<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 March 30, 1996
Commission File Number: O-19406
Zebra Technologies Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation 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 May 10, 1996, there were the following shares outstanding:
Class A Common Stock, $.01 par value: 16,882,348
Class B Common Stock, $.01 par value: 7,318,062
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
QUARTER ENDED MARCH 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Independent Auditors' Review Report page 2
Consolidated Balance Sheets as of March 30, 1996
(unaudited) and December 31, 1995 page 3
Consolidated Statements of Earnings (unaudited)
for the three months ended March 30, 1996 and
April 1, 1995 page 4
Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 30, 1996 and
April 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 6. Exhibits and Reports on Form 8-K page 9
SIGNATURES page 11
<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 March 30, 1996, and the related
consolidated statements of earnings and cash flows for the three-month
periods ended March 30, 1996 and April 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.
KPMG Peat Markwick LLP
Chicago, Illinois
April 16, 1996
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
March 30, December 31,
1996 1995
(Unaudited)
<S><C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $8,393 $10,017
Investments and marketable securities 67,799 61,841
Accounts receivable, net of allowance 25,324 24,887
Inventories:
Finished goods 9,593 9,519
Work-in-process 759 354
Raw materials 10,099 10,492
Total inventories 20,451 20,365
Deferred income taxes 0 787
Prepaid expenses 1,857 1,379
Total current assets 123,824 119,276
Machinery and equipment at cost, less
accumulated depreciation and amortization 8,861 8,319
Other assets 3,171 3,476
Total assets $135,856 $131,071
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $9,719 $11,268
Accrued liabilities 3,203 4,012
Short term note payable 241 37
Current portion of obligation under
capitalized lease with related party 60 59
Income taxes payable 4,767 4,067
Total current liabilities 17,990 19,443
Obligation under capitalized lease with
related party, less current portion 162 177
Long term liability 2,000 2,000
Deferred tax liability 689 1,124
Other 319 121
Total liabilities $21,160 $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 29,990 29,645
Retained earnings 84,956 79,709
Unrealized holding loss on investments (82) (1,166)
Cumulative translation adjustment (410) (224)
Total stockholders' equity $114,696 $108,206
Total liabilities and stockholders' equity $135,856 $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
March 30, April 1,
1996 1995
<S><C> <C> <C>
Net sales $38,352 $34,392
Cost of sales 19,919 17,914
Gross profit 18,433 16,478
Operating expenses:
Sales and marketing 4,640 3,035
Research and development 2,674 1,749
General and administrative 3,312 2,202
Acquired in-process technology 1,114 0
Total operating expenses 11,740 6,986
Income from operations 6,693 9,492
Other income (expense)
Investment income 1,303 808
Interest expense (4) (3)
Other, net (25) 44
Foreign exchange gain 5 108
Total other income $1,279 $957
Income before income taxes 7,972 10,449
Provision for income taxes 2,723 3,836
Net income $5,249 $6,613
Net income per share $0.22 $0.27
Average shares 24,189 24,071
See accompanying Notes to Consolidated Financial Statement
</TABLE>
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
Three Months Ended
March 30, April 1,
1996 1995
<S><C> <C> <C>
Cash flows from operating activities:
Net income $5,249 $6,613
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 752 430
(Increase) in accounts receivable (437) (2,222)
(Increase) in inventories (86) (761)
Decrease in other assets 305 1
Increase (decrease) in accounts payable (1,549) 1,065
Increase (decrease) in accrued expenses (611) 43
Increase in income taxes payable 700 2,435
Increase in deferred taxes 352 236
Net increase (decrease) in other
operating activities (666) 311
Net purchases of investments and
marketable securities (4,288) (8,437)
Net cash used in operating activities (279) (286)
Cash flows from investing activities:
Purchases of machinery and equipment (1,294) (620)
Net purchases of investments and
marketable securities (586) (138)
Net cash used in investing activities (1,880) (758)
Cash flows from financing activities:
Proceeds from exercise of stock options 345 347
Issuance of short-term notes payable 204 0
Payments for obligation under capital lease (14) (9)
Net cash provided by financing activities 35 38
Net decrease in cash and cash equivalents (1,624) (706)
Cash including cash equivalents at
beginning of period 10,017 10,421
Cash including cash equivalents at
end of period $8,393 $9,715
Supplemental disclosures of cash flow information:
Interest paid $4 $3
Income taxes paid $1,685 $1,400
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. The accompanying
unaudited interim consolidated financial statements reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results of the interim periods presented. The results of operations
for such interim periods are not necessarily indicative of the results for
the full year.
Note 2 - Acquisition
Effective February 16, 1996, the Company purchased the assets of Fenestra
Computer Services, a UK partnership, in exchange for $1,314,000 paid 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. The acquired in-process technology was expensed in the first
quarter of 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations First Quarter of 1996 versus First Quarter of 1995
Net sales for the first quarter of 1996 increased 11.5% to $38,352,000 versus
sales of $34,392,000 for the first quarter of 1995. The net sales increase
for the quarter 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 7.2% and
supplies sales by 2.9% over the first quarter of 1995, bringing printer sales
to 69.2% and supplies sales to 24.3% of consolidated net sales, respectively.
The remaining 6.5% of net sales consisted of service and software revenue.
Approximately 43.7% of first quarter net sales were derived from international
sources as compared to 44.8% during the first quarter of 1995.
Gross profit increased to $18,433,000 for the first quarter of 1996, a 11.9%
gain over gross profit of $16,478,000 for the first quarter of 1995. As a
percentage of net sales, gross profit increased 0.2% from 47.9% to 48.1%, 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 $4,640,000 were up 52.9% for the first
quarter of 1996 as compared to $3,035,000 for the first quarter of 1995. As
a percentage of net sales, first quarter sales and marketing expenses were
12.1% compared to 8.8% for the same period last year. This increase is
principally due to expenses required to develop the retail channel of
distribution for the Company's software products developed by Zebra VTI, as
well as increased staffing in the sales and marketing organizations 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 the first quarter of last year.
Research and development expenses for the first quarter of 1996 increased by
52.9% to $2,674,000 (7.0% of net sales) as compared to $1,749,000 (5.1% of
net sales) in the first quarter of 1995. The increase in research and
development expenses for the quarter on both a dollar and percentage basis
was primarily the result of increased staffing and project costs to support
new product development as well as the acquisition of Vertical Technologies,
Inc.
General and administrative expenses for the first quarter of 1996 increased
by 50.4% to $3,312,000 (8.6% of net sales) as compared to $2,202,000 (6.4% of
net sales) for the same period last year. The increase in general and
administrative expenses for the quarter on both a dollar and percentage basis
was primarily the result of increases in staffing, recruiting, depreciation,
and mainframe computer expenses. The expenses were offset in part by
reductions in outside consulting services. Also included is $137,000 for
amortization of intangible assets and goodwill resulting from the Company's
acquisition of Vertical Technologies, Inc. This amount is currently not
deductible for income tax purposes. In addition, $17,000 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. This amount is deductible for
income tax purposes.
During the first quarter of 1996, the Company recorded a non-recurring write-
off of acquired in-process technology in the amount of $1,114,000 as a result
of the Company's acquisition of the assets of Fenestra Computer Services.
The increased level of operating expenses in the first quarter combined with
the write-off of acquired in-process technology caused income from operations
for the first quarter of 1996 to decrease by $2,799,000 or 29.5% to
$6,693,000 (17.5% of net sales) compared to $9,492,000 (27.6% of net sales)
for the first quarter of 1995.
Investment income for the first quarter of 1996 increased by $495,000 or
61.3% to $1,303,000 versus $808,000 for the first quarter of last year. This
increase was the result of larger average investment balances, combined with
higher rates of return within the portfolio.
Income before income taxes was $7,972,000 in the first quarter of 1996
compared to $10,449,000 in the same quarter of last year, a decrease of
$2,477,000 or 23.7%. Income taxes were provided at a rate of 34.2% in the
first quarter of 1996, resulting in net income of $5,249,000 or 13.7% of net
sales and net income per share of $0.22 on 24,189,000 average outstanding
shares. In the first quarter of 1995, the provision for income taxes was
36.7% resulting in net income of $6,613,000 or 19.2% of net sales, and net
income per share of $0.27 on 24,071,000 average outstanding shares.
Liquidity and Capital Resources
The Company's principal sources of liquidity continue to be cash generated
from operations. At the end of the first quarter, the Company had $76,192,000
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>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
23.1 Acknowledgment of Independent Certified Public Accountants
Regarding Independent Auditors' Review Report
(b) Reports.
No reports on Form 8-K have been filed by the Registrant for the
quarterly period covered by this report.
<PAGE>
Exhibit 23.1
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 (No. 33-44706 and No. 33-72774) on
Form S-8, we acknowledge our awareness of the use therein of our report dated
April 16, 1996 related to our review of interim financial information.
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.
Very truly yours,
KPMG Peat Marwick LLP
Chicago, Illinois
May 10, 1996
<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: May 10, 1996
By: Edward L. Kaplan
Chief Executive Officer
Date: May 10, 1996
By: 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 SHEET AT MARCH
30, 1996 AND CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE MONTH PERIOD
ENDED MARCH 30, 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> MAR-30-1996
<CASH> 8,393
<SECURITIES> 67,799
<RECEIVABLES> 25,614
<ALLOWANCES> (467)
<INVENTORY> 20,451
<CURRENT-ASSETS> 123,824
<PP&E> 17,310
<DEPRECIATION> (8,449)
<TOTAL-ASSETS> 135,856
<CURRENT-LIABILITIES> 17,990
<BONDS> 0
0
0
<COMMON> 242
<OTHER-SE> 114,454
<TOTAL-LIABILITY-AND-EQUITY> 135,856
<SALES> 38,352
<TOTAL-REVENUES> 38,352
<CGS> 19,919
<TOTAL-COSTS> 19,919
<OTHER-EXPENSES> 11,618
<LOSS-PROVISION> 122
<INTEREST-EXPENSE> (4)
<INCOME-PRETAX> 7,972
<INCOME-TAX> 2,723
<INCOME-CONTINUING> 5,249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,249
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
