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): February 13, 2020
 
 
 
 
 
 
 
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.)
 
 
3 Overlook Point, Lincolnshire, Illinois
60069
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: 847-634-6700

 
 
 
 
 
 
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 240.13e-4(c))
 
 
 
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of exchange on which registered
Class A Common Stock, par value $.01 per share
 
ZBRA
 
The NASDAQ Stock Market, LLC
 
 
 
 
 





Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐





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 February 13, 2020, we announced our results of operations and financial position as of and for the fourth quarter and full year ended December 31, 2019. 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. 
Exhibit Number
Description of Exhibits
99.1
Registrant’s Press Release dated February 13, 2020
104
Cover Page Interactive Data File (embedded within the Inline XBRL)





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: February 13, 2020
 
 
 
By:
 
/s/ Cristen Kogl
 
 
 
 
 
 
Cristen Kogl
 
 
 
 
 
 
SVP, General Counsel





EXHIBIT INDEX
 
Exhibit Number
Description of Exhibits
99.1
104
Cover Page Interactive Data File (embedded within the Inline XBRL)




Exhibit


Exhibit 99.1
zebralogoa23.jpg
Zebra Technologies Corporation
 
3 Overlook Point
Lincolnshire, IL 60069 USA
+1 847 634 6700
www.zebra.com
Zebra Technologies Announces Fourth-Quarter and Full-Year 2019 Results

Fourth-Quarter Financial Highlights
Net sales of $1,192 million; year-over-year growth of 4.8%
Net income of $169 million and net income per diluted share of $3.10; year-over-year increases of 47.0% and 46.9%, respectively
Non-GAAP diluted EPS increased 14.8% year-over-year to $3.56
Adjusted EBITDA increased 6.3% year-over-year to $255 million

Lincolnshire, Ill., Feb. 13, 2020 — 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 fourth quarter and full year ended December 31, 2019.

"In the fourth quarter, solid sales growth in our North America and EMEA regions was partially offset by a continued softer spending environment in China. Earnings per share were at the low end of our guidance range due to tariff expenses and a higher mix of large year-end budget orders, each of which impacted gross margin,” said Anders Gustafsson, Chief Executive Officer of Zebra Technologies. “We entered 2020 with a strong order backlog and our pipeline of opportunities is solid. Our core portfolio offering continues to resonate well in the market. At the same time, we are making good progress broadening our role as a solutions provider, investing in capabilities that digitize and automate our customers’ enterprise operations."

$ in millions, except per share amounts
4Q19
4Q18
Change
 
FY19
FY18
Change
Select reported measures:
 
 
 
 
 
 
 
Net sales
$
1,192

$
1,137

4.8
%
 
$
4,485

$
4,218

6.3
%
Gross profit
544

539

0.9
%
 
2,100

1,981

6.0
%
Gross margin
45.6
%
47.4
%
(180) bps

 
46.8
%
47.0
%
(20) bps

Net income
169

115

47.0
%
 
544

421

29.2
%
Net income margin
14.2
%
10.1
%
410 bps

 
12.1
%
10.0
%
210 bps

Net income per diluted share
$
3.10

$
2.11

46.9
%
 
$
9.97

$
7.76

28.5
%
 


 
 
 
 
 
 
Select Non-GAAP measures:
 
 
 
 
 
 
 
Adjusted net sales
$
1,192

$
1,137

4.8
%
 
$
4,485

$
4,218

6.3
%
   Organic net sales growth
 
 
4.6
%
 
 
 
5.5
%
Adjusted gross profit
546

542

0.7
%
 
2,111

1,988

6.2
%
   Adjusted gross margin
45.8
%
47.7
%
(190) bps

 
47.1
%
47.1
%
0 bps

Adjusted EBITDA
255

240

6.3
%
 
970

873

11.1
%
   Adjusted EBITDA margin
21.4
%
21.1
%
30 bps

 
21.6
%
20.7
%
90 bps

Non-GAAP net income
$
194

$
169

14.8
%
 
$
706

$
598

18.1
%
Non-GAAP earnings per diluted share
$
3.56

$
3.10

14.8
%
 
$
12.94

$
11.01

17.5
%

Net sales were $1,192 million in the fourth quarter of 2019, a 4.8% increase from the prior year period, reflecting growth in North America and EMEA, partially offset by lower sales in Asia-Pacific. Consolidated organic net sales growth for the fourth quarter was 4.6%. Net sales in the Enterprise Visibility & Mobility ("EVM") segment were $813 million in the fourth quarter of 2019 compared with $770 million in the fourth quarter of 2018. Asset





Intelligence & Tracking ("AIT") segment net sales were $379 million in the fourth quarter of 2019 compared to $367 million in the prior year period. Fourth-quarter year-over-year organic net sales growth was 6.3% in the EVM segment and 1.2% in the AIT segment.

Fourth-quarter 2019 gross profit was $544 million compared to $539 million in the comparable prior year period. Gross margin decreased to 45.6% for the fourth quarter of 2019, compared to 47.4% in the prior year period. This decrease was primarily due to $10 million net incremental cost of sales attributable to Section 301 List 4 tariffs and unfavorable business mix. Adjusted gross margin decreased to 45.8% for the fourth quarter of 2019, compared to 47.7% in the prior year period.

Operating expenses decreased in the fourth quarter of 2019 to $356 million from $360 million in the prior year period primarily due to reduced project spend, lower incentive compensation expense, and lower amortization expense; partially offset by the inclusion of expenses from recently acquired businesses and higher exit and restructuring charges. Adjusted operating expenses decreased in the fourth quarter of 2019 to $308 million from $320 million in the prior year period.

Net income for the fourth quarter of 2019 was $169 million, or $3.10 per diluted share, compared to net income of $115 million, or $2.11 per diluted share, for the fourth quarter of 2018. Lower interest expense and effective tax rate contributed to the year-over-year improvement. Non-GAAP net income for the fourth quarter of 2019 was $194 million, or $3.56 per diluted share, compared with $169 million, or $3.10 per diluted share, for the fourth quarter of 2018.

Adjusted EBITDA for the fourth quarter of 2019 increased to $255 million, or 21.4% of adjusted net sales, compared to $240 million, or 21.1% of adjusted net sales, for the fourth quarter of 2018 due to lower operating expenses.

Balance Sheet and Cash Flow
As of December 31, 2019, the company had cash and cash equivalents of $30 million and total debt of $1,286 million.

For the full year 2019, the company generated $685 million of operating cash flow and incurred capital expenditures of $61 million, generating free cash flow of $624 million. In 2019, the company made $312 million of net debt repayments and $63 million of cash interest payments, as well as paid $262 million in cash for our acquisitions of Cortexica, Temptime, and Profitect. Additionally, the company made $47 million of share repurchases under the authorization announced on July 30, 2019.

Outlook
Our outlook for the first quarter and full year 2020, without taking into account the full potential impact of the coronavirus outbreak in China, is set forth below. See the text below under the caption “Anticipated Impact of Coronavirus Outbreak” for a discussion of the possible impact of the outbreak on the company’s results of operations.

First Quarter 2020
The company expects first-quarter 2020 net sales to increase approximately 4% to 7% from the first quarter of 2019. This expectation includes an approximately 1 percentage point additive impact from acquisitions, and an approximately 1 percentage point negative impact from foreign currency translation.

Adjusted EBITDA margin is expected to be approximately 20% for the first quarter of 2020, which includes an approximately $10 million net incremental cost of sales attributable to Section 301 List 4 tariffs and approximately $4 million of additional freight expense related to the coronavirus outbreak. Non-GAAP earnings per diluted share are expected to be in the range of $2.90 to $3.10. This assumes an adjusted effective tax rate of approximately 16%.

Full Year 2020





The company expects full-year 2020 net sales to increase approximately 4% to 6% from 2019. This expectation includes an approximately 30 basis point positive impact from acquisitions, and an approximately 1 percentage point negative impact from foreign currency translation.

Adjusted EBITDA margin is expected to be slightly higher than 22% for the full-year 2020, favorable to 2019 despite a net impact to cost of sales from the Section 301 List 4 tariffs of approximately $15 million in the first half of 2020.

For the full-year 2020, the company expects to generate free cash flow of at least $700 million.

As previously stated, the company is diversifying the sourcing of most of its U.S. volumes out of China. These actions are expected to result in up to an additional $25 million of one-time pre-tax charges through mid-2020, plus an estimated $10-15 million of capital expenditures.

The company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis 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 the most directly comparable forward-looking GAAP financial measure as discussed under the "Forward-Looking Statements" caption below. This would include 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. 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.

Anticipated Impact of Coronavirus Outbreak
The first-quarter and full year 2020 outlook in the section immediately above expressly does not take into account the full potential impact of the ongoing coronavirus outbreak. The outlook provided in that section should be read in conjunction with this section.

The situation in China pertaining to the coronavirus is complex and rapidly-evolving and we are not yet able to fully ascertain its potential impact on our results of operations, either with respect to its impact on our manufacturing operations in China or with respect to its impact on our sales to customers in China. Our current expectation is the coronavirus outbreak could have an impact on sales of between $0 and $50 million. This expectation is based solely on facts as we understand them to be today. This impact could be significantly greater if the coronavirus outbreak were to develop in a manner that is significantly worse than our current expectations.

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 2019. The conference call will be held today, Thursday, Feb. 13, 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/e-commerce, 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. In 2019, Zebra ranked #166 on Forbes’ list of the World’s Best Employers, and the company joined the S&P 500 index. For more information, visit www.zebra.com or sign up for our news alerts. Follow us on our Your Edge Blog along with
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. In particular, and as noted in the body of the release, we cannot be certain of the impact that the coronavirus outbreak in China will have on our results of operations. 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.

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 the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the company’s foreign currency hedging program.

Additionally, for purposes of computing organic net sales growth, amounts directly attributable to acquisitions are excluded for twelve months following their respective acquisition dates.

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
(In millions, except share data)

 

December 31,
2019

December 31, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
30

 
$
44

Accounts receivable, net of allowances for doubtful accounts of $2 million and $3 million as of December 31, 2019 and 2018, respectively
613

 
520

Inventories, net
474

 
520

Income tax receivable
32

 
24

Prepaid expenses and other current assets
46

 
54

Total Current assets
1,195

 
1,162

Property, plant and equipment, net
259

 
249

Right-of-use lease asset
107

 

Goodwill
2,622

 
2,495

Other intangibles, net
275

 
232

Deferred income taxes
127

 
114

Other long-term assets
126

 
87

Total Assets
$
4,711

 
$
4,339

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
197

 
$
157

Accounts payable
552

 
552

Accrued liabilities
379

 
322

Deferred revenue
238

 
210

Income taxes payable
38

 
60

Total Current liabilities
1,404

 
1,301

Long-term debt
1,080

 
1,434

Long-term lease liabilities
100

 

Deferred income taxes

 
8

Long-term deferred revenue
221

 
172

Other long-term liabilities
67

 
89

Total Liabilities
2,872

 
3,004

Stockholders’ Equity:
 
 
 
Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued

 

Class A common stock, $.01 par value; authorized 150,000,0000 shares; issued 72,151,857 shares
1

 
1

Additional paid-in capital
339

 
294

Treasury stock at cost, 18,148,925 and 18,280,673 shares as of December 31, 2019 and 2018, respectively
(689
)
 
(613
)
Retained earnings
2,232

 
1,688

Accumulated other comprehensive loss
(44
)
 
(35
)
Total Stockholders’ Equity
1,839

 
1,335

Total Liabilities and Stockholders’ Equity
$
4,711

 
$
4,339


-6-



ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)


 
 
Three Months Ended
 
Twelve Months Ended
 
(Unaudited)
 
 
 
 
 
December 31,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Net sales
 
 
 
 
 
 
 
Tangible products
$
1,039

 
$
998

 
$
3,907

 
$
3,685

Services and software
153

 
139

 
578

 
533

Total Net sales
1,192

 
1,137

 
4,485

 
4,218

Cost of sales:
 
 
 
 
 
 
 
Tangible products
550

 
503

 
2,006

 
1,871

Services and software
98

 
95

 
379

 
366

Total Cost of sales
648

 
598

 
2,385

 
2,237

Gross profit
544

 
539

 
2,100

 
1,981

Operating expenses:
 
 
 
 
 
 
 
Selling and marketing
130

 
122

 
503

 
483

Research and development
118

 
121

 
447

 
444

General and administrative
79

 
89

 
323

 
328

Amortization of intangible assets
19

 
26

 
103

 
97

Acquisition and integration costs
2

 

 
22

 
8

Exit and restructuring costs
8

 
2

 
10

 
11

Total Operating expenses
356

 
360

 
1,408

 
1,371

Operating income
188

 
179

 
692

 
610

Other expenses:
 
 
 
 
 
 
 
Foreign exchange loss
(4
)
 

 
(6
)
 
(5
)
Interest expense, net
(4
)
 
(39
)
 
(89
)
 
(91
)
Other, net
(1
)
 
8

 
1

 
10

Total Other expenses, net
(9
)
 
(31
)
 
(94
)
 
(86
)
Income before income tax
179

 
148

 
598

 
524

Income tax expense
10

 
33

 
54

 
103

Net income
$
169

 
$
115

 
$
544

 
$
421

Basic earnings per share
$
3.13

 
$
2.14

 
$
10.08

 
$
7.86

Diluted earnings per share
$
3.10

 
$
2.11

 
$
9.97

 
$
7.76


-7-



ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

 
Year Ended December 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
544

 
$
421

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
175

 
175

Investment (gain) loss
(3
)
 
(10
)
Amortization of debt issuance costs and discounts
6

 
15

Share-based compensation
48

 
45

Debt extinguishment costs
1

 
1

Deferred income taxes
(42
)
 
2

Unrealized loss (gain) on forward interest rate swaps
19

 
(8
)
Other, net

 
4

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(96
)
 
(31
)
Inventories, net
51

 
(43
)
Other assets
(20
)
 
(12
)
Accounts payable
(5
)
 
122

Accrued liabilities
(18
)
 
35

Deferred revenue
71

 
51

Income taxes
(31
)
 
24

Other operating activities
(15
)
 
(6
)
Net cash provided by operating activities
685

 
785

Cash flows from investing activities:
 
 
 
Acquisition of businesses, net of cash acquired
(262
)
 
(72
)
Purchases of property, plant and equipment
(61
)
 
(64
)
Proceeds from the sale of long-term investments
10

 
2

Purchases of long-term investments
(22
)
 
(3
)
Net cash used in investing activities
(335
)
 
(137
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
637

 
909

Payments of long term-debt
(949
)
 
(1,566
)
Payments of debt extinguishment costs
(1
)
 
(1
)
Payments of debt issuance costs and discounts
(6
)
 
(2
)
Payments for repurchases of common stock
(47
)
 

Payments of taxes related to net settlements of equity awards, net of proceeds from exercise of stock options and stock purchase plan purchases
(32
)
 
(1
)
Unremitted cash collections from servicing factored receivables
33

 

Net cash used in financing activities
(365
)
 
(661
)
Effect of exchange rate changes on cash
1

 
(5
)
Net decrease in cash and cash equivalents
(14
)
 
(18
)
Cash and cash equivalents at beginning of year
44

 
62

Cash and cash equivalents at end of year
$
30

 
$
44

Supplemental disclosures of cash flow information:
 
 
 
Income taxes paid
$
140

 
$
76

Interest paid
$
63

 
$
90


-8-



ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF ORGANIC NET SALES GROWTH
(UNAUDITED)


 
 
 
 
 
 
Three Months Ended
 
December 31, 2019
 
AIT
 
EVM
 
Consolidated
Reported GAAP Consolidated Net sales growth
3.3
 %
 
5.6
 %
 
4.8
 %
Adjustments:
 
 
 
 
 
Impact of foreign currency translation(1)
1.0
 %
 
1.1
 %
 
1.1
 %
Impact of acquisitions(2)
(3.1
)%
 
(0.4
)%
 
(1.3
)%
Organic Net sales growth
1.2
 %
 
6.3
 %
 
4.6
 %
 
 
 
 
 
 
 
Twelve Months Ended
 
December 31, 2019
 
AIT
 
EVM
 
Consolidated
Reported GAAP Consolidated Net sales growth
3.9
 %
 
7.5
 %
 
6.3
 %
Adjustments:
 
 
 
 
 
Impact of foreign currency translation(1)
1.0
 %
 
1.1
 %
 
1.1
 %
Impact of acquisitions(2)
(2.7
)%
 
(1.4
)%
 
(1.9
)%
Organic Net sales growth
2.2
 %
 
7.2
 %
 
5.5
 %
 
 
 
 
 
 

(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, inclusive of the Company’s foreign currency hedging program.

(2)
For purposes of computing Organic Net sales growth, amounts directly attributable to acquisitions are excluded for twelve months following their respective acquisition dates.

-9-



ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN
(In millions)
(Unaudited)




 
Three Months Ended
 
December 31, 2019
 
December 31, 2018
 
AIT
 
EVM
 
Consolidated
 
AIT
 
EVM
 
Consolidated
GAAP
 
 
 
 
 
 
 
 
 
 
 
Reported Net sales
$
379

 
$
813

 
$
1,192

 
$
367

 
$
770

 
$
1,137

Reported Gross profit (1)
183

 
362

 
544

 
182

 
359

 
539

Gross Margin
48.3
%
 
44.5
%
 
45.6
%
 
49.6
%
 
46.6
%
 
47.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net sales
$
379

 
$
813

 
$
1,192

 
$
367

 
$
770

 
$
1,137

Adjusted Gross profit (2)
183

 
363

 
546

 
182

 
360

 
542

Adjusted Gross Margin
48.3
%
 
44.6
%
 
45.8
%
 
49.6
%
 
46.8
%
 
47.7
%

 
Twelve Months Ended
 
December 31, 2019
 
December 31, 2018
 
AIT
 
EVM
 
Consolidated
 
AIT
 
EVM
 
Consolidated
GAAP
 
 
 
 
 
 
 
 
 
 
 
Reported Net sales
$
1,479

 
$
3,006

 
$
4,485

 
$
1,423

 
$
2,795

 
$
4,218

Reported Gross profit (1)
736

 
1,371

 
2,100

 
710

 
1,274

 
1,981

Gross Margin
49.8
%
 
45.6
%
 
46.8
%
 
49.9
%
 
45.6
%
 
47.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net sales
$
1,479

 
$
3,006

 
$
4,485

 
$
1,423

 
$
2,795

 
$
4,218

Adjusted Gross profit (2)
737

 
1,374

 
2,111

 
711

 
1,277

 
1,988

Adjusted Gross Margin
49.8
%
 
45.7
%
 
47.1
%
 
50.0
%
 
45.7
%
 
47.1
%

(1)
Consolidated results include corporate eliminations related to business acquisitions and product sourcing diversification costs that are not reported in segment results.
(2)
Adjusted Gross profit excludes purchase accounting adjustments, product sourcing diversification costs, and share-based compensation expense.



-10-



ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except share data)
(Unaudited)
 
 
Three Months Ended
 
Twelve Months Ended
 
December 31,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Net income
$
169

 
$
115

 
$
544

 
$
421

Adjustments to Cost of sales(1)
 
 
 
 
 
 
 
Purchase accounting adjustments

 
2

 
6

 
3

Share-based compensation
1

 
1

 
4

 
4

Product sourcing diversification initiative
1

 

 
1

 

Total adjustments to Cost of sales
2

 
3

 
11

 
7

Adjustments to Operating expenses(1)
 
 
 
 
 
 
 
Amortization of intangible assets
19

 
26

 
103

 
97

Acquisition and integration costs
2

 

 
22

 
8

Legal Settlement

 

 

 
13

Share-based compensation
16

 
12

 
56

 
49

Exit and restructuring costs
8

 
2

 
10

 
11

Product sourcing diversification initiative
3

 

 
4

 

Total adjustments to Operating expenses
48

 
40

 
195

 
178

Adjustments to Other expenses, net(1)
 
 
 
 
 
 
 
Debt extinguishment costs

 

 
3

 

Amortization of debt issuance costs and discounts
1

 
2

 
7

 
15

Investment gain

 
(9
)
 
(3
)
 
(10
)
Foreign exchange loss
4

 

 
6

 
5

Forward interest rate swaps loss (gain)
(8
)
 
18

 
19

 
(6
)
Total adjustments to Other expenses, net
(3
)
 
11

 
32

 
4

Income tax effect of adjustments(2)
 
 
 
 
 
 
 
Reported income tax expense
10

 
33

 
54

 
103

Adjusted income tax
(32
)
 
(33
)
 
(130
)
 
(115
)
Total adjustments to income tax
(22
)
 

 
(76
)
 
(12
)
Total adjustments
25

 
54

 
162

 
177

Non-GAAP Net income
$
194

 
$
169

 
$
706

 
$
598

 
 
 
 
 
 
 
 
GAAP earnings per share
 
 
 
 
 
 
 
       Basic
$
3.13

 
$
2.14

 
$
10.08

 
$
7.86

       Diluted
$
3.10

 
$
2.11

 
$
9.97

 
$
7.76

Non-GAAP earnings per share
 
 
 
 
 
 
 
       Basic
$
3.60

 
$
3.13

 
$
13.08

 
$
11.16

       Diluted
$
3.56

 
$
3.10

 
$
12.94

 
$
11.01

 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
53,985,729

 
53,831,395

 
53,991,249

 
53,591,655

Diluted weighted average and equivalent shares outstanding
54,541,638

 
54,468,545

 
54,594,417

 
54,299,812

(1)
Presented on a pre-tax basis.
(2)
Represents the adjustment to the GAAP income tax expense commensurate with non-GAAP adjustments (including the resulting impacts to U.S. BEAT/GILTI provisions) and to exclude the impacts of certain discrete income tax items.

-11-



ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION TO EBITDA
(In millions)
(Unaudited)

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Net income
$
169

 
$
115

 
$
544

 
$
421

Add back:
 
 
 
 
 
 
 
Depreciation
17

 
18

 
72

 
78

Amortization of intangible assets
19

 
26

 
103

 
97

Total Other expenses, net
9

 
31

 
94

 
86

Income tax expense
10

 
33

 
54

 
103

EBITDA (Non-GAAP)
224

 
223

 
867

 
785

 
 
 
 
 
 
 
 
Adjustments to Cost of sales
 
 
 
 
 
 
 
Purchase accounting adjustments

 
2

 
6

 
3

Share-based compensation
1

 
1

 
4

 
4

Product sourcing diversification initiative
1

 

 
1

 

Total adjustments to Cost of sales
2

 
3

 
11

 
7

Adjustments to Operating expenses
 
 
 
 
 
 
 
Acquisition and integration costs
2

 

 
22

 
8

Legal Settlement

 

 

 
13

Share-based compensation
16

 
12

 
56

 
49

Exit and restructuring costs
8

 
2

 
10

 
11

Product sourcing diversification initiative
3

 

 
4

 

Total adjustments to Operating expenses
29

 
14

 
92

 
81

Total adjustments to EBITDA
31

 
17

 
103

 
88

Adjusted EBITDA (Non-GAAP)
$
255

 
$
240

 
$
970

 
$
873

 
 
 
 
 
 
 
 
Adjusted EBITDA % of Adjusted Net Sales
21.4
%
 
21.1
%
 
21.6
%
 
20.7
%

FREE CASH FLOW
 
Twelve Months Ended
 
December 31,
2019
  
December 31,
2018
Net cash provided by operating activities
$
685

  
$
785

Less: Purchases of property, plant and equipment
(61
)
 
(64
)
Free cash flow (Non-GAAP)(1)
$
624

  
$
721

(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.

-12-