Zebra Annual Report 2000

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FY2000 Annual Report · Zebra

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Technology

People

Solutions

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

U M M A

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

)
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n
o
i
l
l
i

m
n
i
(

450

400

350

300

250

200

150

100

Earnings Per Share*

Free Cash Flow

$2.50

2.25

2.00

1.75

1.50

1.25

1.00

.75

.50

.25

$60

)
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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 :

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

EBITDA*

$150

135

120

105

)
s
n
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(

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.

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.

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

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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.

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

o
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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.

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.

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TDPR #

132635

Model

2001 CO26

HIGHLANDER 4DR PP 3 AT 3P1–SILVER

VIN: 2T1BR12E31C384358 BARCO: 00016

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

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.

Global

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

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

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.

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.

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.

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.

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.

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.

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

10,913

46,887

513

—

208

$ 23,798
11,295
196
264
7,541

43,094

571

1,473

105

47,608

45,336

—

256

63,491

(50,128)

361,026

(3,416)

371,288

$ 418,896

—

249

60,072

—

289,404

(483)

349,307

$394,643

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

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,

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

—

(4)

—

223

—

249

—

(32)

—

(21)

—

(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.

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

—

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.

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.

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

$504,107

74,360

2.42

2.39

$459,869

69,996

2.25

2.22

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

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

—

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

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

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

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.

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

(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

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

825

2,354

152

2,843

2,538

1,235

10,045

—

(1,975)

—

(1,975)

$ 8,070

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.

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

208

$ 733

143

590

Long-term portion of obligation under capital lease

$ 513

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

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

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.

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

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

417,570

$ 23.10

$ 26.56

$ 32.01

$ 46.05

$ 0.00

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

0.54

0.53

0.74

0.73

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

0.55

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

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

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.

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