Zebra
Annual Report 2000

Plain-text annual report

C O N N E C T I N G Technology People Solutions 2 0 0 0 a n n u a l r e p o r t A b o u t T h e C o m p a n y F I N A N C I A L S U M M A R Y Zebra Technologies is the world’s leading manufacturer of bar code labeling solu- tions and instant-issuance plastic card printers. In more than 90 countries our printers, supplies and software are used for high-growth automatic identification applications to help companies improve quality, pro- ductivity and customer service. High Performance Tabletop Bar Code Label and Specialty Printers Desktop Label and Receipt Printers Mobile Printing Systems Instant-Issuance Plastic Card Printers Thermal Printing Supplies Connectivity and Label Design Software 2000 % change 1999 % change 1998 (In thousands, except per share data and percentages) Operating Results Net sales Gross profit Operating income Net income Diluted earnings per share Capitalization Cash and cash equivalents and investments in marketable securities Working capital Total assets $481,569 232,428 108,670 71,622 2.30 $156,714 256,799 418,896 Total shareholders’ equity 371,288 19.7% 14.3 4.7 2.9 4.1 $402,213 18.4% $339,678 203,271 103,784 69,632 2.21 $235,568 302,804 394,643 349,307 30.2 67.8 73.8 71.3 156,039 61,865 40,069 1.29 $162,668 229,688 310,002 270,884 Net Sales $500 ) s n o i l l i m n i ( 450 400 350 300 250 200 150 100 50 Earnings Per Share* Free Cash Flow $2.50 2.25 2.00 1.75 1.50 1.25 1.00 .75 .50 .25 $60 54 48 42 36 30 24 18 12 6 ) s n o i l l i m n i ( 96 97 98 99 2000 96 97 98 99 2000 96 97 98 99 2000 *Excludes merger costs and other one-time items. T O O U R S H A R E H O L D E R S : Z ebra’s enduring success has come from continually extend- ing its leadership in the growth market for bar code labeling solutions. This year was no excep- tion. Our accomplish- ments in 2000 made us an even stronger com- pany in barcoding and instant-issuance plastic card printing. As impor- tant, they positioned Zebra for further growth in exciting new and emerging markets. Significant new products in all segments helped open markets, serve new applications and gain market share. Notably, we attained the Number One position in the high-growth market for mobile printing solutions by acquiring Comtec in April. Comtec also gave us direct sales capabilities to serve larger companies more effectively and better access to retailers. gave our printers emulation capabilities to displace competing printers and perform low-cost stand-alone operations. In 2000, radio frequency identification became a reality, with the first shipments of our RFID printer/encoders to simultaneously print a bar code and encode the chip embedded in a “smart label.” New offices in South Korea and Hong Kong furthered our international expansion, which continues to offer outstanding growth opportunities. We also added representation in Australia and other countries, and focused more attention on our growing Latin American business. The addition of Comtec, continued high growth in international markets and further share gains in plastic card printing contributed to our tenth consecutive year of growth as a public company. Net sales increased 19.7% to a record $481.6 million, while earnings excluding merger costs increased 8.1% to a record $2.53 per share. We generated $56.1 million in free cash and, at the end of 2000, had $156.7 mil- lion in cash and investments available for further acquisitions and other investments. intact. The implementation of comple- mentary technologies and growth in new industries add to this favorable outlook. The global market leadership, unmatched brand and distribution strength, and product depth and breadth that we discuss in the following pages prepare us to capture the outstanding opportunities we see ahead. Leveraging on our tremendous competitive advantages will make us an even greater force than we are today, as we capture market share and growing product volumes drive down manufacturing costs and support profitability. Fueled by our strong cash generation, acquisitions have been enormously successful in strengthening our compet- itive advantages and vaulting us to the Number One market position. They will continue to play a meaningful role in building value in our core business, as well as diversifying into related high- growth opportunities and technologies. We enter another year optimistic for further success, as the 2,000 Zebra associates worldwide are building the value of Zebra for all its shareholders. Wireless technology, which accompanied the Comtec acquisition, significantly added to the value of our printing solutions. Also in 2000, we introduced industry- leading Internet connectivity for unpar- alleled global control over Zebra bar code printer networks. Still other advances Our accomplishments in 2000, which strengthened Zebra on many fronts, and the long-term outlook for auto-ID technologies fill us with enthusiasm. The fundamental reasons for adopting barcoding—productivity improvement and quality enhancement—remain firmly Edward Kaplan Chairman and Chief Executive Officer 1 Edward Kaplan Chairman and Chief Executive Officer EBITDA* $150 135 120 105 90 75 60 45 30 15 ) s n o i l l i m n i ( 96 97 98 99 2000 *Earnings before interest, taxes, depreciation and amortization Zebra Technologies is well positioned to grow shareholder value. We continue to build on the elements that Products that deliver real value are the foundation of Zebra’s long-term success. Recent introductions, such as Internet connectivity, radio frequency identification, and wireless communication, improve the performance and flexibility of our printing solutions to meet a growing number of bar code labeling and automatic identification applications. New products help us grow by serving new applications, attracting new customers, and opening new markets. W H Y Z E B R A ? Global Growth Innovative Products delivered an impressive record of sales and earnings growth, high profitability and financial strength. 2 The world is getting smaller, as companies increasingly source products from suppliers worldwide. To deliver their products on time at the lowest possible cost, suppliers are adopting industry bar code labeling standards—making the global supply chain more streamlined and sophisticated. Zebra is ideally positioned to serve this important growth market with a vast network of reseller partners in more than 90 countries. We will continue to expand this network to tap the growth potential of international markets. Zebra is the clear global market leader in thermal bar code label printing with unsurpassed brand strength. No other company brings such depth and breadth of product to the market: from rugged, high-performance printers in mission-critical applications to compact desktop and portable models in offices and on the go. Zebra’s leadership offers a material advantage to our valued resellers and end users: best-of-breed printers from a single source. Growing Markets Market Leadership New Technologies Competition drives companies to increase productivity, lower costs, and improve customer service. The continued adoption of barcoding and automatic identification technology is assured with the increasing sophistication of supply chain management, new compliance labeling standards, emerging markets for applying the benefits of barcoding and auto-ID, and the desire for greater customer convenience, personal identification and security. What began as a mechanical bar code label printer is now a sophisticated information management tool. Whether it's a bar coded shipping label or magnetically encoded plastic card, Zebra products deliver information on demand in highly useable formats. Real-time links with databases encode labels for accuracy and efficiency. Internet connectivity provides unparalleled control over worldwide label printer networks. Wireless capabilities and other new technologies enable Zebra to deliver more value to the market and open new applications for our printing solutions. 3 T E C H N O L O G Y , P R O D U C T S , S O L U T I O N S E S I T I V O h P R I I I i X 6 9 M 4 Z 6 4 1 - T H H E A L T H C A R E Healthcare providers reduce costly errors with Zebra specialty labels for patient identification, laboratory procedures, and other operations requiring the highest accuracy levels. St. Anthony Central and St. Anthony North hospitals in Denver use Zebra products when conducting glucose scans. The nurse enters an ID number and scans the patient-identifying bar code. Information from the glucose scan is downloaded to the hospital’s laboratory database and merged with the patient’s billing record. 4 R a d i o F r e q u e n c y I d e n t i f i c a t i o n Zebra delivers new auto-ID capabilities to its customers with radio frequency identification technology. “Smart labels” from the R-140 printer/encoder combine human-readable and non-line-of-sight reading with the ability to append information on an integrated chip embedded within the label. These features give companies new levels of control over their asset management throughout the supply chain. Curbside Baggage Check-in 3 o e m a C Supply Chain Logistics Billions of packages move through the supply chain every year. Around the world, from source to final destination, Zebra’s bar code labeling solutions keep packages moving with increasing speed and efficiency. Zebra products help American Airlines deliver better customer service with curbside airport check-in. Thanks to wireless connectivity and Zebra printers, travelers can check their bags and get their boarding passes right at curbside and bypass the lines inside the terminal. Instant-Issuance Plastic Card Printing Personalized digital driver’s licenses and identification cards for the State of Ohio and other governmental agencies worldwide are printed on Zebra’s instant-issuance plastic card printers. Security and access control are two rapidly growing personal identification applications, which can incorporate magnetic stripe, smart card, bar code, and laminate overlay technologies. TM N E W A L L I A N C E S Strategic partnerships expand the applications for Zebra printers and make it easier for companies to connect their Zebra printers to data networks. Users of SAP® e-business solutions can take advantage of our BAR-ONE for SAP R/3® to enable bar code printing from SAP solutions without additional software or servers, system modification or manual scripting. Zebra Technologies is a mySAP.com® Software Partner Toyota de Puerto Rico relies on Zebra mobile printing systems, high-performance tabletop printers and genuine Zebra supplies to track the 26,000 vehicles that arrive annually on the island. S p e c i a l S o l u t i o n s f o r E x t r e m e A p p l i c a t i o n s Because it endures the blazing heat and high humidity of tropical Puerto Rico, a PolyPro 2000 label containing essential information is printed and affixed to each vehicle. Toyota lowers costs, increases accuracy, and improves productivity as its sophisticated system tracks inventory in real time. c r i e t s a l P t n i r P 0 2 4 P d r a C TDPR # 132635 Model 2001 CO26 HIGHLANDER 4DR PP 3 AT 3P1–SILVER VIN: 2T1BR12E31C384358 BARCO: 00016 6 Entertainment and Leisure San Diego’s Barona Casino builds customer loyalty with personalized membership cards printed on Zebra plastic card printers. Hospitality and entertainment are exciting growth markets for Zebra, as companies provide enhanced services to their customers with digital instant-issuance cards for membership, frequent buying, and event access. ZebraLink: the power to control and monitor bar code printers from anywhere in the world. Alert automatically sends a message to any wire or wireless email-enabled device when a printer runs out of media or other situations arise, minimizing downtime and keeping operations running smoothly. WebView offers familiar Web-based tools to adjust printer and network settings, and to download label formats to any or all networked Zebra printers over the Internet. ZBI™ (Zebra BASIC Interpreter) controls other peripheral devices for stand-alone applications and can emulate non-Zebra printers for easy upgrades to Zebra performance and reliability. 2-D Barcoding New compliance labeling, such as the General Motors GM1724-A standard, uses high-density, two-dimensional bar codes to pack large amounts of information onto a shipping label. Clear and accurate scanning of these labels is assured with the use of Zebra printers and supplies. Zebra Technologies is an official compliance-certifying agent for the GM1724-A Common Global Shipping Label. Alaska Marine Lines keeps costs low and productivity high in delivering essential food, clothing, and building materials to the people of southeast Alaska. Using Zebra printers and PolyPro™ synthetic labels, AML's automatic data capture system speeds goods from port to port while W I R E L E S S Automatic Data Capture customers track their orders on the Web. With the aid of robust wireless connectivity, Wal-Mart and SAM’S Club associates use lightweight Zebra mobile printing systems for several in-store printing functions such as shelf labeling and merchandise re-ticketing. Mobile printing appli- cations are growing rapidly, as companies change the way they do business to improve customer service and take advantage of the productivity enhancements mobile printing delivers. 7 Global E V I T C E P S R E P In 2000, international customers generated 37% of Zebra’s total sales. International markets offer abundant growth opportunities for Zebra, as world economies become ever more interdependent. Zebra is well positioned to serve the expanding needs of businesses around the world, with our network of valued reseller partners located in more than 90 countries. We support this vast and effective system, which has sold more than two million Zebra printers, with 16 manufacturing, warehousing, and sales facilities worldwide. Zebra Locations: Representation in: Reseller Locations: Washington, D.C. Australia Dubai The Netherlands South Africa Spain Illinois California Florida Rhode Island Wisconsin Denmark France Germany Hong Kong Italy Japan Singapore South Korea United Kingdom 8 American Samoa Cayman Islands Chile China Colombia Costa Rica Croatia Cyprus Finland France French Polynesia Germany Greece Guam Guatemala Italy Jamaica Japan Jordan Kenya Kuwait Latvia Antigua and Barbuda Argentina Australia Austria Bahamas Bahrain Barbados Belarus Belgium Bermuda Bolivia Brazil Bulgaria Canada Czech Republic Honduras Denmark Dominican Republic Ecuador Egypt El Salvador Estonia Hong Kong Hungary Iceland India Indonesia Ireland Israel Mauritius Mexico Morocco Netherlands Puerto Rico Romania Russia Samoa Taiwan Thailand Tunisia Turkey New Zealand Saudi Arabia Ukraine Nigeria Norway Oman Pakistan Panama Singapore United Arab Slovakia Slovenia Emirates United Kingdom South Africa United States South Korea Uruguay Lebanon Liechtenstein Lithuania Luxembourg Paraguay Macedonia Peru Malaysia Malta Mauritania Philippines Poland Portugal Spain Sri Lanka Sweden Switzerland Syria Uzbekistan Vietnam Venezuela Yugoslavia Zimbabwe Selected Consolidated Financial Data Z E B R A T E C H N O L O G I E S C O R P O R A T I O N (In thousands, except per share amounts) Year Ended December 31, Consolidated statements of earnings data Net sales Cost of sales Gross profit 2000 1999 1998 1997 1996 $ 481,569 $ 402,213(5) $ 339,678(5) $ 300,071(5) $ 255,012(5) 249,141 198,942(5) 183,639(5) 153,205(5) 137,754(5) 232,428 203,271 156,039 146,866 117,258 Total operating expenses 123,758(1) 99,487(2) 94,174(2) 72,446 62,880(4) Operating income 108,670(1) 103,784(2) 61,865(2) 74,420 54,378(4) Income from continuing operations before income taxes 111,911(1) 108,800(2) 65,021(2) 82,225(3) 60,703(4) Income from continuing operations 71,622(1) 69,632(2) 40,069(2) 54,447(3) 37,952(4) Earnings per share from continuing operations Basic Diluted $ $ 2.33(1) 2.30(1) $ $ 2.23(2) 2.21(2) $ $ 1.30(2) 1.29(2) $ $ 1.76(3) 1.74(3) $ $ 1.24(4) 1.21(4) Weighted average shares outstanding Basic Diluted 30,790 31,155 31,175 31,521 30,919 31,176 30,897 31,380 30,696 31,269 (In thousands) December 31, Consolidated balance sheet data Cash and cash equivalents and investments and marketable securities $ 156,714 $ 235,568 $ 162,668 $ 139,320 $ 103,777 Working capital Total assets Long-term obligations Shareholders’ equity 256,799 302,804 229,688 209,862 164,678 418,896 394,643 310,002 270,447 218,631 513 664 36 314 3,137 371,288 349,307 270,884 236,220 184,007 (1) Includes pretax charges for merger costs of $11,066 relating to the acquisition of Comtec Information Systems, Inc., and merger with Eltron International, Inc. (2) Includes a pretax charge for merger costs of $6,341 in 1999 and $8,080 in 1998 relating to the merger with Eltron International, Inc. (3) Includes a one-time pretax gain of $5,458 from the sale of Zebra’s investment in Norand Corporation common stock. (4) Reflects a pretax charge for acquired in-process technology of $1,117 relating to the Company’s acquisition of Fenestra Computer Services and $2,500 relating to the Company’s acquisition of Privilege, S.A. (5) Reflects the adjustment of net sales and cost of sales for EITF Issue No. 00-10, which requires freight billed to customers to be reported as revenue, not as a reduction of freight costs. This adjustment has no impact on net income. 9 Management’s Discussion and Analysis of Financial Condition and Results of Operations General On October 28, 1998, the Company merged with Eltron International, Inc. This transaction has been accounted for as a pooling of interests for financial reporting purposes. All financial statements for periods presented prior to the merger have been restated to give effect to the combination. Comparison of Years Ended December 31, 2000 and 1999 Net sales increased 19.7% in 2000 to a record $481,569,000 from $402,213,000 in 1999. A significant portion of this sales growth was due to the addition of sales derived from the Comtec acquisition. Hardware sales increased 17.6% to $377,842,000 from $321,354,000 technology. This slowdown became more pronounced and evident in the second half of 2000, and has con- tinued into 2001. While management believes that the long-term outlook for bar code label printing remains favorable, North American sales growth is expected to be below historical rates in 2001. On April 3, 2000, Zebra acquired all of the outstanding capital stock of Comtec Information Systems, Inc. This acquisition was accounted as a purchase transaction. Accordingly, Zebra’s results of operations reflect Comtec’s results of operations from the date of acquisition. During the fourth quarter of 2000, the Company adopted Securities and Exchange Commission Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Accounting Statements, and Emerging Issues Task Force Issue No. 00-10 (EITF 00-10). In accordance with EITF 00-10, the Company adjusted sales for all years reported to include freight billed to customers as freight revenue. Previously, these freight billings were classified as a reduction of freight costs in cost of sales. This change in classification has no effect on previously reported net income. 10 and represented 78.5% of net sales, compared with International sales for 2000 were $179,989,000, up 79.9% of net sales for 1999. Sales of supplies increased 11.9% from $160,893,000 and accounted for 37.4% of 16.8% to $80,703,000 from $69,092,000 to represent net sales in 2000, compared with 40.0% in 1999. All 16.8% of net sales in 2000 versus 17.2% in 1999. international regions experienced sales increases to Because of the higher proportion of service revenue record levels, with strong sales growth posted in Asia in the portable printer business from the Comtec Pacific and Latin America. Management believes that acquisition, service and software revenue advanced the Asia Pacific and Latin American regions hold signif- 113.7% to $17,251,000 from $8,071,000 and accounted icant growth opportunities for the Company, because it for 3.6% of net sales in 2000 compared with 2.0% for believes that barcoding and other auto-id technologies 1999. Freight revenue for 2000 was $5,773,000, up are not as well adopted in international markets as in 56.2% from $3,695,000 for 1999, and accounted for North America. The strength of the U.S. dollar versus 1.2% of net sales in 2000 and 0.9% in 1999. the British pound and the euro impeded sales growth for the Company’s European region. Management Geographically, North American sales increased 25.0% estimates that the strong U.S. dollar reduced reported to a record $301,580,000 from $241,320,000. The high sales for 2000 by approximately $5,400,000, compared concentration of Comtec sales in North America with exchange rates that prevailed during 1999. It is contributed to the sales growth in the region. A slowing difficult for management to forecast the direction of U.S. economy, however, restricted sales growth of bar foreign exchange movements, and therefore, the code label printers in North America, as companies potential impact foreign exchange rates will have on reduced expenditures on capital and information future financial results, either positive or negative. Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Gross profit increased 14.3% to $232,428,000 for 2000 Research and development expenses for 2000 were As part of the Comtec acquisition, the Company from $203,271,000 for 1999. Several factors, however, $26,746,000, or 5.6% of net sales, up 21.5% from the acquired printer and wireless technology. A portion of led to a decline in gross profit margin to 48.3% in $22,007,000, or 5.5% of net sales, recorded for 1999. the purchase price was attributed to acquired in-process 2000 from 50.5% in 1999. Notably, faster growth in Primarily due to the addition of engineering activities technology, as the development work associated with portable printers, brought about by the Comtec acqui- related to the Comtec acquisition, the Company the projects had not yet reached technological feasibility sition, and other lower priced printers contributed to incurred increased personnel-related expenses from and was believed to have no alternative future use. The an unfavorable product mix, because these products higher staffing levels, increased use of outside con- Company assessed the fair value of the acquired in- generally carry lower gross margins than other products sulting services, and generally higher costs related to process technology using an income approach. During in the Company’s product line. Foreign exchange a larger research and development program. the second quarter of 2000, the Company recorded a rates also negatively affected gross margins, as the $5,953,000 charge to write off this acquired in-process strength of the U.S. dollar against the British pound and General and administrative expenses increased by technology. There was no such charge in 1999. euro lowered reported sales of products to European 8.9% to $33,594,000 from $30,858,000. As a percentage customers. Unfavorable variances to standard costs of net sales, general and administrative expenses related to higher component costs, increased freight declined to 7.0% from 7.7%. During 2000, the Company charges and higher labor costs also contributed to the recorded higher personnel-related expenses from lower gross profit margin. Higher production volumes higher staffing levels, as well as costs for expanded partially offset these negative factors. operations related to the Comtec acquisition. Lower The Company incurred merger costs of $5,113,000 in 2000 and $6,341,000 in 1999. These costs related to Eltron and Comtec transactions and could not be determined for at the time of the transactions. These costs consisted principally of expenditures on infor- costs for outside services, notably recruiting, partially mation technology infrastructure to integrate Eltron Selling and marketing expenses increased 20.8% to offset these higher expenses. operations into the Company’s enterprise-wide $48,306,000 from $39,990,000. As a percentage of net resource planning (ERP) system, and on product line sales, selling and marketing expenses increased Amortization of intangible assets totaled $4,046,000 rationalization of the Company’s expanded portable slightly to 10.0% from 9.9%. Lower expenses for for 2000, compared with $291,000 for 1999. The printer line. In 1999, these costs related to the Eltron business development, including trade show expenses, increase was due to the amortization of intangible merger for consulting fees and personnel-related and outside professional services partially offset assets related to the Comtec acquisition. expenses for relocation, severance and recruitment. higher expenses related to increased staffing levels and other internal operations. These higher expenses derived primarily from the addition of sales-related personnel in connection with the Comtec acquisition. The Company substantially completed the integration with Eltron in 2000. Management estimates that merger costs related to the Comtec acquisition will be incurred through the fourth quarter of 2001. 11 Investment income increased 29.9% to $11,345,000 Net income for 2000 was $71,622,000, or $2.30 per Gross profit increased 30.3% to $203,271,000 for 1999 from $8,732,000. Higher investment returns more than diluted share, up 2.9% from $69,632,000, or $2.21 per from $156,039,000 for 1998. As a percentage of net offset lower average invested balances. diluted share, for 1999. Excluding the effects of merger sales, gross profit increased to 50.5% from 45.9%. expenses, net income for 2000 was $78,704,000, or Excluding $3,485,000 in one-time adjustments to cost Other expense for 2000 totaled $8,104,000, compared $2.53 per diluted share, versus $73,691,000, or $2.34 of goods sold related to the Eltron merger, 1998 gross with $3,716,000 for 1999. The expense increase was per diluted share, for 1999. profit would have been $159,524,000, or 47.0% of net primarily due to losses from foreign currency transac- tions on the value of euro-denominated cash deposits and receivables from customers and pound sterling- Comparison of Years Ended December 31, 1999 and 1998 sales. Excluding the effect of merger costs on 1998 gross profit, the increase in gross profit margin was primarily due to better overhead utilization and lower denominated receivables from the Company’s U.K. Net sales increased 18.4% in 1999 to $402,213,000 product component costs. Average unit costs deterio- subsidiary. These losses totaled $6,032,000 for 2000, from $339,678,000 in 1998. Unit growth in hardware rated slightly, primarily because of changes in the mix compared with $1,985,000 for 1999. During the sec- principally drove sales growth. Product mix changes of products sold toward shipments of relatively larger ond half of 2000, the Company implemented currency lowered the average unit price for printers, because volumes of lower priced printers. hedging strategies to minimize the effects of foreign volume in lower-priced models increased faster than currency transactions. Higher other expense also in higher-priced models. Hardware sales increased Selling and marketing expenses increased 11.7% to resulted from interest expense related to short-term 21.0% to 80.6% of net sales, and supplies sales $39,990,000 from $35,816,000. As a percentage of net loans related to the Comtec acquisition. increased 10.9% to 17.3% of net sales. Service and sales, selling and marketing expenses decreased to software revenue of $8,071,000 accounted for 2.0% of 9.9% from 10.5%. Excluding one-time charges of Income before income taxes increased 2.9% to net sales in 1999, and freight revenue of $3,695,000 $242,000 related to the Eltron merger, selling and $111,911,000 from $108,800,000. As a percentage of represented 0.9% of 1999 sales. marketing expenses for 1998 would have been sales, income before income taxes declined to 23.2% $35,574,000, or 10.5% of net sales. Excluding the from 27.1%. Excluding merger-related charges of North American sales increased 18.3%, while effect of merger costs, the higher selling and marketing $11,066,000 in 2000 and $6,341,000 in 1999, income international sales rose 18.6%. International sales expenses in 1999 resulted from higher co-op and other before income taxes increased 6.8% to $122,977,000, increased to $160,893,000 from $135,681,000 and business development expenses and higher staffing or 25.5% of net sales, from $115,141,000, or 28.6% of accounted for 40.0% of net sales in 1999 and 39.9% levels to support the increased levels of business. net sales, in 1999. The effective income tax rate for of net sales in 1998. the Company was 36.0% in both 2000 and 1999. 12 Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Research and development expenses for 1999 $8,080,000 in merger-related costs for accounting, The effective income tax rate for the Company in 1999 increased 2.7% to $22,007,000, or 5.5% of net sales, legal, investment banking, and consulting fees, as well was 36.0%, compared with 38.4% for 1998. The provi- from $21,428,000, or 6.3% of net sales, for 1998. as provisions for facilities consolidation and severance. sion for income taxes for 1998 includes the effect of Research and development expenses for 1998 included $2,875,000 in merger-related costs, which are not $175,000 in one-time charges related to the Eltron Investment income increased to $8,732,000 from deductible for income tax purposes. Excluding these merger. Excluding these one-time charges, research $4,005,000. The increase was principally due to higher costs, the Company’s effective tax rate for 1998 would and development expenses for 1998 would have been invested balances and a more normalized return on the have been 36.8%. $21,253,000, or 6.3% of net sales. For 1999, lower Company’s investment portfolio during 1999, compared business development expenses partially offset higher with the loss resulting from the unusually high volatility Net income for 1999 was $69,632,000, or $2.21 per expenses for increased staffing levels and outside in the capital markets during the second half of 1998. diluted share. For 1998, net income was $40,069,000, or professional services. $1.29 per diluted share. Excluding the effects of merger General and administrative expenses increased by with $849,000 for 1998. The expense increase was prin- $2.34 per diluted share, up 49.1% from $49,420,000, Other expense for 1999 totaled $3,716,000, compared expenses, net income for 1999 was $73,691,000, or 8.3% to $30,858,000 from $28,505,000. As a percentage cipally due to one-time items recorded during the third or $1.59 per diluted share, for 1998. of net sales, general and administrative expenses quarter of 1999, including a settlement for claims prior decreased to 7.7% from 8.4%. Excluding $1,178,000 in to any litigation that was unrelated to the Company’s Liquidity and Capital Resources one-time charges related to the Eltron merger, 1998 operations. Other expense also includes a revaluation Internally generated funds from operations are the general and administrative expenses were $27,327,000, of the Company’s euro- and deutsche mark-denominated primary source of liquidity for the Company. As of or 8.0% of net sales. For 1999, higher expenses related receivables and cash balances as a result of the relative December 31, 2000, the Company had $156,714,000 to increased staffing levels and information technology strength of the pound sterling versus both the euro and in cash and marketable securities, compared with operations were partially offset by lower expenditures deutsche mark in the fourth quarter of 1999. $235,568,000 at the end of 1999. Capital expendi- for outside consulting and other professional services. tures were $8,948,000 in 2000, $11,349,000 in 1999 In 1999, the Company incurred $6,341,000 in costs $108,800,000 from $65,021,000. Excluding merger- existing capital resources and funds generated from related to the Eltron merger for consulting fees and related charges of $6,341,000 in 1999 and $13,161,000 operations are sufficient to finance anticipated Income before income taxes increased 67.3% to and $25,615,000 in 1998. Management believes that personnel-related expenses for relocation, severance in 1998, income before income taxes increased 47.3% capital requirements. and recruitment. For 1998, the Company incurred to $115,141,000 in 1999 from $78,182,000 in 1998. 13 Recently Issued Accounting Pronouncements During the fourth quarter of 2000, the Company Specifically, the factors that could affect this outlook In June 1998, the Financial Accounting Standards Board adopted Securities and Exchange Commission Staff include market acceptance of the Company’s products, issued Statement of Financial Accounting Standards Accounting Bulletin No. 101 (SAB 101), Revenue including those mentioned in this annual report, and No. 133 (SFAS 133), Accounting for Derivative Recognition in Accounting Statements, and EITF 00-10. competitors’ product offerings. They also include Instruments and Hedging Activities. It was amended by In accordance with EITF 00-10, the Company restated economic conditions in the United States and other SFAS No. 137, Accounting for Derivative Instruments sales for all years reported to include freight billed to countries, the rate of adoption of bar code labeling and Hedging Activities-Deferral of the Effective Date of customers as freight revenue. Previously, these freight systems relative to the current outlook, and the FASB Statement No. 133 and SFAS No. 138, Accounting billings were classified as a reduction of freight costs in success and speed of the Company’s integration with for Derivative Instruments and Certain Hedging cost of sales. This change in classification has no effect Comtec Information Systems. The Company’s ability Activities. SFAS 133 is effective for all fiscal quarters of on previously reported net income. to control manufacturing and operating costs will all fiscal years beginning after June 15, 2000. SFAS 133 affect future profitability. Interest rate and financial establishes a comprehensive standard for the recogni- Significant Customers market conditions will also have an impact on results, tion and measurement of derivative instruments and For the years ended December 31, 2000 and 1999, no because of the Company’s large investment portfolio. hedging activities. This pronouncement will require the customer accounted for 10.0% or more of net sales. Foreign exchange rates will affect financial results, Company to recognize derivatives on its balance sheet One customer, United Parcel Service, represented because of the large percentage of the Company’s at fair value. Changes in the fair values of derivatives 10.3% of net sales in 1998. international sales, particularly in Europe. When used that qualify as cash flow hedges will be recognized in in this annual report and documents referenced, the other comprehensive income until the hedged item is Safe Harbor words “anticipate,” “believe,” “estimate,” and “expect” recognized in earnings. The Company expects that this Forward-looking statements contained in this annual and similar expressions as they relate to the Company new standard will not have a significant effect on its report are subject to the safe harbor created by the or its management are intended to identify such results of operations. Private Securities Reform Act of 1995 and are highly forward-looking statements. dependent upon a variety of important factors which could cause actual results to differ materially from those reflected in such forward looking statements. 14 Consolidated Balance Sheets Z E B R A T E C H N O L O G I E S C O R P O R A T I O N (Amounts in thousands, except share and per share data) December 31, Assets Current assets: Cash and cash equivalents Investments and marketable securities Accounts receivable, net of allowance of $1,420 in 2000 and $1,850 in 1999 Inventories Deferred income taxes Prepaid expenses Total current assets Property and equipment at cost, less accumulated depreciation and amortization Deferred income taxes Excess of cost over fair value of net assets acquired Other intangibles Other assets Total assets Liabilities and shareholders’ equity Current liabilities: Accounts payable Accrued liabilities Short-term note payable Current portion of obligation under capital lease with related party Income taxes payable Total current liabilities Obligation under capital lease with related party, less current portion Long-term liability Deferred income taxes Other Total liabilities 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, 25,610,515 and 24,877,501 shares issued; 24,551,762 and 24,877,501 shares outstanding in 2000 and 1999, respectively Class B Common Stock, $.01 par value; 28,358,189 shares authorized, 5,936,001 and 6,540,188 shares issued and outstanding in 2000 and 1999, respectively Additional paid-in capital Treasure stock (1,058,753 shares) Retained earnings Accumulated other comprehensive income Total shareholders’ equity Total liabilities and shareholders’ equity See accompanying notes to consolidated financial statements. 2000 1999 $ 24,815 131,899 83,941 56,852 4,601 1,578 303,686 41,587 3,469 34,529 29,281 6,344 $ 38,501 197,067 62,870 42,379 3,467 1,614 345,898 41,686 — 189 — 6,870 $ 418,896 $394,643 $ 23,838 11,910 149 77 10,913 46,887 513 — — 208 $ 23,798 11,295 196 264 7,541 43,094 571 93 1,473 105 47,608 45,336 — 256 59 63,491 (50,128) 361,026 (3,416) 371,288 $ 418,896 — 249 65 60,072 — 289,404 (483) 349,307 $394,643 15 Consolidated Statements of Earnings Z E B R A T E C H N O L O G I E S C O R P O R A T I O N (Amounts in thousands, except per share data) Year Ended December 31, Net sales Cost of sales Gross profit Operating expenses: Selling and marketing Research and development General and administrative Amortization of intangible assets Acquired in-process technology Merger costs Total operating expenses Operating income Operating income (expense): Investment income Interest expense Other, net Total other income Income before income taxes Income taxes Net income Basic earnings per share Diluted earnings per share See accompanying notes to consolidated financial statements. Basic weighted average shares outstanding Diluted weighted average and equivalent shares outstanding 16 2000 1999 1998 $ 481,569 $ 402,213 $ 339,678 249,141 232,428 48,306 26,746 33,594 4,046 5,953 5,113 123,758 108,670 11,345 (1,120) (6,984) 3,241 111,911 40,289 198,942 203,271 39,990 22,007 30,858 291 — 6,341 99,487 103,784 8,732 (209) (3,507) 5,016 108,800 39,168 183,639 156,039 35,816 21,428 28,505 345 — 8,080 94,174 61,865 4,005 (425) (424) 3,156 65,021 24,952 $ 71,622 $ 69,632 $ 40,069 $ $ 2.33 2.30 30,790 31,155 $ $ 2.23 2.21 31,175 31,521 $ $ 1.30 1.29 30,919 31,176 Statements of Comprehensive Income Consolidated Z E B R A T E C H N O L O G I E S C O R P O R A T I O N (Amounts in thousands) Year Ended December 31, 2000 1999 1998 Net income $ 71,622 $ 69,632 $ 40,069 Other comprehensive income (loss): Foreign currency translation adjustment (1,508) (1,432) 659 See accompanying notes to consolidated financial statements. Comprehensive income $ 68,689 $ 68,200 $ 40,728 net of income tax benefit of $801 for 2000 (1,425) — — Unrealized holding losses on investments: Net change in unrealized holding loss for the period, 17 Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Consolidated Statements of Shareholders’ Equity (Dollars in thousands) Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Unrealized Holding Loss on Investments Cumulative Translation Adjustment Total Accumulated Other Comprehensive Income Balance at December 31, 1997 $ 194 $115 $ 55,918 $ 179,703 Issuance of 55,578 shares of Class A Common Stock Issuance of 229,290 shares of Class B Common Stock Conversion of 3,187,641 shares of Class B Common Stock to 3,187,641 shares of Class A Common Stock Elimination of intercorporate investments in Eltron Tax benefit resulting from exercise of options Net income Foreign currency translation adjustment Balance at December 31, 1998 Issuance of 474,676 shares of Class A Common Stock Conversion of 2,079,731 shares of Class B Common Stock to 2,079,731 shares of Class A Common Stock Tax benefit resulting from exercise of options Net income Foreign currency translation adjustment Balance at December 31, 1999 Issuance of 128,827 shares of Class A Common Stock Conversion of 604,187 shares of Class B Common Stock to 604,187 shares of Class A Common Stock Repurchase of 1,170,500 shares of Class A Common Stock Reissuance of 111,747 treasury shares Tax benefit resulting from exercise of options Gains on put options Net income Unrealized holding loss on investments (net of income taxes) Foreign currency translation adjustment 1 — 32 (4) — — — 223 5 21 — — — 249 1 6 — — — — — — — — 3 (32) — — — — 86 — (21) — — — 65 — (6) — — — — — — — 946 566 — (8,088) 512 — — 49,854 9,828 — 390 — — 60,072 3,227 — — (1,952) 1,505 639 — — — — — — — — 40,069 — 219,772 — — — 69,632 — 289,404 — — — — — — 71,622 — — — — — — — — — — — — — — — — — — — (55,505) 5,377 — — — — — — — — — — — — — — — — — — — — — — — — — — — (1,425) — $ 290 $ 236,220 — — — — — — 659 949 — — — — (1,432) (483) — — — — — — — — (1,508) 947 569 — (8,092) 512 40,069 659 270,884 9,833 — 390 69,632 (1,432) 349,307 3,228 — (55,505) 3,425 1,505 639 71,622 (1,425) (1,508) Balance at December 31, 2000 $256 $59 $63,491 $361,026 $(50,128) $(1,425) $(1,991) $371,288 See accompanying notes to consolidated financial statements. 18 Consolidated Statements of Cash Flows Z E B R A T E C H N O L O G I E S C O R P O R A T I O N (Amounts in thousands) Year Ended December 31, Cash flows from operating activities: Net income 2000 1999 1998 $ 71,622 $ 69,632 $ 40,069 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Tax benefit from exercise of options Acquired in-process technology Depreciation (appreciation) in market value of investments and marketable securities Deferred income taxes Changes in assets and liabilities, net of business acquired: Accounts receivable, net Inventories Other assets Accounts payable Accrued liabilities Income taxes payable Other operating activities Investments and marketable securities Net cash provided by operating activities Cash flows from investing activities: Purchases of property and equipment Acquisition of Comtec Information Systems, net of cash acquired Sales of investments and marketable securities Net cash used in investing activities Cash flows from financing activities: Purchase of treasury stock Reissuance of treasury stock Proceeds from exercise of stock options Proceeds from put options Common stock retired in Eltron merger Issuance (repayment) of notes payable Payments for obligation under capital lease Net cash provided by (used in) financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year 14,383 1,505 5,953 2,952 (6,076) (7,106) (7,179) 883 (6,064) (810) 3,372 (305) 60,791 133,921 (8,948) (88,476) — (97,424) (55,505) 3,425 3,228 639 — (140) (322) (48,675) (1,508) (13,686) 38,501 9,900 390 — (936) 1,211 (5,216) (2,695) (2,931) 3,233 (203) 3,055 (286) (51,800) 23,354 (11,349) — 6,946 (4,403) — — 9,833 — — 70 (312) 9,591 (1,432) 27,110 11,391 10,248 512 — 1,085 1,995 (6,046) 4,176 (294) 3,496 744 (205) 430 (23,967) 32,243 (25,615) — — (25,615) — — 1,516 — (8,092) (180) (65) (6,821) 659 466 10,925 Cash and cash equivalents at end of year $ 24,815 $ 38,501 $ 11,391 Supplemental disclosures of cash flow information: Interest paid Income taxes paid See accompanying notes to consolidated financial statements. Supplemental disclosures of non-cash transactions: Equipment under capital lease obligation $ 1,120 44,736 $ 209 36,010 $ 425 22,624 — 1,096 — 19 Notesto Consolidated Financial Statements Note 1 Description of Business Inventories. Inventories are stated at the lower of cost or market, and cost is deter- Zebra Technologies Corporation and its wholly-owned subsidiaries (the Company) design, mined by the first-in, first-out (FIFO) method. manufacture, sell and support a broad line of bar code label and plastic card printers, self-adhesive labeling materials, plastic card supplies, thermal transfer ribbons and bar code label design software. These products are used principally in automatic identifica- tion (auto ID), data collection and personal identification applications and are distributed world-wide through a multi-channel network of resellers, distributors and end users rep- resenting a wide cross section of industrial, service and government organizations. Note 2 Summary of Significant Accounting Policies Principles of Consolidation. The accompanying financial statements have been pre- pared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit have been eliminated in consolidation. Cash Equivalents. Cash equivalents consist primarily of short-term treasury securities. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. Investments and Marketable Securities. Investments and marketable securities at December 31, 2000 consisted of U.S. government securities, state and municipal bonds, partnership interests and equity securities, which are held indirectly in diversi- fied funds actively managed by investment professionals. The Company classifies its debt and marketable equity securities in one of three categories: trading, available- for-sale or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securi- ties that the Company has the ability and intent to hold until maturity. All securities not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of discounts or premiums. Unrealized holding gains and losses on trading securities Property and Equipment. Property and equipment is stated at cost. Depreciation and amortization is computed primarily using the straight-line method over the estimated useful lives of the various classes of property and equipment, which are 30 years for buildings and range from 3 to 10 years for other property. Property and equipment held under capital leases is amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Income Taxes. The Company accounts for income taxes under the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Intangible Assets. Excess cost over fair value of net assets acquired represents the unamortized excess of the cost of acquiring a business over the fair values of the net assets received at the date of acquisition. It is being amortized on a straight-line basis over 20 years and is stated net of accumulated amortization of $2,870,000 and $1,355,000 at December 31, 2000 and 1999, respectively. Other intangible assets consist primarily of customer lists, assembled workforce and current technology. These assets are recorded at cost and amortized on a straight- line basis over periods up to 15 years. Accumulated amortization for these other intangible assets was $2,505,000 at December 31, 2000. Revenue Recognition. Revenue is recognized at the time of shipping, and includes freight billed to customers. are included in earnings. Unrealized holding gains and losses, net of the related tax Research and Development Costs. Research and development costs are expensed effect, on available-for-sale securities are excluded from earnings and are reported as as incurred. a separate component of shareholders’ equity until realized. 20 Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Advertising. Advertising costs are expensed as incurred. Advertising expenses for Foreign Currency Translation. The balance sheets of the Company’s foreign sub- the years ended December 31, 2000, 1999 and 1998 totaled $4,637,000, $4,700,000 sidiaries are translated into U.S. dollars using the year-end exchange rate, and state- and $3,931,000, respectively. Warranty. The Company provides warranty coverage of up to one year on printers against defects in material and workmanship. A provision for warranty expense is recorded at the time of shipment. To date, the Company has not experienced any significant warranty claims. Financial instruments. The reported amounts of the Company’s financial instruments, which include investments and marketable securities, trade accounts receivable, accounts payable, accrued liabilities, income taxes payable and short-term notes payable, approximate their fair values because of the contractual maturities and short-term nature of these instruments. Stock-based Compensation. The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and provides the pro forma disclosures required by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-based Compensation. Reclassifications. Certain amounts in the prior years’ financial statements have been reclassified to conform to the current year’s presentation. In accordance with EITF 00-10, the Company adjusted sales for all years reported to include freight billed to customers as freight revenue. Previously, these freight billings were being classified as a reduction of freight costs in cost of sales. This change in classification has no effect on previously reported net income. Use of Estimates. The preparation of financial statements in conformity with gener- ally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ment of earnings items are translated using the average exchange rate for the year. The resulting translation gains or losses are recorded in shareholders’ equity as a cumulative translation adjustment, which is a component of accumulated other comprehensive income. New Accounting Pronouncement. In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities–Deferral of the Effective Date of FASB Statement No. 133 and SFAS No. 138, Accounting for Derivative Instruments and Certain Hedging Activities. The new statement requires companies to report among other things, the fair market value of derivatives on the balance sheet and record in income or other comprehensive income, as appropriate, any changes in the fair value of the derivative. SFAS No.133 will become effective with respect to the Company on January 1, 2001. The adoption of the new Statement will not have a material effect on the Company’s financial position, results of operations, or cash flows. Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of. The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. The statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the car- rying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount of fair value less costs to sell. 21 Note 3 Business Combinations Eltron. On October 28, 1998, the Company acquired all of the outstanding capital Comtec Information Systems, Inc. On April 3, 2000, the Company acquired Comtec stock of Eltron International, Inc. (Eltron), a manufacturer of bar code label and Information Systems, Inc. (Comtec), by acquiring all of the outstanding capital stock plastic card printers and related accessories, in exchange for 6,916,951 shares of the of Comtec for approximately $88,476,000 in cash. Located in Warwick, Rhode Island, Company’s Class B Common Stock, which had a market value of approximately Comtec had been a privately held company. Comtec designs, manufactures and $201,000,000 at the time of the acquisition. supports mobile printing systems. The acquisition was accounted for under the pur- chase method. Accordingly, the purchase price has been allocated to identifiable tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values. Estimated amounts allocated to acquired in-process technol- ogy were expensed at the time of the acquisition. The excess of cost over net assets acquired is amortized on a straight-line basis over the expected period to be bene- fited of 20 years. Other intangible assets are amortized on a straight-line basis over periods up to 15 years. The consolidated statements of operation reflect the results of operations of Comtec since the effective date of the acquisition. The following summary presents information concerning the purchase price allocation The acquisition was accounted for as a pooling of interests and, accordingly, the consolidated financial statements have been restated as if the companies had been combined for all periods presented. Merger costs reported in the consolidated statement of earnings for the years ended December 31, 2000, 1999 and 1998 include invest- ment banking and other professional fees, write-downs of certain assets, employee severance, and other acquisition related charges. As of December 31, 2000 and 1999, accrued liabilities related to these costs included $0 and $115,000, respectively. RJS, Incorporated. In January 1998, Printronix, Inc., a leading manufacturer of computer printers, acquired the assets and rights to the bar code verification business and the RJS name from the Company for approximately $2.8 million. In the first for the Comtec acquisition: Net tangible assets Acquired in-process technology Intangible assets Excess cost over fair value of net assets acquired Purchase price Amount (in thousands) quarter of 1998, the Company recorded a tax-effected gain on the sale of approximately $15,235 5,953 31,786 35,502 $88,476 $250,000. The Company retained the rights to the in-line verification technology for use in its line of integrated verified printing systems, as well as the QualaBar and ThermaBar industrial printer lines. Note 4 Earnings Per Share The following unaudited pro forma information (in thousands, except per-share computed as follows (in thousands, except per-share amounts): For the years ended December 31, 2000, 1999, and 1998, earnings per share were amounts) presents the combined results of operations of the Company and Comtec as if the acquisition had occurred as of the beginning of 2000 and 1999. The pro forma finan- cial information does not necessarily reflect the results of operations that would have occurred had the Company and Comtec constituted a single entity during such periods. Years Ended December 31, 2000 1999 Net sales Net income Basic earnings per share Diluted earnings per share 22 $504,107 74,360 2.42 2.39 $459,869 69,996 2.25 2.22 2000 2000 1999 1998 The amortized cost, gross unrealized holding gains, gross unrealized holding losses Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Basic earnings per share: Net income Weighted average common shares outstanding Per share amount Diluted earnings per share: $71,622 $69,632 $40,069 follows (in thousands): and aggregate fair value of investment securities at December 31, 1999, were as 30,790 $ 2.33 31,175 $ 2.23 30,919 $ 1.30 Amortized Cost Gross Unrealized Gross Unrealized Holding Gains Holding Losses Fair Value Net income $71,622 $69,632 $40,069 Weighted average common shares outstanding Add: Effect of dilutive securities – stock options Diluted weighted average and equivalent shares outstanding Per share amount 30,790 31,175 30,919 365 346 257 31,155 $ 2.30 31,521 $ 2.21 31,176 $ 1.29 Trading Securities: U.S. government and agency securities $ 8,191 $ State and municipal bonds 138,946 Corporate bonds Equity securities Partnership interests Other 5,056 9,522 26,933 3,428 $ 192,076 16 90 — 32 6,106 196 $6,440 $ (81) $ 8,126 (426) (39) (903) — — 138,610 5,017 8,651 33,039 3,624 $ (1,449) $ 197,067 The potentially dilutive securities, which were excluded from the earnings per share The contractual maturities of debt securities at December 31, 2000, were as follows calculation, consisted of stock options for which the exercise price was greater than the (in thousands): average market price of the Class A Common Stock. The shares amounted to 267,500, 21,500, and 227,250 for the year ended December 31, 2000, 1999, and 1998, respectively. Note 5 Investments and Marketable Securities The amortized cost, gross unrealized holding gains, gross unrealized holding losses and aggregate fair value of investment securities at December 31, 2000, were as follows (in thousands): Available for sale (including in other assets): Amortized Cost Gross Unrealized Gross Unrealized Holding Gains Holding Losses Fair Value Equity securities $ 4,596 $ — $ (2,226) $ 2,370 Due within one year Due after one year through five years Due after five years Fair Value $ 53,647 40,412 26,813 $ 120,872 Using the specific identification method, the proceeds and realized gains on the sales of available-for-sale securities were as follows (in thousands): Proceeds Realized gains 2000 $ — — 1999 $ 6,947 19 1998 $ — — Trading Securities: U.S. government and agency securities 11,525 State and municipal bonds 104,699 Corporate bonds Partnership interests 5,054 8,614 129,892 110 326 35 2,413 2,884 (61) (816) — — (877) 11,574 104,209 5,089 11,027 131,899 Note 6 Related-Party Transactions Unique Building Corporation (Unique), an entity controlled by certain officers and shareholders of the Company, leases a facility and equipment to the Company under a lease described in Note 11. Management believes that the lease payments are substantially consistent with amounts that could be negotiated with third parties on $ 134,488 $2,884 $ (3,103) $ 134,269 an arm’s-length basis. 23 Interest expense and lease payments related to the leases were included in the Note 9 Income Taxes consolidated financial statements as follows (in thousands): The geographical sources of earnings before income taxes were as follows 2000 1999 1998 Unique Operating Lease Payments Interest Expense on Unique Capital Leases $ 2,085 1,662 1,323 $ 0 1 4 (in thousands): United States Outside United States Total 2000 1999 1998 $ 101,532 10,379 $ 111,911 $ 95,637 13,163 $108,800 $ 62,071 2,950 $ 65,021 Note 7 Inventories The components of inventories are as follows (in thousands): The provision for income taxes consists of the following (in thousands): December 31, Raw material Work in process Finished goods Total inventories 2000 1999 Current: $ 35,907 365 20,580 $ 56,852 $ 23,098 3,744 15,537 $ 42,379 Federal State Foreign Deferred: Federal State Foreign 2000 1999 1998 $ 35,362 $ 27,914 $ 17,194 6,441 3,761 (4,922) (472) 119 4,489 5,554 1,376 (85) (80) 2,822 2,941 2,197 (202) — Note 8 Property and Equipment Property and equipment, which includes assets under capital leases, is comprised of the following (in thousands): Total $ 40,289 $ 39,168 $ 24,952 December 31, Buildings Land Machinery, equipment and tooling Machinery and equipment under capital leases Furniture and office equipment Computers and software Automobiles Leasehold improvements Projects in progress Less accumulated depreciation and amortization 2000 1999 $ 11,981 $ 11,185 The provision for income taxes differs from the amount computed by applying the U.S. statutory Federal income tax rate of 35%. The reconciliation of statutory and effective income taxes is presented below (in thousands): 1,910 31,211 1,670 5,375 27,854 254 2,516 1,508 84,279 42,692 1,910 26,672 1,670 5,310 25,775 347 2,848 — 75,717 34,031 2000 1999 1998 Provision computed at statutory rate $ 39,169 $ 38,080 $ 22,747 State income tax (net of Federal tax benefit) Tax-exempt interest and dividend income Tax benefit of exempt foreign trade income Acquisition related items Other 3,880 (1,588) (1,035) — (137) 2,862 (1,677) (805) — 708 2,044 (1,369) (1,227) 1,006 1,751 Net property and equipment $ 41,587 $ 41,686 Provision for income taxes $ 40,289 $ 39,168 $ 24,952 24 Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Deferred income taxes reflect the impact of temporary differences between the Temporary differences that give rise to deferred tax assets and liabilities are as follows amounts of assets and liabilities for financial reporting purposes and such amounts (in thousands): as measured by tax laws. Based on management’s assessment, it is more likely than not that the deferred tax assets will be realized through future taxable earnings. The Company is litigating a dispute over a 1998 tax assessment in the amount of approximately $2.6 million, including penalties and interest, with the Illinois Department of Revenue for the years 1993 through 1995. The case was filed by the Company on November 1, 2000, in the District Court of Illinois and tried during December 31, Deferred tax assets: Deferred rent — building Capital equipment lease Accrued vacation Inventory items Allowance for doubtful accounts November 2000. A decision is expected from the court during 2001. The Company Other accruals believes that it has a strong position and should prevail. The outcome of the litiga- tion, however, cannot be predicted with certainty. Because adequate provisions have been made in the Company’s financial statements for any liability arising from this dispute and because of the Company’s strong cash position, the Company does not believe that an adverse decision in this matter would have a material adverse effect on its business or financial position. The Illinois Department of Revenue is currently examining the Company’s tax returns for the years 1996 and 1997. Management believes that this examination will not be completed until the outcome of the lawsuit relating to the 1993 through 1995 Acquisition related items Unrealized loss on securities Total deferred tax assets Deferred tax liabilities: Unrealized gain on securities Depreciation Other Total deferred tax liabilities Net deferred tax asset 2000 1999 $ 83 15 825 2,354 152 2,843 2,538 1,235 10,045 — (1,975) — (1,975) $ 8,070 $ 42 20 798 2,221 405 1,096 413 — 4,995 (1,067) (1,934) — (3,001) $ 1,994 returns is known. The Company believes that adequate provision has also been Note 10 401(k) Savings and Profit Sharing Plans made in its financial statements for any liability related to the potential assessments The Company has a Retirement Savings and Investment Plan (the 401(k) Plan), for the years 1996 through 2000. which is intended to qualify under Section 401(k) of the Internal Revenue Code. Qualified employees may participate in the Company’s 401(k) Plan by contributing up to 15% of their gross earnings to the plan subject to certain Internal Revenue Service restrictions. The Company matches each participant’s contribution of up to 6% of gross eligible earnings at the rate of 50%. The Company may contribute additional amounts to the 401(k) Plan at the discretion of the Board of Directors, subject to certain legal limits. The Company has a discretionary profit-sharing plan for qualified employees, to which it contributed 3.1% of eligible earnings for 2000, 4.2% for 1999 and 3.4% for 1998. Participants are not permitted to make contributions under the profit-sharing plan. 25 Company contributions to these plans, which were charged to operations, approximated Rent expense for operating leases charged to operations for the years ended the following (in thousands): December 31, 2000, 1999, and 1998 was $4,833,000, $4,317,000, and $2,898,000, 401(k) Profit sharing Total 2000 1999 1998 $ 1,287 877 $ 2,164 $ 740 820 $ 1,560 $ 620 970 $ 1,590 Note 11 Commitments and Contingencies Leases. In September 1989, the Company entered into a lease agreement for its Vernon Hills facility and certain machinery, equipment, furniture and fixtures with Unique Building Corporation. The facility portion of the lease is the only remaining respectively. Letter of credit. In connection with the lease agreements described above, the Company has guaranteed Unique’s full and prompt payment under Unique’s letter of credit agreement with a bank. The contingent liability of the Company under this guaranty as of December 31, 2000, is $700,000, which is the limit of the Company’s guaranty throughout the term of the IRB. Derivative Instruments. In the normal course of business, portions of the Company’s operations are subject to fluctuations in currency values. The Company addresses these risks through a controlled program of risk management that includes the use portion in existence as of December 31, 2000, and is treated as an operating lease. of derivative financial instruments. An amendment to the lease dated July 1997 added 59,150 square feet and extended the term of the existing lease through June 30, 2014. The lease agreement includes a The Company enters into foreign exchange forward contracts to manage exposure to modification to the base monthly rental, which goes into effect if the prescribed rent fluctuations in foreign exchange rates to the funding of its United Kingdom operations. payment is less than the aggregate principal and interest payments required to be The Company accounts for such contracts by recording any unrealized gains or losses made by Unique under an Industrial Revenue Bond (IRB). in income each reporting period. At December 31, 2000 and 1999, the notional principal amounts of outstanding forward contracts were $14,085,050, and $0, respectively. Minimum future obligations under noncancelable operating leases and future minimum capital lease payments as of December 31, 2000, are as follows (in thousands): 2001 2002 2003 2004 2005 Thereafter Total minimum lease payments Less amount representing interest Present value of minimum payments Less current portion of obligation under capital lease Capital Lease Operating Leases $ 111 $ 4,262 3,478 2,831 2,512 2,552 22,554 $ 38,189 111 111 96 96 208 $ 733 143 590 77 Long-term portion of obligation under capital lease $ 513 26 Note 12 Segment Data and Export Sales The Company operates in one industry segment. Information regarding the Company’s operations by geographic area for the years ended December 31, 2000, 1999, and 1998 is contained in the following table. These amounts (in thousands) are reported in the geographic area where the final sale originates. 2000 1999 1998 Net sales Identifiable assets Net sales Identifiable assets Net sales Identifiable assets Domestic $ 357,412 369,419 $ 284,462 327,347 $ 241,091 267,470 Europe $ 124,157 49,284 $ 117,751 67,177 $ 97,355 41,751 Other $ — 193 $ — 119 $ 1,232 781 Total $ 481,569 418,896 $ 402,213 394,643 $ 339,678 310,002 Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Note 13 Shareholders’ Equity plan. These options have an exercise price equal to the closing market price of the Holders of Class A Common Stock are entitled to one vote per share. Holders of Company’s stock on the date of grant. Typically, the options vest in annual installments Class B Common Stock are entitled to 10 votes per share. Holders of Class A and of 15% on the first anniversary, 17.5% on the second anniversary, 20.0% on the third Class B Common Stock vote together as a single class on all actions submitted to a anniversary, 22.5% on the fourth anniversary, and 25.0% on the fifth anniversary of vote of shareholders, except in certain circumstances. If at any time the number of the grant date. Upon vesting, the options have a legal life of two years from the date outstanding shares of Class B Common Stock represents less than 10% of the total of vesting. The Board of Directors determines the specific provisions of any grant. number of outstanding shares of both classes of common stock, then at that time such outstanding shares of Class B Common Stock will automatically convert into an equal number of shares of Class A Common Stock. The Board of Directors and shareholders also adopted a Directors’ Stock Option Plan, which reserves 80,000 shares of Class A Common Stock for issuance under the plan. As of December 31, 2000, 12,000 shares were available under the plan. All options Class A Common Stock has no conversion rights. A holder of Class B Common Stock granted under this plan are exercisable immediately upon grant at a price per share may convert the Class B Common Stock into Class A Common Stock, in whole or in equal to the closing market price of the Company’s Class A Common on the date of part, at any time and from time to time. Shares of Class B Common Stock convert grant. Options granted to the Board of Directors carry a seven-year expiration into shares of Class A Common stock on a share-for-share basis. period, however, should a member of the board discontinue service on the Board of Holders of Class A and Class B Common Stock are entitled to receive cash dividends Directors, they are limited to a two year period to exercise all outstanding options. equally on a per-share basis, if and when the Company’s Board of Directors declares The Board of Directors and shareholders adopted an employee stock purchase plan such dividends. In the case of any stock dividend paid, holders of Class A Common (Stock Purchase Plan) and have reserved 300,000 shares of Class A Common Stock Stock are entitled to receive the same percentage dividend (payable in shares of for issuance thereunder. Under this plan, employees who work a minimum of 20 Class A Common Stock) as the holders of Class B Common Stock receive (payable hours per week may elect to withhold up to 10% of their cash compensation through in shares of Class B Common Stock). Holders of Class A and Class B Common Stock share with each other on a ratable basis as a single class in the net assets of the Company in the event of liquidation. Note 14 Stock Option and Purchase Plans As of December 31, 2000, the Company had five stock option and stock purchase plans, described below. regular payroll deductions to purchase shares of Class A Common Stock from the Company over a period not to exceed 12 months at a purchase price per share equal to the lesser of: (1) 85% of the fair market value of the shares as of the date of the grant, or (2) 85% of the fair market value of the shares as of the date of purchase. As of December 31, 2000, 226,661 shares have been purchased under the plan. The Company’s Board of Directors adopted the 1997 Stock Option Plan, effective February 11, 1997, and reserved 4,250,000 shares of Class A Common Stock for issuance under the plan. The 1997 Stock Option Plan is a flexible plan that provides The Board of Directors and shareholders adopted the Zebra Technologies Corporation the Option Committee broad discretion to fashion the terms of the awards to provide Stock Option Plan (the 1991 Plan), effective as of August 1, 1991. A total of 400,000 eligible participants with stock-based incentives, including: (i) nonqualified and shares of Class A Common Stock have been authorized and reserved for issuance incentive stock options for the purchase of the Company’s Class A Common Stock under the 1991 Plan. Under this plan, the Company has granted only nonqualified and (ii) dividend equivalents. The persons eligible to participate in the 1997 Stock stock options. As of December 31, 2000, 197,311 shares were available under the Option Plan are directors, officers, and employees of the Company or any subsidiary 27 of the Company who, in the opinion of the Option Committee, are in a position to make The Company applies APB No. 25 in accounting for its plans. No compensation cost contributions to the growth, management, protection and success of the Company or its has been recognized for its fixed stock option plans and its stock purchase plan. Had subsidiaries. As of December 31, 2000, 2,090,069 shares were available under the plan. compensation cost for the Company’s stock option and stock purchase plans been determined consistent with SFAS No. 123, the Company’s net income and diluted earnings per share would have been as follows: The options granted under the 1997 Stock Option Plan have an exercise price equal to the closing market price of the Company’s stock on the date of grant. The options generally vest over two- to five-year periods and have a legal life of ten years from the date of grant. The Board of Directors determines the specific provisions of any grant. The Company’s Board of Directors adopted the 1997 Director Plan, effective February 11, 1997. The 1997 Director Plan provides for the issuance of options to purchase up to 77,000 shares of Class A Common Stock, which shares are reserved and available for purchase upon the exercise of options granted under the 1997 Director Plan. Only Net income: As reported Pro forma Basic earnings per share: As reported Pro forma directors who are not employees or officers of the Company are eligible to participate Diluted earnings per share: in the 1997 Director Plan. Under the 1997 Director Plan, each non-employee director was granted, on the effective date of the plan, an option to purchase 15,000 shares As reported Pro forma of Class A Common Stock, and each non-employee director subsequently elected to 2000 1999 1998 $ 71,622 67,613 $ 2.33 2.20 $ 2.30 2.17 $ 69,632 66,569 $ $ 2.23 2.14 2.21 2.11 $ 40,069 37,785 $ $ 1.30 1.22 1.29 1.21 the Board will be granted an option to purchase shares of Class A Common Stock on For purposes of calculating the compensation cost consistent with SFAS No. 123, the date of his or her election. Options granted under the 1997 Director Plan provide the fair value of each stock option grant is estimated on the date of grant using the for the purchase of Class A Common Stock at a price equal to the fair market value Black-Scholes option-pricing model with the following weighted-average assump- on the date of grant. If there are not sufficient shares remaining and available to all tions used for stock option grants in 2000, 1999, and 1998, respectively: expected non-employee directors eligible for an automatic grant at the time at which an auto- dividend yield of 0% for each period; expected volatility of 58%, 50%, and 55%; risk matic grant would otherwise be made, then each eligible non-employee director shall free interest rate of 5.05%, 6.54%, and 4.75%; and expected weighted-average life of receive an option to purchase a pro rata number of shares. As of December 31, 2000, five years. The fair market value of options granted were $24,290,000 in2000, 24,500 shares were available under the plan. $19,774,000 in 1999 and $12,966,000 in 1998. Unless otherwise provided in an option agreement, options granted under the 1997 The fair value of the employees’ purchase rights pursuant to the Stock Purchase Director Plan shall become exercisable in five equal increments beginning on the Plan are estimated using the Black-Scholes option-pricing model with the following date of the grant and on each of the first four anniversaries thereof. All options weighted-average assumptions used for purchase rights granted in 2000, 1999, and expire on the earlier of (a) ten years following the grant date or (b) the second 1998, respectively: fair market value of $44.62, $30.45, and $28.75; option price of anniversary of the termination of the non-employee director’s directorship for any $37.92, $25.88, and $24.44; expected dividend yield of 0% for each period; expected reason other than due to death or disability (as defined in the 1997 Director Plan). volatility of 71%, 49%, and 51%; risk-free interest rate of 5.85%, 6.11%, and 4.60%; and expected lives of three months to one year. 28 Z E B R A T E C H N O L O G I E S C O R P O R A T I O N Stock option activity for the years ended December 31, 2000, 1999, and 1998 was as follows: Fixed Options Shares Weighted-Average Exercise Price Shares Weighted-Average Exercise Price Shares Weighted-Average Exercise Price Outstanding at beginning of year 1,390,588 $27.88 1,416,138 $26.55 1,180,293 $23.31 2000 1999 1998 Granted Exercised Canceled Outstanding at end of year Options exercisable at end of year 436,500 (195,369) (144,466) 1,487,253 417,570 55.29 23.76 31.57 36.10 27.82 720,500 (433,526) (312,524) 1,390,588 291,485 27.45 21.28 30.03 27.88 25.24 368,550 (66,767) (65,938) 1,416,138 604,453 35.18 18.03 25.34 26.55 23.10 The following table summarizes information about fixed stock options outstanding at December 31, 2000: Range of Exercise Prices $ 4.31 – $24.50 $26.56 – $26.56 $29.25 – $38.75 $39.50 – $54.69 $60.63 – $60.63 Options Outstanding Options Exercisable Number of Shares Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price Number of Shares Weighted-Average Exercise Price 249,921 473,550 315,282 208,500 240,000 1,487,253 5.73 years 8.17 years 6.70 years 9.24 years 9.13 years $23.57 $26.56 $33.89 $47.93 $60.63 147,446 92,325 173,074 4,725 0 417,570 $ 23.10 $ 26.56 $ 32.01 $ 46.05 $ 0.00 29 Note 15 Quarterly Results of Operations (unaudited) Note 16 Major Customers (Amounts in thousands, except per share data) First Quarter(1)(2) Second Quarter(1)(2) Third Quarter(1)(2) Fourth Quarter(2) Service represented 10.3% of net sales in 1998. No customer accounted for 10% or more of net sales in 2000 or 1999. United Parcel 2000 Net sales Gross profit Operating expenses Operating income Net income $ 99,635 $129,995 $129,717 $ 122,222 49,380 25,171 24,209 15,228 62,312 37,369 24,943 16,650 64,180 29,325 34,855 22,590 56,555 31,892 24,663 17,154 Basic earnings per share Diluted earnings per share $ $ 0.48 0.48 $ $ 0.54 0.53 $ $ 0.74 0.73 $ $ 0.56 0.56 (Amounts in thousands, except per share data) First Quarter(1)(2) Second Quarter(1)(2) Third Quarter(1)(2) Fourth Quarter(1)(2) 1999 Net sales Gross profit Operating expenses Operating income Net income $ 90,691 $ 98,204 $104,904 $ 108,414 42,457 24,526 17,931 12,650 48,703 24,666 24,037 17,122 55,616 24,458 31,158 19,932 56,495 25,837 30,658 19,928 Basic earnings per share Diluted earnings per share $ $ 0.41 0.41 $ $ 0.55 0.55 $ $ 0.64 0.63 $ $ 0.64 0.63 (1) Reflects the adjustment of net sales and cost of sales for EITF Issue No. 00-10, which requires freight billed to customers to be reported as revenue, not as a reduction of freight costs. This adjustment has no impact on net income. (2) Reflects a pretax charge for merger costs relating to the Company’s merger with Eltron International, Inc. and acquisition of Comtec Information Systems, Inc. as follows: First Quarter Second Quarter Third Quarter Fourth Quarter 2000 1999 $1,009 $1,869 $1,732 $1,291 $1,651 $1,581 $ 721 $1,600 30 Independent Auditors’ Report The Board of Directors and Shareholders Zebra Technologies Corporation: Z E B R A T E C H N O L O G I E S C O R P O R A T I O N We have audited the accompanying consolidated balance sheets of Zebra Technologies We conducted our audits in accordance with auditing standards generally accepted Corporation and Subsidiaries as of December 31, 2000 and 1999, and the related in the United States of America. Those standards require that we plan and perform consolidated statements of earnings, comprehensive income, shareholders’ equity, the audit to obtain reasonable assurance about whether the financial statements are and cash flows for each of the years in the three-year period ended December 31, free of material misstatement. An audit includes examining, on a test basis, evidence 2000. These consolidated financial statements are the responsibility of the Company’s supporting the amounts and disclosures in the financial statements. An audit also management. Our responsibility is to express an opinion on these consolidated includes assessing the accounting principles used and significant estimates made by financial statements based on our audits. management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Zebra Technologies Corporation and Subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Chicago, Illinois January 31, 2001 31 Shareholder Information Corporate Office Zebra Technologies Corporation 333 Corporate Woods Parkway Stock Information: Price Range and Common Stock The Company’s Class A Common Stock is traded on the Nasdaq Stock Market under the symbol ZBRA. The following table shows the high and low trade prices for each Vernon Hills, Illinois 60061 3109 U.S.A. quarter in 2000 and 1999, as reported by the Nasdaq Stock Market. No market exists Phone: 847-634-6700 Fax: 847-913-8766 Independent Auditors KPMG LLP Chicago, Illinois Corporate Counsel Katten Muchin Zavis Chicago, Illinois Investor Relations For corporate or product information please contact the Corporate Office. for the Company’s Class B Common Stock. The shares of Class B Common Stock are convertible on a one-for-one basis into shares of Class A Common Stock at the option of the holder. 2000 First Quarter Second Quarter Third Quarter Fourth Quarter 1999 First Quarter Second Quarter Third Quarter Fourth Quarter High $70.88 58.06 54.75 50.50 High $37.00 38.50 50.38 64.50 Low $39.81 42.13 41.88 37.13 Low $22.88 23.50 37.00 44.19 Form 10-K Report Source: The Nasdaq Stock Market You may receive a free copy of the Zebra Technologies Corporation Form 10-K Report At March 12, 2001, the last reported price for the Class A Common Stock was filed with the Securities and Exchange Commission by contacting the Investor $41.188 per share, and there were 483 registered shareholders of record for the Relations Department at the Corporate Headquarters. Company’s Class A Common Stock and 26 registered shareholders of record for the Company’s Class B Common Stock. Web Site Investors are invited to learn more about Zebra Technologies Corporation by Dividend Policy accessing the Company’s web site at www.zebracorporation.com Since the Company’s initial public offering in 1991, the Company has not declared Equal Employment Opportunity/Affirmative Action any cash dividends or distributions on its capital stock. The Company intends to retain its earnings to finance future growth and therefore does not anticipate paying It is the policy of Zebra Technologies Corporation to provide equal opportunity and any cash dividends in the foreseeable future. affirmative action in all areas of its employment practices without regard to race, color, religion, national origin, sex, age, ancestry, citizenship, disability, veteran status, Number of Employees marital status, sexual orientation or any other reason prohibited by law. The Company had approximately 2,000 associates as of March 1, 2001. 32 Board of Directors Executive Officers Edward Kaplan Chairman and Chief Executive Officer Gerhard Cless Executive Vice President and Secretary Charles Turnbull President John Kindsvater Senior Vice President, Business Development Charles Whitchurch Chief Financial Officer and Treasurer Edward Kaplan Chairman and Chief Executive Officer Zebra Technologies Corporation Gerhard Cless Executive Vice President and Secretary Zebra Technologies Corporation Donald Skinner Vice Chairman Zebra Technologies Corporation Chairman, President and Chief Executive Officer, Ceryx, Inc. Vice Chairman, RF-Code, Inc. Christopher Knowles (1) Retired Chief Executive Officer Insurance Auto Auctions, Inc. David Riley (1) Director and Retired President and Chief Executive Officer The Middleby Corporation Michael Smith (1) Chairman and Chief Executive Officer FireVision, L.L.C. (1) Member of Audit Committee Zebra Technologies Corporation International Headquarters 333 Corporate Woods Parkway | Vernon Hills, IL | 60061-3109 U.S.A. 847-634-6700 | www.zebracorporation.com 

Continue reading text version or see original annual report in PDF format above