8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 5, 2014

ZEBRA TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware

000-19406

36-2675536

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)


475 Half Day Road, Suite 500, Lincolnshire, Illinois		60069
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: 847-634-6700

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13c-4(c))

Item 2.02. Results of Operations and Financial Conditions.

The information contained in this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On August 5, 2014, we announced our results of operations and financial position as of and for the second quarter ended June 28, 2014. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits. The following Exhibit is being furnished herewith:


Exhibit Number		Description of Exhibits

99.1		Registrant’s Press Release dated August 5, 2014.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	ZEBRA TECHNOLOGIES CORPORATION

Date: August 5, 2014	By:	/s/ Jim Kaput
		Jim Kaput
		SVP, General Counsel

EXHIBIT INDEX


Exhibit Number		Description of Exhibits

99.1		Registrant’s Press Release dated August 5, 2014

EX-99.1

Exhibit 99.1

LOGO

475 Half Day Road, Suite 500

Lincolnshire, IL 60069 USA

T: +1 847 634 6700

F: +1 847 913 8766

www.zebra.com

FOR IMMEDIATE RELEASE

Contact:


Investors:		Media:
Douglas A. Fox, CFA		Robb Kristopher
Vice President, Investor Relations		Director, Corporate Communications
and Treasurer		and Public Relations
+ 1 847 793 6735		+ 1 847 793 5514
dfox@zebra.com		rkristopher@zebra.com

FOR IMMEDIATE RELEASE

Zebra Technologies Announces Record Sales

for the 2014 Second Quarter

Acquisition expenses of $20.4 million related to the

pending acquisition of the Enterprise Business of Motorola Solutions

Lincolnshire, Ill., August 5, 2014— Zebra Technologies Corporation (NASDAQ: ZBRA) today reported record 2014 second quarter net sales of $288,421,000, up 13.9% from $253,160,000 for the second quarter of 2013. Diluted earnings per share of $0.54 for the second quarter of 2014 include $20,364,000 in acquisition expenses related to the pending acquisition of the Enterprise business of Motorola Solutions, which was announced on April 15, 2014. Diluted earnings per share for the second quarter of 2013 were $0.60 and include $618,000 of acquisition expenses.

For the second quarter of 2014, non-GAAP net income was $43,265,000, or $0.84 per diluted share, up 35.5% from $31,959,000, or $0.62 per diluted share, for the second quarter of 2013.


Summary Financial Performance (Unaudited)
	2Q14		2Q13		Change
Net sales (in 000s)	$	288,421	$	253,160		13.9	%
Gross margin (%)		49.3		47.8		1.5	pts.
GAAP net income (in 000s)	$	27,557	$	30,566		(9.8	)%
GAAP Diluted EPS	$	0.54	$	0.60		(10.0	)%
Non-GAAP net income (in 000s)	$	43,265	$	31,959		35.4	%
Non-GAAP Diluted EPS	$	0.84	$	0.62		35.5	%

(1)

A Reconciliation of Non-GAAP financial information to GAAP information is available in the financial tables in this release.

“Zebra continued to extend its industry leadership, with effective execution on a proven business strategy,” stated Anders Gustafsson, Zebra’s chief executive officer. “Our singular focus of delivering products and solutions that deliver increasing levels of visibility into the operations of our customers is driving more business and greater opportunities for growth. During the second quarter, we made good progress on integration planning for the pending acquisition of Motorola’s Enterprise business. We remain enthusiastic about the compelling strategy supporting the transaction. The combination of the businesses will make Zebra the industry leader in Asset Enterprise Intelligence, and position the company to increasingly benefit from important trends in mobility, cloud computing and data analytics.”

As of June 28, 2014, Zebra had $528,581,000 in cash and investments, and no long-term debt. Net inventories were $126,103,000, and net accounts receivable were $165,426,000.

Discussion and Analysis – Second Quarter

•

Net sales growth of 13.9% from the comparable quarter a year ago resulted from sales growth across all product categories, with notable increases in supplies, services, and tabletop, desktop and mobile printers. The increase in service revenue was modestly affected by the December 2013 acquisition of Hart Systems LLC, which also contributed to growth in North American sales. Performance in North American sales also reflects an increase in shipments of large enterprise deals. The Europe, Middle East and Africa region benefited from improved business activity, with notable sales to retail customers. Movement in foreign currency, net of hedges, increased sales by $3,523,000.

•

Gross margin of 49.3%, versus 47.8% in 2013, reflects higher sales across all regions and product volumes across all product categories, lower product costs, and a reduction in freight costs. Favorable movements in foreign currency, net of hedges, increased second quarter gross profit by $1,867,000

•

Operating expenses for the second quarter increased 28.9%, primarily as a result of increased compensation, acquisition and amortization costs as a result of the December 2013 acquisition of Hart Systems LLC. Acquisition costs consist of transactions costs and integration activities related to the pending acquisition of the Enterprise business of Motorola Solutions, which was announced in April 2014.

•

During the second quarter, Zebra entered into forward interest rate swaps to hedge potential movements in interest rates associated with the anticipated debt funding for the acquisition of Motorola’s Enterprise business. A decline in interest rates resulted in a $2,433,000 loss in the value of the hedging instruments for the quarter.

•

Effective income tax rate of 11.1% reflects the effect of acquisition costs on income primarily in the U.S. These higher costs are resulting in a higher than normal percentage of income generated from jurisdictions with lower effective income tax rates.

Third Quarter Outlook

Zebra announced its financial forecast for the third quarter of 2014. Net sales are expected within a range of $285,000,000 to $295,000,000. Non-GAAP earnings per share are expected within a range of $0.81 to $0.91, excluding certain expenses including those associated with the acquisition of Motorola’s Enterprise business, and assuming an income tax rate of 20.0%.

Conference Call Notification

Investors are invited to listen to a live webcast of Zebra’s conference call discussing the company’s financial results for the second quarter of 2014. The conference call will be held at 9:00 AM Eastern Time today. To listen to the call, visit the company’s website at http://www.zebra.com.

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 third quarter of 2013 stated in the paragraph above captioned “Third Quarter Outlook.” Similarly, statements herein that describe the proposed transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of managements’ beliefs, intentions, or goals are also forward-looking statements. 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, 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 a large investment portfolio, 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 Hart Systems, 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,” “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, 2013.

About Zebra Technologies

A global leader in enterprise asset intelligence, Zebra Technologies Corporation (NASDAQ: ZBRA) offers solutions that give a virtual voice to an organization’s assets, people and transactions, enabling organizations to unlock greater business value. The company’s extensive portfolio of innovative and reliable marking and printing products, RFID and real-time location solutions, illuminates mission-critical information that help customers take smarter business actions. For more information about Zebra’s solutions, visit http://www.zebra.com.

Use of Non-GAAP Financial Information

This press release contains certain non-GAAP financial measures, consisting of “EBITDA,” “Adjusted EBITDA,” “Non-GAAP net income” and “Non-GAAP earnings per share” in addition to measure our operating performance. 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. Reconciliations of Operating Income to EBITDA, EBITDA to Adjusted EBITDA, and GAAP net income to Non-GAAP net income are included in the financial schedules contained in this press release. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.

Contact:


Investors:		Media:
Douglas A. Fox, CFA		Robb Kristopher
Vice President, Investor Relations		Director, Corporate Communications
and Treasurer		and Public Relations
+ 1 847 793 6735		+ 1 847 793 5514
dfox@zebra.com		rkristopher@zebra.com

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


	June 28, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	70,349		$	62,827
Investments and marketable securities		455,644			350,380
Accounts receivable, net		165,426			176,917
Inventories, net		126,103			121,023
Deferred income taxes		19,810			19,810
Income tax receivable		8,860			7,622
Prepaid expenses and other current assets		13,055			15,524
Total current assets		859,247			754,103
Property and equipment at cost, less accumulated depreciation and amortization		107,115			109,588
Goodwill		155,800			155,800
Other intangibles, net		63,629			68,968
Other assets		33,178			31,353

Total assets	$	1,218,969		$	1,119,812

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	31,752		$	34,688
Accrued liabilities		65,518			61,962
Deferred revenue		16,896			15,506
Income taxes payable		9,112			6,898
Total current liabilities		123,278			119,054
Long-term deferred tax liability		28,471			25,492
Deferred rent		1,484			1,131
Other long-term liabilities		17,674			15,477

Total liabilities		170,907			161,154

Stockholders’ equity:
Class A Common Stock		722			722
Additional paid-in capital		149,475			143,295
Treasury stock		(666,084	)		(678,456	)
Retained earnings		1,572,041			1,502,878
Accumulated other comprehensive loss		(8,092	)		(9,781	)

Total stockholders’ equity		1,048,062			958,658

Total liabilities and stockholders’ equity	$	1,218,969		$	1,119,812

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in thousands, except per share data)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013
Net sales:
Net sales of tangible products	$	270,049		$	239,909		$	531,941		$	465,030
Revenue from services and software		18,372			13,251			44,748			25,067

Total net sales		288,421			253,160			576,689			490,097

Cost of sales:
Cost of sales of tangible products		136,962			125,664			267,411			242,775
Cost of services and software		9,290			6,589			19,171			13,350

Total cost of sales		146,252			132,253			286,582			256,125

Gross profit		142,169			120,907			290,107			233,972

Operating expenses:
Selling and marketing		35,755			33,830			71,171			67,345
Research and development		23,710			23,201			46,567			45,059
General and administrative		26,321			24,053			54,712			49,329
Amortization of intangible assets		2,667			1,863			5,339			3,726
Acquisition costs		20,364			618			25,291			1,100
Exit and restructuring costs		287			1,101			554			2,996

Total operating expenses		109,104			84,666			203,634			169,555

Operating income		33,065			36,241			86,473			64,417

Other income (expense):
Investment income		379			473			800			1,150
Foreign exchange income (loss)		43			(462	)		(249	)		(560	)
Loss on interest rate swaps		(2,433	)		0			(2,433	)		0
Other, net		(57	)		1,464			(49	)		1,473

Total other income		(2,068	)		1,475			(1,931	)		2,063

Income from continuing operations before income taxes		30,997			37,716			84,542			66,480
Income taxes		3,440			7,158			15,379			12,380

Income from continuing operations		27,557			30,558			69,163			54,100
Income from discontinued operations, net of tax		0			8			0			8

Net income	$	27,557		$	30,566		$	69,163		$	54,108

Basic earnings per share:
Income from continuing operations	$	0.54		$	0.60		$	1.37		$	1.06
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income	$	0.54		$	0.60		$	1.37		$	1.06

Diluted earnings per share:
Income from continuing operations	$	0.54		$	0.60		$	1.35		$	1.05
Income from discontinued operations		0.00			0.00			0.00			0.00

Net income	$	0.54		$	0.60		$	1.35		$	1.05

Basic weighted average shares outstanding		50,606			50,900			50,509			50,929
Diluted weighted average and equivalent shares outstanding		51,278			51,283			51,129			51,310

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013
Net income	$	27,557		$	30,566		$	69,163		$	54,108
Other comprehensive income (loss):
Unrealized gains (losses) on hedging transactions, net of income taxes		776			(391	)		1,389			1,352
Unrealized holding gains (losses) on investments, net of income taxes		348			(867	)		496			(939	)
Foreign currency translation adjustment		(29	)		223			(196	)		317

Comprehensive income	$	28,652		$	29,531		$	70,852		$	54,838

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Six Months Ended
	June 28, 2014			June 29, 2013
Cash flows from operating activities:
Net income	$	69,163		$	54,108
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		18,096			15,412
Share-based compensation		7,110			6,504
Excess tax benefit from share-based compensation		(3,947	)		(3,727	)
Loss on sale of property and equipment		49			182
Deferred income taxes		2,979			4,439
Loss on forward interest rate swaps		2,433			0
Changes in assets and liabilities:
Accounts receivable, net		11,359			(1,976	)
Inventories, net		(5,061	)		14,190
Other assets		2,583			1,313
Accounts payable		(5,336	)		3,263
Accrued liabilities		3,535			(6,094	)
Deferred revenue		502			1,585
Income taxes		4,706			476
Other operating activities		1,742			1,381

Net cash provided by operating activities		109,913			91,056

Cash flows from investing activities:
Purchases of property and equipment		(7,962	)		(8,547	)
Acquisition of intangible assets		0			(500	)
Purchase of long-term investments		(1,213	)		(604	)
Purchase of investments and marketable securities		(276,400	)		(231,174	)
Maturities of investments and marketable securities		20,852			19,188
Proceeds from sales of investments and marketable securities		150,781			142,230

Net cash used in investing activities		(113,942	)		(79,407	)

Cash flows from financing activities:
Purchase of treasury stock		0			(28,563	)
Proceeds from exercise of stock options and stock purchase plan purchases		7,711			4,104
Excess tax benefit from share-based compensation		3,947			3,727

Net cash provided by (used in) financing activities		11,658			(20,732	)

Effect of exchange rate changes on cash		(107	)		229

Net increase (decrease) in cash and cash equivalents		7,522			(8,854	)
Cash and cash equivalents at beginning of period		62,827			64,740

Cash and cash equivalents at end of period	$	70,349		$	55,886

Supplemental disclosures of cash flow information:
Income taxes paid, net	$	7,627		$	5,346

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL SALES INFORMATION

(Amounts in thousands)

(Unaudited)

SALES BY PRODUCT CATEGORY


	Three Months Ended
	June 28,		June 29,		Percent		Percent of		Percent of
Product Category	2014		2013		Change		Net Sales 2014		Net Sales 2013
Hardware	$	203,215	$	178,938		13.6		70.5		70.8
Supplies		65,279		59,618		9.5		22.6		23.5
Service and software		18,372		13,251		38.6		6.4		5.2

Subtotal products		286,866		251,807		13.9		99.5		99.5
Shipping and handling		1,555		1,353		14.9		0.5		0.5

Total net sales	$	288,421	$	253,160		13.9		100.0		100.0


	Six Months Ended
	June 28,		June 29,		Percent		Percent of		Percent of
Product Category	2014		2013		Change		Net Sales – 2014		Net Sales – 2013
Hardware	$	399,432	$	345,630		15.6		69.3		70.6
Supplies		128,783		116,741		10.3		22.3		23.8
Service and software		44,748		25,067		78.5		7.8		5.1

Subtotal products		572,963		487,438		17.5		99.4		99.5
Shipping and handling		3,726		2,659		40.1		0.6		0.5

Total net sales	$	576,689	$	490,097		17.7		100.0		100.0

SALES BY GEOGRAPHIC REGION


	Three Months Ended
	June 28,		June 29,		Percent		Percent of		Percent of
Geographic Region	2014		2013		Change		Net Sales 2014		Net Sales 2013
Europe, Middle East and Africa	$	94,200	$	80,913		16.4		32.7		32.0
Latin America		25,204		24,322		3.6		8.7		9.6
Asia-Pacific		40,334		36,973		9.1		14.0		14.6

Total International		159,738		142,208		12.3		55.4		56.2
North America		128,683		110,952		16.0		44.6		43.8

Total net sales	$	288,421	$	253,160		13.9		100.0		100.0


	Six Months Ended
	June 28,		June 29,		Percent		Percent of		Percent of
Geographic Region	2014		2013		Change		Net Sales – 2014		Net Sales – 2013
Europe, Middle East and Africa	$	185,639	$	158,586		17.1		32.2		32.4
Latin America		50,844		47,454		7.1		8.8		9.7
Asia-Pacific		78,301		69,882		12.0		13.6		14.3

Total International		314,784		275,922		14.1		54.6		56.4
North America		261,905		214,175		22.3		45.4		43.6

Total net sales	$	576,689	$	490,097		17.7		100.0		100.0

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(Amounts in thousands, except per-share data)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013
Net income (GAAP)	$	27,557		$	30,566		$	69,163		$	54,108
Acquisition costs	$	20,364		$	618		$	25,291		$	1,100
Exit and restructuring costs		287			1,101			554			2,996
Loss on interest rate swaps		2,433			0			2,433			0
Effect on income taxes		(7,376	)		(326	)		(5,144	)		(763	)

Total adjustments	$	15,708		$	1,393		$	23,134		$	3,333

Net income (Non-GAAP)	$	43,265		$	31,959		$	92,297		$	57,441

GAAP net income per share
Basic	$	0.54		$	0.60		$	1.37		$	1.06

Diluted	$	0.54		$	0.60		$	1.35		$	1.05

Non-GAAP net income per share
Basic	$	0.85		$	0.63		$	1.83		$	1.13

Diluted	$	0.84		$	0.62		$	1.81		$	1.12

Basic weighted average shares outstanding		50,606			50,900			50,509			50,929
Diluted weighted average and equivalent shares outstanding		51,278			51,283			51,129			51,310

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATION

(Amounts in thousands, except per-share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 28, 2014		June 29, 2013		June 28, 2014		June 29, 2013
Operating Income to EBITDA and Adjusted EBITDA
Operating income (GAAP)	$	33,065	$	36,241	$	86,473	$	64,417
Depreciation		6,427		6,178		12,757		11,687
Amortization of intangible assets		2,667		1,863		5,339		3,726

EBITDA (Non-GAAP)	$	42,159	$	44,282	$	104,569	$	79,830

Acquisition costs		20,364		618		25,291		1,100
Exit and restructuring costs		287		1,101		554		2,996
Stock-based compensation expense		4,144		4,358		7,110		6,504
Loss on interest rate swaps		2,433		0		2,433		0

Adjusted EBITDA (Non-GAAP)	$	69,387	$	50,359	$	139,957	$	90,430