<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 29, 1996
Commission File Number: O-19406
Zebra Technologies Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction ofincorporation or organization)
36-2675536
(I.R.S. Employer Identification No.)
333 Corporate Woods Parkway, Vernon Hills, IL 60061
(Address of principal executive offices) (Zip Code)
(847)634-6700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and has been subject to such
filing requirements for the past 90 days.
[ X ] Yes [ ] No
As of August 12, 1996, there were the following shares outstanding:
Class A Common Stock, $.01 par value: 16,885,006
Class B Common Stock, $.01 par value: 7,315,404
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
QUARTER ENDED JUNE 29, 1996
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Independent Auditors' Review Report page 2
Consolidated Balance Sheets as of June 29, 1996
(unaudited) and December 31, 1995 page 3
Consolidated Statements of Earnings (unaudited)
for the three and six months ended June 29, 1996
and July 1, 1995 page 4
Consolidated Statements of Cash Flows (unaudited)
for the three and six months ended June 29, 1996
and July 1, 1995 page 5
Notes to Consolidated Financial Statements page 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations page 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings page 10
Item 4. Submissions of Matters to a Vote of Security Holders page 10
Item 6. Exhibits and Reports on Form 8-K page 11
SIGNATURES page 14
<PAGE>
Independent Auditors' Review Report
The Board of Directors
Zebra Technologies Corporation:
We have reviewed the consolidated balance sheet of Zebra Technologies
Corporation and subsidiaries as of June 29, 1996, and the related
consolidated statements of earnings for the three-month and six-month periods
ended June 29, 1996 and July 1, 1995 and consolidated statements of cash
flows for the six months ended June 29, 1996 and July 1, 1995. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for
them to be in conformity with generally accepted accounting principles. We
have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Zebra Technologies Corporation
and subsidiaries as of December 31, 1995, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for the year
then ended (not presented herein); and in our report dated February 13, 1996,
we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1995, is fairly presented, in
all material respects, in relation to the consolidated balance sheet from
which it has been derived.
Chicago, Illinois KPMG Peat Marwick LLP
July 11, 1996
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
June 29, December 31,
1996 1995
(Unaudited)
<S><C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $9,550 $10,017
Investments and marketable securities 69,625 61,841
Accounts receivable, net of allowance 26,181 24,887
Inventories:
Finished goods 9,288 9,519
Work-in-process 299 354
Raw materials 11,115 10,492
Total inventories 20,702 20,365
Deferred income taxes 0 787
Prepaid expenses 974 1,379
Total current assets 127,032 119,276
Machinery and equipment at cost, less
accumulated depreciation and amortization 10,231 8,319
Other assets 2,977 3,476
Total assets $140,240 $131,071
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $7,846 $11,268
Accrued liabilities 4,288 4,012
Short term note payable 233 37
Current portion of obligation under
capital lease with related party 61 59
Income taxes payable 2,624 4,067
Total current liabilities 15,052 19,443
Obligation under capital lease with
related party, less current portion 147 177
Long term liability 2,000 2,000
Deferred tax liability 874 1,124
Other 312 121
Total liabilities $18,385 $22,865
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized, none outstanding
Class A Common Stock, $.01 par value; 35,000,000
shares authorized, 16,878,348 and 16,865,500 shares
issued and outstanding in 1996 and 1995, respectively 169 169
Class B Common Stock, $.01 par value; 35,000,000
shares authorized, 7,318,062 shares issued and
outstanding in 1996 and 1995 73 73
Paid-in capital 30,039 29,645
Retained earnings 91,218 79,709
Unrealized holding gain (loss) on investments 562 (1,166)
Cumulative translation adjustment (206) (224)
Total stockholders' equity $121,855 $108,206
Total liabilities and stockholders' equity $140,240 $131,071
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
<S><C> <C> <C> <C> <C>
Net sales $40,490 $35,488 $78,842 $69,880
Cost of sales 21,099 18,887 41,019 36,801
Gross profit 19,391 16,601 37,823 33,079
Operating expenses:
Sales and marketing 4,941 3,082 9,581 6,117
Research and development 3,013 1,573 5,687 3,322
General and administrative 3,484 1,820 6,796 4,023
Acquired in-process technology 0 0 1,114 0
Total operating expenses 11,438 6,475 23,178 13,462
Income from operations 7,953 10,126 14,645 19,617
Other income (expense):
Investment income 1,455 878 2,759 1,686
Interest expense (9) (7) (13) (11)
Other, net 9 54 (16) 98
Foreign exchange gain 79 32 84 140
Total other income 1,534 957 2,814 1,913
Income before income taxes 9,487 11,083 17,459 21,530
Provision for income taxes 3,227 3,991 5,950 7,826
Net income $6,260 $7,092 $11,509 $13,704
Net income per share $0.26 $0.29 $0.48 $0.57
Average shares 24,198 24,081 24,194 24,076
See accompanying Notes to Consolidated Financial Statement
</TABLE>
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE> Six Months Ended
June 29, July 1,
1996 1995
<S><C> <C> <C>
Cash flows from operating activities:
Net income $11,509 $13,704
Adjustments to reconcile net income to net
cash provided by operating activities, net
of acquisition:
Depreciation and amortization 1,487 861
Acquired in-process technology 1,114 0
Increase in accounts receivable (1,294) (2,698)
Decrease (increase) in inventories (337) 55
Decrease (increase) in other assets 499 (474)
Increase (decrease) in accounts payable (3,422) 947
Increase (decrease) in accrued expenses 467 (322)
Increase (decrease) in income taxes payable (1,443) 810
Increase in net deferred tax liability 537 510
Net increase in other operating activities 360 153
Net purchases of investments and
marketable securities (5,911) (10,229)
Net cash provided by operating activities 3,566 3,317
Cash flows from investing activities
Purchases of machinery and equipment (3,399) (2,449)
Net sales (purchases) of investments and
marketable securities (145) 280
Payment for acquisition (1,049) 0
Net cash used in investing activities (4,593) (2,169)
Cash flows from financing activities:
Proceeds from exercise of stock options 393 347
Issuance of short-term notes payable 196 0
Payments for obligation under capital lease (29) (29)
Net cash provided by financing activities 560 318
Net increase (decrease) in cash and cash equivalents (467) 1,466
Cash including cash equivalents at beginning
of period 10,017 10,421
Cash including cash equivalents at end of period $9,550 $11,887
Supplemental disclosures of cash flow information:
Interest paid $13 $11
Income taxes paid $7,227 $6,997
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The consolidated financial statements included herein have been prepared by
Zebra Technologies Corporation and subsidiaries (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest Annual Report to Stockholders (the "Annual
Report") incorporated by reference into the Company's Form 10-K filed with
the Securities and Exchange Commission. The consolidated balance sheet as of
December 31, 1995 presented herein has been derived from the audited
consolidated balance sheet contained in the Annual Report. In the opinion
of the Company, the consolidated financial statements reflect all adjustments
necessary to present fairly the consolidated financial position of Zebra
Technologies Corporation and subsidiaries as of June 29, 1996 and December
31, 1995, and the consolidated results of their operations for the three-
month and six-month periods ended June 29, 1996 and July 1, 1995 and cash
flows for the six months ended June 29, 1996 and July 1, 1995. The results
of operations for such interim periods are not necessarily indicative of the
results for the full year.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results ofOperations
Results of Operations Second Quarter of 1996 versus Second Quarter of 1995
and Year-to-date 1996 versus Year-to-date 1995
Net sales of $40,490,000 for the second quarter of 1996 increased 14.1% over
net sales of $35,488,000 for the second quarter of 1995. On a year-to-date
basis, 1996 net sales of $78,842,000 increased 12.8% over last year's net
sales of $69,880,000. The net sales increase for the quarter and year-to-date
is attributed to unit growth in all product categories rather than price
increases, as the average unit price of printer products has decreased due to
product mix changes. Printer sales increased by 11.0% and supplies sales by
7.8% over the second quarter of 1995, bringing printer sales to 71.7% and
supplies sales to 23.2% of consolidated net sales, respectively. On a year-
to-date basis, printer sales increased by 9.1% and supplies sales by 5.3%
over 1995, bringing printer sales to 70.5% and supplies sales to 23.7% of
consolidated net sales, respectively. Approximately 43.2% of second quarter
net sales were derived from international sources as compared to 44.6% during
the second quarter of 1995. Similarly, 43.5% of year-to-date net sales were
derived from international sources as compared to 44.7% in the prior year.
Gross profit increased to $19,391,000 for the second quarter of 1996, a 16.8%
gain over the gross profit of $16,601,000 for the same period last year. As
a percentage of net sales, gross profit increased 1.1% from 46.8% in the
second quarter of last year to 47.9% in the second quarter of 1996. Year-
to-date gross profit of $37,823,000 also increased as a percentage of net
sales, from 47.3% last year to 48.0% this year. The increase in gross profit
is due principally to favorable mix changes within the Company's printer
product sales and a lower percentage of supplies sales.
Sales and marketing expenses of $4,941,000 were up 60.3% in the second
quarter of 1996 versus the same period last year. As a percentage of net
sales, sales and marketing expenses increased to 12.2% for the second quarter
from 8.7% last year. Year-to-date sales and marketing expenses of $9,581,000
were up 56.6% over last year, increasing as a percentage of net sales from
8.8% last year to 12.2%. Increased spending on a quarterly and year-to-date
basis is principally due to expenses required to develop the retail channel
of distribution for the Company's software products, as well as increased
staffing at the Company's Vernon Hills and High Wycombe facilities that are
necessary to support anticipated sales growth. These expense increases were
offset in part by reductions in co-op advertising and outside consulting
services in comparison to last year on both a quarterly and year-to-date
basis.
Research and development expenses in the second quarter of 1996 increased by
91.5% to $3,013,000 (7.4% of net sales) versus $1,573,000 (4.4% of net sales)
in the second quarter of 1995. Year-to-date research and development expenses
increased by 71.2% to $5,687,000 (7.2% of net sales) versus $3,322,000 (4.8%
of net sales) last year. The Company increased research and development
expenses to support several significant product releases scheduled for the
June to August time frame, including the XiII printer series and the 170 PAX
print engine, among others. Management believes that product development
expenses will trend down as a percentage of sales, as absolute dollar
expenditures in this area are expected to stabilize in the near term and
sales revenue increases.
General and administrative expenses increased by 91.4% to $3,484,000 (8.6% of
net sales) in the second quarter of 1996 compared to $1,820,000 (5.1% of net
sales) last year. On a year-to-date basis, general and administrative
expenses increased by 68.9% to $6,796,000 (8.6% of net sales) compared to
$4,023,000 (5.8% of net sales) last year. The increase in general and
administrative expenses for the quarter and year-to-date on both a dollar and
percentage basis was primarily the result of increases in staffing,
depreciation, and mainframe computer expenses. The expenses were offset in
part by reductions in outside consulting services. Also included is $137,000
in the second quarter and $274,000 for the year-to-date for amortization of
intangible assets and goodwill resulting from the Company's acquisition of
Vertical Technologies, Inc. In addition, $17,000 in the second quarter and
$34,000 for the year-to-date is included for amortization of intangible
assets and goodwill resulting from the Company's acquisition of the assets of
Fenestra Computer Services, as described in the Liquidity and Capital
Resources section below.
Compared to the previous year, income from operations in the second quarter
of 1996 decreased by $2,173,000 to $7,953,000 as the result of higher
operating expenses. Year-to-date income from operations decreased by
$4,972,000 compared to the previous year, also the result of higher operating
expenses, and because of a $1,114,000 non-recurring write-off of acquired
in-process technology related to the Company's acquisiton of the assets of
Fenestra Computer Services in the first quarter of 1996. As a percentage of
net sales, operating profits in the second quarter were 19.6% in 1996
compared to 28.5% in 1995. Year-to-date, operating profits as a percentage
of net sales were 18.6% in 1996 versus 28.1% in the previous year.
Investment income for the second quarter of 1996 increased by $577,000 or
65.7% to $1,455,000 versus $878,000 for the second quarter of 1995. On a
year-to-date basis, investment income increased by $1,073,000 or 63.6% to
$2,759,000 versus $1,686,000 in 1995. On both a quarterly and year to date
basis the Company had larger cash balances invested and was able to earn a
higher rate of return than in the comparable period from 1995. On a year to
date basis, average cash and marketable securities increased from $60,555,000
in 1995 to $75,517 in 1996. In 1995 the annualized year to date return on
these funds was 5.6%, compared to a return of 7.3% for the comparable period
in 1996.
Income before income taxes for the second quarter of 1996 of $9,487,000 was
$1,596,000 or 14.4% below the prior year amount of $11,083,000 for the same
period. The provision for income taxes was 34.0% in the second quarter of
1996, resulting in net income of $6,260,000 or 15.5% of net sales and net
income per share of $0.26 on 24,198,000 weighted average shares outstanding.
In the second quarter of 1995, the provision for income taxes was 36.0%
resulting in net income of $7,092,000 or 20.0% of net sales and net income
per share of $0.29 on 24,081,000 weighted average shares outstanding. Year-
to-date income before income taxes of $17,459,000 was $4,071,000 or 18.9%
below the prior year amount of $21,530,000 for the same period. The
provision for income taxes on a year-to-date basis was 34.0% in 1996,
resulting in net income of $11,509,000 or 14.6% of net sales and net income
per share of $0.48 on 24,194,000 weighted average shares outstanding. On a
year-to-date basis, the provision for income taxes in 1995 was 36.3%
resulting in net income of $13,704,000 or 19.6% of net sales and net income
per share of $0.57 on 24,076,000 weighted average shares outstanding.
Liquidity and Capital Resources
The Company's principal sources of liquidity continue to be cash generated
from operations. At the end of the second quarter, the Company had
$79,175,000 in cash and marketable securities versus $71,858,000 at the end
of 1995.
Effective February 16, 1996, the Company purchased the assets of Fenestra
Computer Services, a UK partnership, in exchange for $1,314,000 in the form
of cash and Zebra Class A common stock. The transaction has been accounted
for under the purchase method of accounting. Assets and liabilities,
including software and hardware technology, and trade names have been
recorded at their respective fair market values with $1,114,000 assigned
to acquired in-process technology based on an independent third-party
appraisal.
Management believes that existing capital resources and funds generated from
operations are sufficient to finance anticipated capital requirements. The
Company has no commitments or agreements with respect to acquisitions or
other significant capital expenditures.
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 filed with the Securities and Exchange
Commission on March 25, 1996, and the description therein of a suit filed
against the Company and Zebra Technologies VTI, Inc. (Zebra VTI) by David
Carter and William Flury. Such lawsuit has been stayed pending resolution of
the action filed by the Company and Zebra VTI in Illinois against Messrs.
Carter and Flury, as described in the 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Company was held on May 22,
1996.
(b) 1. The Stockholders voted to elect five directors to the Company's
Board of Directors, with the following votes:
<TABLE>
Authority Broker
Directors For Against Withheld Abstentions Non-Votes
<S><C> <C> <C> <C> <C> <C>
Gerhard Cless 87,683,137 0 17,126 0 0
Edward Kaplan 87,683,137 0 17,126 0 0
Christopher Knowles 87,683,005 0 17,258 0 0
David Riley 87,682,855 0 17,408 0 0
Michael Smith 87,682,855 0 17,408 0 0
</TABLE>
2. The Stockholders also voted to ratify the selection by the
Board of Directors ofKPMG Peat Marwick LLP as the independent
auditors of the Company's financial statements for the fiscal
year ending December 31, 1996 with the following vote:
<TABLE>
Authority Broker
For Against Withheld Abstentions Non-Votes
<S><C> <C> <C> <C> <C> <C>
87,670,989 18,270 0 11,074 0
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
15. Acknowledgment of Independent Certified Public Accountants
Regarding Independent Auditors' Review Report
27. Financial Data Schedule
(b) Reports.
No reports on Form 8-K have been filed by the Registrant for the
quarterly period covered by this report.
<PAGE>
Exhibit 15
Acknowledgment of Independent Certified Public Accountants Regarding
Independent Auditors'Review Report
Zebra Technologies Corporation
333 Corporate Woods Parkway
Vernon Hills, Illinois 60061-3109
Ladies and Gentlemen:
With respect to the registration statements on Form S-8 of Zebra Technologies
Corporation, we acknowledge our awareness of the use therein of our report
dated July 11, 1996 related to our review of interim financial information
as of June 29, 1996.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
Chicago, Illinois KPMG Peat Marwick LLP
August 12, 1996
<PAGE>
Exhibit 27
The schedule contains summary financial information extracted from Zebra
Technologies Corporation and subsidiaries consolidated balance sheets for
June 29, 1996 and consolidated statements of earnings for June 29, 1996 and
is qualified in its entirety by reference to such financial statements.
ZEBRA TECHNOLOGIES CORPORATION
Appendix A to Item 601(c) of Regulation S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
<TABLE>
Item Number Item Description Amount
<S><C> <C> <C>
5-02(1) cash and cash items 9,550
5-02(2) marketable securities 69,625
5-02(3)(a)(1) notes and accounts receivable-trade 26,756
5-02(4) allowances for doubtful accounts (574)
5-02(6) inventory 20,702
5-02(9) total current assets 127,032
5-02(13) property, plant and equipment 19,414
5-02(14) accumulated depreciation (9,183)
5-02(18) total assets 140,240
5-02(21) total current liabilities 15,052
5-02(22) bonds, mortgages and similar debt 0
5-02(28) preferred stock-mandatory redemption 0
5-02(29) preferred stock-no mandatory redemption 0
5-02(30) common stock 242
5-02(31) other stockholder's equity 121,613
5-02(32) total liabilities and stockholder's equity 140,240
5-03(b)1(a) net sales of tangible products 39,770
5-03(b)1 total revenues 40,490
5-03(b)2(a) cost of tangible goods sold 20,898
5-03(b)2 total costs and expenses applicable to sales
and revenues 21,099
5-03(b)3 other costs and expenses 11,438
5-03(b)5 provision for doubtful accounts and notes 131
5-03(b)(8) interest and amortization of debt discount (9)
5-03(b)(10) income before income taxes 9,487
5-03(b)11 income tax expense 3,227
5-03(b)(14) income/loss 6,260
5-03(b)(15) discontinued operations 0
5-03(b)(17) extraordinary items 0
5-03(b)(18) cumulative effect- changes in accounting principles 0
5-03(b)(19) net income or loss 6,260
5-03(b)(20) earnings per share-primary 0.26
5-03(b)(20) earnings per share-fully diluted 0.26
</TABLE>
<PAGE>
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 thereunto duly authorized.
ZEBRA TECHNOLOGIES CORPORATION
Date: August 13, 1996 By: /s/Edward L. Kaplan
Edward L. Kaplan
Chief Executive Officer
Date: August 13, 1996 By: /s/Charles R. Whitchurch
Charles R. Whitchurch
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Zebra
Technologies Corporation and subsidiaries consolidated balance sheets for
June 29, 1996 and consolidated statements of earnings for June 29, 1996 and
is qualified in its entirety by reference to such financial statements.
Dollars in thousands, except per share data.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-29-1996
<CASH> 9,550
<SECURITIES> 69,625
<RECEIVABLES> 26,756
<ALLOWANCES> (574)
<INVENTORY> 20,702
<CURRENT-ASSETS> 127,032
<PP&E> 19,414
<DEPRECIATION> (9,183)
<TOTAL-ASSETS> 140,240
<CURRENT-LIABILITIES> 15,052
<BONDS> 0
0
0
<COMMON> 242
<OTHER-SE> 121,613
<TOTAL-LIABILITY-AND-EQUITY> 140,240
<SALES> 39,770
<TOTAL-REVENUES> 40,490
<CGS> 20,898
<TOTAL-COSTS> 21,099
<OTHER-EXPENSES> 11,438
<LOSS-PROVISION> 131
<INTEREST-EXPENSE> (9)
<INCOME-PRETAX> 9,487
<INCOME-TAX> 3,227
<INCOME-CONTINUING> 6,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,260
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
