Zebra Technologies Reports Record Fourth Quarter and Full-Year Financial Results

Zebra Technologies Reports Record Fourth Quarter and Full-Year Financial Results

VERNON HILLS, Ill., Feb. 9 /PRNewswire-FirstCall/ -- Zebra Technologies Corporation (NASDAQ:ZBRA) today announced strong growth in net sales, net income and earnings per share to record levels for the fourth quarter and year that ended December 31, 2004. Quarterly net income increased 31.0% to $31,963,000, or $0.44 per diluted share, from $24,395,000, or $0.34 per diluted share, for the same period a year ago. Net sales for the fourth quarter of $174,874,000 topped the upper end of the company's sales guidance range and were up 18.8% from $147,200,000 for the fourth quarter of 2003. Per- share figures were adjusted for a three-for-two stock split that was paid on August 25, 2004, in the form of a 50% stock dividend. Zebra also announced continued strong business momentum and a favorable outlook for the first quarter of 2005.

For 2004, annual net income increased 31.6% to a record $120,643,000, or $1.66 per diluted share, from 2003's $91,696,000, or $1.28 per diluted share. Record net sales for 2004 were $663,054,000, up 23.6% from $536,397,000 for the prior year.

"High sales growth across all dimensions of our business -- products, channels, geographic regions -- helped sustain exceptional business strength throughout the year," stated Edward Kaplan, Zebra's chairman and chief executive officer. "Our performance is a direct result of pursuing a strategy to gain market share, extend global reach and deliver more solutions for established and high-growth specialty printing applications. We are serving international customers better with more Zebra representatives working with a more robust set of valued channel partners in strategic geographic territories. Our entire range of printer products is consistently meeting with strong market demand, as companies and organizations build infrastructure and enable enterprise mobility."

Mr. Kaplan added, "We enter 2005 with positive business momentum, a stronger Zebra brand, better business execution and greatly extended competitive leadership. The trends that made for a successful 2004 will have an enduring effect this year and beyond: greater deployments of mobile and wireless printing, better coverage in high-growth international geographic regions including China, and a wider array of business improvement applications with robust thermal printer products. All of this, plus the growing opportunities in radio frequency identification and vertical market applications make us optimistic about further growth and success in building greater stockholder value in 2005."

At December 31, 2004, Zebra had $557,993,000 in cash, investments and marketable securities, and no long-term debt. Inventories totaled $59,255,000 and accounts receivable were $96,881,000 to reflect the higher level of business.

Discussion and Analysis

For the fourth quarter of 2004, the company benefited from sales growth in all major product lines and geographic regions. All of the company's international regions, which increased 20.6% overall, achieved record quarterly sales, with the highest percentage growth occurring in the Latin American region. The highest dollar sales growth occurred in the company's North American region, which increased 17.2%. Gross profit margin of 52.0% increased 1.5 percentage points from the fourth quarter of 2003, primarily from higher capacity utilization related to the higher sales volume, cost reductions and favorable foreign exchange rates. Fourth quarter operating expenses increased 6.1%. Fourth quarter operating expenses reflect higher payroll and benefits from increased headcount to support sales and marketing activities and product development, including those related to RFID products, as well as higher legal expenses related to litigation and increased work on intellectual property matters. Quarterly operating income increased 43.1% on margin expansion to 26.4% of net sales from 21.9% for the fourth quarter of 2003.

First Quarter Outlook

Zebra also announced its financial forecast for the first quarter of 2005. Net sales are expected within a range of $175,000,000 and $178,000,000, with earnings between $0.43 and $0.45 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 first quarter of 2005 stated in the paragraph directly above. These 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. Specifically, these factors include market acceptance of the company's products and product lines and competitors' product offerings, as well as the speed of adoption of the company's printing technologies and competing technologies. When used in this release and documents referenced, the words "anticipate," "believe," "estimate," "forecast," 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, 2003.

Zebra Technologies Corp. delivers innovative and reliable on-demand printing solutions for business improvement and security applications in 90 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 four million printers, including RFID printer/encoders and wireless mobile solutions, and also offers software, connectivity solutions and printing supplies. Information about Zebra bar code 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 fourth quarter of 2004. 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)

December 31, December 31,
2004 2003
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $17,983 $14,266
Investments and marketable securities 540,010 433,582
Accounts receivable, net 96,881 81,867
Inventories 59,255 42,781
Deferred income taxes 6,625 4,507
Prepaid expenses 3,884 4,415
Total current assets 724,638 581,418

Property and equipment at cost, less
accumulated depreciation and amortization 46,283 39,286
Goodwill 61,793 61,150
Other intangibles, net 6,517 9,031
Other assets 22,991 10,726
Total assets $862,222 $701,611

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $24,130 $16,238
Accrued liabilities 29,248 26,938
Current portion of obligation under
capital lease 54 153
Income taxes payable 6,144 2,273
Total current liabilities 59,576 45,602

Obligation under capital lease, less
current portion 117 452
Deferred income taxes 417 723
Deferred rent 564 518
Other long-term liabilities 3,894 2,401
Total liabilities 64,568 49,696

Stockholders' equity:
Preferred stock - -
Class A Common Stock 718 711
Additional paid-in capital 84,180 61,929
Retained earnings 706,489 585,846
Accumulated other comprehensive income 6,267 3,429
Total stockholders' equity 797,654 651,915
Total liabilities and
stockholders' equity $862,222 $701,611



ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)

Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2004 2003 2004 2003
Net sales $174,874 $147,200 $663,054 $536,397
Cost of sales 83,979 72,803 319,895 263,320
Gross profit 90,895 74,397 343,159 273,077
Operating expenses:
Selling and
marketing 22,615 19,506 77,062 66,635
Research and
development 9,368 8,722 37,093 31,759
General and
administrative 11,959 11,456 49,097 41,892
Amortization of
intangible assets 647 527 2,569 1,640
Acquired in-process
technology - 692 22 692
Exit costs 146 1,232 2,100 1,232
Merger costs - 9 46 9
Total operating
expenses 44,735 42,144 167,989 143,859

Operating income 46,160 32,253 175,170 129,218

Other income (expense):
Investment income 2,949 4,079 10,628 8,553
Interest expense (5) (38) (44) (154)
Foreign exchange
gains (losses) (9) (304) 485 (552)
Other, net (457) (524) (1,691) (1,073)
Total other income 2,478 3,213 9,378 6,774

Income before
income taxes 48,638 35,466 184,548 135,992
Income taxes 16,675 11,071 63,905 44,296
Net income $31,963 $24,395 $120,643 $91,696

Basic earnings
per share $0.45 $0.34 $1.69 $1.30
Diluted earnings
per share $0.44 $0.34 $1.66 $1.28

Basic weighted average
shares outstanding 71,773 70,990 71,556 70,647
Diluted weighted average
and equivalent shares
outstanding 72,719 71,993 72,539 71,495

Note: Share and per-share figures were adjusted for a three-for-two stock
split that was paid in the form of a 50% stock dividend on August 25,
2004.



ZEBRA TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

Twelve Months Ended
December 31, December 31,
2004 2003
Cash flows from operating activities:
Net income $120,643 $91,696
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 12,255 11,580
Tax benefit from exercise of options 6,965 4,987
Acquired in-process technology 22 692
Deferred income taxes (2,358) (697)
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable, net (11,491) (5,141)
Inventories (15,456) (1,659)
Other assets (11,492) 350
Accounts payable 6,420 (3,156)
Accrued liabilities 1,974 6,909
Income taxes payable 3,720 (962)
Other operating activities 54 (2,196)
Net cash provided by
operating activities 111,256 102,403

Cash flows from investing activities:
Purchases of property and equipment (16,243) (8,407)
Acquisition of Atlantek, Inc., net of
cash acquired - (13,680)
Purchases of investments and
marketable securities (1,287,388) (1,055,125)
Sales of investments and
marketable securities 1,180,960 951,702
Net cash used in investing activities (122,671) (125,510)

Cash flows from financing activities:
Proceeds from exercise of stock options
and stock purchase plan purchases 15,531 17,762
Payments for obligation under capital lease (434) (200)
Other financing activities (238) (142)
Net cash provided by
financing activities 14,859 17,420

Effect of exchange rate changes on cash 273 1,535

Net increase (decrease) in cash and
cash equivalents 3,717 (4,152)
Cash and cash equivalents at beginning of year 14,266 18,418
Cash and cash equivalents at end of year $17,983 $14,266

Supplemental disclosures of cash flow information:
Interest paid $44 $154
Income taxes paid 56,055 38,779

Supplemental disclosures of non-cash transactions:
Conversion of Class B Common Stock to Class A
Common Stock - 87



ZEBRA TECHNOLOGIES CORPORATION
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)

Sales by Product Category

Three Months Ended
December 31, December 31, Percent Percent of
2004 2003 Change Total Sales
Hardware $137,529 $113,263 21.4 78.6
Supplies 30,895 26,738 15.5 17.7
Service and software 6,083 6,165 (1.3) 3.5
Shipping and handling 1,444 1,184 22.0 0.8
Cash flow from
hedging activities (1,077) (150) - (0.6)
Total sales $174,874 $147,200 18.8 100.0


Sales by Geographic Region

Three Months Ended
December 31, December 31, Percent Percent of
2004 2003 Change Total Sales
Europe, Middle East
and Africa $59,398 $47,893 24.0 34.0
Latin America 10,597 7,978 32.8 6.1
Asia-Pacific 14,534 14,215 2.2 8.3
Total international 84,529 70,086 20.6 48.4
North America 90,345 77,114 17.2 51.6
Total sales $174,874 $147,200 18.8 100.0


Sales by Product Category

Twelve Months Ended
December 31, December 31, Percent Percent of
2004 2003 Change Total Sales
Hardware $518,556 $409,144 26.7 78.2
Supplies 116,849 98,519 18.6 17.6
Service and software 24,338 24,355 (0.1) 3.7
Shipping and handling 4,950 4,113 20.4 0.7
Cash flow from
hedging activities (1,639) 266 - (0.2)
Total sales $663,054 $536,397 23.6 100.0


Sales by Geographic Region

Twelve Months Ended
December 31, December 31, Percent Percent of
2004 2003 Change Total Sales
Europe, Middle East
and Africa $213,559 $170,544 25.2 32.2
Latin America 38,119 29,406 29.6 5.7
Asia-Pacific 52,302 43,904 19.1 7.9
Total international 303,980 243,854 24.7 45.8
North America 359,074 292,543 22.7 54.2
Total sales $663,054 $536,397 23.6 100.0



Source: Zebra Technologies Corporation

CONTACT: Charles R. Whitchurch, Chief Financial Officer of Zebra
Technologies Corporation, +1-847-634-6700, or Fax, +1-847-821-2545

Web site: http://www.zebra.com/


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