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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Zebra Technologies Corp | NASDAQ:ZBRA | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 309.59 | 294.84 | 325.00 | 0 | 12:00:00 |
ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
36-2675536
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
Large accelerated filer
|
ý
|
Accelerated filer
|
¨
|
|
Non-accelerated filer
|
¨
(Do not check if smaller reporting company)
|
Smaller reporting company
|
¨
|
|
|
|
Emerging growth company
|
¨
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|
PAGE
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Item 1.
|
|
|
|
|
|
|
Consolidated Balance Sheets as of July 1, 2017 (unaudited) and December 31, 2016
|
|
|
|
|
|
Consolidated Statements of Operations (unaudited) for the three and six months ended July 1, 2017 and July 2, 2016
|
|
|
|
|
|
Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended July 1, 2017 and July 2, 2016
|
|
|
|
|
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Consolidated Statements of Cash Flows (unaudited) for the six months ended July 1, 2017 and July 2, 2016
|
|
|
|
|
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||
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Item 2.
|
||
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Item 3.
|
||
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Item 4.
|
||
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Item 1.
|
||
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Item 1A.
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||
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Item 2.
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||
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Item 6.
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||
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Item 1.
|
Consolidated Financial Statements
|
|
July 1,
2017 |
|
December 31,
2016 |
||||
|
(Unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
95
|
|
|
$
|
156
|
|
Accounts receivable, net of allowances for doubtful accounts of $3
|
527
|
|
|
625
|
|
||
Inventories, net
|
414
|
|
|
345
|
|
||
Income tax receivable
|
65
|
|
|
32
|
|
||
Prepaid expenses and other current assets
|
35
|
|
|
64
|
|
||
Total Current assets
|
1,136
|
|
|
1,222
|
|
||
Property, plant and equipment, net
|
273
|
|
|
292
|
|
||
Goodwill
|
2,464
|
|
|
2,458
|
|
||
Other intangibles, net
|
380
|
|
|
480
|
|
||
Long-term deferred income taxes
|
124
|
|
|
113
|
|
||
Other long-term assets
|
68
|
|
|
67
|
|
||
Total Assets
|
$
|
4,445
|
|
|
$
|
4,632
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
436
|
|
|
$
|
413
|
|
Accrued liabilities
|
314
|
|
|
323
|
|
||
Deferred revenue
|
214
|
|
|
191
|
|
||
Income taxes payable
|
19
|
|
|
22
|
|
||
Total Current liabilities
|
983
|
|
|
949
|
|
||
Long-term debt
|
2,418
|
|
|
2,648
|
|
||
Long-term deferred income taxes
|
2
|
|
|
3
|
|
||
Long-term deferred revenue
|
122
|
|
|
124
|
|
||
Other long-term liabilities
|
108
|
|
|
116
|
|
||
Total Liabilities
|
3,633
|
|
|
3,840
|
|
||
Stockholders’ Equity:
|
|
|
|
||||
Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued
|
—
|
|
|
—
|
|
||
Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
234
|
|
|
210
|
|
||
Treasury stock at cost, 19,042,813 and 19,267,269 shares at July 1, 2017 and December 31, 2016, respectively
|
(622
|
)
|
|
(614
|
)
|
||
Retained earnings
|
1,256
|
|
|
1,240
|
|
||
Accumulated other comprehensive loss
|
(57
|
)
|
|
(45
|
)
|
||
Total Stockholders’ Equity
|
812
|
|
|
792
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
4,445
|
|
|
$
|
4,632
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Net sales of tangible products
|
$
|
779
|
|
|
$
|
753
|
|
|
$
|
1,514
|
|
|
$
|
1,469
|
|
Revenue from services and software
|
117
|
|
|
126
|
|
|
247
|
|
|
259
|
|
||||
Total Net sales
|
896
|
|
|
879
|
|
|
1,761
|
|
|
1,728
|
|
||||
Cost of sales:
|
|
|
|
|
|
|
|
||||||||
Cost of sales of tangible products
|
408
|
|
|
387
|
|
|
787
|
|
|
762
|
|
||||
Cost of services and software
|
77
|
|
|
86
|
|
|
162
|
|
|
170
|
|
||||
Total Cost of sales
|
485
|
|
|
473
|
|
|
949
|
|
|
932
|
|
||||
Gross profit
|
411
|
|
|
406
|
|
|
812
|
|
|
796
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling and marketing
|
114
|
|
|
112
|
|
|
223
|
|
|
225
|
|
||||
Research and development
|
99
|
|
|
95
|
|
|
195
|
|
|
188
|
|
||||
General and administrative
|
68
|
|
|
77
|
|
|
143
|
|
|
151
|
|
||||
Amortization of intangible assets
|
52
|
|
|
60
|
|
|
102
|
|
|
119
|
|
||||
Acquisition and integration costs
|
19
|
|
|
34
|
|
|
46
|
|
|
70
|
|
||||
Exit and restructuring costs
|
1
|
|
|
5
|
|
|
5
|
|
|
10
|
|
||||
Total Operating expenses
|
353
|
|
|
383
|
|
|
714
|
|
|
763
|
|
||||
Operating income
|
58
|
|
|
23
|
|
|
98
|
|
|
33
|
|
||||
Other (expenses) income:
|
|
|
|
|
|
|
|
||||||||
Foreign exchange gain (loss)
|
2
|
|
|
(5
|
)
|
|
1
|
|
|
(3
|
)
|
||||
Interest expense, net
|
(40
|
)
|
|
(49
|
)
|
|
(81
|
)
|
|
(99
|
)
|
||||
Other, net
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
||||
Total Other expenses
|
(39
|
)
|
|
(56
|
)
|
|
(81
|
)
|
|
(105
|
)
|
||||
Income (loss) before income taxes
|
19
|
|
|
(33
|
)
|
|
17
|
|
|
(72
|
)
|
||||
Income tax expense (benefit)
|
2
|
|
|
12
|
|
|
(8
|
)
|
|
(1
|
)
|
||||
Net income (loss)
|
$
|
17
|
|
|
$
|
(45
|
)
|
|
$
|
25
|
|
|
$
|
(71
|
)
|
Basic earnings (loss) per share
|
$
|
0.33
|
|
|
$
|
(0.88
|
)
|
|
$
|
0.49
|
|
|
$
|
(1.38
|
)
|
Diluted earnings (loss) per share
|
$
|
0.32
|
|
|
$
|
(0.88
|
)
|
|
$
|
0.48
|
|
|
$
|
(1.38
|
)
|
Basic weighted average shares outstanding
|
51,996,353
|
|
|
51,533,236
|
|
|
51,928,911
|
|
|
51,405,373
|
|
||||
Diluted weighted average and equivalent shares outstanding
|
53,128,657
|
|
|
51,533,236
|
|
|
53,037,956
|
|
|
51,405,373
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net income (loss)
|
$
|
17
|
|
|
$
|
(45
|
)
|
|
$
|
25
|
|
|
$
|
(71
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized (loss) gain on anticipated sales hedging transactions
|
(8
|
)
|
|
11
|
|
|
(14
|
)
|
|
(4
|
)
|
||||
Unrealized (loss) gain on forward interest rate swaps hedging transactions
|
—
|
|
|
(3
|
)
|
|
2
|
|
|
(10
|
)
|
||||
Foreign currency translation adjustment
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(2
|
)
|
||||
Comprehensive income (loss)
|
$
|
9
|
|
|
$
|
(43
|
)
|
|
$
|
13
|
|
|
$
|
(87
|
)
|
|
Six months ended
|
||||||
|
July 1,
2017 |
|
July 2,
2016 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
25
|
|
|
$
|
(71
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
141
|
|
|
154
|
|
||
Amortization of debt issuance costs and discount
|
10
|
|
|
11
|
|
||
Share-based compensation
|
15
|
|
|
12
|
|
||
Deferred income taxes
|
(10
|
)
|
|
3
|
|
||
Unrealized gain on forward interest rate swaps
|
(1
|
)
|
|
(2
|
)
|
||
Other, net
|
2
|
|
|
4
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
104
|
|
|
43
|
|
||
Inventories, net
|
(68
|
)
|
|
35
|
|
||
Other assets
|
15
|
|
|
21
|
|
||
Accounts payable
|
22
|
|
|
51
|
|
||
Accrued liabilities
|
(30
|
)
|
|
(74
|
)
|
||
Deferred revenue
|
20
|
|
|
4
|
|
||
Income taxes
|
(35
|
)
|
|
(61
|
)
|
||
Other operating activities
|
(7
|
)
|
|
(6
|
)
|
||
Net cash provided by operating activities
|
203
|
|
|
124
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property, plant and equipment
|
(22
|
)
|
|
(35
|
)
|
||
Purchases of long-term investments
|
—
|
|
|
(1
|
)
|
||
Net cash used in investing activities
|
(22
|
)
|
|
(36
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Payment of long-term debt
|
(240
|
)
|
|
(213
|
)
|
||
Proceeds from issuance of long-term debt
|
—
|
|
|
68
|
|
||
Proceeds from exercise of stock options and stock purchase plan purchases
|
7
|
|
|
5
|
|
||
Taxes paid related to net share settlement of equity awards
|
(5
|
)
|
|
(6
|
)
|
||
Net cash used in financing activities
|
(238
|
)
|
|
(146
|
)
|
||
Effect of exchange rate changes on cash
|
(4
|
)
|
|
7
|
|
||
Net decrease in cash and cash equivalents
|
(61
|
)
|
|
(51
|
)
|
||
Cash and cash equivalents at beginning of year
|
156
|
|
|
192
|
|
||
Cash and cash equivalents at end of year
|
$
|
95
|
|
|
$
|
141
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Income taxes paid
|
$
|
43
|
|
|
$
|
52
|
|
Interest paid
|
$
|
70
|
|
|
$
|
99
|
|
•
|
At the end of each fiscal quarter, the Company estimates the income tax provision that will be provided for the fiscal year.
|
•
|
The forecasted annual effective tax rate is applied to the year-to-date ordinary income (loss) at the end of each quarter to compute the year-to-date tax applicable to ordinary income (loss). The term ordinary income (loss) refers to income (loss) from continuing operations, before income taxes, excluding significant, unusual, or infrequently occurring items.
|
•
|
The tax effects of significant, unusual, or infrequently occurring items are recognized as discrete items in the interim periods in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, the effects of changes in judgment about valuation allowances established in prior years, and changes in tax reserves resulting from the finalization of tax audits or reviews are examples of significant, unusual, or infrequently occurring items.
|
|
July 1,
2017 |
|
December 31,
2016 |
||||
Raw material
|
$
|
154
|
|
|
$
|
172
|
|
Work in process
|
2
|
|
|
1
|
|
||
Finished goods
|
339
|
|
|
254
|
|
||
Inventories, gross
|
495
|
|
|
427
|
|
||
Inventory reserves
|
(81
|
)
|
|
(82
|
)
|
||
Inventories, net
|
$
|
414
|
|
|
$
|
345
|
|
|
Cumulative costs incurred through December 31, 2016
|
|
Costs incurred for the six months ended July 1, 2017
|
|
Cumulative costs incurred through July 1, 2017
|
||||||
Severance, related benefits and, other expenses
|
$
|
54
|
|
|
$
|
5
|
|
|
$
|
59
|
|
Obligations for future non-cancellable lease payments
|
11
|
|
|
—
|
|
|
11
|
|
|||
Total
|
$
|
65
|
|
|
$
|
5
|
|
|
$
|
70
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Balance at the beginning of the period
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
10
|
|
|
$
|
15
|
|
Charged to earnings, net
|
1
|
|
|
5
|
|
|
5
|
|
|
10
|
|
||||
Cash paid
|
(5
|
)
|
|
(5
|
)
|
|
(8
|
)
|
|
(12
|
)
|
||||
Balance at the end of the period
|
$
|
7
|
|
|
$
|
13
|
|
|
$
|
7
|
|
|
$
|
13
|
|
|
July 1,
2017 |
|
December 31,
2016 |
||||
Accrued liabilities
|
$
|
4
|
|
|
$
|
7
|
|
Other long-term liabilities
|
3
|
|
|
3
|
|
||
Total liabilities related to exit and restructuring activities
|
$
|
7
|
|
|
$
|
10
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market investments related to the deferred compensation plan
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
Total Assets at fair value
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Forward interest rate swap contracts (2)
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
25
|
|
Foreign exchange contracts (1)
|
11
|
|
|
6
|
|
|
—
|
|
|
17
|
|
||||
Liabilities related to the deferred compensation plan
|
13
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||
Total Liabilities at fair value
|
$
|
24
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
55
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts (1)
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
23
|
|
Money market investments related to the deferred compensation plan
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||
Total Assets at fair value
|
$
|
22
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
34
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Forward interest rate swap contracts (2)
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
27
|
|
Liabilities related to the deferred compensation plan
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||
Total Liabilities at fair value
|
$
|
11
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
Asset (Liability) Derivatives
|
||||||||
|
Balance Sheet Classification
|
|
Fair Value
|
||||||
|
|
|
July 1,
2017 |
|
December 31, 2016
|
||||
Derivative instruments designated as hedges:
|
|
|
|
|
|
||||
Foreign exchange contracts
|
Prepaid expenses and other current assets
|
|
$
|
—
|
|
|
$
|
12
|
|
Foreign exchange contracts
|
Accrued liabilities
|
|
(6
|
)
|
|
—
|
|
||
Forward interest rate swaps
|
Accrued liabilities
|
|
(5
|
)
|
|
(3
|
)
|
||
Forward interest rate swaps
|
Other long-term liabilities
|
|
(11
|
)
|
|
(13
|
)
|
||
Total derivative instruments designated as hedges
|
|
|
$
|
(22
|
)
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
||||
Derivative instruments not designated as hedges:
|
|
|
|
|
|
||||
Foreign exchange contracts
|
Prepaid expenses and other current assets
|
|
$
|
—
|
|
|
$
|
11
|
|
Foreign exchange contracts
|
Accrued liabilities
|
|
(11
|
)
|
|
—
|
|
||
Forward interest rate swaps
|
Accrued liabilities
|
|
(3
|
)
|
|
(1
|
)
|
||
Forward interest rate swaps
|
Other long-term liabilities
|
|
(6
|
)
|
|
(10
|
)
|
||
Total derivative instruments not designated as hedges
|
|
|
(20
|
)
|
|
—
|
|
||
Total Net Derivative Liability
|
|
|
$
|
(42
|
)
|
|
$
|
(4
|
)
|
|
Gain (Loss) Recognized in Income
|
|||||||||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
Statement of Operations Classification
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
Derivative instruments not designated as hedges:
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
Foreign exchange (loss) gain
|
$
|
(11
|
)
|
|
$
|
2
|
|
|
$
|
(16
|
)
|
|
$
|
(3
|
)
|
Forward interest rate swaps
|
Interest expense, net
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Total (loss) gain recognized in income
|
|
$
|
(11
|
)
|
|
$
|
3
|
|
|
$
|
(15
|
)
|
|
$
|
(1
|
)
|
|
July 1, 2017
|
|
December 31, 2016
|
||||
Notional balance of outstanding contracts:
|
|
|
|
||||
British Pound/U.S. dollar
|
£
|
18
|
|
|
£
|
3
|
|
Euro/U.S. dollar
|
€
|
107
|
|
|
€
|
148
|
|
British Pound/Euro
|
£
|
5
|
|
|
£
|
8
|
|
Canadian Dollar/U.S. dollar
|
$
|
15
|
|
|
$
|
13
|
|
Czech Koruna/U.S. dollar
|
Kč
|
|
|
|
Kč
|
147
|
|
Brazilian Real/U.S. dollar
|
R$
|
58
|
|
|
R$
|
56
|
|
Malaysian Ringgit/U.S. dollar
|
RM
|
—
|
|
|
RM
|
16
|
|
Australian Dollar/U.S. dollar
|
$
|
18
|
|
|
$
|
50
|
|
Swedish Krona/U.S. dollar
|
kr
|
15
|
|
|
kr
|
7
|
|
Japanese yen/U.S. dollar
|
¥
|
323
|
|
|
¥
|
48
|
|
Singapore dollar/U.S. dollar
|
S$
|
9
|
|
|
S$
|
15
|
|
Net fair value asset (liability) of outstanding contracts
|
$
|
(11
|
)
|
|
$
|
11
|
|
|
Gross Fair
Value
|
|
Counterparty
Offsetting
|
|
Net Fair
Value in the
Consolidated
Balance
Sheets
|
||||||
Counterparty A
|
$
|
12
|
|
|
$
|
7
|
|
|
$
|
5
|
|
Counterparty B
|
4
|
|
|
2
|
|
|
2
|
|
|||
Counterparty C
|
4
|
|
|
2
|
|
|
2
|
|
|||
Counterparty D
|
8
|
|
|
3
|
|
|
5
|
|
|||
Counterparty E
|
4
|
|
|
1
|
|
|
3
|
|
|||
Counterparty F
|
4
|
|
|
1
|
|
|
3
|
|
|||
Counterparty G
|
5
|
|
|
—
|
|
|
5
|
|
|||
Total
|
$
|
41
|
|
|
$
|
16
|
|
|
$
|
25
|
|
Year 2017
|
$
|
—
|
|
Year 2018
|
544
|
|
|
Year 2019
|
544
|
|
|
Year 2020
|
272
|
|
|
Year 2021
|
272
|
|
|
Notional balance of outstanding contracts
|
$
|
1,632
|
|
|
July 1,
2017 |
|
December 31, 2016
|
||||
Senior Notes
|
$
|
1,050
|
|
|
$
|
1,050
|
|
Term Loan
|
1,413
|
|
|
1,653
|
|
||
Less: Debt Issuance Costs
|
(20
|
)
|
|
(22
|
)
|
||
Less: Unamortized Discounts
|
(25
|
)
|
|
(33
|
)
|
||
Total outstanding debt
|
$
|
2,418
|
|
|
$
|
2,648
|
|
2017
|
$
|
—
|
|
|||
2018
|
—
|
|
||||
2019
|
—
|
|
||||
2020
|
—
|
|
||||
2021
|
1,413
|
|
||||
Thereafter
|
1,050
|
|
||||
Total maturities of long-term debt
|
$
|
2,463
|
|
|
Six Months Ended
|
||||||
|
July 1
2017 |
|
July 2
2016 |
||||
Balance at the beginning of the period
|
$
|
21
|
|
|
$
|
22
|
|
Warranty expense
|
13
|
|
|
14
|
|
||
Warranty payments
|
(15
|
)
|
|
(15
|
)
|
||
Balance at the end of the period
|
$
|
19
|
|
|
$
|
21
|
|
|
Six Months Ended
|
|||||
|
July 1,
2017 |
|||||
SARs
|
Shares
|
|
Weighted-Average
Exercise Price |
|||
Outstanding at beginning of period
|
1,740,786
|
|
|
$
|
56.15
|
|
Granted
|
400,682
|
|
|
98.85
|
|
|
Exercised
|
(147,350
|
)
|
|
48.88
|
|
|
Forfeited
|
(30,134
|
)
|
|
69.81
|
|
|
Expired
|
(4,065
|
)
|
|
108.20
|
|
|
Outstanding at end of period
|
1,959,919
|
|
|
$
|
65.12
|
|
Exercisable at end of period
|
972,304
|
|
|
$
|
50.57
|
|
|
July 1, 2017
|
|
July 2, 2016
|
Expected dividend yield
|
0%
|
|
0%
|
Forfeiture rate
|
9.37%
|
|
9.01%
|
Volatility
|
35.49%
|
|
43.14%
|
Risk free interest rate
|
1.77%
|
|
1.29%
|
Range of interest rates
|
0.71% - 2.41%
|
|
0.25% - 1.75%
|
Expected weighted-average life
|
4.13
|
|
5.33
|
Fair value of SARs granted (in millions)
|
$12
|
|
$12
|
Weighted-average grant date fair value of SARs granted
(per underlying share) |
$29.84
|
|
$19.95
|
|
Outstanding
|
|
Exercisable
|
||||
Aggregate intrinsic value - (in millions)
|
$
|
61
|
|
|
$
|
43
|
|
Weighted-average remaining contractual term
|
6.6
|
|
|
5.3
|
|
|
|
Six Months Ended
|
|||||
|
|
July 1,
2017 |
|||||
Restricted Stock Awards
|
|
Shares
|
|
Weighted-Average
Grant Date Fair Value |
|||
Outstanding at beginning of year
|
|
622,814
|
|
|
$
|
70.19
|
|
Granted
|
|
196,877
|
|
|
98.80
|
|
|
Released
|
|
(147,654
|
)
|
|
75.91
|
|
|
Forfeited
|
|
(15,567
|
)
|
|
69.56
|
|
|
Outstanding at end of year
|
|
656,470
|
|
|
$
|
77.49
|
|
|
|
Six Months Ended
|
|||||
|
|
July 1,
2017 |
|||||
Performance Share Awards
|
|
Shares
|
|
Weighted-Average
Grant Date Fair Value |
|||
Outstanding at beginning of year
|
|
379,226
|
|
|
$
|
70.14
|
|
Granted
|
|
79,423
|
|
|
98.87
|
|
|
Released
|
|
(2,029
|
)
|
|
62.70
|
|
|
Forfeited
|
|
(183,961
|
)
|
|
73.07
|
|
|
Outstanding at end of year
|
|
272,659
|
|
|
$
|
76.72
|
|
|
Six Months Ended
|
|||||
|
July 1,
2017 |
|||||
Non-qualified Options
|
Shares
|
|
Weighted-
Average
Exercise Price
|
|||
Outstanding at beginning of year
|
154,551
|
|
|
$
|
35.96
|
|
Granted
|
—
|
|
|
—
|
|
|
Exercised
|
(81,705
|
)
|
|
36.94
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Expired
|
(5,941
|
)
|
|
41.25
|
|
|
Outstanding at end of year
|
66,905
|
|
|
$
|
34.30
|
|
Exercisable at end of year
|
66,905
|
|
|
$
|
34.30
|
|
|
Outstanding
|
|
Exercisable
|
||||
Aggregate intrinsic value - (in millions)
|
$
|
4
|
|
|
$
|
4
|
|
Weighted-average remaining contractual term
|
0.9
|
|
|
0.9
|
|
•
|
Unrealized (loss) gain on anticipated sales hedging transactions
relates to derivative instruments used to hedge the exposure related to currency exchange rates for forecasted Euro sales. These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs. See Note 7,
Derivative Instruments
for more details.
|
•
|
Unrealized (loss) gain on forward interest rate swaps hedging transactions
refers to the hedging of the interest rate risk exposure associated with the variable rate commitment entered into for the Acquisition. See Note 7,
Derivative Instruments
for more details.
|
•
|
Foreign currency translation adjustment
relates to the Company’s non-U.S. subsidiary companies that have designated a functional currency other than the U.S. dollar. The Company is required to translate the subsidiary functional currency financial statements to dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of accumulated other comprehensive income.
|
|
|
Unrealized (loss) gain on sales hedging
|
|
Unrealized (loss)/ gain on forward interest rate swaps
(1)
|
|
Currency translation adjustments
|
|
Total
|
||||||||
Balance at December 31, 2015
|
|
$
|
(1
|
)
|
|
$
|
(15
|
)
|
|
$
|
(32
|
)
|
|
$
|
(48
|
)
|
Other comprehensive (loss) income before reclassifications
|
|
(11
|
)
|
|
(16
|
)
|
|
(2
|
)
|
|
(29
|
)
|
||||
Amounts reclassified from AOCI
|
|
6
|
|
|
1
|
|
|
—
|
|
|
7
|
|
||||
Tax benefit
|
|
1
|
|
|
5
|
|
|
—
|
|
|
6
|
|
||||
Other comprehensive (loss) income
|
|
(4
|
)
|
|
(10
|
)
|
|
(2
|
)
|
|
(16
|
)
|
||||
Balance at July 2, 2016
|
|
$
|
(5
|
)
|
|
$
|
(25
|
)
|
|
$
|
(34
|
)
|
|
$
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2016
|
|
$
|
6
|
|
|
$
|
(15
|
)
|
|
$
|
(36
|
)
|
|
$
|
(45
|
)
|
Other comprehensive (loss) income before reclassifications
|
|
(16
|
)
|
|
1
|
|
|
—
|
|
|
(15
|
)
|
||||
Amounts reclassified from AOCI
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
||||
Tax benefit (expense)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Other comprehensive (loss) income
|
|
(14
|
)
|
|
2
|
|
|
—
|
|
|
(12
|
)
|
||||
Balance at July 1, 2017
|
|
$
|
(8
|
)
|
|
$
|
(13
|
)
|
|
$
|
(36
|
)
|
|
$
|
(57
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Legacy Zebra
|
$
|
313
|
|
|
$
|
305
|
|
|
$
|
635
|
|
|
$
|
619
|
|
Enterprise
|
584
|
|
|
577
|
|
|
1,128
|
|
|
1,115
|
|
||||
Total segment
|
897
|
|
|
882
|
|
|
1,763
|
|
|
1,734
|
|
||||
Corporate, eliminations
(1)
|
(1
|
)
|
|
(3
|
)
|
|
(2
|
)
|
|
(6
|
)
|
||||
Total
|
$
|
896
|
|
|
$
|
879
|
|
|
$
|
1,761
|
|
|
$
|
1,728
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
||||||||
Legacy Zebra
|
$
|
63
|
|
|
$
|
57
|
|
|
$
|
130
|
|
|
$
|
128
|
|
Enterprise
|
68
|
|
|
69
|
|
|
123
|
|
|
111
|
|
||||
Total segment
|
131
|
|
|
126
|
|
|
253
|
|
|
239
|
|
||||
Corporate, eliminations
(2)
|
(73
|
)
|
|
(103
|
)
|
|
(155
|
)
|
|
(206
|
)
|
||||
Total
|
$
|
58
|
|
|
$
|
23
|
|
|
$
|
98
|
|
|
$
|
33
|
|
(1)
|
Amounts included in Corporate, eliminations consist of purchase accounting adjustments not reported in segments related to the Acquisition.
|
(2)
|
Amounts included in Corporate, eliminations consist of purchase accounting adjustments not reported in segments, amortization expense, acquisition and integration expenses, and exit and restructuring costs.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
||||||||||||||
Net sales
|
$
|
896
|
|
|
$
|
879
|
|
|
$
|
17
|
|
|
1.9
|
%
|
|
$
|
1,761
|
|
|
$
|
1,728
|
|
|
$
|
33
|
|
|
1.9
|
%
|
Gross profit
|
411
|
|
|
406
|
|
|
5
|
|
|
1.2
|
%
|
|
812
|
|
|
796
|
|
|
16
|
|
|
2.0
|
%
|
||||||
Operating expenses
|
353
|
|
|
383
|
|
|
(30
|
)
|
|
(7.8
|
)%
|
|
714
|
|
|
763
|
|
|
(49
|
)
|
|
(6.4
|
)%
|
||||||
Operating income
|
$
|
58
|
|
|
$
|
23
|
|
|
35
|
|
|
152.2
|
%
|
|
$
|
98
|
|
|
$
|
33
|
|
|
65
|
|
|
197.0
|
%
|
||
Gross margin
|
45.9
|
%
|
|
46.2
|
%
|
|
|
|
|
|
46.1
|
%
|
|
46.1
|
%
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
||||||||||||||
Europe, Middle East and Africa
|
$
|
279
|
|
|
$
|
283
|
|
|
$
|
(4
|
)
|
|
(1.4
|
)%
|
|
$
|
566
|
|
|
$
|
557
|
|
|
$
|
9
|
|
|
1.6
|
%
|
Latin America
|
57
|
|
|
53
|
|
|
4
|
|
|
7.5
|
%
|
|
110
|
|
|
99
|
|
|
11
|
|
|
11.1
|
%
|
||||||
Asia-Pacific
|
123
|
|
|
129
|
|
|
(6
|
)
|
|
(4.7
|
)%
|
|
231
|
|
|
243
|
|
|
(12
|
)
|
|
(4.9
|
)%
|
||||||
Total International
|
459
|
|
|
465
|
|
|
(6
|
)
|
|
(1.3
|
)%
|
|
907
|
|
|
899
|
|
|
8
|
|
|
0.9
|
%
|
||||||
North America
|
437
|
|
|
414
|
|
|
23
|
|
|
5.6
|
%
|
|
854
|
|
|
829
|
|
|
25
|
|
|
3.0
|
%
|
||||||
Total net sales
|
$
|
896
|
|
|
$
|
879
|
|
|
$
|
17
|
|
|
1.9
|
%
|
|
$
|
1,761
|
|
|
$
|
1,728
|
|
|
$
|
33
|
|
|
1.9
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
||||||||||||||
Selling and marketing
|
$
|
114
|
|
|
$
|
112
|
|
|
$
|
2
|
|
|
1.8
|
%
|
|
$
|
223
|
|
|
$
|
225
|
|
|
$
|
(2
|
)
|
|
(0.9
|
)%
|
Research and development
|
99
|
|
|
95
|
|
|
4
|
|
|
4.2
|
%
|
|
195
|
|
|
188
|
|
|
7
|
|
|
3.7
|
%
|
||||||
General and administrative
|
68
|
|
|
77
|
|
|
(9
|
)
|
|
(11.7
|
)%
|
|
143
|
|
|
151
|
|
|
(8
|
)
|
|
(5.3
|
)%
|
||||||
Amortization of intangible assets
|
52
|
|
|
60
|
|
|
(8
|
)
|
|
(13.3
|
)%
|
|
102
|
|
|
119
|
|
|
(17
|
)
|
|
(14.3
|
)%
|
||||||
Acquisition and integration costs
|
19
|
|
|
34
|
|
|
(15
|
)
|
|
(44.1
|
)%
|
|
46
|
|
|
70
|
|
|
(24
|
)
|
|
(34.3
|
)%
|
||||||
Exit and restructuring costs
|
1
|
|
|
5
|
|
|
(4
|
)
|
|
(80.0
|
)%
|
|
5
|
|
|
10
|
|
|
(5
|
)
|
|
(50.0
|
)%
|
||||||
Total operating expenses
|
$
|
353
|
|
|
$
|
383
|
|
|
$
|
(30
|
)
|
|
(7.8
|
)%
|
|
$
|
714
|
|
|
$
|
763
|
|
|
$
|
(49
|
)
|
|
(6.4
|
)%
|
|
Three Months Ended
|
|
Six Months Ended
|
||
|
July 1, 2017
|
|
July 1, 2017
|
||
Reported GAAP Consolidated Net sales growth
|
1.9
|
%
|
|
1.9
|
%
|
Adjustments:
|
|
|
|
||
Impact of Wireless LAN Net sales
(1)
|
3.9
|
%
|
|
4.0
|
%
|
Impact of foreign currency translation
(2)
|
0.8
|
%
|
|
1.0
|
%
|
Corporate, eliminations
(3)
|
(0.2
|
)%
|
|
(0.2
|
)%
|
Consolidated Organic Net sales growth
|
6.4
|
%
|
|
6.7
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
||||||||||||||
Net sales
|
$
|
313
|
|
|
$
|
305
|
|
|
$
|
8
|
|
|
2.6
|
%
|
|
$
|
635
|
|
|
$
|
619
|
|
|
$
|
16
|
|
|
2.6
|
%
|
Gross profit
|
155
|
|
|
153
|
|
|
2
|
|
|
1.3
|
%
|
|
317
|
|
|
318
|
|
|
(1
|
)
|
|
(0.3
|
)%
|
||||||
Operating expenses
|
92
|
|
|
96
|
|
|
(4
|
)
|
|
(4.2
|
)%
|
|
187
|
|
|
190
|
|
|
(3
|
)
|
|
(1.6
|
)%
|
||||||
Operating income
|
$
|
63
|
|
|
$
|
57
|
|
|
6
|
|
|
10.5
|
%
|
|
$
|
130
|
|
|
$
|
128
|
|
|
2
|
|
|
1.6
|
%
|
||
Gross margin
|
49.5
|
%
|
|
50.2
|
%
|
|
|
|
|
|
49.9
|
%
|
|
51.4
|
%
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||
|
July 1, 2017
|
|
July 1, 2017
|
||
Reported GAAP Net sales growth
|
|
|
|
||
Legacy Zebra Reported GAAP Net sales growth
|
2.6
|
%
|
|
2.6
|
%
|
Adjustments:
|
|
|
|
||
Impact of foreign currency translations
(1)
|
1.1
|
%
|
|
1.1
|
%
|
Legacy Zebra Organic Net sales growth
|
3.7
|
%
|
|
3.7
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
||||||||||||||
Net sales
|
$
|
584
|
|
|
$
|
577
|
|
|
$
|
7
|
|
|
1.2
|
%
|
|
$
|
1,128
|
|
|
$
|
1,115
|
|
|
$
|
13
|
|
|
1.2
|
%
|
Gross profit
|
257
|
|
|
257
|
|
|
—
|
|
|
—
|
%
|
|
497
|
|
|
485
|
|
|
12
|
|
|
2.5
|
%
|
||||||
Operating expenses
|
189
|
|
|
188
|
|
|
1
|
|
|
0.5
|
%
|
|
374
|
|
|
374
|
|
|
—
|
|
|
—
|
%
|
||||||
Operating income
|
$
|
68
|
|
|
$
|
69
|
|
|
(1
|
)
|
|
(1.4
|
)%
|
|
$
|
123
|
|
|
$
|
111
|
|
|
12
|
|
|
10.8
|
%
|
||
Gross margin
|
44.0
|
%
|
|
44.5
|
%
|
|
|
|
|
|
44.1
|
%
|
|
43.5
|
%
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||
|
July 1, 2017
|
|
July 1, 2017
|
||
Enterprise Reported GAAP Net sales growth
|
1.2
|
%
|
|
1.2
|
%
|
Adjustments:
|
|
|
|
||
Impact of Wireless LAN Net sales
(1)
|
6.0
|
%
|
|
6.3
|
%
|
Impact of foreign currency translation
(2)
|
0.7
|
%
|
|
1.0
|
%
|
Enterprise Organic Net sales growth
|
7.9
|
%
|
|
8.5
|
%
|
|
Six Months Ended
|
|||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
$ Change
|
|
% Change
|
|||||||
Operating activities
|
$
|
203
|
|
|
$
|
124
|
|
|
$
|
79
|
|
|
63.7
|
%
|
Investing activities
|
(22
|
)
|
|
(36
|
)
|
|
14
|
|
|
(38.9
|
)%
|
|||
Financing activities
|
(238
|
)
|
|
(146
|
)
|
|
(92
|
)
|
|
63.0
|
%
|
|||
Effect of exchange rates on cash
|
(4
|
)
|
|
7
|
|
|
(11
|
)
|
|
(157.1
|
)%
|
|||
Net decrease in cash and cash equivalents
|
$
|
(61
|
)
|
|
$
|
(51
|
)
|
|
$
|
(10
|
)
|
|
19.6
|
%
|
•
|
The improvement in cash flow from operations was driven by net income of
$25 million
in the current period compared to net loss of
$71 million
in the prior year period. This included significant non-cash drivers of a lower deferred income tax benefit of
$13 million
and lower depreciation and amortization of
$13 million
. This was offset slightly by improved working capital of
$8 million
during 2017, driven primarily by benefits related to accounts receivable and accounts payables management offset by an increase in inventory levels. Net inventory increased as a
|
•
|
The decline in net cash used in investing activities is driven by lower capital expenditures.
|
•
|
Net cash used in financing activities during
2017
consisted primarily of early debt principal repayments of
$240 million
under the Term Loan compared to
$145 million
in the prior year comparable period, which included
$68 million
in proceeds from the issuance of long-term debt, offset by
$68 million
in payments of long-term debt within the Consolidated Statements of Cash Flows.
|
Senior Notes
|
$
|
1,050
|
|
Term Loan
|
1,413
|
|
|
Less: Debt Issuance Costs
|
(20
|
)
|
|
Less: Unamortized Discounts
|
(25
|
)
|
|
Total Long-Term Debt
|
$
|
2,418
|
|
|
Six Months Ended
|
||||||||||||||||
|
July 1, 2017
|
|
July 2, 2016
|
||||||||||||||
|
Zebra
|
|
Enterprise
|
|
Total
|
|
Zebra
|
|
Enterprise
|
|
Total
|
||||||
Customer A
|
6.9
|
%
|
|
14.3
|
%
|
|
21.2
|
%
|
|
5.9
|
%
|
|
14.2
|
%
|
|
20.1
|
%
|
Customer B
|
4.6
|
%
|
|
8.5
|
%
|
|
13.1
|
%
|
|
5.0
|
%
|
|
8.3
|
%
|
|
13.3
|
%
|
Customer C
|
6.4
|
%
|
|
6.6
|
%
|
|
13.0
|
%
|
|
5.5
|
%
|
|
6.5
|
%
|
|
12.0
|
%
|
•
|
Market acceptance of Zebra’s products and solution offerings and competitors’ offerings and the potential effects of technological changes,
|
•
|
The effect of global market conditions, including North America, Latin America, Asia-Pacific, Europe, Middle East, and Africa regions in which we do business,
|
•
|
Our ability to control manufacturing and operating costs,
|
•
|
Risks related to the manufacturing of Zebra’s products and conducting business operations in countries outside the U.S., including the risk of depending on key suppliers who are also in countries outside the U.S.,
|
•
|
Zebra’s ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions,
|
•
|
The availability of credit and the volatility of capital markets, which may affect our suppliers, customers and ourselves,
|
•
|
Success of integrating acquisitions, including the Enterprise business we acquired in October 2014 from Motorola Solutions, Inc.,
|
•
|
Interest rate and financial market conditions,
|
•
|
Access to cash and cash equivalents held outside the U. S.,
|
•
|
The effect of natural disasters on our business,
|
•
|
The impact of changes in governmental policies, laws or regulations in countries where we conduct business, including the U.S.,
|
•
|
The impact of foreign exchange rates due to the large percentage of our sales and operations being in countries outside the U.S.,
|
•
|
The outcome of litigation in which Zebra may be involved, particularly litigation or claims related to infringement of third-party intellectual property rights, and
|
•
|
The outcome of any future tax matters or tax law changes.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 6.
|
Exhibits
|
10.1
|
Amended and Restated Credit Agreement, dated as of July 26, 2017, by and among Zebra, the lenders and issuing banks party thereto, JPMorgan Chase Bank, N.A., and Morgan Stanley Senior Funding, Inc.
|
|
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification
|
|
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification
|
|
|
32.1
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
32.2
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101
|
The following financial information from Zebra Technologies Corporation Quarterly Report on Form 10-Q, for the quarter ended July 1, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the consolidated balance sheets; (ii) the consolidated statements of operations; (iii) the consolidated statements of comprehensive (loss) income; (iv) the consolidated statements of cash flows; and (v) notes to consolidated financial statements.
|
|
ZEBRA TECHNOLOGIES CORPORATION
|
||
|
|
|
|
Date: August 8, 2017
|
By:
|
|
/s/ Anders Gustafsson
|
|
|
|
Anders Gustafsson
|
|
|
|
Chief Executive Officer
|
|
|
|
|
Date: August 8, 2017
|
By:
|
|
/s/ Olivier Leonetti
|
|
|
|
Olivier Leonetti
|
|
|
|
Chief Financial Officer
|
1 Year Zebra Technologies Chart |
1 Month Zebra Technologies Chart |
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