Attached files
| file | filename |
|---|---|
| 8-K - 8-K - ZEBRA TECHNOLOGIES CORP | zebra8-k022317.htm |
Exhibit 99.1
 | Zebra Technologies Corporation |
3 Overlook Point Lincolnshire, IL 60069 USA T: +1 847 634 6700 F: +1 847 913 8766 www.zebra.com | |
Zebra Technologies Announces Fourth-Quarter and Full-Year 2016 Results
Financial Highlights
• | Achieved strong fourth-quarter net sales at the top end of our guidance |
• | Fourth-quarter net income of $17 million; non-GAAP net income of $102 million |
• | Fourth-quarter adjusted EBITDA increased 18% year-over-year to $179 million; and adjusted EBITDA margin expanded 310 basis points to 19.0% |
• | $382 million repayment of debt principal in 2016 |
• | Generated $372 million of cash from operations and $295 million of free cash flow in 2016 |
Lincolnshire, Ill., Feb. 23 2017 — Zebra Technologies Corporation (NASDAQ: ZBRA), a global leader in providing solutions and services that give enterprises real-time visibility into their operations, today announced results for the fourth quarter and full year ended December 31, 2016.
“We delivered solid fourth-quarter and full-year results, driven largely by strong demand for our innovative solutions. We returned to organic sales growth, expanded gross margin and reduced operating expenses, resulting in a significant improvement in profitability. We also continued to realize working capital efficiencies and divested the non-core wireless LAN business, enabling Zebra to exceed our debt reduction goals,” said Anders Gustafsson, chief executive officer of Zebra Technologies. “I’m proud of our teams for a strong finish to the year and success in extending Zebra’s leadership in the markets we serve. Zebra is well positioned to continue to deliver visibility solutions for the smarter enterprise and drive shareholder value.”
$ in millions, except per share amounts | 4Q16 | 4Q15 | Change | FY16 | FY15 | Change | |||||||||||
Select reported measures: | |||||||||||||||||
Net sales | $ | 942 | $ | 951 | (0.9 | )% | $ | 3,574 | $ | 3,650 | (2.1 | )% | |||||
Gross profit | 432 | 428 | 0.9 | % | 1,642 | 1,644 | (0.1 | )% | |||||||||
Net income (loss) | 17 | (28 | ) | 160.7 | % | (137 | ) | (158 | ) | 13.3 | % | ||||||
Net earnings (loss) per diluted share | $ | 0.34 | $ | (0.53 | ) | 164.2 | % | $ | (2.65 | ) | $ | (3.10 | ) | 14.5 | % | ||
Select Non-GAAP measures: | |||||||||||||||||
Adjusted net sales | $ | 944 | $ | 955 | (1.2 | )% | $ | 3,584 | $ | 3,666 | (2.2 | )% | |||||
Organic net sales growth | 3.5 | % | 0.4 | % | |||||||||||||
Adjusted gross profit | 435 | 432 | 0.7 | % | 1,654 | 1,667 | (0.8 | )% | |||||||||
Adjusted gross margin | 46.1 | % | 45.2 | % | 90 bps | 46.1 | % | 45.5 | % | 60 bps | |||||||
Adjusted EBITDA | 179 | 152 | 17.8 | % | 628 | 595 | 5.5 | % | |||||||||
Adjusted EBITDA margin | 19.0 | % | 15.9 | % | 310 bps | 17.5 | % | 16.2 | % | 130 bps | |||||||
Non-GAAP net income | $ | 102 | $ | 68 | 50.0 | % | $ | 293 | $ | 265 | 10.6 | % | |||||
Non-GAAP earnings per diluted share | $ | 1.93 | $ | 1.30 | 48.5 | % | $ | 5.60 | $ | 5.08 | 10.2 | % | |||||
Reported (GAAP) results
GAAP net sales were $942 million in the fourth quarter of 2016 compared to $951 million in the fourth quarter of 2015. Fourth quarter 2016 gross profit was $432 million compared to $428 million in the comparable prior year
period. Net income for the fourth quarter of 2016 was $17 million, or $0.34 per diluted share, compared with a net loss of $28 million, or $0.53 per diluted share, for the fourth quarter of 2015.
Adjusted (Non-GAAP) results
Consolidated adjusted net sales were $944 million in the fourth quarter of 2016 compared to $955 million in the fourth quarter of 2015. Consolidated organic net sales growth for the fourth quarter was 3.5%. Net sales in the Enterprise segment were $617 million in the fourth quarter of 2016, compared with $635 million in the fourth quarter of 2015. Legacy Zebra segment adjusted net sales were $327 million in the fourth quarter of 2016 compared to $320 million in the fourth quarter of 2015. On a constant currency basis, and excluding purchase accounting adjustments, fourth-quarter year-over-year adjusted net sales grew approximately 3% in the Legacy Zebra segment and declined approximately 1% in the Enterprise segment. Sales results from the divested wireless LAN business negatively impacted sales growth in the Enterprise segment by approximately 5 percentage points.
Adjusted gross margin for the quarter was 46.1%, compared to 45.2% in the prior year period. The increase was primarily due to lower service and product costs. Adjusted operating expenses for the fourth quarter were $275 million compared to $299 million in the prior year period due to lower sales and marketing and research and development expenses, as well as the divestiture of the wireless LAN business in October 2016.
Adjusted EBITDA for the fourth quarter of 2016 was $179 million, or 19.0% of adjusted net sales compared to $152 million, or 15.9% of adjusted net sales for the fourth quarter of 2015, primarily due to higher gross margins and lower operating expenses.
Non-GAAP net income for the fourth quarter of 2016 was $102 million, or $1.93 per diluted share, compared with $68 million, or $1.30 per diluted share, for the fourth quarter of 2015.
Tax adjustments and changes in profitability mix by jurisdiction had an approximate $0.16 positive impact to non-GAAP earnings per share in the fourth quarter of 2016.
Balance Sheet and Cash Flow
As of December 31, 2016, the company had cash and cash equivalents of $156 million and total long-term debt of $2.6 billion.
Free cash flow was $99 million and $295 million in the fourth quarter and full year of 2016, respectively.
For the fourth quarter of 2016, the company generated $127 million of cash flow from operations and incurred capital expenditures of $28 million. Also, in the fourth quarter Zebra received $39 million of net cash proceeds from the divestiture of the wireless LAN business. The company made $147 million in term loan principal payments and $59 million in scheduled cash interest payments in the fourth quarter.
For the year 2016, the company generated $372 million of cash flow from operations and incurred capital expenditures of $77 million. The company made $382 million in term loan principal payments and $180 million in scheduled cash interest payments during the full year.
Outlook
Mr. Gustafsson added, “Zebra entered 2017 with an unmatched portfolio of innovative solutions, a solid backlog, and a healthy pipeline of opportunities to drive profitable sales growth. Additionally, we are committed to further deleveraging our capital structure and are on track to exceed our two-year debt paydown target of $650 million.”
First Quarter 2017
The company expects first-quarter 2017 adjusted net sales to change approximately (2)% to 1% from adjusted net sales of $852 million in the first quarter of 2016. The company expects organic net sales growth of approximately 3% to 6% in the first quarter. This expectation excludes a 4 percentage point adverse impact from wireless LAN business sales, as well as an estimated 1 percentage point adverse impact from foreign currency translation.
Adjusted EBITDA margin is expected to be approximately 17% for the first quarter 2017, an improvement from the prior year period. Non-GAAP earnings per diluted share are expected to increase from the prior year period to be in the range of $1.20 to $1.40, assuming an effective tax rate in the low- to mid-20% range.
Full Year 2017
The company expects low-single digit organic net sales growth for the full year 2017, excluding a 3 percentage point adverse impact from wireless LAN business sales, as well as an estimated 1 percentage point adverse impact from foreign currency translation. The company expects organic net sales growth to moderate through 2017 considering year-over-year comparisons.
Adjusted EBITDA margin is expected to be in the range of 18% to 19% for the full year 2017, an improvement compared to the full year 2016.
For the full year 2017, the company expects to make debt principal payments totaling at least $300 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 fourth quarter and full year of 2016. The conference call will be held today, Thursday, Feb. 23, 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.
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, including the Enterprise business, 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. 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.
About Zebra
With the unparalleled visibility Zebra (NASDAQ: ZBRA) provides, enterprises become as smart and connected as the world we live in. Real-time information - gleaned from visionary solutions including hardware, services and software - give organizations the competitive edge they need to simplify operations, know more about their businesses and customers, and empower their mobile workers to succeed in today’s data-centric world. For more information, visit www.zebra.com or sign up for our news alerts. Follow us on LinkedIn, Twitter and Facebook.
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,” “adjusted operating expenses,” and “constant currency.” 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 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 constant currency financial information 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, for certain currencies, 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 both the current year and 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.
Contacts
Investors: Media:
Michael Steele, CFA, IRC Therese Van Ryne
Vice President, Investor Relations Director, Global Public Relations
Phone: + 1 847 793 6707 Phone: + 1 847 370 2317
msteele@zebra.com therese.vanryne@zebra.com
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions, except share data)
December 31, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 156 | $ | 192 | |||
Accounts receivable, net | 625 | 671 | |||||
Inventories, net | 345 | 397 | |||||
Income tax receivable | 32 | 4 | |||||
Prepaid expenses and other current assets | 64 | 70 | |||||
Total Current assets | 1,222 | 1,334 | |||||
Property, plant and equipment, net | 292 | 298 | |||||
Goodwill | 2,458 | 2,490 | |||||
Other intangibles, net | 480 | 757 | |||||
Long-term deferred income taxes | 113 | 70 | |||||
Other long-term assets | 67 | 91 | |||||
Total Assets | $ | 4,632 | $ | 5,040 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 413 | $ | 289 | |||
Accrued liabilities | 323 | 367 | |||||
Deferred revenue | 191 | 197 | |||||
Income taxes payable | 22 | 42 | |||||
Total Current liabilities | 949 | 895 | |||||
Long-term debt | 2,648 | 3,012 | |||||
Long-term deferred tax liability | 3 | 1 | |||||
Long-term deferred revenue | 124 | 124 | |||||
Other long-term liabilities | 116 | 115 | |||||
Total Liabilities | 3,840 | 4,147 | |||||
Stockholders’ Equity: | |||||||
Preferred stock, $0.01 par value; authorized 10,000,000 shares; none issued | — | — | |||||
Class A common stock, $0.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares | 1 | 1 | |||||
Additional paid-in capital | 210 | 194 | |||||
Treasury stock at cost, 19,267,269 and 19,990,006 shares at December 31, 2016 and December 31, 2015, respectively | (614 | ) | (631 | ) | |||
Retained earnings | 1,240 | 1,377 | |||||
Accumulated other comprehensive loss | (45 | ) | (48 | ) | |||
Total Stockholders’ Equity | 792 | 893 | |||||
Total Liabilities and Stockholders’ Equity | $ | 4,632 | $ | 5,040 | |||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions, except share data)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | ||||||||||||
Net sales: | |||||||||||||||
Net sales of tangible products | $ | 815 | $ | 826 | $ | 3,056 | $ | 3,131 | |||||||
Revenue from services and software | 127 | 125 | 518 | 519 | |||||||||||
Total Net sales | 942 | 951 | 3,574 | 3,650 | |||||||||||
Cost of sales: | |||||||||||||||
Cost of sales of tangible products | 429 | 433 | 1,593 | 1,629 | |||||||||||
Cost of services and software | 81 | 90 | 339 | 377 | |||||||||||
Total Cost of sales | 510 | 523 | 1,932 | 2,006 | |||||||||||
Gross profit | 432 | 428 | 1,642 | 1,644 | |||||||||||
Operating expenses: | |||||||||||||||
Selling and marketing | 107 | 127 | 444 | 494 | |||||||||||
Research and development | 92 | 98 | 376 | 394 | |||||||||||
General and administrative | 82 | 80 | 307 | 283 | |||||||||||
Amortization of intangible assets | 51 | 60 | 229 | 251 | |||||||||||
Acquisition and integration costs | 27 | 51 | 125 | 145 | |||||||||||
Impairment of goodwill and other intangibles | — | — | 62 | — | |||||||||||
Exit and restructuring costs | 2 | 5 | 19 | 40 | |||||||||||
Total Operating expenses | 361 | 421 | 1,562 | 1,607 | |||||||||||
Operating income | 71 | 7 | 80 | 37 | |||||||||||
Other expenses: | |||||||||||||||
Foreign exchange loss | (1 | ) | (1 | ) | (5 | ) | (23 | ) | |||||||
Interest expense, net | (48 | ) | (49 | ) | (193 | ) | (193 | ) | |||||||
Other, net | (2 | ) | — | (11 | ) | (1 | ) | ||||||||
Total Other expenses | (51 | ) | (50 | ) | (209 | ) | (217 | ) | |||||||
Income (loss) before income taxes | 20 | (43 | ) | (129 | ) | (180 | ) | ||||||||
Income tax expense (benefit) | 3 | (15 | ) | 8 | (22 | ) | |||||||||
Net income (loss) | $ | 17 | $ | (28 | ) | $ | (137 | ) | $ | (158 | ) | ||||
Basic earnings (loss) per share | $ | 0.34 | $ | (0.53 | ) | $ | (2.65 | ) | $ | (3.10 | ) | ||||
Diluted earnings (loss) earnings per share | $ | 0.34 | $ | (0.53 | ) | $ | (2.65 | ) | $ | (3.10 | ) | ||||
Basic weighted average shares outstanding | 51,792,228 | 51,207,102 | 51,579,112 | 50,996,297 | |||||||||||
Diluted weighted average and equivalent shares outstanding | 52,573,283 | 51,207,102 | 51,579,112 | 50,996,297 | |||||||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
Twelve Months Ended | |||||||
December 31, 2016 | December 31, 2015 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (137 | ) | $ | (158 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 304 | 320 | |||||
Impairment of goodwill, intangibles and other assets | 69 | — | |||||
Amortization of debt issuance cost and discount | 23 | 16 | |||||
Share-based compensation | 27 | 31 | |||||
Excess tax benefit from share-based compensation | (3 | ) | (12 | ) | |||
Deferred income taxes | (44 | ) | (142 | ) | |||
Unrealized gain on forward interest rate swaps | — | (4 | ) | ||||
Other | 3 | 14 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | 34 | 2 | |||||
Inventories, net | 34 | (13 | ) | ||||
Other assets | 7 | (7 | ) | ||||
Accounts payable | 125 | (21 | ) | ||||
Accrued liabilities | (29 | ) | (5 | ) | |||
Deferred revenue | 7 | 16 | |||||
Income taxes | (41 | ) | 47 | ||||
Other operating activities | (7 | ) | 26 | ||||
Net cash provided by operating activities | 372 | 110 | |||||
Cash flows from investing activities: | |||||||
Acquisition of businesses, net of cash acquired | — | (52 | ) | ||||
Purchases of property, plant and equipment | (77 | ) | (122 | ) | |||
Proceeds for the sale of a business | 39 | — | |||||
Proceeds from the sale of long-term investments | — | 3 | |||||
Purchases of long-term investments | (1 | ) | (1 | ) | |||
Purchases of investments and marketable securities | — | (1 | ) | ||||
Proceeds from sales of investments and marketable securities | — | 25 | |||||
Net cash used in investing activities | (39 | ) | (148 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt | 102 | — | |||||
Payment of long-term debt | (484 | ) | (165 | ) | |||
Proceeds from exercise of stock options and stock purchase plan purchases | 11 | 17 | |||||
Taxes paid related to net share settlement of equity awards | (8 | ) | (13 | ) | |||
Excess tax benefit from share-based compensation | 3 | 12 | |||||
Net cash used in financing activities | (376 | ) | (149 | ) | |||
Effect of exchange rate changes on cash | 7 | (15 | ) | ||||
Net decrease in cash and cash equivalents | (36 | ) | (202 | ) | |||
Cash and cash equivalents at beginning of year | 192 | 394 | |||||
Cash and cash equivalents at end of year | $ | 156 | $ | 192 | |||
Supplemental disclosures of cash flow information: | |||||||
Income taxes paid | $ | 81 | $ | 38 | |||
Interest paid | $ | 180 | $ | 183 | |||
-7-
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SALES INFORMATION
(UNAUDITED)
(In millions)
REPORTED NET SALES BY PRODUCT CATEGORY
Three Months Ended | |||||||||||||
December 31, 2016 | December 31, 2015 | Percent Change | Percent of Net Sales 2016 | Percent of Net Sales 2015 | |||||||||
Product category | |||||||||||||
Hardware | $ | 747 | $ | 762 | (2.0) | 79.3 | 80.2 | ||||||
Supplies | 68 | 65 | 4.6 | 7.2 | 6.8 | ||||||||
Service and software | 127 | 124 | 2.4 | 13.5 | 13.0 | ||||||||
Total Net sales | $ | 942 | $ | 951 | (0.9) | 100.0 | 100.0 | ||||||
Twelve Months Ended | |||||||||||||
December 31, 2016 | December 31, 2015 | Percent Change | Percent of Net Sales 2016 | Percent of Net Sales 2015 | |||||||||
Product category | |||||||||||||
Hardware | $ | 2,778 | $ | 2,863 | (3.0) | 77.7 | 78.5 | ||||||
Supplies | 278 | 268 | 3.7 | 7.8 | 7.3 | ||||||||
Service and software | 518 | 519 | (0.2) | 14.5 | 14.2 | ||||||||
Total Net sales | $ | 3,574 | $ | 3,650 | (2.1) | 100.0 | 100.0 | ||||||
REPORTED NET SALES BY GEOGRAPHIC REGION
Three Months Ended | |||||||||||||
December 31, 2016 | December 31, 2015 | Percent Change | Percent of Net Sales 2016 | Percent of Net Sales 2015 | |||||||||
Geographic region | |||||||||||||
Europe, Middle East and Africa | $ | 299 | $ | 324 | (7.7) | 31.7 | 34.1 | ||||||
Latin America | 61 | 55 | 10.9 | 6.5 | 5.8 | ||||||||
Asia-Pacific | 118 | 118 | 0.0 | 12.5 | 12.4 | ||||||||
Total International | 478 | 497 | (3.8) | 50.7 | 52.3 | ||||||||
North America | 464 | 454 | 2.2 | 49.3 | 47.7 | ||||||||
Total Net sales | $ | 942 | $ | 951 | (0.9) | 100.0 | 100.0 | ||||||
Twelve Months Ended | |||||||||||||
December 31, 2016 | December 31, 2015 | Percent Change | Percent of Net Sales 2016 | Percent of Net Sales 2015 | |||||||||
Geographic region | |||||||||||||
Europe, Middle East and Africa | $ | 1,138 | $ | 1,194 | (4.7) | 31.8 | 32.7 | ||||||
Latin America | 214 | 219 | (2.3) | 6.0 | 6.0 | ||||||||
Asia-Pacific | 483 | 463 | 4.3 | 13.5 | 12.7 | ||||||||
Total International | 1,835 | 1,876 | (2.2) | 51.3 | 51.4 | ||||||||
North America | 1,739 | 1,774 | (2.0) | 48.7 | 48.6 | ||||||||
Total Net sales | $ | 3,574 | $ | 3,650 | (2.1) | 100.0 | 100.0 | ||||||
-8-
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(UNAUDITED)
(In millions, except share data)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | ||||||||||||
Net income (loss) | $ | 17 | $ | (28 | ) | $ | (137 | ) | $ | (158 | ) | ||||
Adjustment to Net sales(1) | |||||||||||||||
Purchase accounting adjustments | 2 | 4 | 10 | 16 | |||||||||||
Total adjustment to Net sales | 2 | 4 | 10 | 16 | |||||||||||
Adjustments to Cost of sales(1) | |||||||||||||||
Purchase accounting adjustments | — | — | — | 4 | |||||||||||
Share-based compensation | 1 | — | 2 | 3 | |||||||||||
Total adjustments to Cost of sales | 1 | — | 2 | 7 | |||||||||||
Adjustments to Operating expenses(1) | |||||||||||||||
Amortization of intangible assets | 51 | 60 | 229 | 251 | |||||||||||
Acquisition and integration costs | 27 | 51 | 125 | 145 | |||||||||||
Impairment of goodwill and other intangibles | — | — | 62 | — | |||||||||||
Share-based compensation | 6 | 6 | 26 | 30 | |||||||||||
Exit and restructuring costs | 2 | 5 | 19 | 40 | |||||||||||
Total adjustments to Operating expenses | 86 | 122 | 461 | 466 | |||||||||||
Adjustments to Other expenses(1) | |||||||||||||||
Amortization of debt issuance cost and discount | 7 | 4 | 23 | 16 | |||||||||||
Impairment of cost-based investments | 2 | — | 7 | — | |||||||||||
Foreign exchange loss | 1 | 1 | 5 | 23 | |||||||||||
Forward interest rate swaps loss (gain) | 2 | — | — | (4 | ) | ||||||||||
Total adjustments to Other expenses | 12 | 5 | 35 | 35 | |||||||||||
Income tax effect of adjustments | |||||||||||||||
Income tax expense (benefit) | 3 | (15 | ) | 8 | (22 | ) | |||||||||
Tax-effect of Non-GAAP items(2) | (19 | ) | (20 | ) | (86 | ) | (79 | ) | |||||||
Total income tax effect of adjustments | (16 | ) | (35 | ) | (78 | ) | (101 | ) | |||||||
Total adjustments | 85 | 96 | 430 | 423 | |||||||||||
Non-GAAP Net income | $ | 102 | $ | 68 | $ | 293 | $ | 265 | |||||||
GAAP earnings (loss) per share | |||||||||||||||
Basic | $ | 0.34 | $ | (0.53 | ) | $ | (2.65 | ) | $ | (3.10 | ) | ||||
Diluted | $ | 0.34 | $ | (0.53 | ) | $ | (2.65 | ) | $ | (3.10 | ) | ||||
Non-GAAP earnings per share | |||||||||||||||
Basic | $ | 1.96 | $ | 1.32 | $ | 5.67 | $ | 5.19 | |||||||
Diluted | $ | 1.93 | $ | 1.30 | $ | 5.60 | $ | 5.08 | |||||||
Basic weighted average shares outstanding | 51,792,228 | 51,207,102 | 51,579,112 | 50,996,297 | |||||||||||
Diluted weighted average and equivalent shares outstanding | 52,573,283 | 51,978,081 | 52,259,157 | 52,096,036 | |||||||||||
(1) Presented on a pre-tax basis. | |||||||||||||||
(2) Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP adjustments. | |||||||||||||||
-9-
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION
(UNAUDITED)
(In millions)
Three Months Ended | Twelve Months Ended | ||||||||||||||
EBITDA Reconciliation | December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | |||||||||||
Operating income | $ | 71 | $ | 7 | $ | 80 | $ | 37 | |||||||
Depreciation | 19 | 19 | 75 | 69 | |||||||||||
Amortization of intangible assets | 51 | 60 | 229 | 251 | |||||||||||
EBITDA (Non-GAAP) | 141 | 86 | 384 | 357 | |||||||||||
Adjustments to Net sales | |||||||||||||||
Purchase accounting adjustments | 2 | 4 | 10 | 16 | |||||||||||
Total adjustments to Net sales | 2 | 4 | 10 | 16 | |||||||||||
Adjustments to Cost of sales | |||||||||||||||
Purchase accounting adjustments | — | — | — | 4 | |||||||||||
Share-based compensation | 1 | — | 2 | 3 | |||||||||||
Total adjustments to Cost of sales | 1 | — | 2 | 7 | |||||||||||
Adjustments to Operating expenses | |||||||||||||||
Acquisition and integration costs | 27 | 51 | 125 | 145 | |||||||||||
Impairment of goodwill and other intangibles | — | — | 62 | — | |||||||||||
Share-based compensation | 6 | 6 | 26 | 30 | |||||||||||
Exit and restructuring costs | 2 | 5 | 19 | 40 | |||||||||||
Total adjustments to Operating expenses | 35 | 62 | 232 | 215 | |||||||||||
Total adjustments to EBITDA | 38 | 66 | 244 | 238 | |||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 179 | $ | 152 | $ | 628 | $ | 595 | |||||||
Operating income % of GAAP Net sales | 7.5 | % | 0.7 | % | 2.2 | % | 1.0 | % | |||||||
Adjusted EBITDA % of Non-GAAP sales | 19.0 | % | 15.9 | % | 17.5 | % | 16.2 | % | |||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION
(UNAUDITED)
(In millions)
ORGANIC NET SALES GROWTH
Three Months Ended December 31, 2016 | ||
Reported Net sales decline | (0.9) | % |
Adjustments: | ||
Purchase accounting adjustments | (0.2) | % |
Impact of wireless LAN Net sales(1) | 3.2 | % |
Impact of foreign currency translation(2) | 1.4 | % |
Organic Net sales growth | 3.5 | % |
Twelve Months Ended December 31, 2016 | ||
Reported Net sales decline | (2.1) | % |
Adjustments: | ||
Purchase accounting adjustments | (0.2) | % |
Impact of wireless LAN Net sales(1) | 1.4 | % |
Impact of foreign currency translation(2) | 1.3 | % |
Organic Net sales growth | 0.4 | % |
(1) The company sold the wireless LAN business in October 2016. We are excluding the impact of the net sales of this business in both the current and prior year periods when computing organic net sales growth. | ||
(2) Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations. We use the term “constant currency” to represent certain results that have been adjusted to exclude the estimated impact of exchange rate fluctuations for certain foreign currencies. 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, for certain currencies, 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 both the current and prior year periods. | ||
NET SALES BY SEGMENT
Three Months Ended | |||||||||
December 31, 2016 | December 31, 2015 | Percent Change | |||||||
Enterprise | $ | 617 | $ | 635 | (2.8) | ||||
Legacy Zebra | 327 | 320 | 2.2 | ||||||
Adjusted net sales | 944 | 955 | (1.2) | ||||||
Purchase accounting adjustments | (2 | ) | (4 | ) | |||||
Net sales | $ | 942 | $ | 951 | (0.9) | ||||
Twelve Months Ended | |||||||||
December 31, 2016 | December 31, 2015 | Percent Change | |||||||
Enterprise | $ | 2,337 | $ | 2,380 | (1.8) | ||||
Legacy Zebra | 1,247 | 1,286 | (3.0) | ||||||
Adjusted net sales | 3,584 | 3,666 | (2.2) | ||||||
Purchase accounting adjustments | (10 | ) | (16 | ) | |||||
Net sales | $ | 3,574 | $ | 3,650 | (2.1) | ||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION
(UNAUDITED)
(In millions)
FREE CASH FLOW
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | ||||||||||||
Net cash provided by (used in) operating activities | $ | 127 | $ | (6 | ) | $ | 372 | $ | 110 | ||||||
Less: Purchases of property, plant and equipment | (28 | ) | (35 | ) | (77 | ) | (122 | ) | |||||||
Free cash flow(1) | $ | 99 | $ | (41 | ) | $ | 295 | $ | (12 | ) | |||||
(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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