-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GXF38Yjzz0sZLJiz9dB/KLwqqXnso3Ps4aWocyH2TBMCo3lyBpO9gYZ9m3vV0VD2 1x8C01Zy0pZ9xnuvWXnJgA== 0000877212-96-000007.txt : 19960816 0000877212-96-000007.hdr.sgml : 19960816 ACCESSION NUMBER: 0000877212-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZEBRA TECHNOLOGIES CORP/DE CENTRAL INDEX KEY: 0000877212 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 362675536 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19406 FILM NUMBER: 96611805 BUSINESS ADDRESS: STREET 1: 333 CORPORATE WOODS PKWY CITY: VERNON HILLS STATE: IL ZIP: 60061 BUSINESS PHONE: 7086346700 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 29, 1996 Commission File Number: O-19406 Zebra Technologies Corporation (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction ofincorporation or organization) 36-2675536 (I.R.S. Employer Identification No.) 333 Corporate Woods Parkway, Vernon Hills, IL 60061 (Address of principal executive offices) (Zip Code) (847)634-6700 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No As of August 12, 1996, there were the following shares outstanding: Class A Common Stock, $.01 par value: 16,885,006 Class B Common Stock, $.01 par value: 7,315,404 ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES QUARTER ENDED JUNE 29, 1996 INDEX PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Independent Auditors' Review Report page 2 Consolidated Balance Sheets as of June 29, 1996 (unaudited) and December 31, 1995 page 3 Consolidated Statements of Earnings (unaudited) for the three and six months ended June 29, 1996 and July 1, 1995 page 4 Consolidated Statements of Cash Flows (unaudited) for the three and six months ended June 29, 1996 and July 1, 1995 page 5 Notes to Consolidated Financial Statements page 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations page 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings page 10 Item 4. Submissions of Matters to a Vote of Security Holders page 10 Item 6. Exhibits and Reports on Form 8-K page 11 SIGNATURES page 14 Independent Auditors' Review Report The Board of Directors Zebra Technologies Corporation: We have reviewed the consolidated balance sheet of Zebra Technologies Corporation and subsidiaries as of June 29, 1996, and the related consolidated statements of earnings for the three-month and six-month periods ended June 29, 1996 and July 1, 1995 and consolidated statements of cash flows for the six months ended June 29, 1996 and July 1, 1995. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Zebra Technologies Corporation and subsidiaries as of December 31, 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 13, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1995, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Chicago, Illinois KPMG Peat Marwick LLP July 11, 1996 ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) June 29, December 31, 1996 1995 (Unaudited) Assets Current assets: Cash and cash equivalents $9,550 $10,017 Investments and marketable securities 69,625 61,841 Accounts receivable, net of allowance 26,181 24,887 Inventories: Finished goods 9,288 9,519 Work-in-process 299 354 Raw materials 11,115 10,492 Total inventories 20,702 20,365 Deferred income taxes 0 787 Prepaid expenses 974 1,379 Total current assets 127,032 119,276 Machinery and equipment at cost, less accumulated depreciation and amortization 10,231 8,319 Other assets 2,977 3,476 Total assets $140,240 $131,071 Liabilities And Stockholders' Equity Current liabilities: Accounts payable $7,846 $11,268 Accrued liabilities 4,288 4,012 Short term note payable 233 37 Current portion of obligation under capital lease with related party 61 59 Income taxes payable 2,624 4,067 Total current liabilities 15,052 19,443 Obligation under capital lease with related party, less current portion 147 177 Long term liability 2,000 2,000 Deferred tax liability 874 1,124 Other 312 121 Total liabilities $18,385 $22,865 Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, none outstanding Class A Common Stock, $.01 par value; 35,000,000 shares authorized, 16,878,348 and 16,865,500 shares issued and outstanding in 1996 and 1995, respectively 169 169 Class B Common Stock, $.01 par value; 35,000,000 shares authorized, 7,318,062 shares issued and outstanding in 1996 and 1995 73 73 Paid-in capital 30,039 29,645 Retained earnings 91,218 79,709 Unrealized holding gain (loss) on investments 562 (1,166) Cumulative translation adjustment (206) (224) Total stockholders' equity $121,855 $108,206 Total liabilities and stockholders' equity $140,240 $131,071 See accompanying Notes to Consolidated Financial Statements
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 29, July 1, June 29, July 1, 1996 1995 1996 1995 Net sales $40,490 $35,488 $78,842 $69,880 Cost of sales 21,099 18,887 41,019 36,801 Gross profit 19,391 16,601 37,823 33,079 Operating expenses: Sales and marketing 4,941 3,082 9,581 6,117 Research and development 3,013 1,573 5,687 3,322 General and administrative 3,484 1,820 6,796 4,023 Acquired in-process technology 0 0 1,114 0 Total operating expenses 11,438 6,475 23,178 13,462 Income from operations 7,953 10,126 14,645 19,617 Other income (expense): Investment income 1,455 878 2,759 1,686 Interest expense (9) (7) (13) (11) Other, net 9 54 (16) 98 Foreign exchange gain 79 32 84 140 Total other income 1,534 957 2,814 1,913 Income before income taxes 9,487 11,083 17,459 21,530 Provision for income taxes 3,227 3,991 5,950 7,826 Net income $6,260 $7,092 $11,509 $13,704 Net income per share $0.26 $0.29 $0.48 $0.57 Average shares 24,198 24,081 24,194 24,076 See accompanying Notes to Consolidated Financial Statement
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Six Months Ended June 29, July 1, 1996 1995 Cash flows from operating activities: Net income $11,509 $13,704 Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition: Depreciation and amortization 1,487 861 Acquired in-process technology 1,114 0 Increase in accounts receivable (1,294) (2,698) Decrease (increase) in inventories (337) 55 Decrease (increase) in other assets 499 (474) Increase (decrease) in accounts payable (3,422) 947 Increase (decrease) in accrued expenses 467 (322) Increase (decrease) in income taxes payable (1,443) 810 Increase in net deferred tax liability 537 510 Net increase in other operating activities 360 153 Net purchases of investments and marketable securities (5,911) (10,229) Net cash provided by operating activities 3,566 3,317 Cash flows from investing activities Purchases of machinery and equipment (3,399) (2,449) Net sales (purchases) of investments and marketable securities (145) 280 Payment for acquisition (1,049) 0 Net cash used in investing activities (4,593) (2,169) Cash flows from financing activities: Proceeds from exercise of stock options 393 347 Issuance of short-term notes payable 196 0 Payments for obligation under capital lease (29) (29) Net cash provided by financing activities 560 318 Net increase (decrease) in cash and cash equivalents (467) 1,466 Cash including cash equivalents at beginning of period 10,017 10,421 Cash including cash equivalents at end of period $9,550 $11,887 Supplemental disclosures of cash flow information: Interest paid $13 $11 Income taxes paid $7,227 $6,997 See accompanying Notes to Consolidated Financial Statements
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The consolidated financial statements included herein have been prepared by Zebra Technologies Corporation and subsidiaries (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest Annual Report to Stockholders (the "Annual Report") incorporated by reference into the Company's Form 10-K filed with the Securities and Exchange Commission. The consolidated balance sheet as of December 31, 1995 presented herein has been derived from the audited consolidated balance sheet contained in the Annual Report. 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 June 29, 1996 and December 31, 1995, and the consolidated results of their operations for the three- month and six-month periods ended June 29, 1996 and July 1, 1995 and cash flows for the six months ended June 29, 1996 and July 1, 1995. The results of operations for such interim periods are not necessarily indicative of the results for the full year. Item 2. Management's Discussion and Analysis of Financial Condition and Results ofOperations Results of Operations Second Quarter of 1996 versus Second Quarter of 1995 and Year-to-date 1996 versus Year-to-date 1995 Net sales of $40,490,000 for the second quarter of 1996 increased 14.1% over net sales of $35,488,000 for the second quarter of 1995. On a year-to-date basis, 1996 net sales of $78,842,000 increased 12.8% over last year's net sales of $69,880,000. The net sales increase for the quarter and year-to-date is attributed to unit growth in all product categories rather than price increases, as the average unit price of printer products has decreased due to product mix changes. Printer sales increased by 11.0% and supplies sales by 7.8% over the second quarter of 1995, bringing printer sales to 71.7% and supplies sales to 23.2% of consolidated net sales, respectively. On a year- to-date basis, printer sales increased by 9.1% and supplies sales by 5.3% over 1995, bringing printer sales to 70.5% and supplies sales to 23.7% of consolidated net sales, respectively. Approximately 43.2% of second quarter net sales were derived from international sources as compared to 44.6% during the second quarter of 1995. Similarly, 43.5% of year-to-date net sales were derived from international sources as compared to 44.7% in the prior year. Gross profit increased to $19,391,000 for the second quarter of 1996, a 16.8% gain over the gross profit of $16,601,000 for the same period last year. As a percentage of net sales, gross profit increased 1.1% from 46.8% in the second quarter of last year to 47.9% in the second quarter of 1996. Year- to-date gross profit of $37,823,000 also increased as a percentage of net sales, from 47.3% last year to 48.0% this year. The increase in gross profit is due principally to favorable mix changes within the Company's printer product sales and a lower percentage of supplies sales. Sales and marketing expenses of $4,941,000 were up 60.3% in the second quarter of 1996 versus the same period last year. As a percentage of net sales, sales and marketing expenses increased to 12.2% for the second quarter from 8.7% last year. Year-to-date sales and marketing expenses of $9,581,000 were up 56.6% over last year, increasing as a percentage of net sales from 8.8% last year to 12.2%. Increased spending on a quarterly and year-to-date basis is principally due to expenses required to develop the retail channel of distribution for the Company's software products, as well as increased staffing at the Company's Vernon Hills and High Wycombe facilities that are necessary to support anticipated sales growth. These expense increases were offset in part by reductions in co-op advertising and outside consulting services in comparison to last year on both a quarterly and year-to-date basis. Research and development expenses in the second quarter of 1996 increased by 91.5% to $3,013,000 (7.4% of net sales) versus $1,573,000 (4.4% of net sales) in the second quarter of 1995. Year-to-date research and development expenses increased by 71.2% to $5,687,000 (7.2% of net sales) versus $3,322,000 (4.8% of net sales) last year. The Company increased research and development expenses to support several significant product releases scheduled for the June to August time frame, including the XiII printer series and the 170 PAX print engine, among others. Management believes that product development expenses will trend down as a percentage of sales, as absolute dollar expenditures in this area are expected to stabilize in the near term and sales revenue increases. General and administrative expenses increased by 91.4% to $3,484,000 (8.6% of net sales) in the second quarter of 1996 compared to $1,820,000 (5.1% of net sales) last year. On a year-to-date basis, general and administrative expenses increased by 68.9% to $6,796,000 (8.6% of net sales) compared to $4,023,000 (5.8% of net sales) last year. The increase in general and administrative expenses for the quarter and year-to-date on both a dollar and percentage basis was primarily the result of increases in staffing, depreciation, and mainframe computer expenses. The expenses were offset in part by reductions in outside consulting services. Also included is $137,000 in the second quarter and $274,000 for the year-to-date for amortization of intangible assets and goodwill resulting from the Company's acquisition of Vertical Technologies, Inc. In addition, $17,000 in the second quarter and $34,000 for the year-to-date is included for amortization of intangible assets and goodwill resulting from the Company's acquisition of the assets of Fenestra Computer Services, as described in the Liquidity and Capital Resources section below. Compared to the previous year, income from operations in the second quarter of 1996 decreased by $2,173,000 to $7,953,000 as the result of higher operating expenses. Year-to-date income from operations decreased by $4,972,000 compared to the previous year, also the result of higher operating expenses, and because of a $1,114,000 non-recurring write-off of acquired in-process technology related to the Company's acquisiton of the assets of Fenestra Computer Services in the first quarter of 1996. As a percentage of net sales, operating profits in the second quarter were 19.6% in 1996 compared to 28.5% in 1995. Year-to-date, operating profits as a percentage of net sales were 18.6% in 1996 versus 28.1% in the previous year. Investment income for the second quarter of 1996 increased by $577,000 or 65.7% to $1,455,000 versus $878,000 for the second quarter of 1995. On a year-to-date basis, investment income increased by $1,073,000 or 63.6% to $2,759,000 versus $1,686,000 in 1995. On both a quarterly and year to date basis the Company had larger cash balances invested and was able to earn a higher rate of return than in the comparable period from 1995. On a year to date basis, average cash and marketable securities increased from $60,555,000 in 1995 to $75,517 in 1996. In 1995 the annualized year to date return on these funds was 5.6%, compared to a return of 7.3% for the comparable period in 1996. Income before income taxes for the second quarter of 1996 of $9,487,000 was $1,596,000 or 14.4% below the prior year amount of $11,083,000 for the same period. The provision for income taxes was 34.0% in the second quarter of 1996, resulting in net income of $6,260,000 or 15.5% of net sales and net income per share of $0.26 on 24,198,000 weighted average shares outstanding. In the second quarter of 1995, the provision for income taxes was 36.0% resulting in net income of $7,092,000 or 20.0% of net sales and net income per share of $0.29 on 24,081,000 weighted average shares outstanding. Year- to-date income before income taxes of $17,459,000 was $4,071,000 or 18.9% below the prior year amount of $21,530,000 for the same period. The provision for income taxes on a year-to-date basis was 34.0% in 1996, resulting in net income of $11,509,000 or 14.6% of net sales and net income per share of $0.48 on 24,194,000 weighted average shares outstanding. On a year-to-date basis, the provision for income taxes in 1995 was 36.3% resulting in net income of $13,704,000 or 19.6% of net sales and net income per share of $0.57 on 24,076,000 weighted average shares outstanding. Liquidity and Capital Resources The Company's principal sources of liquidity continue to be cash generated from operations. At the end of the second quarter, the Company had $79,175,000 in cash and marketable securities versus $71,858,000 at the end of 1995. Effective February 16, 1996, the Company purchased the assets of Fenestra Computer Services, a UK partnership, in exchange for $1,314,000 in the form of cash and Zebra Class A common stock. The transaction has been accounted for under the purchase method of accounting. Assets and liabilities, including software and hardware technology, and trade names have been recorded at their respective fair market values with $1,114,000 assigned to acquired in-process technology based on an independent third-party appraisal. Management believes that existing capital resources and funds generated from operations are sufficient to finance anticipated capital requirements. The Company has no commitments or agreements with respect to acquisitions or other significant capital expenditures. PART II. - OTHER INFORMATION Item 1. Legal Proceedings Reference is made to Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the Securities and Exchange Commission on March 25, 1996, and the description therein of a suit filed against the Company and Zebra Technologies VTI, Inc. (Zebra VTI) by David Carter and William Flury. Such lawsuit has been stayed pending resolution of the action filed by the Company and Zebra VTI in Illinois against Messrs. Carter and Flury, as described in the 10-K. Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders of the Company was held on May 22, 1996. (b) 1. The Stockholders voted to elect five directors to the Company's Board of Directors, with the following votes: Authority Broker Directors For Against Withheld Abstentions Non-Votes Gerhard Cless 87,683,137 0 17,126 0 0 Edward Kaplan 87,683,137 0 17,126 0 0 Christopher Knowles 87,683,005 0 17,258 0 0 David Riley 87,682,855 0 17,408 0 0 Michael Smith 87,682,855 0 17,408 0 0
2. The Stockholders also voted to ratify the selection by the Board of Directors ofKPMG Peat Marwick LLP as the independent auditors of the Company's financial statements for the fiscal year ending December 31, 1996 with the following vote: Authority Broker For Against Withheld Abstentions Non-Votes 87,670,989 18,270 0 11,074 0
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 15. Acknowledgment of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27. Financial Data Schedule (b) Reports. No reports on Form 8-K have been filed by the Registrant for the quarterly period covered by this report. Exhibit 15 Acknowledgment of Independent Certified Public Accountants Regarding Independent Auditors'Review Report Zebra Technologies Corporation 333 Corporate Woods Parkway Vernon Hills, Illinois 60061-3109 Ladies and Gentlemen: With respect to the registration statements on Form S-8 of Zebra Technologies Corporation, we acknowledge our awareness of the use therein of our report dated July 11, 1996 related to our review of interim financial information as of June 29, 1996. 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. Chicago, Illinois KPMG Peat Marwick LLP August 12, 1996 Exhibit 27 The schedule contains summary financial information extracted from Zebra Technologies Corporation and subsidiaries consolidated balance sheets for June 29, 1996 and consolidated statements of earnings for June 29, 1996 and is qualified in its entirety by reference to such financial statements. ZEBRA TECHNOLOGIES CORPORATION Appendix A to Item 601(c) of Regulation S-K Commercial and Industrial Companies Article 5 of Regulation S-X Item Number Item Description Amount 5-02(1) cash and cash items 9,550 5-02(2) marketable securities 69,625 5-02(3)(a)(1) notes and accounts receivable-trade 26,756 5-02(4) allowances for doubtful accounts (574) 5-02(6) inventory 20,702 5-02(9) total current assets 127,032 5-02(13) property, plant and equipment 19,414 5-02(14) accumulated depreciation (9,183) 5-02(18) total assets 140,240 5-02(21) total current liabilities 15,052 5-02(22) bonds, mortgages and similar debt 0 5-02(28) preferred stock-mandatory redemption 0 5-02(29) preferred stock-no mandatory redemption 0 5-02(30) common stock 242 5-02(31) other stockholder's equity 121,613 5-02(32) total liabilities and stockholder's equity 140,240 5-03(b)1(a) net sales of tangible products 39,770 5-03(b)1 total revenues 40,490 5-03(b)2(a) cost of tangible goods sold 20,898 5-03(b)2 total costs and expenses applicable to sales and revenues 21,099 5-03(b)3 other costs and expenses 11,438 5-03(b)5 provision for doubtful accounts and notes 131 5-03(b)(8) interest and amortization of debt discount (9) 5-03(b)(10) income before income taxes 9,487 5-03(b)11 income tax expense 3,227 5-03(b)(14) income/loss 6,260 5-03(b)(15) discontinued operations 0 5-03(b)(17) extraordinary items 0 5-03(b)(18) cumulative effect- changes in accounting principles 0 5-03(b)(19) net income or loss 6,260 5-03(b)(20) earnings per share-primary 0.26 5-03(b)(20) earnings per share-fully diluted 0.26
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: August 13, 1996 By: /s/Edward L. Kaplan Edward L. Kaplan Chief Executive Officer Date: August 13, 1996 By: /s/Charles R. Whitchurch Charles R. Whitchurch Chief Financial Officer EX-27 2
5 The schedule contains summary financial information extracted from Zebra Technologies Corporation and subsidiaries consolidated balance sheets for June 29, 1996 and consolidated statements of earnings for June 29, 1996 and is qualified in its entirety by reference to such financial statements. Dollars in thousands, except per share data. 3-MOS DEC-31-1996 JUN-29-1996 9,550 69,625 26,756 (574) 20,702 127,032 19,414 (9,183) 140,240 15,052 0 0 0 242 121,613 140,240 39,770 40,490 20,898 21,099 11,438 131 (9) 9,487 3,227 6,260 0 0 0 6,260 0.26 0.26
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