<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 3, 2000.
--------------
Zebra Technologies Corporation
------------------------------------------------
(Exact Name of Registrant as Specified in Charter
Delaware 00-19406 36-2675536
---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
333 Corporate Woods Parkway, Vernon Hills, IL 60061
--------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 634-6700
This Current Report on Form 8-K/A is an amendment to Items 7(a) and
(b) to the Current Report on Form 8-K filed on April 18, 2000.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Below are the financial statements required by Item 7(a) relating to
the acquisition of Comtec Information Systems, Inc. ("Comtec")
described in Item 2 of the Current Report on Form 8-K of Zebra
Technologies Corporation ("Company") filed on April 18, 2000,
including:
COMTEC INFORMATION SYSTEMS, INC.
- Report of Independent Auditors;
- Consolidated Balance Sheet;
- Consolidated Statement of Income;
- Consolidated Statement of Changes in Shareholders' Equity;
- Consolidated Statement of Cash Flows; and
- Notes to Consolidated Financial Statements.
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors
and Shareholders
Comtec Information Systems, Inc.
We have audited the accompanying consolidated balance sheet of Comtec
Information Systems, Inc. as of December 31, 1999, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Comtec
Information Systems, Inc. as of December 31, 1999, and the consolidated
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States.
Providence, RI
January 25, 2000
ERNST & YOUNG LLP
3
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COMTEC INFORMATION SYSTEMS, INC.
Consolidated Balance Sheet
December 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,293,994
Marketable securities (NOTE 1) 2,000,488
Trade accounts receivable, net of an allowance
for doubtful accounts of $356,461 (NOTE 2) 15,752,617
Inventories (NOTE 1) 7,023,448
Prepaid expenses 145,513
------------
Total current assets 27,216,060
Property, plant and equipment (NOTES 3 AND 7):
Property, plant and equipment 7,713,724
Less: Accumulated depreciation and amortization 3,479,516
------------
4,234,208
Other assets:
Marketable securities (NOTE 1) 484,730
Investment in other securities 567,768
Deposits 235,553
------------
Total assets $ 32,738,319
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,705,884
Accrued expenses 3,057,223
Deferred maintenance revenue 619,102
Current portion of note payable (NOTE 4) 191,851
Capitalized lease obligation (NOTE 7) 177,638
------------
Total current liabilities 9,751,698
Long-term liabilities:
Capitalized lease obligation with related party,
excluding current portion (NOTE 7) 3,095,922
Note payable (NOTE 4) 543,635
Due to related parties 303,176
Shareholders' equity (NOTE 6):
Class A Common Stock, par value $1 per share; 1,000
shares authorized; 43 shares issued and outstanding 43
Class B Common Stock, par value $1 per share; 7,000
shares authorized; 4,267 shares issued and outstanding 4,267
Additional paid-in capital 559,545
Retained earnings 18,230,740
Accumulated other comprehensive income 249,293
------------
Total shareholders' equity 19,043,888
------------
Total liabilities and shareholders' equity $ 32,738,319
============
</TABLE>
See notes to consolidated financial statements.
4
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COMTEC INFORMATION SYSTEMS, INC.
Consolidated Statement of Income
Year ended December 31, 1999
<TABLE>
<S> <C>
Net sales $ 57,655,730
Cost of sales 33,383,886
------------
Gross profit 24,271,844
Selling, general and administrative expenses 11,493,642
Research and development costs 2,893,651
------------
14,387,293
------------
Operating income 9,884,551
Other income (expense):
Interest expense (577,148)
Interest income 263,656
------------
(313,492)
------------
Net income $ 9,571,059
============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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COMTEC INFORMATION SYSTEMS, INC.
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock
-------------------------- Accumulated
Additional Other Total
Paid-in Retained Comprehensive Shareholder
Class A Class B Capital Earnings Income Equity
--------- -------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998 $ 43 $ 4,267 $ 559,545 $13,994,681 $ 130,422 $14,688,958
Comprehensive income
Net income -- -- -- 9,571,059 -- 9,571,059
Translation adjustments -- -- -- -- 118,871 118,871
-----------
Comprehensive income 9,689,930
Distributions to shareholders -- -- -- (5,335,000) -- (5,335,000)
-------- ------- --------- ----------- --------- -----------
Balances, December 31, 1999 $ 43 $ 4,267 $ 559,545 $18,230,740 $ 249,293 $19,043,888
======== ======= ========= =========== ========= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
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COMTEC INFORMATION SYSTEMS, INC.
Consolidated Statement of Cash Flows
Year ended December 31, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 9,571,059
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 835,464
Provision for allowance for doubtful accounts 182,490
Increase (decrease) in cash from changes in assets and liabilities:
Accounts receivable (7,335,533)
Prepaid expenses (21,848)
Inventories (2,355,785)
Deposits (184,926)
Accounts payable 3,783,518
Accrued expenses 868,248
Deferred maintenance revenue 115,182
Due to related parties, net (14,309)
Interest receivable 12,146
------------
Net cash provided by operating activities 5,455,706
Investing activities
Purchases of marketable securities, net (1,095,167)
Purchases of property, plant and equipment (1,438,173)
Purchase of other securities (317,768)
------------
Net cash used in investing activities (2,851,108)
Financing activities
Distributions to shareholders, net (5,335,000)
Payments on lease financing (167,862)
Payments on note payable (178,349)
------------
Net cash used in financing activities (5,681,211)
------------
Net decrease in cash and cash equivalents (3,076,613)
Cash and cash equivalents at beginning of year 5,370,607
------------
Cash and cash equivalents at end of year $ 2,293,994
============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 577,000
============
Supplemental schedule of non-cash investing and financing activity:
Leased asset additions and related obligation $ 206,544
============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Comtec Information Systems, Inc. (the Company) is engaged in the design,
marketing and manufacture of data processing, automatic identification, and
printing systems.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its 100%-owned subsidiary, Comtec Information Systems Limited, and its
79%-owned subsidiary, Comtec B.V.; the remaining 21% ownership is held by
shareholders of the Company. Significant intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION Assets and liabilities of operations outside the
United States are translated into United States dollars using current
exchange rates; revenue and expense items are translated into United States
dollars using a weighted average exchange rate for the period. The gains and
losses resulting from such translation are accumulated as a separate
component of shareholders' equity, whereas gains and losses resulting from
foreign currency transactions generally are included in results of operations.
8
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company recognizes revenues from product sales upon shipment, and from
service revenue as it is earned.
CASH AND CASH EQUIVALENTS
For purposes of statement of cash flows, the Company considers cash held in
banks and highly-liquid investments with an original maturity of three months
or less to be cash equivalents.
INVENTORIES
The Company records inventory at the lower of cost or market using the FIFO
(first-in, first-out) method.
The components of inventory at December 31, are as follows:
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
Raw materials $ 4,715,791
Work-in-process 1,498,416
Finished goods 809,241
-----------
$ 7,023,448
===========
</TABLE>
MARKETABLE SECURITIES
The Company classifies its marketable securities as held-to-maturity, trading
or available-for-sale at the time of purchase and reevaluates such
designation as of each balance sheet date. The Company has classified holdings
at December 31, 1999, as held-to-maturity securities, which are carried at
amortized cost.
At December 31, 1999, held-to-maturity securities consisted of the following:
<TABLE>
<CAPTION>
Held-to-Maturity Securities
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------------------------------------------
<S> <C> <C> <C> <C>
State and municipal securities $ 2,468,738 $ -- $(10,664) $2,458,074
Equity securities 16,480 20,300 -- 36,780
----------- ---------- -------- ----------
2,485,218 $ 20,300 $(10,664) $2,494,854
=====================================
Less short-term marketable securities
2,000,488
-----------
Long-term marketable securities $ 484,730
===========
</TABLE>
9
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PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. All fixed assets are
depreciated using an accelerated or straight-line method over the estimated
useful lives of the assets (the lesser of the estimated useful life or the
lease term for assets held under capitalized lease obligations).
DEFERRED REVENUE
Deferred revenue represents advance payments on service contracts which are
recognized as revenue over the period of the contract and hardware purchase
orders which are recognized as the order is filled.
INCOME TAXES
The Company is an S Corporation as defined in the Internal Revenue Code.
Accordingly, no federal or state income taxes are provided since the
Company's income is included in the shareholders' individual income tax
returns on a pro rata basis.
2. ACCOUNTS RECEIVABLE
Accounts receivable are primarily from major retailers in the United States.
The Company extends credit based on an evaluation of a customer's financial
position and generally does not require collateral. The allowance for
doubtful accounts is determined based on management's evaluation of the
collectibility of individual receivables and the financial condition of the
market.
For the year ended December 31, 1999, approximately 55% of the Company's
sales were to five customers. At December 31, 1999, approximately 56% of the
Company's receivables were with three customers.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1999, consists of the following:
<TABLE>
<S> <C>
Land and building $ 3,488,262
Machinery and equipment 4,214,732
Furniture and fixtures 10,730
-----------
$ 7,713,724
===========
</TABLE>
4. NOTE PAYABLE
During 1998, the Company paid, to a related party, $1,000,000 in the form of
a five-year note, for rights to a partially developed proprietary process.
The note bears interest at a rate of 7.42% per annum and is payable in sixty
equal monthly installments of $20,000, commencing July 31, 1998 through
June 30, 2003.
Maturities of long-term debt in the years ending December 31, 2000 through
2003 are approximately $192,000, $207,000, $222,000 and $115,000, respectively.
5. LINE-OF-CREDIT FACILITY
On May 31, 1997, the Company amended its $4,000,000 revolving line of credit,
dated March 4, 1994, with interest at prime plus .5% payable to Fleet
National Bank expiring on May 31, 2000. The facility provides for an unused
facility fee of .25%. Borrowings under the facility are collateralized by
substantially all assets of the Company. At December 31, 1999, the Company
had no borrowings under this agreement. The facility contains certain
restrictive covenants which require the maintenance of tangible net worth of
at least $8,000,000, debt to net worth of less than 1.75 to 1, and a debt
coverage ratio of at least 2 to 1 for the term of the facility on a combined
basis for Comtec and CRE Corporation (a related party through a group of
shareholders who own Comtec and CRE).
6. SHAREHOLDERS' EQUITY
The Company has two classes of Common Stock, Class A Common Stock (Class A)
and Class B Common Stock (Class B). The designations, powers, preferences and
rights of Class A and Class B stock are identical except that Class A is
voting and Class B is nonvoting Common Stock.
10
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7. COMMITMENTS
The Company has several noncancelable operating leases for printing presses
and labeling equipment that expire at various dates over the next four years.
In March 1994, Comtec entered into a lease agreement for its operating
facility at 30 Plan Way, Warwick, Rhode Island with CRE, whereby Comtec
leased from CRE assets which CRE had leased from the State of Rhode Island.
The term of the lease is 20 years and will expire on March 2014. CRE's lease
is collateralized by a bank letter of credit and the assets under the lease
agreement. Comtec has also guaranteed the lease with the State of Rhode
Island, which issued revenue bonds to finance the acquisition. The lease
contains certain restrictive covenants similar to those described in Note 5.
The lease contains certain restrictive covenants similar to those described
in Note 5. The lease contains certain escalation provisions.
The lease is a capital lease for financial reporting purposes and is included
in fixed assets as follows:
<TABLE>
<S> <C>
Building and building improvements $2,527,760
Land 700,000
Equipment 215,365
----------
$3,443,125
==========
</TABLE>
11
<PAGE>
7. COMMITMENTS (CONTINUED)
Accumulated amortization for assets under capitalized lease obligations was
$940,848 at December 31, 1999.
Future annual minimum lease payments (without giving effect to future
escalation provisions) for capital and operating leases as of December 31,
1999, are as follows:
<TABLE>
<CAPTION>
Capitalized Lease
Year Obligation Operating Leases
---- ------------------ ----------------
<S> <C> <C>
2000 $ 572,376 $ 213,291
2001 572,376 90,661
2002 572,376 57,557
2003 572,376 --
2004 572,376 --
Thereafter 5,294,478 --
------------ -----------
Total minimum lease payments 8,156,358 $ 361,509
===========
Less amounts representing interest 4,986,070
------------
Present value of minimum lease payments 3,170,288
Less current lease portion 74,366
------------
Present value of minimum lease payments less
current portion $ 3,095,922
============
</TABLE>
Rental expense during the year ended December 31, 1999, for operating leases
was $281,070.
8. EMPLOYEE RETIREMENT PLAN
The Company has established a qualified defined contribution plan covering
substantially all employees. Participants are allowed to contribute a
percentage of their annual compensation to the Plan and the Company, at its
discretion, matches a percentage of that contribution. The Company's
contribution expense was $145,740 for the year ended December 31, 1999.
9. YEAR 2000 (UNAUDITED)
The Company completed all Year 2000 readiness with regard to its computer
systems, computerized manufacturing equipment, products and other aspects of
its operations dependent upon automation or computerized operation. To date,
the Company has not experienced any significant operational problems with its
computer systems or other critically dependent equipment. In the opinion of
management, the total costs of addressing the Year 2000 issue did not have a
material impact on the Company's financial position or results of operations.
12
<PAGE>
(b) Below are the pro forma financial information required by Item 7(b)
relating to the acquisition of Comtec described in Item 2 of the
Company's Current Report on Form 8-K filed on April 18, 2000,
including:
ZEBRA TECHNOLOGIES CORPORATION UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION
- Consolidated Balance Sheet
- Consolidated Statement of Earnings
- Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
13
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
(In thousands)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- -------------------------------------
ZEBRA CIS ADJUSTMENTS COMBINED
----------------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 38,501 $ 2,294 $ 40,795
Investments and marketable securities 197,067 2,000 (92,693) (2) 106,374
Accounts receivable, net 62,870 15,753 (47) (2b) 78,576
Inventories 42,379 7,023 (231) (2b) 49,171
Deferred income taxes 3,467 -- -- 3,467
Prepaid expenses 1,614 146 -- 1,760
---------- -------- -------- ---------
Total current assets 345,898 27,216 (92,971) 280,143
---------- -------- -------- ---------
Property and equipment at cost, less
accumulated depreciation
and amortization 41,686 4,234 (2,851) (2c) 43,069
Intangibles -- -- 31,786 (2d) 31,786
Excess of cost over fair value
of net assets acquired -- -- 35,555 (2c) 35,555
Other assets 7,059 1,288 8,347
---------- -------- -------- ---------
TOTAL ASSETS $ 394,643 $ 32,738 $(28,481) $ 398,900
========== ======== ======== =========
Current liabilities:
Accounts payable $ 23,798 $ 5,706 -- $ 29,504
Accrued liabilities 11,295 3,360 -- 14,655
Short-term note payable 196 192 -- 388
Current portion of obligation under
capital lease with related party 264 178 (74) (2c) 368
Income taxes payable 7,541 7,541
---------- -------- -------- ---------
Total current liabilities 43,094 9,436 (74) 52,456
---------- -------- -------- ---------
Obligation under capital lease with
related party, less current portion 571 3,096 (3,096) (2c) 571
Long-term liability 93 544 -- 637
Deferred income taxes 1,473 -- -- 1,473
Other 105 619 -- 724
---------- -------- -------- ---------
TOTAL LIABILITIES 45,336 13,695 (3,170) 55,861
Shareholders' equity 349,307 19,043 (25,311) (2f) 343,039
---------- -------- -------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 394,643 $ 32,738 $(28,481) $ 398,900
========== ======== ======== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements.
14
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1999
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------- --------------------------------
ZEBRA CIS ADJUSTMENTS COMBINED
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Net sales $ 398,517 $ 57,656 -- $ 456,173
Cost of sales 196,128 33,384 -- 229,512
------------ -------- ------------ ---------
Gross profit 202,389 24,272 226,661
Operating expenses:
Selling, marketing, general
and administrative 70,848 11,494 -- 82,342
Amortization of intangible assets 291 -- 5,115 (2h) 5,406
Research and development 22,007 2,894 -- 24,901
Merger costs 6,341 -- -- 6,341
------------ -------- ------------ ---------
Total operating expenses 99,487 14,388 5,115 118,990
------------ -------- ------------ ---------
Operating income 102,902 9,884 (5,115) 107,671
------------ -------- ------------ ---------
Other income (expense):
Investment income 8,732 264 (3,888)(2g) 5,108
Interest expense (209) (577) (786)
Other, net (2,625) -- (2,625)
------------ -------- ------------ ---------
Total other income (expense) 5,898 (313) (3,888) 1,697
------------ -------- ------------ ---------
Income before income taxes 108,800 9,571 (9,003) 109,368
Income taxes 39,168 -- 204 (2i) 39,372
------------ -------- ------------ ---------
Net income $ 69,632 $ 9,571 $ (9,207) $ 69,996
============ ======== ============ =========
Basic earnings per share $ 2.23 $ 2.25
Diluted earnings per share $ 2.21 $ 2.22
Basic weighted average shares
outstanding 31,175 31,175
Diluted weighted average and
equivalent shares outstanding 31,521 31,521
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements.
15
<PAGE>
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Amounts in thousands)
NOTE 1 BASIS OF PRESENTATION.
The unaudited pro forma condensed combined balance sheet combines the
historical consolidated balance sheet of Zebra Technologies Corporation
("Zebra") with the historical consolidated balance sheet of Comtec
Information Systems ("CIS") at December 31, 1999, as if the acquisition had
occurred on that date. The unaudited pro forma condensed combined statement
of earnings combine the historical consolidated statement of earnings of
Zebra with the historical consolidated statement of earnings of CIS for the
year ended December 31, 1999, as if the acquisition occurred on January 1,
1999.
The unaudited pro forma condensed combined financial statements exclude (a)
the effect of any operating income improvements which may be achieved upon
combining the resources of the companies and (b) costs associated with the
integration and consolidation of the companies, which are not currently
estimable.
NOTE 2 PRO FORMA ADJUSTMENTS
(a) To reflect the payment of the purchase price under the purchase and
sale agreement between Zebra and CIS.
(b) To adjust inventory and accounts receivable of CIS to
their estimated fair values at the date of acquisition.
(c) To reduce fixed assets to the estimated fair value at the date of
acquisition.
(d) To reflect the estimated fair value of identifiable intangible
assets acquired including: assembled workforce, current technology
and customer lists.
(e) To reflect excess of cost over the fair value of net assets acquired.
(f) To eliminate CIS pre-acquisition equity and to reflect the write-off
of $5,953 of acquired in-process research and development.
(g) To reduce Zebra's investment income due to the use of
investments and marketable securities to acquire CIS.
(h) To record amortization of the identifiable intangible assets
(estimated useful lives of 5 to 15 years) and the excess of cost over
fair value of net assets acquired (estimated useful life of 20
years).
(i) To adjust the combined tax expense to reflect Zebra's effective tax
rate.
16
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(c) Exhibits
23 Consent of Ernst & Young LLP, independent auditors
17
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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 hereunto duly authorized.
ZEBRA TECHNOLOGIES CORPORATION
By: /s/ Charles R. Whitchurch
Name: Charles R. Whitchurch
Title: Chief Financial Officer
Dated: June 16, 2000
18
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
23 Consent of Ernst & Young LLP, independent auditors
</TABLE>
