strength, clear brand leadership, diverse revenue base, and comprehensive go-to-market channels enabled us to extend our industry leadership,” stated Anders Gustafsson, Zebra’s chief executive officer. “During the quarter, we reduced operating costs and focused on activities that will deliver the highest return on our investments, including the buyback of Zebra stock. We remain cautious in our near-term outlook and nimble to respond to changing business conditions and opportunities. Zebra is well positioned to help our customers improve their business processes with innovative solutions that help them track assets smarter and improve supply chain efficiency.”
At December 31, 2008, Zebra had $224,886,000 in cash and investments, and no long-term debt. Net inventories were $100,199,000, and accounts receivable, net, were $152,679,000, down from $106,261,000 and $171,928,000, respectively, at the end of the third quarter of 2008.
Discussion and Analysis
For the fourth quarter of 2008, compared with the fourth quarter of 2007:
— Consolidated net sales declined 0.4%. A 3.1% sales decline in the
company’s Specialty Printing Group (SPG) was substantially offset by
growth of the company’s Enterprise Solutions Group (ESG) sales which
increased by $5,729,000 primarily from the acquisitions of Navis and
proveo in the second half of 2007. Sales to large customers in North
America helped sustain sales growth of 3.6% in the region. Continued
weakness in the Europe, Middle East and Africa region offset growth in
the company’s Latin America and Asia Pacific regions.
— Gross profit margin of 47.7% versus 48.5% a year ago was principally
affected by unfavorable foreign exchange rates and product mix within
SPG, offset by a favorable product mix associated with higher-margin
sales by ESG.
— Operating expenses before impairment charges and exit, restructuring
and integration costs were substantially unchanged from a year ago.
Although research and development expenses increased as a result of
the acquisitions in ESG, they were offset by lower selling and
marketing and general and administrative expenses from company actions
to lower operating costs during 2008 by restructuring and streamlining
operations.
— Operating expenses were also affected by a $1,414,000 increase in the
amortization of intangible assets from the acquisitions of Navis and
Multispectral Solutions, and $7,791,000 in exit costs related to the
company’s previously announced initiative to transfer final assembly
of thermal printers to a third party; expenses for integrating
operations in ESG; and severance and other restructuring charges.
— During the fourth quarter of 2008, the company recorded non-cash
charges of $157,600,000 following an impairment review in accordance
with the Statement of Financial Accounting Standard (SFAS) No. 142
“Goodwill and Other Intangibles” and SFAS No. 144 “Accounting for the
Impairment or Disposal of Long-lived Assets.” The charges were
primarily attributable to impairment of goodwill and other assets
recorded in connection with acquisitions in ESG in response to current
and expected business conditions primarily in automotive and
industrial manufacturing. The impairment also includes a charge for a
reduction in the estimated value of RFID licenses, patents and other
intellectual property related to SPG. The non-cash impairment charges
do not affect the company’s ongoing business operations and will not
have any impact on its compliance with debt covenants, cash flow or
liquidity. The impairment charges will reduce the amortization of
intangible assets by approximately $8,000,000 annually.
— The income tax rate was affected by the impairment charges, a
substantial portion of which were not deductible for income tax
purposes.
Stock Purchase Update
During the fourth quarter of 2008, the company repurchased 2,627,532 shares of Zebra Technologies Class A Common Stock out of an authorization to purchase up to 5,000,000 shares of Zebra stock. The company’s Board of Directors recently authorized an additional 3,000,000 shares that can be purchased under the stock buyback program. At December 31, 2008, Zebra had 60,861,592 shares of common stock outstanding.
First Quarter Outlook
Zebra announced its financial forecast for the first quarter of 2009. Net sales are expected within a range of $195,000,000 and $210,000,000. Diluted earnings per share are expected within a range of $0.11 and $0.20. This forecast includes expected exit and restructuring costs of $3,000,000.