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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO QUARTERLY REPORT ON 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 October 3, 1998
Commission File Number: 000-19406
Zebra Technologies Corporation
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(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
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(Address of principal executive offices) (Zip Code)
(847) 634-6700
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(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 November 10, 1998, there were the following shares outstanding:
Class A Common Stock, $.01 par value 19,439,347
Class B Common Stock, $.01 par value 11,807,568
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
QUARTER ENDED OCTOBER 3, 1998
The registrant hereby amends Item 1 of the Report on Form 10-Q
Filed November 17, 1998, in order to revise certain balance
sheet information as of October 3, 1998, and to make
corresponding revisions to certain exhibits.
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Independent Auditors' Review Report 3
Consolidated Balance Sheets
as of October 3, 1998 (unaudited) and December 31, 1997 4
Consolidated Statements of Earnings and Comprehensive Income
(unaudited) for the three months and nine months ended October 3, 1998
and September 27, 1997 5
Consolidated Statements of Cash Flows (unaudited)
for the nine months ended October 3, 1998 and September 27, 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors and Shareholders
Zebra Technologies Corporation:
We have reviewed the consolidated balance sheet of Zebra Technologies
Corporation and subsidiaries as of October 3, 1998, the related consolidated
statements of earnings and comprehensive income for the three-month and
nine-month periods ended October 3, 1998 and September 27, 1997, and the related
consolidated statements of cash flows for the nine-month periods ended October
3, 1998 and September 27, 1997. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews 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 reviews, 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, 1997, and the related consolidated statements of
earnings, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 27, 1998, 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, 1997 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
October 14, 1998
3
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 3, DECEMBER 31,
1998 1997
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<S> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 7,140 $ 7,155
Investments and marketable securities 143,589 121,698
Accounts receivable, net of allowance of $1,746 in 1998
and $1,788 in 1997 41,891 31,032
Inventories 20,136 22,443
Deferred income taxes 3,210 4,307
Prepaid expenses 1,400 843
-------- --------
Total current assets 217,366 187,478
-------- --------
Machinery and equipment at cost, less
accumulated depreciation and amortization 18,371 12,753
Deferred tax asset - -
Other assets 4,288 3,353
-------- --------
TOTAL ASSETS $240,025 $203,584
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,421 $ 11,141
Accrued liabilities 6,379 6,900
Short-term note payable 137 137
Current portion of obligation under capitalized lease with related party 67 65
Income taxes payable 5,756 4,329
-------- --------
Total current liabilities 24,760 22,572
-------- --------
Obligation under capitalized lease with related party, less current portion - 51
Long-term liability - 212
Deferred income taxes 1,427 911
Other 234 287
-------- --------
TOTAL LIABILITIES 26,421 24,033
-------- --------
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized,
none outstanding - -
Class A Common Stock, $.01 par value; 50,000,000 shares
authorized, 19,439,347 and 19,413,933 shares issued
and outstanding in 1998 and 1997, respectively 194 194
Class B Common Stock, $.01 par value; 28,358,189 shares
authorized, 4,890,609 shares issued and outstanding
in 1998 and 1997 49 49
Paid-in capital 30,443 29,984
Retained earnings 181,732 148,779
Accumulated other comprehensive income 1,186 545
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TOTAL SHAREHOLDERS' EQUITY 213,604 179,551
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $240,025 $203,584
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
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OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1998 1997 1998 1997
--------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 57,354 $ 49,889 $ 162,922 $ 138,742
Cost of sales 26,677 24,878 77,314 69,027
--------------- -------------- ------------- ---------------
Gross profit 30,677 25,011 85,608 69,715
Operating expenses:
Sales and marketing 5,717 4,863 16,654 13,807
Research and development 3,461 2,767 9,821 7,935
General and administrative 4,502 3,730 13,034 10,620
--------------- -------------- ------------- ---------------
Total operating expenses 13,680 11,360 39,509 32,362
--------------- -------------- ------------- ---------------
Income from operations 16,997 13,651 46,099 37,353
--------------- -------------- ------------- ---------------
Other income (expense):
Investment income 1,238 1,278 3,650 3,715
Gain (loss) on securities (647) 583 2,218 7,276
Other, net (83) 27 (496) 364
--------------- -------------- ------------- ---------------
Total other income 508 1,888 5,372 11,355
--------------- -------------- ------------- ---------------
Income from continuing operations before taxes 17,505 15,539 51,471 48,708
Provision for income taxes 6,275 5,594 18,518 17,591
--------------- -------------- ------------- ---------------
Income from continuing operations 11,230 9,945 32,953 31,117
--------------- -------------- ------------- ---------------
Loss from discontinued operation (less
applicable income tax benefit) -- -- -- (2,655)
--------------- -------------- ------------- ---------------
Net income $ 11,230 $ 9,945 $ 32,953 $ 28,462
=============== ============== ============= ===============
Other comprehensive income -
foreign currency translation adjustments 489 (630) 641 (1,029)
--------------- -------------- ------------- ---------------
Comprehensive income $ 11,719 $ 9,315 $ 33,594 $ 27,433
=============== ============== ============= ===============
Basic earnings per share from continuing operations $ 0.46 $ 0.41 $ 1.35 $ 1.29
Diluted earnings per share from continuing operations $ 0.46 $ 0.41 $ 1.35 $ 1.28
Basic earnings per share $ 0.46 $ 0.41 $ 1.35 $ 1.18
Diluted earnings per share $ 0.46 $ 0.41 $ 1.35 $ 1.17
Basic weighted-average shares outstanding 24,327 24,176 24,322 24,166
Diluted weighted-average and equivalent shares
outstanding 24,417 24,257 24,412 24,247
</TABLE>
See accompanying notes to consolidated financial statements.
5
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 32,953 $ 28,462
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,962 2,694
Depreciation (appreciation)
in market value of investments & marketable securities 2,671 (468)
Discontinued operations - (3,371)
Increase in accounts receivable (10,859) (212)
Decrease in inventories 2,307 208
Decrease (increase) in other assets (935) 1,062
Increase (decrease) in accounts payable 1,280 (2,198)
Increase (decrease) in accrued liabilities and other (574) 3,396
Increase (decrease) in income taxes payable 1,427 (108)
Decrease (increase) in deferred taxes 1,613 (2,171)
Net increase (decrease) in other operating activities 84 (2,583)
Net purchases of investments and marketable securities (24,562) (23,017)
-------- --------
Net cash provided by operating activities 9,367 1,694
-------- --------
Cash flows from investing activities:
Purchases of machinery and equipment (9,580) (3,506)
Net sales of investments and marketable securities - 6,044
-------- --------
Net cash provided by (used in) investing activities (9,580) 2,538
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options and stock purchase plan 459 259
Issuance of short-term notes payable - 136
Payment of long-term notes payable (212) -
Payments for obligation under capital lease (49) (46)
-------- --------
Net cash provided by financing activities 198 349
-------- --------
Net increase (decrease) in cash and cash equivalents (15) 4,581
Cash and cash equivalents at beginning of period 7,155 5,168
-------- --------
Cash and cash equivalents at end of period $ 7,140 $ 9,749
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 467 $ 9
Income taxes paid $ 12,236 $ 15,936
</TABLE>
See accompanying notes to consolidated financial statements.
6
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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, 1997, 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 October 3, 1998, the consolidated results of their operations
for the three months and nine months ended October 3, 1998, and September 27,
1997, and their cash flows for the nine months ended October 3, 1998, and
September 27, 1997. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," as of January 1, 1998.
NOTE 2 - DISCONTINUED BUSINESS OPERATIONS
As of June 28, 1997, the Company decided to discontinue the operations of its
subsidiary, Zebra Technologies VTI ("VTI"). A one-time charge of $2,363,000,
before income tax benefits, was recorded in the second quarter of 1997 and was
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, provision for slow moving/obsolete
product, and provisions for estimated contingent liabilities. The Company's
financial statements for the nine months ended September 27, 1997, have been
revised to reflect the discontinuance of VTI.
NOTE 3 - TAX AUDITS AND RELATED LITIGATION
As of April 4, 1998, the Internal Revenue Service completed audits covering the
Company's federal income tax returns from 1993 and 1994. Settlements with the
IRS for both years amounted to $999,500 and were paid prior to the close of the
quarter ended July 4, 1998.
As of July 4, 1998, the Company made a final settlement to the IRS for interest
charges related to the audits covering 1993 and 1994. The interest payments for
both years amounted to $403,700 and were paid in the quarter ended July 4, 1998.
These payments are reflected in such quarter's statement of earnings and
comprehensive income as other expenses.
7
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Completion of the State of Illinois income tax audit covering the same tax years
was settled during the first quarter of 1998. A settlement of $190,400 was paid
in April 1998 for the tax years of 1993 and 1994.
The Illinois Department of Revenue has recently challenged the Company on the
tax status and treatment of the Company's intangible entities. Although the
Company and its attorneys believe that the Company has a strong position, the
Company was required to make deposits of $2,893,788 while the matter is pending.
These deposits were made in the third and fourth quarters of 1998.
NOTE 4 - SUBSEQUENT EVENT
On October 28, 1998, the Company completed the acquisition of Eltron
International, Inc. ("Eltron"), acquiring all of the outstanding capital stock
of Eltron in exchange for 6,917,00 shares of the Company's Class B Common Stock.
The Class B stock is neither traded on nor quoted by any securities exchange.
Zebra Class A Common Stock is traded on and quoted by the Nasdaq Stock Market.
Class B shares may be converted into Class A shares on a one-for-one basis at
any time at the option of the holder.
Based upon the closing price of the Company's Class A Common Stock, the Class B
Common Stock had a market value of approximately $201 million on the date the
acquisition was consummated. In addition, the Company assumed stock options and
warrants that converted into options and warrants to purchase 807,780 shares of
Class B Common Stock. Eltron manufactures and markets high-quality, low-cost bar
code label and plastic card printers, secure card printing systems, ribbons,
self-adhesive labels, and related accessories throughout the world. Eltron is
located in Camarillo, California.
The acquisition of Eltron will be accounted for as a pooling of interests. On a
pro forma basis, the combined company would have generated sales of $256 million
for the nine months ended October 3, 1998, and $215 million for the nine months
ended September 27, 1997, and would have had approximately $149 million in cash
and investments as of October 3, 1998.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS; THIRD QUARTER OF 1998 VERSUS THIRD QUARTER OF
1997 AND YEAR-TO-DATE 1998 VERSUS YEAR-TO-DATE 1997
Net sales for the third quarter increased 15.0% to $57,354,000 from $49,889,000.
The sales increase is attributable to unit growth in hardware (printers and
replacement parts). The average unit price for printers declined slightly, since
volume in lower-priced models has grown faster than increases in higher-priced
models. For the third quarter, hardware sales increased 19.0% from the third
quarter of 1997 to 79.6% of net sales, and supplies sales increased 1.9% from
the third quarter of 1997 to 17.9% of net sales. The remaining 2.5% of net sales
consisted of service and software revenue.
For the year to-date, net sales increased 17.4% to $162,922,000 from
$138,742,000. Year-to-date hardware sales increased 22.6% to 78.6% of net sales,
and supplies sales declined 0.5% to 18.8% of net sales. The remaining 2.6% of
year-to-date net sales consisted of service and software revenue.
International sales accounted for 42.8% of 1998 third quarter sales, compared
with 45.8% of net sales for the third quarter of 1997. On a year-to-date basis,
international sales accounted for 43.4% of sales in 1998 and 46.7% of sales in
1997. The decrease in the percentage of international sales, on both a quarterly
and year-to-date basis, is principally due to declines in the Company's sales to
the Asia-Pacific region.
Gross profit for the third quarter of 1998 was $30,677,000, up 22.7% from the
gross profit of $25,011,000 for the third quarter of 1997. As a percentage of
net sales, gross profit increased 3.4 percentage points to 53.5% from 50.1%. The
increase in gross profit margin was due to a decrease in printer component
costs, productivity improvements in printer manufacturing, and a favorable
product mix. On a year-to-date basis, gross profit increased to $85,608,000, up
22.8% from $69,715,000 for the same period a year ago. Year-to-date gross profit
also increased as a percentage of net sales, to 52.5% from 50.2%.
Sales and marketing expenses of $5,717,000 increased 17.6% for the third quarter
of 1998 from $4,863,000 for the third quarter of 1997. During the quarter, new
programs to introduce new products began. The Company also staffed new marketing
functions for the Company's personal printer line and opened a new sales office
in Japan. As a percentage of net sales, third quarter sales and marketing
expenses increased to 10.0% from 9.7%. Year-to-date sales and marketing expenses
of $16,654,000 increased 20.6% from $13,807,000, and increased as a percentage
of net sales to 10.2% from 10.0%.
Research and development expenses for the third quarter increased 25.1% to
$3,461,000 from $2,767,000. As a percentage of sales, quarterly research and
development expenses increased to 6.0% from 5.5%. Higher personnel-related
expenses and prototype work related to new product development were primarily
responsible for the increase. Year-to-date research and development expenses
increased 23.8% to $9,821,000, or 6.0% of net sales, in 1998 from $7,935,000, or
5.7% of net sales, in 1997.
9
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General and administrative expenses for the third quarter increased by 20.7% to
$4,502,000 from $3,730,000. As a percentage of net sales, quarterly general and
administrative expenses increased to 7.8% from 7.5%. During the quarter, the
Company experienced higher personnel costs related to increased staffing levels.
In addition, depreciation and other expenses increased, as the Company's Baan
ERP system became active during the second quarter of 1998. For the first nine
months of the year, general and administrative expenses increased 22.7% to
$13,034,000, or 8.0% of net sales, from $10,620,000, or 7.7% of net sales.
Income from operations for the third quarter increased by $3,346,000, or 24.5%,
to $16,997,000, or 29.6% of net sales, from to $13,651,000, or 27.4% of net
sales. For the year to-date, income from operations increased by $8,746,000, or
23.4%, to $46,099,000, or 28.3% of net sales, from $37,353,000, or 26.9% of net
sales.
Investment income and gain (loss) on securities for the third quarter of 1998
decreased 68.2% to $591,000 from $1,861,000 for the same period in 1997.
Unrealized losses on securities because of abnormal financial market volatility
during the quarter were the primary reason for this decline. Also because of the
abnormal market volatility in the third quarter of 1998, year-to-date investment
income and gain on securities decreased 46.6%, to $5,868,000 from $10,991,000
for the first nine months of 1997. For the year to-date in 1997, gain on
securities includes a one-time pre-tax investment gain of $5,458,000, which was
recognized in the first quarter of 1997.
Other expense for the third quarter of 1998 totaled $83,000, compared with other
income of $27,000 for the third quarter of 1997. For the year to-date, other
expense of $496,000 included $403,700 for a one-time interest charge for a tax
deficiency arising from a U.S. Internal Revenue Service tax audit of 1993 and
1994. See Note 3 to the Consolidated Financial Statements included elsewhere
herein.
Income from continuing operations before taxes for the third quarter of 1998 was
$17,505,000, compared with $15,539,000 for the same period in 1997, an increase
of 12.7%. On a year-to-date basis, income from continuing operations before
taxes increased 5.7% to $51,471,000 from $48,708,000 for the previous year.
Excluding the previously discussed one-time investment gain recognized in the
first quarter of 1997, year-to-date income from continuing operations before
taxes increased 19.0%.
The effective income tax rate for the third quarter of 1998 was 35.8%, resulting
in income from continuing operations and net income of $11,230,000, or $0.46 per
share (basic and diluted). For the third quarter of 1997, the effective income
tax rate was 36.0%, and income from continuing operations and net income were
$9,945,000, or $0.41 per share (basic and diluted). As a percentage of net
sales, quarterly net income was 19.6% in 1998, compared with 19.9% in 1997.
For the year to-date, the effective income tax rate was 36.0% for 1998,
resulting in income from continuing operations and net income of $32,953,000, or
$1.35 per share (basic and diluted). For 1997, the effective income tax rate was
36.1%, and income from continuing operations was $31,117,000. Basic earnings
from continuing operations were $1.29 per share, and diluted earnings from
continuing operations were $1.28 per share. Net income for the first nine months
of 1997 was $28,462,000, or basic earnings of $1.18 per share ($1.17 per share
diluted). As a percentage of net sales, year-to-date income from continuing
operations was 20.2% in 1998 and 22.4% in 1997.
10
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LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of liquidity continues to be cash generated from
operations. Cash and cash equivalents and investments and marketable securities
totaled $150,729,000 at October 3, 1998, compared with $128,853,000 at December
31, 1997.
Management believes that existing capital resources and funds generated from
operations are sufficient to finance anticipated capital requirements.
YEAR 2000 CONSIDERATIONS
To meet changing business needs, the Company initiated a conversion in 1995 to
the Baan system, an enterprise-wide business management and resource planning
system. This system is Year 2000 compliant and its implementation was completed
in the third quarter of 1998 for Vernon Hills and will be completed by year-end
1998 for the Company's United Kingdom location. The Company's payroll system,
which is not covered by the Baan system, is expected to be replaced at the
beginning of the second quarter of 1999. The payroll system will integrate
payroll with the Company's human resources software and will be Year 2000
compliant. To date, expenditures on the Baan project have totaled $8,500,000, of
which $6,700,000 has been capitalized. At completion, total expenditures are
estimated to be $8,800,000, of which $7,000,000 is estimated to be capitalized.
The Company does not believe that its non-information technology systems will be
materially affected by the Year 2000 issues.
The Company is in the process of surveying its significant suppliers to
determine if they are Year 2000 compliant. Approximately 96% of these surveys
have been returned. There can be no guarantee that such suppliers will achieve
compliance on a timely basis. The failure by one or more significant suppliers
to achieve compliance could have a material adverse effect on the Company. The
Company has not yet undertaken to quantify the effects of such possible
non-compliance, to determine the likely worst-case scenario or to develop
contingency plans to deal with such scenario.
The Company's printers have no internal clock or dating mechanism and will not
be affected by the change in dates. The Company's PC-470 printer controller has
a self-contained real-time clock and currently is not Year 2000 compliant. The
Company intends to post instructions on its Web site (www.zebra.com) on how to
reset the PC-470's clock so that it will function properly after January 1,
2000. Current versions of the Company's labeling and other software are either
Year 2000 compliant or depend on the internal clock of the computer on which it
is running for proper dating. The Company's LABEL software depends on the BIOS
of the system on which it is running or on the external data source being Year
2000 compliant.
SIGNIFICANT CUSTOMER
Sales to The Peak Technologies Group, Inc. ("Peak") accounted for 14.6% of the
Company's total net sales for the third quarter of 1998, compared with 16.5% of
net sales for the third quarter of 1997. For the year to-date, sales to Peak
represented 14.8% of net sales in 1998 and 16.7% of net sales in 1997.
Moore Corporation acquired Peak in June 1997. Management recognizes that since
Moore Corporation is a major provider of labels, the acquisition could have an
adverse effect on Zebra's label sales to Peak.
11
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SUBSEQUENT EVENT
On October 28, 1998, the company merged with Eltron International, Inc. Each
share of Eltron common stock was exchanged for nine-tenths (.90) of a share of
Zebra Class B Common Stock. The Class B stock is neither traded on nor quoted by
any securities exchange. Zebra Class A Common stock is traded on and quoted by
the Nasdaq Stock Market. Class B shares may be converted into Class A shares on
a one-for-one basis at any time at the option of the holder.
Eltron manufactures and markets high-quality, low-cost bar code label and
plastic card printers, secure card printing systems, ribbons, self-adhesive
labels, and related accessories throughout the world. Eltron is located in
Camarillo, California.
The acquisition of Eltron will be accounted for as a pooling of interests. On a
pro forma basis, the combined company would have generated sales of $256 million
for the nine months ended October 3, 1998, and $215 million for the nine months
ended September 27, 1997, and would have had approximately $149 million in cash
and investments as of October 3, 1998.
SAFE HARBOR
Forward-looking statements contained in this filing are subject to the safe
harbor created by the Private Securities 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 market acceptance of the Company's printer and software
products and competitors' product offerings. They also include the success and
speed of the Company's integration with Eltron International, Inc., as well as
the effect of market conditions in the Asia-Pacific region on the Company's
financial results. 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 and financial market conditions will also have an
impact on results. Foreign exchange rates will have an effect on financial
results due to the large percentage of the Company's international sales. 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 document are referred to prior filings with the
Securities and Exchange Commission, including Zebra's joint proxy
statement/prospectus dated September 21, 1998, particularly the "Risk Factors"
section, for further discussions of issues that could affect Zebra's future
results.
12
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
15.1 Acknowledgment of Independent Certified Public
Accountants Regarding Independent Auditors'
Review Report
27.1 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.
13
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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: November 18, 1998 By: /s/ Edward L. Kaplan
--------------------
Edward L. Kaplan
Chief Executive Officer
Date: November 18, 1998 By: /s/ Charles R. Whitchurch
-------------------------
Charles R. Whitchurch
Chief Financial Officer
14
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Exhibit 15.1
ACKNOWLEDGMENT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS REGARDING INDEPENDENT AUDITORS'
REVIEW REPORT
Zebra Technologies Corporation
333 Corporate Woods Parkway
Vernon Hills, Illinois 60061-3109
Ladies and Gentlemen:
With respect to the registration statements (No. 33-44706, No. 33-72774, and No.
333-59733) on Form S-8 of Zebra Technologies Corporation, we acknowledge our
awareness of the incorporation by reference therein of our report dated
October 14, 1998, related to our review of interim financial information as of
October 3, 1998.
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,
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
November 18, 1998
15
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ZEBRA
TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF
OCTOBER 3, 1998, AND CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS
ENDED OCTOBER 3, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> OCT-03-1998
<CASH> 7,140
<SECURITIES> 143,589
<RECEIVABLES> 43,637
<ALLOWANCES> (1,746)
<INVENTORY> 20,136
<CURRENT-ASSETS> 217,366
<PP&E> 36,976
<DEPRECIATION> (18,605)
<TOTAL-ASSETS> 240,025
<CURRENT-LIABILITIES> 24,760
<BONDS> 0
0
0
<COMMON> 243
<OTHER-SE> 213,361
<TOTAL-LIABILITY-AND-EQUITY> 240,025
<SALES> 143,068
<TOTAL-REVENUES> 162,922
<CGS> 70,513
<TOTAL-COSTS> 77,314
<OTHER-EXPENSES> 39,485
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 467
<INCOME-PRETAX> 51,471
<INCOME-TAX> 18,518
<INCOME-CONTINUING> 32,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,953
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
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