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 29, 1997
Commission File Number: O-19406
Zebra Technologies Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-2675536
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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 April 28, 1997, there were the following shares outstanding:
Class A Common Stock, $.01 par value: 16,984,973
Class B Common Stock, $.01 par value: 7,255,404
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
QUARTER ENDED MARCH 29, 1997
INDEX
<TABLE>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Independent Auditors' Review Report 2
Consolidated Balance Sheets as of March 29, 1997
(unaudited) and December 31, 1996 3
Consolidated Statements of Earnings (unaudited)
for the three months ended March 29, 1997 and
March 30, 1996 4
Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 29, 1997 and
March 30, 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 13
</TABLE>
<PAGE>
Item 1. Consolidated Financial Statements
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 29, 1997, and the related consolidated
statements of earnings and cash flows for the three-month periods ended March
29, 1997 and March 30, 1996. 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, 1996, 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 7, 1997,
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, 1996, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
Chicago, Illinois KPMG Peat Marwick LLP
April 15, 1997
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
March 29, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $8,371 $5,168
Investments and marketable securities 104,246 89,372
Accounts receivable, net of allowances of
$973 and $960 28,176 31,631
Inventories:
Finished goods 9,593 10,428
Work-in-process 759 325
Raw materials 10,082 10,750
Total inventories 20,434 21,503
Deferred Income Taxes
Prepaid expenses 1,544 1,322
Total current assets 162,771 148,996
Machinery and equipment at cost, less
accumulated depreciation and amortization 11,125 11,328
Other assets 2,647 2,812
Deferred tax asset - 147
Total assets $176,543 $163,283
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $9,149 $12,200
Due to related party - -
Accrued liabilities 4,997 4,180
Short-term note payable 83 1
Current portion of obligation under capitalized
lease with related party 63 62
Income taxes payable 7,276 3,750
Total current liabilities 21,568 20,193
Obligation under capitalized lease with related
party,less current portion 99 115
Long-term liability 2,211 2,211
Deferred tax liability 1,431 -
Other 301 308
Total liabilities 25,610 22,827
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, 16,924,973 shares issued
and outstanding 169 169
Class B Common Stock, $.01 par value; 35,000,000
shares authorized, 7,315,404 shares issued
and outstanding 73 73
Paid-in capital 30,386 30,386
Retained earnings 119,858 108,624
Unrealized holding gain/(loss) on investments - (6)
Cumulative translation adjustment 447 1,210
Total stockholders' equity 150,933 140,456
Total liabilities and stockholders' equity $176,543 $163,283
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ZEBRA TECHNOLOGIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except for per share data)
(Unaudited)
<TABLE>
Three Months Ended
March 29, March 30,
1997 1996
<S> <C> <C>
Net sales $42,415 $38,352
Cost of sales 21,185 19,919
Gross profit 21,230 18,433
Operating expenses:
Sales and marketing 4,473 4,640
Research and development 2,529 2,674
General and administrative 3,434 3,312
Acquired in-process technology - 1,114
Total operating expenses 10,436 11,740
Income from operations 10,794 6,693
Other income (expense)
Investment income 1,082 859
Gain on securities 6,029 445
Other, net 11 (25)
Total other income 7,122 1,279
Income before income taxes 17,916 7,972
Provision for income taxes 6,682 2,723
Net income $11,234 $5,249
Net income per share $0.46 $0.22
Average shares 24,240 24,189
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE> Three Months Ended
March 29, March 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $11,234 $5,249
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 909 752
Appreciation in market value of investments
& marketable securities 564 304
Decrease (increase) in accounts receivable 3,455 (437)
Decrease (increase) in inventories 1,069 (86)
Decrease in other assets 165 305
Decrease in accounts payable (3,051) (1,549)
Increase (decrease) in accrued expenses 810 (611)
Increase in income taxes payable 3,526 700
Increase in deferred income taxes 1,578 352
Net decrease in other operating activities (985) (666)
Net purchases of investments and
marketable securities (20,911) (4,288)
Net cash provided by (used in)
operating activities (1,637) 25
Cash flows from investing activities:
Purchases of machinery and equipment (706) (1,294)
Net sales (purchases) of investments and
marketable securities 5,479 (890)
Net cash provided by (used in)
investing activities 4,773 (2,184)
Cash flows from financing activities:
Net proceeds from sale of stock - 345
Issuance of short-term notes payable 82 204
Payments for obligation under capital lease (15) (14)
Net cash provided by financing activities 67 535
Net increase (decrease) in cash and
cash equivalents 3,203 (1,624)
Cash including cash equivalents at
beginning of period 5,168 10,017
Cash including cash equivalents at end of period $8,371 $8,393
Supplemental disclosures of cash flow information:
Interest paid $3 $4
Income taxes paid $1,100 $1,685
</TABLE>
See accompanying notes to consolidated financial statements.
<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 on Form 10-K filed with the
Securities and Exchange Commission. The consolidated balance sheet as of
December 31, 1996 presented herein has been derived from the audited
consolidated balance sheet contained in the Annual Report on Form 10-K. 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 March 29, 1997 and
December 31, 1996, and the consolidated results of their operations and their
cash flows for the three months ended March 29, 1997 and March 30, 1996.
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 of Operations
Results of Operations First Quarter of 1997 versus First Quarter of 1996
Net sales for the first quarter of 1997 increased 10.6% to $42,415,000 versus
sales of $38,352,000 for the first quarter of 1996. This sales increase 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 15.1% and supplies sales by
7.9% over the first quarter of 1996, bringing printer sales to 71.9% and
supplies sales to 23.7% of consolidated net sales, respectively. The
remaining 4.4% of net sales consisted of service and software revenue.
Approximately 45.4% of first quarter net sales were derived from international
sources as compared to 43.7% during the first quarter of 1996.
Gross profit increased to $21,230,000 for the first quarter of 1997, a 15.2%
gain over gross profit of $18,433,000 for the first quarter of 1996. As a
percentage of net sales, gross profit increased 2.0% from 48.1% to 50.1%.
This increase is principally due to decreased material costs of high volume
printer parts plus a favorable product mix within the Company's printer
products and a lower percentage of supplies sales.
Sales and marketing expenses of $4,473,000 were down 3.6% for the first
quarter of 1997 compared to $4,640,000 in the first quarter of 1996. As a
percentage of net sales, first quarter sales and marketing expenses decreased
to 10.5% from 12.1% for the same period last year. The decrease in expense
was the result of improvements in bad debt expense, customer accommodation,
advertising, and travel. The reductions were offset in part by increased
staffing,co-op advertising, public relations, and trade show expenses.
Research and development expenses for the first quarter of 1997 decreased by
5.4% to $2,529,000 (6.0% of net sales) as compared to $2,674,000 (7.0% of net
sales) in the first quarter of 1996. Decreases resulted from reductions in
usage of temporary help and outside services, offset in part by increased
expenses related to new product prototypes.
General and administrative expenses for the first quarter of 1997 increased
by 3.7% to $3,434,000 (8.1% of net sales) as compared to $3,312,000 (8.6% of
net sales) in the first quarter of 1996. The dollar increase was the result
of increases in staffing, outside services, building, and depreciation. These
expenses were offset in part by reductions in recruiting and mainframe
computer costs. Both periods include the amortization of intangible assets
and goodwill for the acquisitions of Vertical Technologies Inc. in July 1995
and Fenestra Computer Services in February 1996.
Income from operations for the first quarter of 1997 increased by $4,101,000
or 61.3% to $10,794,000 (25.4% of net sales) compared to $6,693,000 (17.5% of
net sales) for the first quarter of 1996. This increase was due to higher
gross profits and decreased operating expenses, as previously indicated, and
to the non-recurring write-off of acquired in-process technology of
$1,114,000 in the first quarter of 1996 as a result of the Company's
acquisition of Fenestra Computer Services.
<PAGE>
Investment income for the first quarter of 1997 increased by $5,808,000 or
445.7% to $7,111,000 versus $1,303,000 for the first quarter of last year.
This amount includes a one time gain of $5,458,000 from the sale of 350,000
shares of Norand Corporation common stock which was purchased in October of
1995 when management briefly considered Norand a possible acquisition
candidate.
Income before income taxes was $17,916,000 in the first quarter of 1997
compared to $7,972,000 in the same quarter of last year, an increase of
$9,944,000 or 124.7%. Income taxes were provided at a rate of 37.3% in the
first quarter of 1997 resulting in net income of $11,234,000, or 26.5% of net
sales, and net income per share of $0.46 on 24,240,000 average outstanding
shares. In the first quarter of 1996, the provision for taxes was 34.2%
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.
The Peak Technologies Group, Inc., a customer of the Company which accounted
for 21% of the Company's net sales for the year ended December 31, 1996, has
agreed to be acquired by Moore Corporation. This transaction has not yet
been completed. The Company believes it has an excellent long term
relationship with Peak Technologies Group, Inc. However, the effect which
such transaction will have on the Company's relationship with this customer
- -- positive or negative -- is currently unknown.
Liquidity and Capital Resources
The Company's principal source of liquidity continues to be cash generated
from operations. At March 31, 1997, the Company had $112,617,000 in cash
and marketable securities versus $94,540,000 at the end of 1996.
Effective February 16, 1996 the Company purchased the assets of Fenestra
Computer Services, a UK partnership, in exchange for $1,398,000 in 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 entire amount
of the acquired in-process technology was expensed in the first quarter of 1996.
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.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share"
("EPS"). Implementation of SFAS No. 128 is required for the periods ending
after December 15, 1997. The standard establishes new methods for computing
and presenting EPS and replaces the presentation of primary and fully-diluted
EPS with basic and diluted EPS. The new methods under this standard are not
expected to have a significant impact on the Company's EPS amounts.
<PAGE>
Forward looking statements contained in this filing are subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995 and
are highly dependent upon a variety of important factors which could cause
actual results to differ materially from those reflected in such forward
looking statements. These factors include the acceptance of the Company's
printer and software products by the market, and product offerings made by
its competitors. Profits will be affected by the Company's ability to
control manufacturing and operating costs. Due to the Company's large
investment portfolio, interest rate conditions will also have an impact on
results, as will foreign exchange rates due to the large percentage of the
Company's sales in international markets. When used in this document and
documents referenced, the words "anticipate", "believe", "estimate", and
"expect" and similar expressions as they relate to the Company or its
management are intended to identify such forward looking statements. Readers
of this release are referred to prior filings with the Securities and
Exchange Commission, and Zebra's prospectus of December 7, 1995 for further
discussions of factors that could affect Zebra's future results.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
15. Acknowledgment of Independent Certified Public Accountants
Regarding Independent Accountants 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 (No. 33-44706 and No. 33-72774)
on Form S-8, we acknowledge our awareness of the use therein of our report
dated April 15, 1997 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 9, 1997
<PAGE>
Exhibit 27
The schedule contains summary financial information extracted from Zebra
Technologies Corporation and subsidiaries consolidated balance sheets for
March 29, 1997 and consolidated statements of earnings for the three months
ended March 29, 1997 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>
5-02(1) cash and cash items 8,371
5-02(2) marketable securities 104,246
5-02(3)(a)(1) notes and accounts receivable-trade 29,149
5-02(4) allowances for doubtful accounts (973)
5-02(6) inventory 20,434
5-02(9) total current assets 162,771
5-02(13) property, plant and equipment 22,830
5-02(14) accumulated depreciation (11,705)
5-02(18) total assets 176,543
5-02(21) total current liabilities 21,568
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 150,691
5-02(32) total liabilities and stockholder's equity 176,544
5-03(b)1(a) net sales of tangible products 41,651
5-03(b)1 total revenues 42,415
5-03(b)2(a) cost of tangible goods sold 20,903
5-03(b)2 total costs and expenses applicable to
sales and revenues 21,185
5-03(b)3 other costs and expenses 10,509
5-03(b)5 provision for doubtful accounts and notes 23
5-03(b)(8) interest and amortization of debt discount 2,858
5-03(b)(10) income before income taxes 17,916
5-03(b)11 income tax expense 6,682
5-03(b)(14) income/loss 11,234
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 11,234
5-03(b)(20) earnings per share-primary 0.46
5-03(b)(20) earnings per share-fully diluted 0.46
</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: May 9, 1997 By: /s/Edward L. Kaplan
Edward L. Kaplan
Chief Executive Officer
Date: May 9, 1997 By: /s/Charles R. Whitchurch
Charles R. Whitchurch
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-29-1997
<CASH> 8371
<SECURITIES> 104246
<RECEIVABLES> 29149
<ALLOWANCES> (973)
<INVENTORY> 20434
<CURRENT-ASSETS> 162771
<PP&E> 22830
<DEPRECIATION> (11705)
<TOTAL-ASSETS> 176543
<CURRENT-LIABILITIES> 21568
<BONDS> 0
0
0
<COMMON> 242
<OTHER-SE> 150691
<TOTAL-LIABILITY-AND-EQUITY> 176544
<SALES> 41651
<TOTAL-REVENUES> 42415
<CGS> 20903
<TOTAL-COSTS> 21185
<OTHER-EXPENSES> 10509
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 2858
<INCOME-PRETAX> 17916
<INCOME-TAX> 6682
<INCOME-CONTINUING> 11234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11234
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
