Market Overview

Zebra Technologies Announces Second-Quarter 2019 Results

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Second-Quarter Financial Highlights

  • Strong second-quarter net sales of $1,097 million; year-over-year growth of 8.4%
  • Net income of $124 million and net income per diluted share of $2.26
  • Non-GAAP diluted EPS increased 22% year-over-year to $3.02
  • Adjusted EBITDA increased 17.1% year-over-year to $233 million; and adjusted EBITDA margin expanded 150 bps year-over-year to 21.2%

 

Zebra Technologies Corporation (NASDAQ:ZBRA), an innovator at the edge of the enterprise with solutions and partners that enable businesses to gain a performance edge, today announced results for the second quarter ended June 29, 2019.

"Our second quarter results were driven by continued broad-based demand for our solutions with particular strength in mobile computing. We delivered profitable sales growth, and EBITDA margin and earnings per share each exceeded our outlook. Our team is executing effectively in driving operational efficiencies and serving our global customer base," said Anders Gustafsson, Chief Executive Officer of Zebra Technologies. "We remain on track to achieve our full-year 2019 sales growth target and are increasing our EBITDA margin outlook due to improved productivity in the business. We also continue our focused investment in advancing our enterprise asset intelligence vision, as evidenced by the recent organic and inorganic additions to our analytics and data services offerings."

Gustafsson continued, "Today, we also announced a $1 billion share repurchase authorization which underscores our Board of Directors' confidence in the company's prospects for profitable growth and shareholder value creation."

$ in millions, except per share amounts

2Q19

2Q18

Change

Select reported measures:

 

 

 

Net sales

$

1,097

 

$

1,012

 

8.4

%

Gross profit

520

 

472

 

10.2

%

Net income

124

 

70

 

77.1

%

Net income per diluted share

$

2.26

 

$

1.29

 

75.2

%

 

 

 

 

Select Non-GAAP measures:

 

 

 

Organic net sales growth

 

 

7.0

%

Adjusted gross profit

523

 

473

 

10.6

%

Adjusted gross margin

47.7

%

46.7

%

100 bps

Adjusted EBITDA

233

 

199

 

17.1

%

Adjusted EBITDA margin

21.2

%

19.7

%

150 bps

Non-GAAP net income

$

165

 

$

135

 

22.2

%

Non-GAAP earnings per diluted share

$

3.02

 

$

2.48

 

21.8

%

Reported (GAAP) results

Net sales were $1,097 million in the second quarter of 2019 compared to $1,012 million in the second quarter of 2018. Net sales in the Enterprise Visibility & Mobility ("EVM") segment were $727 million in the second quarter of 2019 compared with $661 million in the second quarter of 2018. Asset Intelligence & Tracking ("AIT") segment net sales were $370 million in the second quarter of 2019 compared to $351 million in the prior year period. Second-quarter 2019 gross profit was $520 million compared to $472 million in the comparable prior year period. Net income for the second quarter of 2019 was $124 million, or $2.26 per diluted share, compared to net income of $70 million, or $1.29 per diluted share, for the second quarter of 2018.

Adjusted (Non-GAAP) results

Consolidated net sales were $1,097 million in the second quarter of 2019 compared to $1,012 million in the prior year period, an increase of 8.4%. Consolidated organic net sales growth for the second quarter was 7.0% reflecting solid growth in North America, EMEA and APAC. Second-quarter year-over-year organic net sales growth was 9.2% in the EVM segment and 2.9% in the AIT segment.

Consolidated adjusted gross margin was 47.7% in the second quarter of 2019, compared to 46.7% in the prior year period. This increase was primarily due to higher productivity and cost efficiency, particularly in support services. Adjusted operating expenses increased in the second quarter of 2019 to $308 million from $294 million in the prior year period primarily due to the inclusion of expenses from recently acquired businesses and investments in growth initiatives, partially offset by lower incentive compensation expense.

Adjusted EBITDA for the second quarter of 2019 increased to $233 million, or 21.2% of adjusted net sales, compared to $199 million, or 19.7% of adjusted net sales, for the second quarter of 2018 primarily due to higher gross margin and lower operating expenses as a percentage of net sales.

Non-GAAP net income for the second quarter of 2019 was $165 million, or $3.02 per diluted share, compared with $135 million, or $2.48 per diluted share, for the second quarter of 2018.

Balance Sheet and Cash Flow

As of June 29, 2019, the company had cash and cash equivalents of $27 million and total debt of $1,724 million.

Free cash flow was $165 million for the first six months of 2019. The company generated $195 million of operating cash flow and incurred capital expenditures of $30 million. During the first six months of 2019 the company had net borrowings of $125 million which funded a portion of the acquisitions of Temptime Corporation, Profitect Inc., and venture investments.

Outlook

Third Quarter 2019

The company expects third-quarter 2019 net sales to increase approximately 3% to 5% from the third quarter of 2018. This expectation includes an approximately 2 percentage point additive impact from recently acquired businesses, and an approximately 1 percentage point negative impact from foreign currency translation.

Adjusted EBITDA margin is expected to be approximately 22% for the third quarter of 2019. Non-GAAP earnings per diluted share are expected to be in the range of $3.15 to $3.35. This assumes an adjusted effective tax rate of approximately 16% to 17%.

Full Year 2019

The company expects full-year 2019 net sales to increase approximately 5% to 8% from 2018. This expectation includes an approximately 2 percentage point positive impact from recently acquired businesses, and an approximately 1 percentage point negative impact from foreign currency translation.

Adjusted EBITDA margin is expected to be approximately 22% for the full-year 2019, favorable to 2018 and our prior outlook.

For the full-year 2019, the company expects to generate free cash flow of at least $625 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 2019. The conference call will be held today, Tuesday, July 30, at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). To view the webcast, visit the investor relations section of the company's website at investors.zebra.com.

About Zebra

Zebra (NASDAQ:ZBRA) empowers the front line of business in retail/ecommerce, manufacturing, transportation and logistics, healthcare and other industries to achieve a performance edge. With more than 10,000 partners across 100 countries, we deliver industry-tailored, end-to-end solutions that intelligently connect people, assets and data to help our customers make business-critical decisions. Our market-leading solutions elevate the shopping experience, track and manage inventory as well as improve supply chain efficiency and patient care. Ranked on Forbes' list of America's Best Employers for the last three years, Zebra helps our customers capture their edge. For more information, visit www.zebra.com or sign up for our news alerts. Follow us on LinkedIn, Twitter and Facebook.

Forward-Looking Statements

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 outlook. 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 and 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 could also affect profitability, reported results and the company's competitive position in its 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. 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. 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, including the company's most recent Form 10-K and Form 10-Q.

Use of Non-GAAP Financial Information

This press release contains certain Non-GAAP financial measures, consisting of "adjusted net sales," "adjusted gross profit," "EBITDA," "Adjusted EBITDA," "Non-GAAP net income," "Non-GAAP earnings per share," "free cash flow," "organic net sales growth," and "adjusted operating expenses." 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. Please see the "Reconciliation of GAAP to Non-GAAP Financial Measures" tables and accompanying disclosures at the end of this press release for more detailed information regarding non-GAAP financial measures herein, including the items reflected in adjusted net earnings calculations. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.

The company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis (including the information under "Outlook" above) where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, are out of the company's control and/or cannot be reasonably predicted, and that would impact diluted net earnings per share, the most directly comparable forward-looking GAAP financial measure. For the same reasons, the company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

As a global company, Zebra's operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations because the underlying foreign currencies in which the company transacts change in value over time compared to the U.S. dollar; accordingly, the company presents certain organic growth financial information, which includes impacts of foreign currency translation, to provide a framework to assess how the company's businesses performed excluding the impact of foreign currency exchange rate fluctuations. Foreign currency impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. dollar. This impact is calculated by translating current period results at the currency exchange rates used in the comparable period in the prior year, rather than the exchange rates in effect during the current period. In addition, the company excludes the impact of its foreign currency hedging program in the prior year periods. The company believes these measures should be considered a supplement to and not in lieu of the company's performance measures calculated in accordance with GAAP.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

 

June 29,

2019

 

December 31,

2018

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

27

 

 

$

44

 

Accounts receivable, net of allowances for doubtful accounts of $2 million and $3 million as of June 29, 2019 and December 31, 2018, respectively

556

 

 

520

 

Inventories, net

484

 

 

520

 

Income tax receivable

78

 

 

24

 

Prepaid expenses and other current assets

43

 

 

54

 

Total Current assets

1,188

 

 

1,162

 

Property, plant and equipment, net

251

 

 

249

 

Right-of-use lease asset

114

 

 

 

Goodwill

2,622

 

 

2,495

 

Other intangibles, net

323

 

 

232

 

Long-term deferred income taxes

88

 

 

114

 

Other long-term assets

115

 

 

87

 

Total Assets

$

4,701

 

 

$

4,339

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

156

 

 

$

157

 

Accounts payable

472

 

 

552

 

Accrued liabilities

282

 

 

322

 

Deferred revenue

230

 

 

210

 

Income taxes payable

60

 

 

60

 

Total Current liabilities

1,200

 

 

1,301

 

Long-term debt

1,561

 

 

1,434

 

Long-term lease liabilities

104

 

 

 

Long-term deferred income taxes

1

 

 

8

 

Long-term deferred revenue

188

 

 

172

 

Other long-term liabilities

88

 

 

89

 

Total Liabilities

3,142

 

 

3,004

 

Stockholders' Equity:

 

 

 

Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued

 

 

 

Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares

1

 

 

1

 

Additional paid-in capital

314

 

 

294

 

Treasury stock at cost, 18,044,028 and 18,280,673 shares as of June 29, 2019 and December 31, 2018, respectively

(643

)

 

(613

)

Retained earnings

1,927

 

 

1,688

 

Accumulated other comprehensive loss

(40

)

 

(35

)

Total Stockholders' Equity

1,559

 

 

1,335

 

Total Liabilities and Stockholders' Equity

$

4,701

 

 

$

4,339

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 29,

2019

 

June 30,

2018

 

June 29,

2019

 

June 30,

2018

Net sales:

 

 

 

 

 

 

 

Tangible products

$

963

 

 

$

889

 

 

$

1,887

 

 

$

1,728

 

Services and software

134

 

 

123

 

 

276

 

 

261

 

Total Net sales

1,097

 

 

1,012

 

 

2,163

 

 

1,989

 

Cost of sales:

 

 

 

 

 

 

 

Tangible products

488

 

 

450

 

 

959

 

 

873

 

Services and software

89

 

 

90

 

 

183

 

 

179

 

Total Cost of sales

577

 

 

540

 

 

1,142

 

 

1,052

 

Gross profit

520

 

 

472

 

 

1,021

 

 

937

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing

127

 

 

121

 

 

249

 

 

241

 

Research and development

108

 

 

109

 

 

219

 

 

210

 

General and administrative

90

 

 

93

 

 

166

 

 

164

 

Amortization of intangible assets

30

 

 

23

 

 

58

 

 

46

 

Acquisition and integration costs

4

 

 

 

 

8

 

 

2

 

Exit and restructuring costs

1

 

 

1

 

 

2

 

 

5

 

Total Operating expenses

360

 

 

347

 

 

702

 

 

668

 

Operating income

160

 

 

125

 

 

319

 

 

269

 

Other expenses:

 

 

 

 

 

 

 

Foreign exchange loss

(1

)

 

(4

)

 

(4

)

 

(4

)

Interest expense, net

(33

)

 

(23

)

 

(57

)

 

(34

)

Other, net

3

 

 

2

 

 

2

 

 

2

 

Total Other expenses, net

(31

)

 

(25

)

 

(59

)

 

(36

)

Income before income tax

129

 

 

100

 

 

260

 

 

233

 

Income tax expense

5

 

 

30

 

 

21

 

 

54

 

Net income

$

124

 

 

$

70

 

 

$

239

 

 

$

179

 

Basic earnings per share

$

2.28

 

 

$

1.31

 

 

$

4.43

 

 

$

3.35

 

Diluted earnings per share

$

2.26

 

 

$

1.29

 

 

$

4.37

 

 

$

3.30

 

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

Six Months Ended

 

June 29,

2019

 

June 30,

2018

Cash flows from operating activities:

 

 

 

Net income

$

239

 

 

$

179

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

95

 

 

86

 

Amortization of debt issuance costs and discounts

2

 

 

9

 

Share-based compensation

24

 

 

24

 

Deferred income taxes

(3

)

 

3

 

Unrealized loss/(gain) on forward interest rate swaps

23

 

 

(18

)

Other, net

(2

)

 

2

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

(37

)

 

(26

)

Inventories, net

49

 

 

(11

)

Other assets

(9

)

 

(9

)

Accounts payable

(81

)

 

21

 

Accrued liabilities

(86

)

 

(48

)

Deferred revenue

30

 

 

22

 

Income taxes

(50

)

 

24

 

Other operating activities

1

 

 

8

 

Net cash provided by operating activities

195

 

 

266

 

Cash flows from investing activities:

 

 

 

Purchases of property, plant and equipment

(30

)

 

(33

)

Acquisition of businesses, net of cash acquired

(266

)

 

 

Proceeds from sale of long-term investments

10

 

 

2

 

Purchases of long-term investments

(20

)

 

(2

)

Net cash used in investing activities

(306

)

 

(33

)

Cash flows from financing activities:

 

 

 

Payment of debt issuance costs and discounts

 

 

(2

)

Payments of long-term debt

(81

)

 

(1,114

)

Proceeds from issuance of long-term debt

206

 

 

879

 

Payments of debt extinguishment costs

 

 

(1

)

Payments of taxes related to net settlements of equity awards, net of proceeds from exercise of stock options and stock purchase plan purchases

(34

)

 

(4

)

Other financing activities

3

 

 

 

Net cash provided by/(used in) financing activities

94

 

 

(242

)

Effect of exchange rate changes on cash

 

 

(7

)

Net decrease in cash and cash equivalents

(17

)

 

(16

)

Cash and cash equivalents at beginning of period

44

 

 

62

 

Cash and cash equivalents at end of period

$

27

 

 

$

46

 

Supplemental disclosures of cash flow information:

 

 

 

Income taxes paid

$

73

 

 

$

21

 

Interest paid

$

33

 

 

$

52

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF ORGANIC NET SALES GROWTH

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

June 29, 2019

 

AIT

 

EVM

 

Consolidated

Reported GAAP Consolidated Net sales growth

5.4

%

 

10.0

%

 

8.4

%

Adjustments:

 

 

 

 

 

Impact of foreign currency translation(1)

1.0

%

 

1.1

%

 

1.1

%

Impact of acquisitions (2)

(3.5

)%

 

(1.9

)%

 

(2.5

)%

Organic Net sales growth

2.9

%

 

9.2

%

 

7.0

%

 

 

 

 

 

 

 

Six Months Ended

 

June 29, 2019

 

AIT

 

EVM

 

Consolidated

Reported GAAP Consolidated Net sales growth

3.4

%

 

11.7

%

 

8.7

%

Adjustments:

 

 

 

 

 

Impact of foreign currency translation(1)

1.0

%

 

1.0

%

 

1.0

%

Impact of acquisitions (2)

(2.4

)%

 

(2.3

)%

 

(2.3

)%

Organic Net sales growth

2.0

%

 

10.4

%

 

7.4

%

(1)

Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, rather than the exchange rates in effect during the current period. In addition, we exclude the impact of the company's foreign currency hedging program in the prior year periods.

(2)

For purposes of computing Organic Net sales, amounts directly attributable to the Xplore acquisition (included in our consolidated results beginning August 14, 2018), the Temptime acquisition (included in our consolidated results beginning February 21, 2019), and the Profitect acquisition (included in our consolidated results beginning May 31, 2019) will be excluded for twelve months following the acquisition date.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN

(In millions)

(Unaudited)

 

 

Three Months Ended

 

June 29, 2019

 

June 30, 2018

 

AIT

 

EVM

 

Consolidated

 

AIT

 

EVM

 

Consolidated

GAAP

 

 

 

 

 

 

 

 

 

 

 

Reported Net sales

$

370

 

 

$

727

 

 

$

1,097

 

 

$

351

 

 

$

661

 

 

$

1,012

 

Reported Gross profit (1)

182

 

 

340

 

 

520

 

 

173

 

 

299

 

 

472

 

Gross Margin

49.2

%

 

46.8

%

 

47.4

%

 

49.3

%

 

45.2

%

 

46.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net sales

$

370

 

 

$

727

 

 

$

1,097

 

 

$

351

 

 

$

661

 

 

$

1,012

 

Adjusted Gross profit (2)

183

 

 

340

 

 

523

 

 

173

 

 

300

 

 

473

 

Adjusted Gross Margin

49.5

%

 

46.8

%

 

47.7

%

 

49.3

%

 

45.4

%

 

46.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

June 29, 2019

 

June 30, 2018

 

AIT

 

EVM

 

Consolidated

 

AIT

 

EVM

 

Consolidated

GAAP

 

 

 

 

 

 

 

 

 

 

 

Reported Net sales

$

727

 

 

$

1,436

 

 

$

2,163

 

 

$

703

 

 

$

1,286

 

 

$

1,989

 

Reported Gross profit (1)

366

 

 

658

 

 

1,021

 

 

356

 

 

581

 

 

937

 

Gross Margin

50.3

%

 

45.8

%

 

47.2

%

 

50.6

%

 

45.2

%

 

47.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net sales

$

727

 

 

$

1,436

 

 

$

2,163

 

 

$

703

 

 

$

1,286

 

 

$

1,989

 

Adjusted Gross profit (2)

367

 

 

659

 

 

1,026

 

 

356

 

 

583

 

 

939

 

Adjusted Gross Margin

50.5

%

 

45.9

%

 

47.4

%

 

50.6

%

 

45.3

%

 

47.2

%

(1)

Fiscal 2019 consolidated results include corporate eliminations related to business acquisitions that are not reported in segment results.

(2)

Adjusted Gross profit excludes purchase accounting adjustments and share-based compensation expense.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(In millions, except share data)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 29,

2019

 

June 30,

2018

 

June 29,

2019

 

June 30,

2018

Net income

$

124

 

 

$

70

 

 

$

239

 

 

$

179

 

Adjustments to Cost of sales(1)

 

 

 

 

 

 

 

Purchase accounting adjustments

2

 

 

 

 

3

 

 

 

Share-based compensation

1

 

 

1

 

 

2

 

 

2

 

Total adjustments to Cost of sales

3

 

 

1

 

 

5

 

 

2

 

Adjustments to Operating expenses(1)

 

 

 

 

 

 

 

Amortization of intangible assets

30

 

 

23

 

 

58

 

 

46

 

Acquisition and integration costs

4

 

 

 

 

8

 

 

2

 

Legal Settlement

 

 

13

 

 

 

 

13

 

Share-based compensation

17

 

 

16

 

 

29

 

 

26

 

Exit and restructuring costs

1

 

 

1

 

 

2

 

 

5

 

Total adjustments to Operating expenses

52

 

 

53

 

 

97

 

 

92

 

Adjustments to Other expenses, net(1)

 

 

 

 

 

 

 

Amortization of debt issuance costs and discounts

1

 

 

8

 

 

2

 

 

10

 

Investment (gain) loss

(4

)

 

(1

)

 

(3

)

 

(1

)

Foreign exchange loss

1

 

 

4

 

 

4

 

 

4

 

Forward interest rate swaps loss (gain)

15

 

 

(6

)

 

23

 

 

(18

)

Total adjustments to Other expenses, net

13

 

 

5

 

 

26

 

 

(5

)

Income tax effect of adjustments(2)

 

 

 

 

 

 

 

Reported income tax expense

5

 

 

30

 

 

21

 

 

54

 

Adjusted income tax

(32

)

 

(24

)

 

(63

)

 

(49

)

Total adjustments to income tax

(27

)

 

6

 

 

(42

)

 

5

 

Total adjustments

41

 

 

65

 

 

86

 

 

94

 

Non-GAAP Net income

$

165

 

 

$

135

 

 

$

325

 

 

$

273

 

 

 

 

 

 

 

 

 

GAAP earnings per share

 

 

 

 

 

 

 

Basic

$

2.28

 

 

$

1.31

 

 

$

4.43

 

 

$

3.35

 

Diluted

$

2.26

 

 

$

1.29

 

 

$

4.37

 

 

$

3.30

 

Non-GAAP earnings per share

 

 

 

 

 

 

 

Basic

$

3.06

 

 

$

2.51

 

 

$

6.02

 

 

$

5.10

 

Diluted

$

3.02

 

 

$

2.48

 

 

$

5.95

 

 

$

5.04

 

Basic weighted average shares outstanding

54,027,576

 

53,537,876

 

53,965,181

 

53,414,267

Diluted weighted average and equivalent shares outstanding

54,648,699

 

54,255,707

 

54,602,372

 

54,134,110

(1)

Presented on a pre-tax basis.

(2)

Represents adjustments to the GAAP income tax expense commensurate with pre-tax non-GAAP adjustments and to exclude the impacts of certain discrete income tax items.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATION TO EBITDA

(In millions)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 29,

2019

 

June 30,

2018

 

June 29,

2019

 

June 30,

2018

Net income

$

124

 

 

$

70

 

 

$

239

 

 

$

179

 

Add back:

 

 

 

 

 

 

 

Depreciation

18

 

 

20

 

 

37

 

 

40

 

Amortization of intangible assets

30

 

 

23

 

 

58

 

 

46

 

Total Other expenses, net

31

 

 

25

 

 

59

 

 

36

 

Income tax expense

5

 

 

30

 

 

21

 

 

54

 

EBITDA (Non-GAAP)

208

 

 

168

 

 

414

 

 

355

 

 

 

 

 

 

 

 

 

Adjustments to Cost of sales

 

 

 

 

 

 

 

Purchase accounting adjustments

2

 

 

 

 

3

 

 

 

Share-based compensation

1

 

 

1

 

 

2

 

 

2

 

Total adjustments to Cost of sales

3

 

 

1

 

 

5

 

 

2

 

Adjustments to Operating expenses

 

 

 

 

 

 

 

Acquisition and integration costs

4

 

 

 

 

8

 

 

2

 

Legal Settlement

 

 

13

 

 

 

 

13

 

Share-based compensation

17

 

 

16

 

 

29

 

 

26

 

Exit and restructuring costs

1

 

 

1

 

 

2

 

 

5

 

Total adjustments to Operating expenses

22

 

 

30

 

 

39

 

 

46

 

Total adjustments to EBITDA

25

 

 

31

 

 

44

 

 

48

 

Adjusted EBITDA (Non-GAAP)

$

233

 

 

$

199

 

 

$

458

 

 

$

403

 

 

 

 

 

 

 

 

 

Adjusted EBITDA % of Adjusted Net Sales

21.2

%

 

19.7

%

 

21.2

%

 

20.3

%

FREE CASH FLOW

 

 

Six Months Ended

 

June 29,

2019

 

June 30,

2018

Net cash provided by operating activities

$

195

 

 

$

266

 

Less: Purchases of property, plant and equipment

(30

)

 

(33

)

Free cash flow (Non-GAAP)(1)

$

165

 

 

$

233

 

(1)

Free cash flow is defined as Net cash provided by operating activities in a period minus purchases of property, plant and equipment (capital expenditures) made in that period. This measure does not represent residual cash flows available for discretionary expenditures as the measure does not deduct the payments required for debt service and other contractual obligations or payments for future business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our entire statements of cash flows.

 

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