LINCOLNSHIRE, Ill., Aug. 9, 2016 /PRNewswire/ -- 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 second quarter ended July 2, 2016.
"Our solid second quarter results reflected sales in-line with our expectations, gross margin expansion, lower expenses, and improved profitability versus the prior year, against a challenging macro-economic backdrop. Furthermore, we continued to make steady progress on our integration of the Enterprise business," said Anders Gustafsson, CEO of Zebra Technologies. "We are reiterating our full year outlook with the assumption of no material change to the macro environment, and we remain fully committed to our strategic priorities. We are well positioned as the leader in helping enterprises improve visibility into their operations and are encouraged by our growth prospects going forward."
Reported Financial Results
Non-GAAP Financial Results
Operating expenses for the second quarter of 2016 were $384 compared to $407 million in the prior year's second quarter. Operating expenses for the second quarter of 2016 include $39 million in acquisition and integration costs and exit and restructuring costs, versus $49 million in the prior year quarter, as well as $60 million for amortization of intangible assets, compared with $63 million for the second quarter of 2015. Adjusted (non-GAAP) metrics exclude these specific operating expense items.
Non-GAAP net income was $70 million, or $1.34 per diluted share, compared with $53 million, or $1.03 per diluted share, for the second quarter of 2015.
Discussion and Analysis
Adjusted gross margin for the quarter was 46.4%, compared to 44.5% in the prior year period, and reflects an increase primarily due to favorable changes in sales mix, improved margin on services, product cost reduction initiatives, and reductions in other costs.
Adjusted EBITDA for the second quarter of 2016 was $144 million, or 16.3% of adjusted net sales compared to $131 million, or 14.6% of adjusted net sales for the second quarter of 2015, primarily due to higher gross margin and lower operating expenses, partially offset by unfavorable foreign currency changes versus the prior year period.
Tax adjustments and estimation changes related to profitability mix by jurisdiction had an approximate $0.14 positive impact to non-GAAP earnings per share in the second quarter of 2016.
Balance Sheet and Cash Flow
For the first half of 2016, the company made $99 million in scheduled cash interest payments and $145 million in term loan principal payments.
For the first half of 2016, the company generated $122 million of cash flow from operations and incurred capital expenditures of $35 million.
Full Year 2016
Adjusted EBITDA margin is expected to be approximately 17% for the full year 2016.
The company expects to pay down $300 million of debt principal in 2016.
Adjusted EBITDA margin is expected to be approximately 17% for the third quarter 2016. Non-GAAP earnings are expected to be in the range of $1.30 to $1.50 per share.
Conference Call Notification
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.
Use of Non-GAAP Financial Information
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