ZEBRA TECHNOLOGIES CORP/DE, 424B4, 1997-09-05

ZEBRA TECHNOLOGIES CORP/DE
424B4, 1997-09-05
GENERAL INDUSTRIAL MACHINERY & EQUIPMENT

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<PAGE>
PROSPECTUS

Filed Pursuant to Rule 424B4
Commission File No. 333-33315

2,056,344 SHARES

[LOGO]

CLASS A COMMON STOCK

All of the 2,056,344 shares of Class A Common Stock offered hereby are being
sold by the Selling Stockholders. See "Selling Stockholders." The Company will
not receive any of the proceeds from the sale of the shares offered hereby.

The Class A Common Stock is traded in the over-the-counter market and quoted
on the Nasdaq National Market under the symbol "ZBRA." On September 3, 1997, the
closing price of the Class A Common Stock as reported by Nasdaq was $29.625 per
share. See "Price Range of Common Stock and Dividends."

All of the shares being sold by the Selling Stockholders are shares of Class
B Common Stock, which will automatically convert into shares of Class A Common
Stock upon their sale in this offering. The holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to ten votes per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR FACTORS THAT SHOULD BE CONSIDERED
BY PROSPECTIVE PURCHASERS OF THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY.

---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) STOCKHOLDERS(2)
<S> <C> <C> <C>
Per Share........................................ $29.625 $1.410 $28.215
Total(3)......................................... $60,919,191 $2,899,445 $58,019,746
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses, payable by the Selling Stockholders, estimated at
$200,000.

(3) Certain of the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to 308,451 additional shares of Class A Common
Stock, solely to cover over-allotments, if any. See "Underwriting." If all
such shares are purchased, the total Price to Public, Underwriting Discount
and Proceeds to Selling Stockholders will be $70,057,052, $3,334,361 and
$66,722,691, respectively.

The Class A Common Stock is offered by the several Underwriters when, as and
if delivered to and accepted by them and subject to their right to reject orders
in whole or in part. It is expected that delivery of certificates representing
the shares will be made on or about September 9, 1997.

WILLIAM BLAIR & COMPANY
THE ROBINSON-HUMPHREY COMPANY, INC.
MONTGOMERY SECURITIES

THE DATE OF THIS PROSPECTUS IS SEPTEMBER 4, 1997
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained upon written
request addressed to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and
other information concerning the Company can also be inspected at the offices of
The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. Copies of
reports, proxy and information statements and other information regarding
registrants that file electronically (including the Company) are available on
the Commission's website at http://www.sec.gov.

The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement which may be
inspected and copied in the manner and at the sources described above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:

(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;

(2) the Company's quarterly report on Form 10-Q for the fiscal quarter ended
March 29, 1997;

(3) the Company's quarterly report on Form 10-Q for the fiscal quarter ended
June 28, 1997, as amended by Amendment No. 1 thereto on Form 10-Q/A; and

(4) the description of the Company's Class A Common Stock contained in the
registration statement on Form 8-A filed by the Company with the Commission on
July 15, 1991.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained in any subsequently filed document which is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to the Company's principal
office: Zebra Technologies Corporation, 333 Corporate Woods Parkway, Vernon
Hills, Illinois 60061, Attention: Secretary (telephone: (847) 634-6700).

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF
PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND OTHER SELLING
GROUP MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF
1934. SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE
NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS'
OVER-ALLOTMENT OPTION IS NOT EXERCISED. SEE "UNDERWRITING."

THE COMPANY

Zebra Technologies Corporation ("Zebra" or the "Company") provides bar code
labeling solutions, principally to manufacturing and service entities worldwide,
for use in automatic identification and data collection systems. The Company
designs, manufactures, sells and supports a broad line of computerized
label/ticket printing systems and related specialty supplies. The Company's
equipment is designed to operate at the user's location to produce and dispense
high quality bar coded labels in extremely time-sensitive and physically
demanding environments. Zebra's solutions approach integrates its applications
expertise, computerized printing systems, specialty supplies and software.
Applications for the Company's systems include inventory control, automated
warehousing, JIT (Just-In-Time) manufacturing, CIM (Computer Integrated
Manufacturing), employee time and attendance records, weighing systems, tool
room control, shop floor control, library systems, prescription labeling and
scientific experimentation.

The Company's net sales from continuing operations have grown from $58.7
million in 1992 to $164.0 million in 1996, a compound annual growth rate of
29.3%, while net income from continuing operations in the same period has grown
from $11.8 million to $30.9 million, a compound annual growth rate of 27.1%.
Management believes that Zebra's success results from its reputation for
reliable and durable products and its focus on providing bar code labeling
solutions for its customers. The Company estimates that over 250,000 Zebra bar
code printing systems are presently installed at approximately 25,000 user sites
around the world. Approximately 47.2% of the Company's net sales from continuing
operations for the six months ended June 28, 1997 was generated from sales to
international customers, as compared to 45.4% for the six months ended June 29,
1996. The Company expects this percentage to continue to increase in the future.

Zebra anticipates that its future growth will be enhanced by two continuing
trends: bar code label standardization programs and the focus of businesses
worldwide on improving quality and productivity. Industry mandated
standardization has been a major catalyst in the rapid development of bar
coding, and management believes that the mandate of standards will continue to
proliferate. Zebra also believes that increasing demands for improvements in
productivity and quality in commercial and service organizations will lead to
increased use of automatic identification systems.

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by the Selling
Stockholders................................... 2,056,344 shares
Common Stock to be outstanding after the
offering(1).................................... 19,058,686 shares of Class A Common Stock
5,199,060 shares of Class B Common Stock
24,257,746 total shares
Nasdaq National Market Symbol................... ZBRA
</TABLE>

- ------------------------

(1) Does not include 497,000 shares of Class A Common Stock reserved for
issuance upon the exercise of certain options, at a weighted average
exercise price of $23.03 per share, and 452,000 shares available for future
grant under the Company's stock option and stock purchase plans.

3
<PAGE>
The Company was founded in 1969 and its principal executive office is
located at 333 Corporate Woods Parkway, Vernon Hills, Illinois 60061, telephone
(847) 634-6700. The Company's website address is http://www.ZEBRA.COM. The
Company's website is not and shall not be deemed to be a part of this
Prospectus. The Company is a Delaware corporation.

IBM is a registered trademark of International Business Machines
Corporation, UNIX is a registered trademark of Novell, Inc., MS/DOS and Windows
are registered trademarks of Microsoft Corporation and MAC is a registered
trademark of Apple Computer. The Company, through its subsidiary Zebra Domestic
Intangibles, Inc., currently holds U.S. trademarks on the words "STRETCH,"
"Value-Line," "Performance Line," "170Xi," "140Xi" and "90Xi," and holds U.S.
registered trademarks on the Company's Zebra head logo and the words or marks
"Zebra," "ZPL," "ZPL II," "STRIPE," "Element Energy Equalizer," "E3," and "Z
Ultimate." The Company, through its subsidiary Zebra International Intangibles,
Inc., holds trademarks on the word "Zebra" and the Company's Zebra head logo in
France, Canada, Germany, the United Kingdom, Sweden and China.

4
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, POTENTIAL
PURCHASERS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING THE
COMPANY, ITS BUSINESS AND THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY:

RISK OF PRODUCT INTRODUCTIONS AND NEW TECHNOLOGY. While the Company
believes that thermal transfer printing will be the method of choice in its
target markets for the foreseeable future, development of a new technology which
better serves customers in these target markets and in which the Company does
not participate could have a material adverse effect on the Company's operations
and growth. See

"-- Competition" and "Business -- Products." Furthermore, the Company's markets
have frequent new product introductions and increasing customer expectations
concerning product performance and price. As a result of these factors the
Company believes that its future growth and financial performance will depend
upon the Company's ability to develop and market new products that achieve
market acceptance, while enhancing existing products to accommodate the latest
technological advances and customer preferences. Failure by the Company to
anticipate or respond adequately to change in technology or customer preferences
or any significant delays in product development or introduction could adversely
affect the Company's business, financial condition or results of operations. In
addition, there can be no assurance that new product introductions will not
result in a decrease in revenues from the Company's existing products or
otherwise adversely affect the Company's business, financial condition or
results of operations.

COMPETITION. Many companies are engaged in the design, manufacture and
marketing of automatic identification equipment. The Company considers its
direct competition to be the providers of thermal transfer and direct thermal
printing systems and supplies to the demand printing environment. Several of
these providers have substantially greater resources than the Company.
Competition in the Company's market depends on a number of factors, including
reliability, quality and reputation of the manufacturer and its products,
hardware innovations and specifications, price, level of technical support,
supplies and applications support offered by the manufacturer and available
distribution channels. In addition, various other methods of bar code printing
exist, although the Company believes that thermal transfer printing offers clear
advantages over such other methods for the Company's target markets.

INTERNATIONAL OPERATIONS. Sales to international customers generated 47.2%
of Zebra's net sales from continuing operations in the six months ended June 28,
1997 and 45.4% of its net sales from continuing operations in the six months
ended June 29, 1996, and the Company expects this percentage to continue to
increase in the future. In connection with international sales, fluctuations in
currency conversion rates can expose the Company's products to price competition
from products produced at lower costs in foreign countries and can otherwise
affect the Company's results of operations and financial position. In addition,
some of the Company's vendors are located in foreign countries and therefore
base their pricing, in part, on currency exchange rates. The Company has
engaged, and may engage in the future, in currency-hedging transactions intended
to reduce the effect of fluctuations in foreign currency exchange rates on the
Company's results of operations and financial position. However, there can be no
assurance that any such hedging transactions will materially reduce the effect
of foreign currency exchange rates on such results. The Company is also subject
to certain other risks inherent in international business generally, including
risks of trade embargoes, political instability and the possibility of war or
other hostility.

ACQUISITIONS. The Company regularly reviews acquisition opportunities which
if pursued would be material to the Company, including one previously
contemplated merger which was publicly disclosed but not consummated. To date,
the Company's management has had limited experience in making acquisitions.
Acquisitions involve a number of special risks and challenges, including the
diversion of management's attention, assimilation of the operations and
personnel of acquired companies, incorporation of acquired products into
existing product lines, adverse short-term effects on reported operating
results, amortization of acquired intangible assets, assumption of the
liabilities of acquired companies, possible loss of key employees and difficulty
of presenting a unified corporate image. No assurance can be given that any
potential acquisition by the Company will or will not occur, or that, if an
acquisition does occur, it will not ultimately have a material adverse effect on
the Company or that any such acquisition will succeed in

5
<PAGE>
enhancing the Company's business. For example, the Company recently discontinued
the operations of its subsidiary, Zebra Technologies VTI ("VTI"), which was
acquired in 1995 and which did not achieve management's expectations.

RISK OF LIMITED SUPPLY SOURCES. The Company purchases certain parts and
supplies from a limited number of vendors and in some instances from a single
vendor. The Company currently relies on a primary source of supply, Kyocera
Corporation, a publicly held Japanese corporation, for the majority of its
thermal and thermal transfer printheads. Although management has taken what it
believes are adequate precautions to limit the risk of short supplies, including
maintaining adequate safety stocks, the Company could be vulnerable to limits in
availability and changes in pricing and could experience delays in manufacturing
and shipping in the event the Company is required to find new suppliers for any
of these parts. Such delays could adversely affect the Company's business,
financial condition or results of operations. See "Business -- Manufacturing."

DEPENDENCE ON KEY PERSONNEL. The Company's success is largely dependent on
the skills, experience and efforts of its senior management and certain other
key personnel. If, for any reason, one or more key personnel were not to remain
active in the Company, the Company's business, financial condition or results of
operations could be adversely affected. Mr. Edward Kaplan assumed the
responsibilities of President of the Company in April, 1997 on an interim basis.
The Company is currently conducting an executive search for President of the
Company and for a Vice President of Engineering to succeed Mr. Gerhard Cless,
who currently serves as Executive Vice President of Engineering. The Company's
future success will depend upon its ability to attract and retain additional
qualified management, technical and marketing personnel. There is competition in
the market for the services of such qualified personnel and there can be no
assurance that the Company will be able to attract and retain such personnel. A
failure to attract and retain such personnel could adversely affect the
Company's business, financial condition or results of operations.

CONTROL BY EXISTING STOCKHOLDERS. The Company's executive officers,
directors, and their families and family trusts, will in the aggregate
beneficially own substantially all of the outstanding Class B Common Stock,
which will represent approximately 21.4% of the Company's outstanding shares,
and approximately 73.2% of the voting power, of Common Stock after this
offering. Holders of the Class B Common Stock are entitled to 10 votes per
share, while holders of the Class A Common Stock are entitled to only one vote
per share. As a result, the stockholders of the Class B Common Stock, if acting
together, would be able effectively to control most matters requiring approval
by the stockholders of the Company, including the election of all of the
directors. If at any time the number of outstanding shares of Class B Common
Stock represents less than 10% of the total number of outstanding shares of both
classes of Common Stock, then such outstanding shares of Class B Common Stock
will automatically convert into an equal number of shares of Class A Common
Stock. Certain provisions of the Company's by-laws and certificate of
incorporation could have the effect of delaying, deferring or preventing a
change in control of the Company. Such ownership could result in conflicts of
interest for such directors, officers and stockholders in situations where the
Company's interests and those of such other companies are not identical.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Forward looking statements contained in this Prospectus 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. The factors include those indicated in "Risk Factors" above. Also,
profit 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 "intend,"
"anticipate," "believe," "estimate," and "expect" and similar expressions as
they relate to the Company or its management are included to identify such
forward looking statements.

6
<PAGE>
USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the Common
Stock offered hereby. See "Selling Stockholders."

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Company's Class A Common Stock is quoted on the Nasdaq National Market
under the symbol ZBRA. The following table sets forth, for the quarters
indicated, the high and low closing prices as reported by Nasdaq.

<TABLE>
<CAPTION>
MARKET PRICE
---------------------
HIGH LOW
---------- ---------
<S> <C> <C>
1995
First Quarter............................................................................ $ 21.38 $ 18.13
Second Quarter........................................................................... 27.13 19.50
Third Quarter............................................................................ 32.00 26.63
Fourth Quarter........................................................................... 34.50 23.38
1996
First Quarter............................................................................ 35.25 25.25
Second Quarter........................................................................... 27.88 17.75
Third Quarter............................................................................ 26.25 15.50
Fourth Quarter........................................................................... 31.50 23.13
1997
First Quarter............................................................................ 27.25 21.38
Second Quarter........................................................................... 32.00 21.50
Third Quarter (through September 3, 1997)................................................ 33.13 27.19
</TABLE>

On September 3, 1997, the last reported sale price of the Class A Common
Stock was $29.625 and there were 517 and 14 holders of record of the Company's
Class A Common Stock and Class B Common Stock, respectively.

Since the Company's initial public offering in August 1991, the Company has
not declared any cash dividends or distributions on its capital stock. The
Company currently intends to retain its earnings to finance future growth and
therefore does not anticipate paying any cash dividends in the foreseeable
future.

7
<PAGE>
SELECTED FINANCIAL DATA

The following table presents selected consolidated financial information for
the Company's five most recent fiscal years and for the six-month periods ended
June 29, 1996 and June 28, 1997. In addition, the table presents the unaudited
pro forma results of operations for the fiscal years ended December 31, 1995 and
1996 giving effect to the discontinuance of the Company's VTI subsidiary, which
was acquired in July 1995. The Company made the decision to discontinue the
operations of VTI in June 1997. The unaudited consolidated financial information
for the six-month periods ended June 29, 1996 and June 28, 1997 include the
effects of the discontinuance. The selected data presented below under the
"Statement of Earnings Data" and "Balance Sheet Data" for, and as of the end of,
each of the years in the five-year period ended December 31, 1996, are derived
from the consolidated financial statements of Zebra Technologies Corporation,
which statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The financial statements as of December 31, 1995
and 1996 and for each of the years in the three-year period ended December 31,
1996 are included in the Company's Annual Report on Form 10-K and are
incorporated by reference to this Prospectus, together with the report of KPMG
Peat Marwick LLP thereon. In the opinion of the Company, the information for the
interim periods ended June 29, 1996 and June 28, 1997, which is derived from
unaudited consolidated financial statements, reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the financial position of the Company at such dates and the
results of operations for such periods. Results from the interim periods are not
necessarily indicative of the results for the entire year.
<TABLE>
<CAPTION>
YEARS ENDED YEARS
--------------------------------------------------------- SIX MONTHS ENDED ENDED
PRO FORMA PRO FORMA -------------------- ---------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, JUNE 29, JUNE 28, DEC. 31,
1992 1993 1994 1995(1) 1996(1) 1996 1997 1995
----------- ----------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales..................... $ 58,711 $ 87,456 $ 107,103 $ 145,348 $ 163,980 $ 75,446 $ 88,853 $ 148,593
Cost of sales................. 29,719 43,889 55,080 76,241 85,302 39,429 44,124 77,606
----------- ----------- --------- --------- --------- --------- --------- ---------
Gross profit................ 28,992 43,567 52,023 69,107 78,678 36,017 44,729 70,987
Operating expenses:
Sales and marketing......... 6,632 9,204 9,011 12,421 15,445 7,370 8,945 14,527
Research and development.... 3,385 4,619 5,835 7,771 9,615 5,864 5,167 8,185
General and
administrative............ 3,568 4,847 6,834 8,934 11,155 5,647 6,917 9,722
Merger costs................ -- -- -- -- 315 -- -- --
Acquired in-process
technology (2)............ -- -- -- -- 1,117 1,114 -- 6,028
----------- ----------- --------- --------- --------- --------- --------- ---------
Total operating expenses...... 13,585 18,670 21,680 29,126 37,647 19,995 21,029 38,462
----------- ----------- --------- --------- --------- --------- --------- ---------
Income from operations........ 15,407 24,897 30,343 39,981 41,031 16,022 23,700 32,525
Total other income (3)........ 2,426 3,571 2,533 5,444 6,358 2,811 9,358 5,448
----------- ----------- --------- --------- --------- --------- --------- ---------
Income before income taxes.... 17,833 28,468 32,876 45,425 47,389 18,833 33,058 37,973
Income taxes.................. 5,990 10,213 11,803 15,851 16,536 6,343 11,887 15,409
----------- ----------- --------- --------- --------- --------- --------- ---------
Net income.................... $ 11,843 $ 18,255 $ 21,073 $ 22,564
----------- ----------- --------- ---------
----------- ----------- --------- ---------
Net income from continuing
operations.................. 29,574 30,853 12,490 21,171
Discontinued operations:
Loss from discontinued
operations (4)............ (7,010) (1,938) (981) (1,692)
Loss on disposal of
discontinued operations
(5)....................... -- -- -- (963)
--------- --------- --------- ---------
Net income.................... $ 22,564 $ 28,915 $ 11,509 $ 18,516
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per share.......... $.49 $.76 $.88 $.94
Net income per share from
continuing operations....... $1.23 $1.27 $.52 $.87
Weighted average shares
outstanding................... 23,958 23,982 24,034 24,113 24,203 24,194 24,242 24,113
BALANCE SHEET DATA (AT PERIOD
END):
Working capital............... $ 39,390 $ 55,972 $ 76,241 $ 111,981 $ 145,218 $ 99,833
Total assets.................. 54,845 76,697 95,043 139,364 180,904 131,071
Long-term obligations......... 347 293 236 2,147 295 2,177
Total stockholders' equity.... 42,177 60,635 82,032 121,855 157,385 108,206

DEC. 31,
1996
---------

<S> <C>
STATEMENT OF EARNINGS DATA:
Net sales..................... $ 169,715
Cost of sales................. 87,796
---------
Gross profit................ 81,919
Operating expenses:
Sales and marketing......... 18,429
Research and development.... 10,452
General and
administrative............ 13,388
Merger costs................ 315
Acquired in-process
technology (2)............ 1,117
---------
Total operating expenses...... 43,701
---------
Income from operations........ 38,218
Total other income (3)........ 6,418
---------
Income before income taxes.... 44,636
Income taxes.................. 15,721
---------
Net income.................... $ 28,915
---------
---------
Net income from continuing
operations..................
Discontinued operations:
Loss from discontinued
operations (4)............
Loss on disposal of
discontinued operations
(5).......................

Net income....................

Net income per share.......... $1.19
Net income per share from
continuing operations.......
Weighted average shares
outstanding................... 24,203
BALANCE SHEET DATA (AT PERIOD
END):
Working capital............... $ 128,803
Total assets.................. 163,283
Long-term obligations......... 2,326
Total stockholders' equity.... 140,456
</TABLE>

FOOTNOTES ON FOLLOWING PAGE

8
<PAGE>
FOOTNOTES FOR PRECEDING PAGE
- ------------------------------
(1) As of June 28, 1997, the Company made the decision to discontinue the
operations of its VTI subsidiary. VTI was acquired in July 1995.

(2) In conjunction with the acquisition of VTI in July 1995, acquired in-process
technology valued at $6,028,000 was expensed immediately. In conjunction
with the purchase of Fenestra Computer Services in February 1996, acquired
in-process technology valued at $1,114,000 was expensed immediately.

(3) Other income includes a one-time gain of $5,458,000 during the first quarter
of 1997 from the sale of the Company's investment in Norand Corporation
common stock.

(4) Loss from discontinued operations is net of an income tax benefit of
$564,000, $1,075,000, $579,000, and $1,213,000, respectively.

(5) Loss on disposal of discontinued operations includes a provision of
$1,819,000 for operating losses during the phase-out period (net of an
income tax benefit of $615,000).

9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF CONTINUING OPERATIONS FOR SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO
SIX MONTHS ENDED JUNE 29, 1996

REVENUES. Net sales for the six months ended June 28, 1997 increased by
17.8% to $88,853,000 versus net sales of $75,446,000 for the six months ended
June 29, 1996. This sales increase for the period is attributed to unit growth
in all product categories, as the average unit price of printer products has
decreased due to product mix changes. Printer sales increased by 20.2% and
supplies sales by 10.6% over the six months ended June 29, 1996, bringing
printer sales to 74.4% and supplies sales to 23.2% of consolidated net sales,
respectively, for the six months ended June 28, 1997 versus 72.9% and 24.8% for
the comparable period of 1996. Approximately 47.2% of net sales during the six
months ended June 28, 1997 were derived from international sources as compared
to 45.4% during the comparable period in 1996.

GROSS PROFIT. Gross profit increased to $44,729,000 for the six months
ended June 28, 1997, a 24.2% gain over the gross profit of $36,017,000 for the
six months ended June 29, 1996. As a percentage of net sales, gross profit
increased 2.6% to 50.3% during the six months ended June 28, 1997 from 47.7% in
the six months ended June 29, 1996. This increase for the period is principally
due to decreased costs of materials used in 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. Sales and marketing expenses of $8,945,000
were up 21.4% in the six month ended June 28, 1997 compared to $7,370,000 in the
comparable period in 1996. As a percentage of net sales, sales and marketing
expenses increased slightly during the six months ended June 28, 1997 to 10.1%
from 9.8% for the same period last year. Increased spending is principally due
to increased staffing, advertising, public relations, and outside consulting
services. These expense increases were offset in part by reductions in warranty
and travel.

RESEARCH AND DEVELOPMENT. Research and development expenses for the six
months ended June 28, 1997 decreased by 11.9% to $5,167,000 versus $5,864,000
for the six months ended June 29, 1996. As a percentage of net sales, research
and development expenses decreased 2.0% to 5.8% for the six months ended June
28, 1997 from 7.8% for the six months ended June 29, 1996. Decreases resulted
from reductions in unusually high development costs in prior periods to more
normal levels in the current period.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the six months ended June 28, 1997 increased by 22.5% to $6,917,000 as
compared to $5,647,000 during the six months ended June 29, 1996. As a
percentage of net sales, general and administrative expenses increased slightly
to 7.8% for the six months ended June 28, 1997 from 7.5% for the comparable
prior period. The increase in general and administrative expenses on both a
dollar and percentage basis was primarily the result of increases in staffing,
depreciation, and building expenses. The increases were offset in part by
reductions in mainframe computer expenses. Both periods include the amortization
of intangible assets and goodwill for the acquisition of the assets of Fenestra
Computer Services, as described in the Liquidity and Capital Resources section
below.

INCOME FROM OPERATIONS. Income from operations for the six months ended
June 28, 1997 increased by $7,678,000 or 47.9% to $23,700,000 compared to
$16,022,000 for the six months ended June 29, 1996. As a percentage of net
sales, income from operations increased to 26.7% for the six months ended June
28, 1997, as compared to 21.2% for the period ended June 29, 1996. These
increases were due to higher gross profits and to the $1,114,000 non-recurring
write-off of acquired in-process technology in the six months ended June 29,
1996 which resulted from the Company's acquisition of Fenestra Computer
Services.

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OTHER INCOME. Other income, which consists of investment income and gains
on the sales of securities (net of interest expense), increased by 232.9% in the
six months ended June 28, 1997 to $9,358,000, from $2,811,000 in the six months
ended June 29, 1996. The substantial increase in investment income was largely
the result of 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, and to a
lesser extent, was the result of the Company's larger cash and marketable
securities balances invested and its higher rate of return on such investments.

INCOME BEFORE INCOME TAXES. Income before income taxes was $33,058,000 for
the six months ended June 28, 1997 compared to $18,833,000 for the comparable
period during 1996, an increase of $14,225,000 or 75.5%.

PROVISION FOR INCOME TAXES. The provision for income taxes for the six
months ended June 28, 1997 was $11,887,000 or 36.0% of income before income
taxes. The provision for income taxes for the six months ended June 29, 1996 was
$6,343,000, or 33.7% of income before income taxes. The increase in the
effective rate in 1997 from 1996 was due to a decrease in tax-exempt income in
the 1997 period compared with the 1996 period.

NET INCOME. Net income for the six months ended June 28, 1997 was
$21,171,000, or 23.8% of net sales, resulting in earnings per share of $.87 on
24,242,000 weighted average shares outstanding. Net income for the six months
ended June 29, 1996 was $12,490,000, or 16.6% of net sales, resulting in
earnings per share of $.52 on 24,194,000 weighted average shares outstanding.

SETTLEMENT. As of June 28, 1997, the Company settled litigation between
Zebra and Messrs. Carter and Flury, the former officers and principals of VTI.
The legal actions initiated in March 1996 have been settled out of court. Terms
are confidential and all payments have been completed. The Company acquired VTI
in July 1995. At the time of the acquisition an accrual for future payments due
to the officers and management of VTI was established. The amounts originally
accrued for Messrs. Carter and Flury were adequate to cover the settlement
amounts. In connection with the settlement of the litigation, the Company
reduced long-term liabilities by $1,999,000 and paid-in capital by $1,372,000.

DISCONTINUANCE OF OPERATIONS. As of June 28, 1997, the Company made the
decision to discontinue the operations of its VTI subsidiary. The discontinuance
of VTI and the related PC retail channel will be completed during the third
quarter of 1997. Net of income tax benefits, a one-time charge of $2,655,000,
was recorded in the six months ended June 28, 1997 related to the discontinuance
of VTI and the Company's presence in the PC retail channel. The one-time charge
includes a provision for expected product returns from present retail channel
partners, a provision for slow moving/obsolete product, and provisions for
estimated contingent liabilities. As part of recording the provisions and
charges, the related remaining goodwill and intangible assets were written off
as part of the discontinued operation charge. The transition of remaining
salable products and the business records and duties will be made during the
third quarter of 1997 to appropriate personnel at the Company's Vernon Hills
facility.

RESULTS OF OPERATIONS FOR 1996 COMPARED TO 1995 AND 1995 COMPARED TO 1994.

The following paragraphs reflect the Company's historical results of
operations, excluding the effects of the discontinuance of VTI. The impact of
the discontinuance is discussed below in the paragraph titled "Adjustments for
discontinued operations."

REVENUES. During 1996, Zebra's net sales were $169,715,000, increasing by
14.2% from net sales of $148,593,000 in 1995. Net sales in 1994 were
$107,103,000. Net sales growth in both 1995 and 1996 is attributed to unit
growth, as the average unit price of the Company's printer products declined due
to the product mix changes and price reductions on certain products.

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PRINTERS VS. SUPPLIES. Zebra sells printer products, software and related
supplies, which consist of self-adhesive labels and thermal transfer ribbons. In
1996, printer sales were $122,127,000 (72.0% of net sales), supplies sales were
$39,561,100 (23.3% of net sales), and software and service revenues accounted
for $8,027,000 (4.7% of net sales). In 1995, printer sales were $106,782,000
(71.9% of net sales), supplies sales were $36,033,000 (24.2% of net sales), and
software and service revenues were $5,778,000 (3.9% of net sales). In 1994,
printer sales were $74,686,000 (69.7% of net sales) and supplies sales were
$30,140,000 (28.1% of net sales). The remaining 1994 sales consisted of service
and other revenue sources.

INTERNATIONAL SALES. Zebra products are sold through an international
network of resellers in over 70 countries. International sales in 1996 were
$75,055,000, an increase of 14.2% over 1995 international sales of $65,720,000.
International sales comprised 44.2% of net sales in both years. In 1994,
international sales were 39.8% of net sales, or $42,631,000. Management believes
that international sales will continue to grow faster than domestic sales due to
the lower penetration of bar code systems outside the United States.

GROSS MARGINS. Gross margins increased slightly in 1996 to 48.3% of net
sales, compared to 47.8% of net sales in 1995. Margins were 48.6% in 1994. The
increase in gross margins in 1996 is attributed to the Company's increased sales
in higher margin printers and software. Supplies sales, which is a lower portion
of total sales in 1996, provide a lower gross margin than the other product
lines.

SALES AND MARKETING EXPENSES. Total sales and marketing expenses increased
by $3,901,000 in 1996, to reach $18,429,000 or 10.8% of net sales, compared to
1995 expenses of $14,527,000 or 9.8% of net sales. In 1994, the Company incurred
$9,011,000 of sales and marketing costs, or 8.4% of net sales. The increasing
trend in sales and marketing expenses as a percentage of net sales over the past
three years is principally the result of expenses related to development of the
PC retail channel and expansion of the Company's sales infrastructure needed to
support international sales, particularly with respect to Europe. The Company's
acquisition of VTI in July of 1995, resulted in a significant expansion of sales
and marketing expenses directly related to establishing and maintaining a
position in the PC retail channel. In addition, the Company expanded its High
Wycombe-based sales and marketing organization in order to support the growth of
its distribution channels in Europe. These expenses included additional funds to
promote the Zebra brand in specific national markets within Europe.

RESEARCH AND DEVELOPMENT. Research and development expenses increased by
27.7% in 1996, to $10,452,000 from $8,185,000 in 1995, and $5,835,000 in 1994.
As a percentage of net sales, these expenses increased to 6.2% in 1996 compared
to 5.5% in 1995, and 5.4% in 1994. The increase in research and development
expenses as a percentage of sales was primarily the result of increased staffing
to support new product development as the Company introduced a significant
number of new products in 1996.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 37.7% to $13,388,000 or 7.9% of net sales in 1996, compared to
$9,722,000, or 6.5% of net sales in 1995. Included among the 1996 expenses are
$739,000 of amortization of intangible assets and goodwill resulting from the
acquisitions of VTI and Fenestra Computer Services. In 1994, general and
administrative expenses were $6,834,000, or 6.4% of net sales. The increased
level of general and administrative expenses in 1996 and 1995 was caused
principally by higher staffing levels plus increased usage of professional
services. In addition, 1996 expenses include increased information systems costs
related to the Company's enterprise-wide software implementation project.

ACQUIRED IN-PROCESS TECHNOLOGY. The charge for acquired in-process
technology in 1996 relates to the Company's acquisition of software technologies
as part of the acquisition of Fenestra Computer Services in the first quarter of
1996. This acquisition was accounted for under the purchase method, which
requires that the purchase price be allocated to the fair market value of the
assets acquired. Among these assets was in-process technology (projects that had
not reached technological feasibility and had no alternative future use) that
was valued at $1,117,000. Accounting rules require that this asset be
immediately expensed.

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<PAGE>
Intangible assets and goodwill resulting from the acquisition are being
amortized over periods of between three and ten years.

OTHER INCOME. Other income, which consists of investment income and gains
on the sales of securities (net of interest expense), increased by 17.8% in 1996
to $6,418,000, from $5,448,000 in 1995. The substantial increase in investment
income is the result of larger investment balances as well as the recognition of
gains resulting from the liquidation of certain security positions in 1996.
Other income in 1995 was up 115.1% from $2,533,000 in 1994, again, principally
due to gains on the Company's investment portfolio.

INCOME BEFORE INCOME TAXES. Income before income taxes for 1996 was
$44,636,000, or 26.3% of net sales, an increase of 17.5% from $37,973,000, or
25.6% of net sales, in the previous year. In 1994, income before income taxes
was $32,876,000, or 30.7% of net sales.

PROVISION FOR INCOME TAXES. The provision for income taxes in 1996 was
$15,721,000, or 35.2% of income before income taxes. The provision for income
taxes in 1995 was $15,409,000, or 40.6% of income before income taxes. The
decrease in the effective tax rate in 1996 from 1995 was due to the 1995 non-
deductibility for tax purposes of the acquired in-process technology charge and
goodwill amortization related to the acquisition of Vertical Technologies, Inc.
Excluding these amounts, the Company's provision for taxes in 1995, would have
been 34.8% of pre-tax income.

NET INCOME. Net income in 1996 was $28,915,000, or $1.19 per share, based
on 24,203,000 average shares outstanding. In 1995, net income was $22,564,000,
or $0.94 per share, based on 24,113,000 average shares outstanding during the
year. In 1994, net income was $21,073,000, or $0.88 per share, based on
24,034,000 average shares outstanding. Outstanding shares have all been adjusted
for the two-for-one stock split effective December 28, 1995. As a percentage of
net sales, net income increased for 1996 to 17.0% of net sales compared to 15.2%
in 1995, and 19.7% in 1994. The decrease in net income as a percentage of sales
in 1995 compared to 1994 was due to the increased operating expenses and
write-off of acquired in-process technology related to the acquisition of
Vertical Technologies, Inc., as previously described. Similar expenses and
write-offs incurred in 1996 related to the acquisition of Fenestra Computer
Services were considerably lower, and consequently, had less of an impact on net
income.

ADJUSTMENTS FOR DISCONTINUED OPERATIONS. As of June 28, 1997, the Company
made the decision to discontinue the operations of VTI. The discussions above
regarding the Company's 1995 and 1996 results are before adjustments relating to
the discontinued operations of VTI. After giving effect to the reclassification
of the VTI operations as discontinued operations, net income from continuing
operations was $30,853,000 in 1996 and $29,574,000 in 1995; earnings per share
from continuing operations were $1.27 in 1996 and $1.23 in 1995; net sales from
continuing operations were $163,980,000 in 1996 and $145,348,000 in 1995; and
45.8% of such net sales was derived from international sales in 1996 as compared
to 45.2% in 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of liquidity continues to be cash generated
from operations and its cash and marketable securities balances. At June 28,
1997, the Company had $111,752,000 in cash and marketable securities versus
$94,540,000 at the end of 1996. The Company has a $6,000,000 unsecured line of
credit plus an additional $4,000,000 unsecured revocable line of credit with its
bank. These credit facilities are priced at either the prime rate or 150 basis
points over the London Inter-bank Offer Rate (LIBOR), at the Company's
discretion. As of June 28, 1997, the Company had no outstanding borrowings under
its lines of credit. Capital expenditures in the six months ended June 28, 1997
and the fiscal year ended December 31, 1996 were $2,700,000 and $5,994,000,
respectively, compared to $4,333,000 in 1995, and $2,116,000 in 1994.

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Effective February 16, 1996, the Company purchased the assets of Fenestra
Computer Services, a UK partnership, in exchange for $1,314,000 paid with a
combination 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 were recorded at
their respective fair market values with $1,117,000 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 1996.

The Company has no commitments or agreements with respect to acquisitions or
other significant capital expenditures.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective February 1997, the Financial Accounting Standards Board issued
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.

SIGNIFICANT CUSTOMER

Sales to The Peak Technologies Group, Inc. ("Peak") accounted for more than
20.0% of the Company's total net sales in the fiscal year ended December 31,
1996 and 16.8% in the six months ended June 28, 1997. Peak was recently acquired
by Moore Corporation. The Company believes it has an excellent long-term
relationship with Peak. However, the effect which the acquisition will have on
the Company's relationship with this customer--positive or negative--is
currently unknown.

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BUSINESS

SUMMARY

The Company provides bar code labeling solutions, principally to
manufacturing and service entities worldwide, for use in automatic
identification and data collection systems. The Company designs, manufactures,
sells and supports a broad line of computerized label/ticket printing systems
and related specialty supplies. The Company's equipment is designed to operate
at the user's location to produce and dispense high quality bar coded labels in
extremely time-sensitive and physically demanding environments. Zebra's
solutions approach integrates its applications expertise, computerized printing
systems, specialty supplies and software. Applications for the Company's systems
include inventory control, automated warehousing, JIT (Just-In-Time)
manufacturing, CIM (Computer Integrated Manufacturing), employee time and
attendance records, weighing systems, tool room control, shop floor control,
library systems, prescription labeling and scientific experimentation.

PRODUCTS

The Company's products consist of a broad line of computerized demand bar
code label printers and print engines, specialty bar code labeling/ticketing
materials, ink ribbons and PC-based bar code software. These products are
integrated to provide automatic identification labeling solutions for
manufacturing, business and industrial applications. The Company's equipment and
supplies are designed for operating at the user's location to produce bar coded
labels in extremely time-sensitive and physically demanding environments. The
Company works closely with its distributors, other resellers and the end users
of its products to fashion labeling solutions which meet the technical demands
of the end user. To achieve this, the Company provides its customers with the
ability to configure printing systems with various options available on the
Company's systems. Additionally, the Company will select and, if necessary,
create appropriate labeling stock, ink ribbons and adhesives to suit the
particular intended use. In-house engineering personnel with years of experience
in the disciplines of software, mechanical, electronic and chemical engineering
all participate in the creation and realization of bar code solutions for
particular applications.

LABEL PRINTING SYSTEMS. The Company produces a broad range of "on demand"
thermal transfer and direct thermal bar code label printers with, the Company
believes, more models, options and features than any of its competitors. Zebra
manufactures 8 thermal transfer label printing systems, which range in list
price from $1,395 to $7,495, direct thermal printers which range in list price
from $595 to $895, and a high performance print engine for label applicator
systems. The Company's products include hundreds of

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optional configurations which can be selected as necessary to meet particular
customer needs. Zebra's printing systems, and their prices, vary based upon
performance criteria including label width, speed, image density and optional
features. Zebra's thermal transfer product line is split into two parts: the
Performance Line-TM- and the Value-Line-TM-. The Performance Line-TM- consists
of four basic models targeted at applications that require continuous operation
in high output, mission critical operations. These units provide a wide variety
of option configurations, features, print widths, dot densities and speeds. The
four units comprising the Value Line-TM- are targeted at distributed printing
applications where heavy duty cycles are less important. These units have fewer
option configurations and features, but are offered at a significantly lower
price. The A-100 and A-300 direct thermal, and the T-300 thermal transfer
Personal Printers, the Company's new offerings in the sub-$1,000 market, are
targeted at applications where convenience, ease of use, small size and price
are important to the user. The Company's 170PAX print engine is targeted at
manufacturers of high speed automatic label applicator systems. This product
contains options and performance characteristics not available on competitive
products.

In addition to use in demand printing situations, the Company's products can
also be used to meet customers' needs for continuous duty production of small or
large quantities of custom bar code labels and other graphics, permitting
on-site label production with less lead time and more efficient use of supplies
than off-site printing can provide. Management believes that of the major
on-site printing technologies, thermal transfer is best suited for most
industrial applications. Thermal transfer printing produces dark and solid
blacks and sharply defined lines which are important for printing readily
scannable bar codes. In addition, thermal transfer printing creates the image
very near the edge of the printer so that no blank areas must be fed out before
the label exits the printer. Finally, this technology permits the use of many
different label materials, adhesives and inks and produces durable images.

The Company's printing systems incorporate Company-designed computer
hardware, electro-mechanisms and software which operate the printing functions
of the system and communicate with the host computer. All Zebra printing
systems, except the A-100 personal printer, operate using Zebra Programming
Language ("ZPL-Registered Trademark-") and Zebra Programming Language II ("ZPL
II-Registered Trademark-"), proprietary printer driver languages which were
designed by the Company and are compatible with virtually all computer operating
systems, including UNIX, MS/DOS and Windows. ZPL-Registered Trademark- and ZPL
II-Registered Trademark- allow users of the Company's systems to replace older
Zebra printers with newer equipment, which is plug and software compatible and
therefore requires no reprogramming, to operate different Zebra equipment for
different applications using standardized programs and to integrate printers
into a network using additional software available from the Company. Management
believes ZPL-Registered Trademark- and ZPL II-Registered Trademark- give the
Company a competitive strength by ensuring compatibility across the full family
of the Company's present and future printer products and by facilitating system
upgrades and customer loyalty to Zebra products. Certain independent software
vendors have written label preparation programs with ZPL-Registered Trademark-
and ZPL II-Registered Trademark- drivers specifically for Zebra printers.
ZPL-Registered Trademark- and ZPL II-Registered Trademark- label format programs
can be run on a personal computer with ordinary word processing programs, making
ZPL-Registered Trademark- and ZPL II-Registered Trademark- particularly
adaptable to PC based systems.

In 1996, the Company upgraded the Zebra 105S printer to include 300 dpi
capability. The Zebra 105S and 160S printers, both feature a rugged metal case
and full roll internal rewind at a Value-Line-TM- price. The Company's
STRIPE-Registered Trademark- printer product line rounds out the Value-Line-TM-
family of products. The Model S-500 at a list price of $1,795 and S-300 at a
list price of $1,395 are the lowest priced printers in the Value-Line-TM-. These
units employ design concepts that have allowed the Company to offer these
products at a lower price point in the market but with performance, quality,
reliability and durability equal to more expensive models.

In 1996, the Company began shipping the 220XiII-TM- and the 170PAX print and
apply engine from its Performance Line-TM- products. The Zebra 220XiII-TM-
printer is a wide-web printer that rounds out the Performance Line-TM- family of
printers which includes the 170XiII-TM-, 140XiII-TM-, and 90XiII-TM-. These
printers are based on an advanced electronics package that includes dual
microprocessors based on RISC technology. As a result, these printers offer
greatly increased print speed, dramatically reduced formatting

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time, improved throughput and image resolution. The 170PAX print and apply
engine, also based on XiII electronics, is the Company's first product offering
in the component sector of the automatic identification market. The print and
apply engine is designed to increase print speeds, reduce formatting times, and
improve image resolution in comparison to competitive products.

Sales of the Company's printer line accounted for $66,143,000 in the six
months ended June 28, 1997, $120,889,000 in the fiscal year ended December 31,
1996, $106,778,000 in 1995, and $74,686,000 in 1994. These sales amounted to
74.4%, 73.7%, 73.5%, and 69.7% of the Company's total net sales in the six
months ended June 28, 1997 and in each of the last three fiscal years,
respectively.

SUPPLIES. The Company sells label/ticketing stock, custom labels and tags,
and thermal transfer ribbons worldwide, to support its printing systems and
systems users. Zebra supplies are selected for a particular user's needs based
on the specific application and environment in which the labeling system must
operate. Critical criteria include levels of abrasion, possible exposure to
chemicals and liquids, variations in both the environment (such as temperature
or humidity) in which the labels will be used and the surfaces to which the
labels will be affixed. These factors are all taken into account in selecting
the type of ribbon, the type of labeling material and the adhesive to be used.
Zebra supplies include proprietary ribbon formulations developed according to
Company specifications. Zebra develops its printers and supplies
contemporaneously, as if they were a single unit, to optimize performance of
Zebra printers and genuine Zebra supplies. Performance is typically measured as
a function of both print speed and print quality and both these factors can be
adversely affected by the use of supplies that are not suited to particular
printers. Because of the close relationship between the printing system, the
supplies and the specific applications, the Company sells supplies together with
printing systems. In addition, the Company sells supplies to existing users of
its printing systems. Zebra promotes the use of Zebra supplies with Zebra
equipment. Management believes that owners of Zebra's printing systems purchase
Zebra supplies to attain peak performance and optimum print quality and to
minimize costly downtime and malfunctions in their automatic identification
systems. Supplies sales in the six months ended June 28, 1997 and the fiscal
years ended December 31, 1996, 1995, and 1994 were $20,683,000, $39,538,000,
$36,033,000, and $30,140,000, respectively, comprising 23.3%, 24.1%, 24.8%, and
28.1%, of total net sales, respectively

MAINTENANCE SERVICES. The Company provides service for its printing systems
with depot repair at its Vernon Hills, Illinois facility and its distributors'
locations in addition to on-site service, which is provided by distributors and
Wang Laboratories, Inc. ("Wang"). Under a service support agreement, Wang and
the Company share the revenue for on-site service contracts sold by Wang for
Zebra printing systems installed in the United States. The Company in turn
provides maintenance parts as needed to repair units under contract. IBM also
provides service for the Company's products. This technical support is available
to end users and to the Company's distributors and resellers. International
maintenance service is handled by the Company's distributors in each country,
either directly or through service agents. Zebra provides service and technical
support assistance from in-house support personnel located both in the United
States and the United Kingdom who are available by telephone hotline five days a
week during regular business hours.

SALES, MARKETING AND CUSTOMERS

SALES. The Company sells its products in the United States and
internationally through a multi-channel distribution system including
distributors, VARs, OEMs, and international accounts. Software is sold
principally through PC software catalogs in addition to the Company's
traditional channels. This multi-channel distribution system purchases,
warehouses, and sells a variety of automatic identification components including
printers, supplies, scanners, and application software, and brings system
integration expertise to the end users. Two of the Company's distributors are
classified as National Distributors because of their broad territorial
representation within the United States. Other distributors have qualified for
Zebra Solution Center (ZSC) status. ZSCs carry the full range of Zebra printers
and supplies, and

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focus on providing a Zebra bar code solution to their customers. VARs, OEMs and
systems integrators provide customers with a variety of automatic identification
components including scanners, accessories, applications software and systems
integration expertise, and, in the case of some OEMs, then resell the products
under their own logos.

The Company utilizes 72 U.S. and approximately 100 international resellers.
The resellers typically cover specific geographic areas of the United States and
70 other countries around the world. The Company has a subsidiary in the United
Kingdom that serves as a sales office, product distribution warehouse and
service center. For the six months ended June 28, 1997 and the fiscal years
ended December 31, 1996, 1995, and 1994, sales to international customers
comprised 47.2%, 45.8%, 45.2% and 39.8%, respectively, of total net sales for
the Company.

Because of the wide variety of end users and applications for the Company's
products and because the Company's products are frequently integrated with
products from other manufacturers to form a complete automatic identification
system, management believes that it is more effective to sell printing systems
principally through multiple distributors and resellers with defined market
niche expertise and presence rather than directly to end users. By forming
relationships with distributors who serve various submarkets and types of end
users and who have existing customers and in-place sales and distribution
networks which identify new customers and sales opportunities, the Company is
able to reach end users throughout the world in a variety of industries. The
Company may designate a customer as a key account when purchases of Company
products reach certain levels. Zebra sales personnel, together with the
Company's distribution partners, manage these accounts to ensure their complete
needs are met, including consistent support for projects and applications around
the world.

MARKETING. The Company's marketing operations include product management,
marketing communications, technical services, training, market research and
market development functions. The product management group specifies new
products and product enhancements that create customer value, and manages
product positioning and introductions. The marketing services group operates as
an internal advertising and public relations resource. This group, working with
advertising agencies and contractors, creates advertising, brochures and
documentation, manages trade show exhibits and places articles highlighting
applications of Zebra products in trade and industry publications. The technical
services group offers technical support to the Company's distribution channels
and end users of the Company's products. These services include, among other
things, a hotline staffed by experienced technical personnel and, when
necessary, trips to customer sites. The Company's market research group is a
strategic planning, research oriented group, which focuses on market definition
and analysis of Company and competitor strengths. This group identifies and
analyzes market opportunities for current, planned and potential products, and
gathers and analyzes competitive and market intelligence. The market development
group is responsible for the development of new market opportunities and
relationships with key customers, vendors and government regulatory and industry
standards committees. This group also prepares speeches, application training
and seminars which are presented around the world to industry and customer
groups.

CUSTOMERS. The Company estimates that it presently has over 250,000 bar
code printing systems installed at approximately 25,000 user sites around the
world. Sales to The Peak Technologies Group, Inc., one of the Company's National
Distributors, accounted for more than 20.0% of the Company's total net sales in
the fiscal year ended December 31, 1996 and 16.8% in the six months ended June
28, 1997.

MANUFACTURING

The Company's strategy is to create and produce production designs which
optimize product performance, quality, reliability, durability and versatility.
These designs facilitate cost-efficient materials sourcing and assembly methods
with high standards of workmanship. The Company has aggressively pursued a
manufacturing strategy of increasing control over the manufacture of its
hardware products by developing in-house capability to produce all mechanical
and electronic assemblies, and it has designed many of its

18
<PAGE>
own tools, fixtures and test equipment. The Company's manufacturing engineering
staff is dedicated to co-engineering new products with Zebra's new products
engineers and with vendors, thereby creating products that are highly
manufacturable, and to specifying and designing manufacturing processes and
facilities simultaneously with product design.

RESEARCH AND DEVELOPMENT

The Company devotes significant resources to developing new products to
serve the needs of targeted markets, providing bar code solutions to users of
the Company's printing systems and developing new and reliable products that
have a high degree of manufacturability. The Company spent $5,167,000,
$9,850,000, $7,771,000, and $5,835,000, in the six months ended June 28, 1997
and the fiscal years ended December 31, 1996, 1995, and 1994, respectively, on
research and development.

19
<PAGE>
SELLING STOCKHOLDERS

The Selling Stockholders are as follows:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING SHARES BENEFICIALLY
OWNED AFTER OFFERING
------------------------------------------- ------------------------
% OF COMBINED NUMBER OF
VOTING SHARES
NAME CLASS NUMBER PERCENT(1) POWER(1)(2) OFFERED(3) NUMBER PERCENT(4)
- ------------------------------- ----- --------- ------------- ----------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward L. Kaplan(5)............ A -- -- -- 0 -- --
B 2,736,504(6) 11.3% 30.6% 1,153,710 1,582,794 6.5%
Carol K. Kaplan................ A -- -- -- 0 -- --
B 563,800(7) 2.3% 6.3% 237,698 326,102 1.3%
Gerhard Cless(8)............... A 140,000(9) * * 0 140,000 *
B 2,812,052 10) 11.6% 31.4% 344,000 2,468,052 10.2%
Ruth I. Cless.................. A -- 11) -- -- 0 -- --
B 1,104,740 12) 4.6% 12.3% 320,936 783,804 3.2%

% OF COMBINED
VOTING
NAME POWER(2)(4)
- ------------------------------- -----------------
<S> <C>
Edward L. Kaplan(5)............ --
22.3%
Carol K. Kaplan................ --
4.6%
Gerhard Cless(8)............... *
34.7%
Ruth I. Cless.................. --
11.0%
</TABLE>

- ------------------------------

* Less than one percent.

(1) Percentages based upon 17,002,342 shares of Class A Common Stock and
7,255,404 shares of Class B Common Stock outstanding on September 3, 1997.

(2) Each share of Class A Common Stock has one vote and each share of Class B
Common Stock has ten votes.

(3) Assumes no exercise of the Underwriters' over-allotment option. If such
option is exercised, Mr. Kaplan, Mrs. Kaplan and Mr. Cless will sell up to
an additional 173,057, 35,654 and 99,740 shares, respectively. Following
such sale, Mr. Kaplan, Mrs. Kaplan and Mr. Cless would own 5.8%, 1.2% and
9.8%, respectively, of the combined outstanding Class A and Class B Common
Stock (with 20.6%, 4.3% and 34.7%, respectively, of the combined voting
power). The shares offered hereby may be sold by one or more family trusts
established by the Selling Stockholders.

(4) Percentages based upon the number of shares of Class A Common Stock and
Class B Common Stock outstanding on September 3, 1997, after giving effect
to the offering of the shares hereby.

(5) Mr. Kaplan is the Chairman and Chief Executive Officer of the Company and
has also served as President of the Company since April 1997 on an interim
basis.

(6) Excludes 563,800 shares which may be deemed held of record or beneficially
by Mr. Kaplan's wife, Carol, which may be deemed to be beneficially owned by
Mr. Kaplan.

(7) Excludes 2,736,504 shares which may be deemed held of record or beneficially
by Mr. Kaplan, which may be deemed to be beneficially owned by Mrs. Kaplan.

(8) Mr. Cless is the Company's Executive Vice President for Engineering and
Technology and Secretary and a member of the Board of Directors.

(9) Includes 140,000 shares held by a foundation of which Mr. Cless is a
director.

(10) Includes 344,000 shares held by Jerry I. Rudman, as Trustee under the
Gerhard Cless 1990 Income Trust. Excludes 1,104,740 shares held of record or
beneficially by Mr. Cless' wife, Ruth, which may be deemed to be
beneficially owned by Mr. Cless.

(11) Excludes 140,000 shares held of record or beneficially by Mr. Cless which
may be deemed to be beneficially owned by Mrs. Cless.

(12) Includes 320,936 shares held by Jerry I. Rudman, as Trustee under the Ruth
I. Cless 1990 Income Trust. Excludes 2,812,052 shares held of record or
beneficially by Mr. Cless, which may be deemed to be beneficially owned by
Mrs. Cless.

20
<PAGE>
Upon its sale in this offering, each share of Class B Common Stock sold by
the Selling Stockholders automatically converts into a share of Class A Common
Stock.

The Company's executive officers, directors, and their families and family
trusts, will in the aggregate beneficially own substantially all of the
outstanding Class B Common Stock, which will represent approximately 21.4% of
the Company's outstanding shares, and approximately 73.2% of the voting power,
of Common Stock after this offering. Holders of the Class B Common Stock are
entitled to 10 votes per share, while holders of the Class A Common Stock are
entitled to only one vote per share. As a result, the holders of the Class B
Common Stock, if acting together, would be able effectively to control most
matters requiring approval by the stockholders of the Company, including the
election of all of the directors. If at any time the number of outstanding
shares of Class B Common Stock represents less than 10% of the total number of
outstanding shares of both classes of Common Stock, then such outstanding shares
of Class B Common Stock will automatically convert into an equal number of
shares of Class A Common Stock. Certain provisions of the Company's Bylaws and
Certificate of Incorporation could have the effect of delaying, deferring or
preventing a change in control of the Company.

Certain of the Company's directors, officers and stockholders own Unique
Building Corporation, which transacts business with the Company. Such ownership
could result in conflicts of interest for such directors, officers and
stockholders in situations where the Company's interests and those of such other
companies are not identical.

21
<PAGE>
UNDERWRITING

William Blair & Company, L.L.C., The Robinson-Humphrey Company, Inc. and
Montgomery Securities (collectively, the "Underwriters") have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement by
and among the Company, the Selling Stockholders and the Underwriters, to
purchase from the Selling Stockholders the aggregate number of shares of Common
Stock (excluding the over-allotment shares) set forth opposite each
Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
William Blair & Company, L.L.C................................................... 822,538
The Robinson-Humphrey Company, Inc............................................... 616,903
Montgomery Securities............................................................ 616,903
----------
Total........................................................................ 2,056,344
----------
----------
</TABLE>

The nature of the Underwriters' obligations under the Underwriting Agreement
is such that all shares of the Common Stock offered hereby, excluding shares
covered by the over-allotment option granted to the Underwriters, must be
purchased if any are purchased. In the event of a default by any Underwriters,
the Underwriting Agreement provides, in certain circumstances, that purchase
commitments of the nondefaulting Underwriters may be increased or such
Underwriting Agreement may be terminated.

The Underwriters have advised the Company and the Selling Stockholders that
they propose to offer the Common Stock directly to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession of not more than $0.78 per
share. Additionally, the Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers. After the
shares are released for sale to the public, the public offering price and other
selling terms may be changed by the Underwriters.

Certain Selling Stockholders have granted to the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase up to
an additional 308,451 shares of Common Stock at the same price per share to be
paid by the Underwriters for the other shares offered hereby. The Underwriters
may exercise the option only for the purpose of covering over-allotments, if
any, made in connection with the distribution of the Common Stock offered
hereby.

The Company, the Selling Stockholders and the Company's directors and
executive officers have agreed, subject to certain exceptions, that they will
not sell, offer to sell, issue, distribute or otherwise dispose of any shares of
Common Stock or any options, rights or warrants with respect to any shares of
Common Stock or register any shares of Common Stock for sale under the
Securities Act, for a period of 90 days after the effective date of the
Registration Statement of which this Prospectus is a part without the prior
written consent of William Blair & Company, L.L.C., except that the Selling
Stockholders may sell shares pursuant to the over-allotment option. The
Underwriters have provided services to the Company in the past and received
customary compensation.

The Representatives have advised the Company that, pursuant to Regulation M
under the Exchange Act, certain persons participating in the offering may engage
in transactions that may stabilize, maintain or otherwise affect the market
price of the Common Stock, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids. A "stabilizing bid" is a bid
for, or the purchase of, the Common Stock on behalf of the Underwriters for the
purposes of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is a bid for, or the purchase of, the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting a managing underwriter to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the

22
<PAGE>
Underwriters in a syndicate covering transaction and has therefore not been
effectively placed by such Underwriter or syndicate member. The Underwriters
have advised the Company that such transactions may be effected on the Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any time.

One or more of the Underwriters currently act as market makers for the
Common Stock and may engage in "passive market making" in such securities on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Exchange Act. Rule 103 permits, upon the satisfaction of certain conditions,
underwriters participating in a distribution that are also Nasdaq market makers
in the security being distributed to engage in limited market making
transactions during the period when Rule 103 would otherwise prohibit such
activity. Rule 103 prohibits underwriters engaged in passive market making
generally from entering a bid or effecting a purchase price that exceeds the
highest bid for those securities displayed on the Nasdaq National Market by a
market maker that is not participating in the distribution. Under Rule 103, each
underwriter engaged in passive market making is subject to a daily net purchase
limitation equal to the greater of (i) 30% of such entity's average daily
trading volume during the two full calendar months immediately preceding, or any
60 consecutive calendar days ending within the ten calendar days preceding, the
date of the filing of the registration statement under the Securities Act
pertaining to the security to be distributed or (ii) 200 shares of common stock.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof. William Blair &
Company, L.L.C. from time to time provides and in the past has provided
investment banking services to the Company and is serving as the lead manager in
this offering.

LEGAL MATTERS

The legality of the shares of Class A Common Stock offered hereby will be
passed upon for the Company and the Selling Stockholders by Katten Muchin &
Zavis, a partnership including professional corporations, Chicago, Illinois.
Winston & Strawn, Chicago, Illinois, is acting as counsel for the Underwriters
in connection with certain legal matters relating to the Class A Common Stock
offered hereby.

EXPERTS

The consolidated financial statements and schedule of the Company as of
December 31, 1995 and 1996, and for each of the years in the three-year period
ended December 31, 1996, have been incorporated by reference in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere and incorporated by reference
in the Registration Statement, and upon the authority of said firm as experts in
accounting and auditing.

With respect to the unaudited interim consolidated financial information for
the periods ended March 29, 1997 and June 28, 1997, incorporated by reference
herein, the independent certified public accountants have reported that they
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports included in the
Company's quarterly reports on Form 10-Q for the quarters ended March 29, 1997
and June 28, 1997 and incorporated by reference herein, state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of section 11 of the
Securities Act for their reports on the unaudited interim financial information
because those reports are not a "report" or a "part" of the registration
statement prepared or certified by the accountants within the meaning of
sections 7 and 11 of the Securities Act.

23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3

Risk Factors.............................................................. 5

Safe Harbor for Forward-Looking Statements................................ 6

Use of Proceeds........................................................... 7

Price Range of Common Stock and Dividends................................. 7

Selected Financial Data................................................... 8

Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 10

Business.................................................................. 15

Selling Stockholders...................................................... 20

Underwriting.............................................................. 22

Legal Matters............................................................. 23

Experts................................................................... 23
</TABLE>

2,056,344 SHARES

[LOGO]

CLASS A COMMON STOCK

-------------------

PROSPECTUS

SEPTEMBER 4, 1997
-------------------

WILLIAM BLAIR & COMPANY

THE ROBINSON-HUMPHREY
COMPANY, INC.

MONTGOMERY SECURITIES

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------