Zebra Technologies (ZBRA) 10-K risk factor changes: FY2017 vs FY2016

We have organized the risk factors into [removed: three] [added: two] sections: (1) Risks related to our business; [removed: (2) Risks related to the Acquisition] and [removed: Integration of Enterprise; and (3)] [added: (2)] Risks related to our Indebtedness.

The Company has substantial operations and sells a significant portion of our products outside of the U.S. and purchases important components, including final products, from suppliers located outside the U.S. Shipments to non-U.S. customers are [added: expected to continue to account for a material portion of net sales.]

| • | Violations of anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery [removed: Act;] [added: Act could result in large fines and penalties;] |

| • | Evolving industry [removed: standards,] [added: standards;] |

| • | Frequent new product and service [removed: introductions,] [added: introductions;] |

| • | Evolving distribution [removed: channels,] [added: channels;] |

| • | Increasing demand for customized product and software [removed: solutions,] [added: solutions;] |

| • | Changing customer [removed: demands,] [added: demands;] and |

We could incur substantial costs if we [removed: have to] [added: must] modify our business to adapt to these changes, and may even be unable to adapt to these changes.

| • | Technologically advanced systems that satisfy user [removed: demands,] [added: demands;] |

| • | Superior customer [removed: service,] [added: service;] |

| • | High levels of quality and [removed: reliability,] [added: reliability;] and |

| • | Increased logistical problems common to complex, expansive operations; [removed: and] |

| • | Increasing international [removed: operations.] [added: operations; and] |

[added: In any] infringement litigation that the Company may undertake to protect our intellectual property, any award of monetary damages may be unlikely or very difficult to obtain, and any such award we may receive may not be commercially valuable.

We periodically perform vulnerability assessments, remediate vulnerabilities, review log/access, perform system maintenance, manage network perimeter protection, [removed: and] implement and manage disaster recovery [removed: testing.][added: testing, and provide periodic educational sessions to our employees to foster awareness of schemes to access sensitive information.]

The governing bodies in such jurisdictions have adopted or are considering adopting laws and regulations regarding the collection, use, transfer, storage and disclosure of personal data obtained from third parties and employees; for [removed: example] [added: example,] General Data Protection Regulation effective May 2018.

We generally have insurance protection against property damage and personal injury liabilities and also seek to limit such risk through product design, [added: manufacturing quality control processes, product testing and contractual indemnification from suppliers.]

The impact of potential changes in [removed: tax] [added: customs] and trade policies in the United States and the potential corresponding actions by other countries in which the Company does business could adversely affect our financial performance.

These proposals [removed: are designed to encourage increased production in the United States and include a border tax on imports, an increase] [added: could result] in [added: increased] customs duties and the renegotiation of [added: some] U.S. trade agreements.

The Company imports a significant percentage of our products into the United States, and [removed: the imposition of a border tax or] an increase in customs duties with respect to these imports could negatively impact the Company’s financial performance.

If such [removed: taxes or] customs duties are implemented, it also may cause the U.S.’ trading partners to take actions with respect to U.S. imports or U.S. investment activities in their respective countries.

Any potential changes in [removed: tax and] trade policies in the United States and the potential corresponding actions by other countries in which the Company does business could adversely affect the Company’s financial performance.

[added: Many countries are adopting revisions to their respective tax laws based on the on-going reports issued by the Organization for Economic Co-operation and Development (“OECD”)/G20 Base Erosion and Profit Shifting (“BEPS”) Project, which, if enacted, could materially impact our tax liability due to our organizational structure and significant operations outside of the U.S.] Our effective tax rate is highly dependent upon the geographic distribution of our worldwide earnings or losses resulting from our structure and operating model, the tax regulations and tax holidays in each geographic region, and the availability of tax credits and carry-forwards.

[removed: Another] [added: An] economic downturn could also result in a decrease in or cancellation of orders for our products and services; negatively impacting the ability to collect accounts receivable on a timely basis; result in additional reserves for uncollectible accounts receivable; and require additional reserves for inventory obsolescence.

[removed: We] [added: Zebra] could be adversely impacted by the United Kingdom’s [removed: referendum on] withdrawal from the European Union.

[removed: We maintain our] [added: Zebra maintains its] European regional headquarters and a label converting facility in the U.K. and [removed: have] [added: has] significant operations and sales throughout Europe.

Because the terms of the U.K.’s withdrawal are uncertain, we are unable at this time to determine the impact on [removed: our] [added: Zebra’s] operations and business in the U.K. and Europe.

[removed: The] [added: Since the] U.K.’s referendum [removed: has resulted, and is expected to continue to result,] in [removed: market volatility,] [added: June 2016 to withdraw from the E.U., markets have been more volatile,] including fluctuations in the British [removed: Pound,] [added: pound,] that could adversely impact [removed: our] [added: Zebra’s] operating costs in the U.K. Such market volatility could also cause customers to alter or delay buying decisions that would adversely impact [removed: our] [added: Zebra’s] sales in the U.K. and throughout Europe.

[removed: Future] [added: The future] trade [removed: agreements] [added: relationship] between the U.K. and the [removed: European Union] [added: E.U.] could adversely impact [removed: our] [added: Zebra’s] operations in the region by increasing costs on or importation requirements on shipments between our distribution center in the Netherlands and customers in the U.K. or between our facility in the U.K. and customers in the [removed: European Union.][added: E.U.]

We may have disputes with our subcontractors, including disputes regarding the quality and [added: timeliness of work performed by the subcontractor or our subcontractors and the functionality, warranty and indemnities of products, software, and services supplied by our subcontractor.]

[removed: As] [added: When] we outsource [removed: more of our] [added: certain] business operations, we are not able to directly control these activities.

As the Company refines our [removed: recently implemented] channel program, some of our third-party dealers, distributors or resellers may exit the program due to modifications to the program structure, thereby reducing our ability to bring products to market and have a negative impact on our results of operations.

If credit pressures or other financial difficulties result in insolvency for third-party dealers, distributors, or retailers and we are unable to successfully transition end-customers to purchase our products from other third-parties or from us directly, it may cause, and in some [removed: cases] [added: cases,] has caused, a negative impact on our financial results.

If these [removed: third party] [added: third-party] manufacturers experience business difficulties or fail to meet our manufacturing needs, then we may be unable to satisfy customer product demands, lose sales, and be unable to maintain customer relationships.

[added: In addition, the business interruption insurance] would not compensate us for the loss of opportunity and potential adverse impact, both short-term and long-term, on relations with our existing customers going forward.

[removed: Our ability to meet customers’ demands depends, in part, on our ability to obtain in a timely manner an adequate] delivery of quality materials, parts, and components, as well as services and software from our suppliers.

From time to time we are [removed: made] a party to litigation, arbitration, or administrative actions.

It is important that we are able to obtain many different types of insurance, and if we are not able to obtain insurance or [removed: exhausts] [added: exhaust] our coverage we may be forced to retain the risk.

We have many types of insurance coverage and [removed: is] [added: are] also self-insured for some risks and obligations.

| • | Attract, develop and retain individuals with the requisite technical expertise to develop new technologies and introduce new products and solutions. |

The U.S. government has made proposals that are intended to address trade imbalances, which include encouraging increased production in the United States.

The effects of the Tax Cuts and Jobs Act on our business have not yet been fully analyzed and could have an adverse effect on our results of operations.

On December 22, 2017, U.S. President Donald Trump signed into law the Tax Cuts and Jobs Act (the “TCJA”) that significantly reforms the Internal Revenue Code of 1986, as amended.

The TCJA, among other things, includes changes to U.S. federal corporate income tax rate, imposes significant additional limitations on the deductibility of interest, allows for the accelerated expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system.

We continue to analyze the impact the TCJA may have on the Company’s business.

Notwithstanding the reduction in the U.S federal corporate income tax rate, the overall impact of the TCJA is uncertain, and the Company’s business and financial condition could be adversely affected.

We describe the estimated impact of the TCJA on our business where appropriate throughout this Form 10-K, and specifically in Note 12, Income Taxes in the Notes to the Consolidated Financial Statements included in this Form 10-K.

Although the U.K. has formally notified the E.U. of its intention to withdraw, such notice only triggered a two-year period ending in March 2019 to negotiate the terms of the withdrawal, which period could be followed by a transition period.

Our ability to meet customers’ demands depends, in part, on our ability to obtain in a timely manner an adequate

Any negative reports concerning our internal controls

We may discover areas of our internal controls that need improvement.

At December 31, 2017, the remaining principal amount of indebtedness was $2.2 billion, gross of unamortized discounts and debt issuance costs.

In addition, we may not be able to affect

| | |

| --- | --- |

expected to continue to account for a material portion of net sales.

In any

manufacturing quality control processes, product testing and contractual indemnification from suppliers.

The U.S. government has recently proposed comprehensive tax and trade reform.

The European Union and countries within the European Union are contemplating changes to their respective tax laws based on the recent reports issued by the Organization for Economic Co-operation and Development

(“OECD”)/G20 Base Erosion and Profit Shifting (“BEPS”) Project, which, if enacted, could materially impact our tax liability due to our organizational structure and significant operations within Europe.

timeliness of work performed by the subcontractor or our subcontractors and the functionality, warranty and indemnities of products, software, and services supplied by our subcontractor.

In addition, the business interruption insurance

We may discover areas of our internal controls that need improvement, particularly with respect to areas of our business impacted by the integration of our business processes, systems, and facilities.

In addition, development of an integrated financial reporting system with the accompanying system of internal controls to comply with the Sarbanes-Oxley Act of 2002 may increase the time and costs necessary to complete the integration of Enterprise or cause us to miss our reporting obligations.

Risks Related to the Acquisition and Integration of Enterprise

We may be unable to effectively integrate Enterprise into our existing business.

The integration of Enterprise into our operations is a significant undertaking and requires significant attention from our management.

The Acquisition, with an approximate enterprise value of $3.45 billion, is significantly larger than prior acquisitions we have completed and significantly increased the size of our operations, increased our number of employees and operating facilities and expanded our geographic scope.

There can be no assurance that we will be able to successfully integrate Enterprise, or if such integration is successfully accomplished, that such integration will not be costlier than currently contemplated.

There can also be no assurance that we can successfully manage the combined business due to our greatly increased size and scope.

If we cannot successfully integrate and manage Enterprise within a reasonable time following the Acquisition, we may not be able to realize the potential and anticipated benefits of the Acquisition, which could have a material adverse effect on our business, financial condition, operating results, cash flows and growth prospects.

We may be unable to realize the expected growth opportunities and cost savings from the Acquisition.

In connection with the integration of Enterprise into our existing operating structure, we seek to realize growth opportunities, along with cost savings.

The anticipated cost savings are based upon assumptions about our ability to implement integration measures in a timely fashion and within certain cost parameters.

Our ability to achieve the planned cost synergies relies upon a number of factors, some of which may be beyond our control.

For example, we may be unable to eliminate duplicative costs in a timely fashion or at all.

Our inability to realize anticipated cost savings, and revenue enhancements from the Acquisition could have a material adverse effect on our business, financial condition, operating results, cash flows, and growth prospects.

We continue to rely on MSI to perform certain critical transition services and there can be no assurance that those services will be performed timely and effectively or that we can replace those services prior to the expiration of the transition services agreement or successfully develop our own operations going forward.

Under the terms of the transition services agreement that we entered into with MSI in connection with the Acquisition, MSI provided and continues to provide us with services critical for the operation and continuity of our operation of Enterprise.

We have transitioned some of these critical functions, and are in the process of transitioning other critical functions, which primarily include information technology systems.

Until we transition all such functions, we will continue to rely on MSI for those services.

There can be no assurances that these remaining services will be performed timely and effectively or that we will be able to successfully or timely transition remaining functions and assume responsibility over them.

Significant disruption in these transition services, or unanticipated costs related to these services, could materially and adversely affect our business, financial condition and results of operations.

Additionally, if we are unable to transition such remaining services to ourselves in a timely fashion or without disruption to our operations, we could experience an adverse effect on our business, financial condition and cash flows, and results of operations.

As part of the integration, we are moving Enterprise off of our legacy ERP systems and implementing an ERP system under a single instance with our legacy business.

The implementation process is complex and involves a number of risks that may adversely affect our business and results of operations.

We are currently replacing our multiple legacy business systems, including moving Enterprise off of our legacy systems that are being operated under a transition services agreement with MSI, with a new company-wide, integrated enterprise resource planning (ERP) system to handle various business, operating and financial processes for us.

The integrated system will streamline a variety of important functions, such as order entry, invoicing, accounts receivable, accounts payable, financial consolidation, logistics, and internal and external financial and management reporting matters.

We moved our operations in Asia Pacific to the combined ERP in May 2016 and expect to move our operations in North America, Latin America and EMEA to the combined ERP before the end of fiscal year 2017.

ERP implementations are complex and time-consuming projects that involve substantial expenditures on system hardware and software and implementation activities that often continue for several years.

Such an integrated, wide-scale implementation is extremely complex and requires transformation of business and financial processes in order to reap the benefits of the ERP system.

Significant efforts are needed for requirements identification, functional design, process documentation, data conversion, user training and post implementation support.

Problems in any of these areas could result in operational issues including delayed shipments or production, missed sales, billing and accounting errors and other operational issues.

System delays or malfunctioning could also disrupt our ability to timely and accurately process and report key components of the results of our consolidated operations, our financial position and cash flows, which could impact our ability to timely complete important business processes such as the evaluation of our internal controls and attestation activities pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.

We design, manufacture, and sell a broad range of products that capture and move data, including: mobile computers; barcode scanners and imagers; RFID readers; specialty printers for barcode labeling and personal identification; RTLS; related accessories and supplies, such as self-adhesive labels and other consumables; and [added: software] utilities and [removed: application software.][added: applications.]

We also provide a full range of services, including maintenance, technical support, [removed: repair,] and [added: repair,] managed [added: and professional] services, including cloud-based subscriptions.

End-users of our products and services include those in the [removed: retail,] [added: retail and e-commerce,] transportation and logistics, manufacturing, healthcare, hospitality, warehouse and distribution, energy and utilities, [added: government] and education [removed: industries] [added: enterprises] around the world.

We provide our products and services globally through a direct sales force and [added: an] extensive network of partners.

We provide products and services in over [removed: 170] [added: 180] countries, with [removed: approximately 120] [added: 114] facilities and [removed: 6,500] [added: approximately 7,000] employees worldwide.

The Company’s operations consist of two reportable segments: [removed: Legacy Zebra] [added: Asset Intelligence & Tracking (“AIT”)] and [removed: Enterprise.][added: Enterprise Visibility & Mobility (“EVM”).]

The [removed: Legacy Zebra] [added: AIT] segment is an industry leader in barcode printing and asset tracking technologies.

Its major product lines include barcode and card printers, [removed: location solutions,] supplies, [added: services] and [removed: services.][added: location solutions.]

Industries served include [removed: retail,] [added: retail and e-commerce,] transportation and logistics, manufacturing, healthcare, and other end markets within the following regions: North America; Europe, Middle East, and Africa; Asia-Pacific; and Latin America.

The [removed: Enterprise] [added: EVM] segment is an industry leader in automatic information and data capture solutions.

For the year ended December 31, [removed: 2016,] [added: 2017,] the Company recorded [removed: $3.6] [added: $3.7] billion of net sales in its consolidated statements of operations, of which approximately [removed: 48.7%] [added: 48.3%] were attributable to North America; approximately [removed: 31.8%] [added: 32.8%] were attributable to Europe, Middle East, and Africa (“EMEA”); and other foreign locations accounted for the remaining [removed: 19.5%.][added: 18.9%.]

Results of Operations: Year Ended [removed: 2016] [added: 2017] versus [removed: 2015] [added: 2016] and Year Ended [removed: 2015] [added: 2016] versus [removed: 2014][added: 2015]

| | Year Ended December 31, | | | | | | | | | | | | Percent Change [removed: 2016] [added: 2017] vs [removed: 2015] [added: 2016] | | | Percent Change [removed: 2015] [added: 2016] vs [removed: 2014] [added: 2015] | |

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014(1)] [added: 2015] | | | | | | | | |

| Net sales | $ | [removed: 3,574] [added: 3,722] | | | $ | [removed: 3,650] [added: 3,574] | | | $ | [removed: 1,671] [added: 3,650] | | | [removed: (2.1] [added: 4.1] | [removed: )%] [added: %] | | [removed: 118.3] [added: (2.1] | [removed: %] [added: )%] |

| Gross profit | [removed: 1,642] [added: $] | [added: 1,710] | | | [removed: 1,644] [added: $] | [added: 1,642] | | | [removed: 778] [added: $] | [added: 1,644] | | | [removed: (0.1] [added: 4.1] | [removed: )%] [added: %] | | [removed: 111.3] [added: (0.1] | [removed: %] [added: )%] |

| Operating expenses | [removed: 1,562] [added: 1,388] | | | | [removed: 1,607] [added: 1,562] | | | | [removed: 689] [added: 1,607] | | | | [removed: (2.8] [added: (11.1] | )% | | [removed: 133.1] [added: (2.8] | [removed: %] [added: )%] |

| Operating income | $ | [removed: 80] [added: 322] | | | $ | [removed: 37] [added: 80] | | | $ | [removed: 89] [added: 37] | | | [removed: 116.2] [added: 302.5] | % | | [removed: (58.4] [added: 116.2] | [removed: )%] [added: %] |

| Gross margin | 45.9 | | % | | [removed: 45.0] [added: 45.9] | | % | | [removed: 46.6] [added: 45.0] | | % | | | | | | |

Net sales [added: to customers] by [removed: product category] [added: geographic region] were as follows (amounts in millions, except percentages):

| Total Net sales | $ | [removed: 3,574] [added: 3,722] | | | $ | [removed: 3,650] [added: 3,574] | | | $ | [removed: 1,671] [added: 3,650] | | | [added: 4.1] | [added: %] | | [added: (2.1] | [added: )%] |

| Europe, Middle East, and Africa | $ | [removed: 1,138] [added: 1,221] | | | $ | [removed: 1,194] [added: 1,138] | | | $ | [removed: 583] [added: 1,194] | | | [removed: (4.7] [added: 7.3] | [removed: )%] [added: %] | | [removed: 104.8] [added: (4.7] | [removed: %] [added: )%] |

| Latin America | [removed: 214] [added: 235] | | | | [removed: 219] [added: 214] | | | | [removed: 135] [added: 219] | | | | [removed: (2.3] [added: 9.8] | [removed: )%] [added: %] | | [removed: 62.7] [added: (2.3] | [removed: %] [added: )%] |

| Asia-Pacific | [removed: 483] [added: 468] | | | | [removed: 463] [added: 483] | | | | [removed: 216] [added: 463] | | | | [removed: 4.3] [added: (3.1] | [removed: %] [added: )%] | | [removed: 114.3] [added: 4.3] | % |

| Total International | [removed: 1,835] [added: 1,924] | | | | [removed: 1,876] [added: 1,835] | | | | [removed: 934] [added: 1,876] | | | | [removed: (2.2] [added: 4.9] | [removed: )%] [added: %] | | [removed: 100.9] [added: (2.2] | [removed: %] [added: )%] |

| North America | [removed: 1,739] [added: 1,798] | | | | [removed: 1,774] [added: 1,739] | | | | [removed: 737] [added: 1,774] | | | | [removed: (2.0] [added: 3.4] | [removed: )%] [added: %] | | [removed: 140.7] [added: (2.0] | [removed: %] [added: )%] |

Operating expenses are summarized below [removed: (in] [added: (amounts in] millions, except percentages):

| Selling and marketing | $ | [removed: 444] [added: 448] | | | $ | [removed: 494] [added: 444] | | | $ | [removed: 213] [added: 494] | | | [removed: (10.1] [added: 0.9] | [removed: )%] [added: %] | | [removed: 131.6] [added: (10.1] | [removed: %] [added: )%] |

| Research and development | [removed: 376] [added: 389] | | | | [removed: 394] [added: 376] | | | | [removed: 151] [added: 394] | | | | [removed: (4.6] [added: 3.5] | [removed: )%] [added: %] | | [removed: 160.7] [added: (4.6] | [removed: %] [added: )%] |

| General and administrative | [removed: 307] [added: 301] | | | | [removed: 283] [added: 307] | | | | [removed: 138] [added: 283] | | | | [removed: 8.5] [added: (2.0] | [removed: %] [added: )%] | | [removed: 104.8] [added: 8.5] | % |

| Amortization of intangible assets | [removed: 229] [added: 184] | | | | [removed: 251] [added: 229] | | | | [removed: 54] [added: 251] | | | | [removed: (8.8] [added: (19.7] | )% | | [removed: 364.0] [added: (8.8] | [removed: %] [added: )%] |

| Acquisition and integration costs | [removed: 125] [added: 50] | | | | [removed: 145] [added: 125] | | | | [removed: 127] [added: 145] | | | | [removed: (13.8] [added: (60.0] | )% | | [removed: 14.4] [added: (13.8] | [removed: %] [added: )%] |

| Impairment of goodwill and other intangibles | [removed: 62] [added: —] | | | | [removed: —] [added: 62] | | | | — | | | | [removed: NMF] [added: (100.0] | [added: )%] | | [removed: —] [added: NMF] | [removed: %] |

| Exit and restructuring costs | [removed: 19] [added: 16] | | | | [removed: 40] [added: 19] | | | | [removed: 6] [added: 40] | | | | [removed: (52.5] [added: (15.8] | )% | | [removed: 565.9] [added: (52.5] | [removed: %] [added: )%] |

| Total Operating expenses | $ | [removed: 1,562] [added: 1,388] | | | $ | [removed: 1,607] [added: 1,562] | | | $ | [removed: 689] [added: 1,607] | | | [removed: (2.8] [added: (11.1] | )% | | [removed: 133.2] [added: (2.8] | [removed: %] [added: )%] |

[removed: On a constant currency basis and excluding purchase accounting adjustments, overall] [added: Organic] net sales [removed: declined approximately 1%] [added: increased 0.4%] compared to the prior year period, reflecting growth [removed: of approximately 4%] in [removed: Asia-Pacific,] [added: Asia-Pacific and North America,] offset by declines [removed: of approximately 2%, 1%, and 3%] in [removed: North America,] EMEA, and Latin [removed: America, respectively.][added: America.]

This improvement in gross margin reflects an increase in the [removed: Enterprise] [added: EVM] segment gross margin primarily due to lower services and hardware product costs.

[removed: Legacy Zebra] [added: AIT] segment gross margin decreased primarily due to lower sales demand and the impact of incentive programs, including the concessions to distributors of printer products imported into China, partially offset by product cost improvements.

See Note [removed: 9] [added: 8,] Long-Term Debt for further information on the debt refinancing amendments.

Operating income [removed: for the year ended December 31, 2015, excluding the effect of the Enterprise business,] increased [removed: $12] [added: $242] million [removed: or 5.2%] compared to the prior year.

In January 2018, the Company changed the names of the reportable segments to better reflect business operations: (1) Asset Intelligence & Tracking (“AIT”), formerly Legacy Zebra, comprised of barcode and card printing, location solutions, supplies, and services; and (2) Enterprise Visibility & Mobility (“EVM”), formerly Enterprise, comprised of mobile computing, data capture, RFID, and services.

Asset Intelligence & Tracking

Enterprise Visibility & Mobility

Industries served include retail and e-commerce, transportation and logistics, manufacturing, healthcare, and other end markets within the following regions: North America; Europe, Middle East, and Africa; Asia-Pacific; and Latin America.

Geographic Information

Acquisition and Integration

In October 2014, the Company acquired the Enterprise business (“Enterprise”), from Motorola Solutions, Inc. (“MSI”) (the “Acquisition”) and began integration activities focused on creating “One Zebra”.

Our integration priorities centered on maintaining business continuity while identifying and implementing cost synergies, operating efficiencies, and integration of functional organizations and processes.

Another key focus of the integration was to exit MSI-provided transition service agreements (“TSAs”) related primarily to IT systems and support services.

These TSAs were an interim measure to continue the operations of the Enterprise business without disruption while integration activities were completed.

The Company substantially completed its integration activities, including the implementation of a common enterprise resource planning system and has exited the last TSAs with MSI.

Restructuring Programs

In the first quarter 2017, the Company’s executive leadership approved an initiative to continue the Company’s efforts to increase operational efficiency (the “Productivity Plan”).

The Company expects the Productivity Plan to build upon the exit and restructuring initiatives specific to the acquisition of the Enterprise business (“Enterprise”) from Motorola Solutions, Inc. in October 2014, (the “Acquisition Plan”).

Actions under the Productivity Plan include organizational design changes, process improvements and automation.

Implementation of actions identified through the Productivity Plan is expected to be substantially complete by December 2018.

Exit and restructuring costs are not included in the operating results of our segments as they are not deemed to impact the specific segment measures as reviewed by our Chief Operating Decision Maker and

therefore are reported as a component of Corporate, eliminations.

See Note 15, Segment Information and Geographic Data in the Notes to Consolidated Financial Statements included in this Form 10-K for further information.

Total exit and restructuring charges of $12 million life-to-date and year-to-date specific to the Productivity Plan have been recorded through December 31, 2017 and relate to severance and related benefits, lease exit costs and other expenses.

Total remaining charges associated with this plan are expected to be in the range of $8 million to $12 million with activities expected to be substantially complete by the end of fiscal 2018.

Total exit and restructuring charges of $69 million life-to-date specific to the Acquisition Plan have been recorded through December 31, 2017 and include severance and related benefits, lease exit costs and other expenses.

Charges related to the Acquisition Plan for the twelve-month period ended December 31, 2017 and 2016, were $4 million and $19 million, respectively.

The Company has substantially completed the activities associated with the Acquisition Plan.

See Note 5, Costs Associated with Exit and Restructuring Activities in the Notes to Consolidated Financial Statements included in this Form 10-K for further information.

Impact of U.S. Tax Reform

The Company is in the process of analyzing the impact of the Tax Cut and Jobs Act (“TCJA” or “the Act”) signed into law on December 22, 2017 and has provisionally provided income tax expense of $72 million, including remeasurement of its net deferred tax assets at 21% of $35 million and the one-time transition tax of $37 million.

The one-time transition tax impact has been reduced by approximately $10 million of income tax credit carryfowards, resulting in an estimated cash tax liability of $26 million, of which $2 million has been classified as a short term liability and $24 million as a long term liability, both to be remitted over the next eight years as follows (in millions):

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| | One-Time Transition Tax - Payments Due for Calendar Year Tax Returns | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | 2017 | | | | 2018 | | | | 2019 | | | | 2020 | | | | 2021 | | | | 2022 | | | | 2023 | | | | 2024 | | |

| Unremitted Earnings Payments | $ | 2 | | | $ | 2 | | | $ | 2 | | | $ | 2 | | | $ | 2 | | | $ | 4 | | | $ | 5 | | | $ | 7 | |

The Company expects that the greatest factor impacting its future effective tax rate is the federal reduction in the tax rate from 35% to 21%.

Primarily due to uncertainties in the interpretation of the one-time transition tax rules and the determination of cash or other specified assets, the December 31, 2017 effective tax rate could differ materially from the amount disclosed in the financial statements.

As permitted, the Company will update the estimates disclosed herein on a quarterly basis throughout 2018.

See Note 12, Income Taxes in the Notes to Consolidated Financial Statements included in this Form 10-K for further information.

The Company has reviewed the impact of other provisions of the Act which took effect on January 1, 2018 and after.

Based on current operations, we estimate that the Company will be subject to the Global Intangible Low-Taxed Income and the Deduction for Foreign-Derived Intangible Income provisions of the Act.

In October 2014, Zebra acquired Enterprise from MSI, excluding its iDEN, or Integrated Digital Enhanced Network Business, for $3.45 billion in cash.

Zebra financed the Acquisition through a combination of cash on hand and borrowings of $3.25 billion (the “Indebtedness”), including the sale of 7.25% senior notes due 2022 with an aggregate principal amount of $1.05 billion and a new credit agreement with various lenders that provided a term loan of $2.20 billion due 2021.

The new credit agreement also included a $250 million revolving credit facility.

See Note 3 Business Combinations and Divestitures for additional information.

On September 13, 2016, the Company entered into an Asset Purchase Agreement with Extreme Networks, Inc. to divest of its wireless LAN (“WLAN”) business (“Divestiture Group”).

WLAN operating results are reported in the Enterprise segment through the closing date of the WLAN divestiture of October 28, 2016.

Legacy Zebra

Enterprise

Geographic Information.

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Hardware | $ | 2,778 | | | $ | 2,863 | | | $ | 1,234 | | | (3.0 | )% | | 132.1 | % |

| Supplies | 278 | | | | 268 | | | | 265 | | | | 3.7 | % | | 1.2 | % |

| Service and Software | 518 | | | | 519 | | | | 172 | | | | (0.2 | )% | | 201.7 | % |

Net sales to customers by geographic region were as follows (in millions, except percentages):

The Company’s non-operating income and expense items are summarized in the following tables (in millions, except percentages):

| Foreign exchange loss | $ | (5 | ) | | $ | (23 | ) | | $ | (9 | ) | | (78.3 | )% | | 162.6 | % |

| Interest expense | (193 | | ) | | (193 | | ) | | (62 | | ) | | — | % | | 211.3 | % |

| Other, net | (11 | | ) | | (1 | | ) | | (1 | | ) | | 1,000.0 | % | | — | % |

| Total Other (expenses) income | $ | (209 | ) | | $ | (217 | ) | | $ | (72 | ) | | (3.7 | )% | | 201.6 | % |

(1) The businesses included in our Enterprise segment were acquired as part of the Acquisition.

The consolidated results for the year ended December 31, 2014 include only two months (November and December 2014) of the Enterprise segment.

The increase in net sales, gross profit, operating expenses and operating income, for the year ended December 31, 2014 was primarily related to the Acquisition.

2015 compared to 2014

Net sales growth of 118.3% for the twelve months ended December 31, 2015 as compared to the prior year was primarily as a result of the Acquisition of the Enterprise business and higher North America sales, offset partially by $149 million of unfavorable foreign currency effects, net of hedges.

The Enterprise business contributed $1,888 million or 95.4% of the increase in total net sales, increased gross profit by $808 million or 93.4%, and increased recurring operating expenses by $830 million or 95.9%, and non-recurring operating expenses by $42 million or 81.3%.

Included within the total recurring operating expenses was an increase of $197 million of amortization expense as a result of intangibles acquired.

Within non-recurring operating expenses were increases of $18 million of integration and acquisition costs as a result of IT costs of transitioning and exiting the Motorola platforms and $34 million of exit and restructuring costs as a result of integrating acquired facilities and related employees.

Included in the total Enterprise impacts of 2015 versus 2014 are the following purchase accounting adjustments: a $10 million reduction in revenue related to the valuation of service contracts acquired, a $25 million decrease to cost of sales related to a step up in value of inventory acquired, and a $167 million increase in depreciation and amortization expenses.

Net sales, excluding the impact of the Acquisition of the Enterprise business, increased by $91 million or 7.7% in 2015 versus 2014.

The unfavorable impact of foreign currency reduced sales by $70 million.

This increase is primarily due to sales growth in the North America and Asia-Pacific regions, specifically higher volumes of barcode printers and location solutions.

Latin America sales were lower driven by a weak macro-economic environment.

Consolidated net sales, excluding the effect of the Enterprise business, grew 12.5%, on a constant currency basis.

Gross margin as a percent of sales, excluding the effect of the Enterprise business, was 50.9% for the year ended December 31, 2015 compared to 50.0% in the comparable year ended December 31, 2014.

This increase in margins reflects the favorable impact of higher unit sales within the North America and Asia-Pacific regions and lower product costs for both hardware and supplies, offset partially by unfavorable foreign currency effects, net of hedges.

Operating expenses for the year ended December 31, 2015, excluding the effect of the Enterprise business, were $415 million compared to $370 million in the prior year.

Included in the increase were exit and restructuring costs within Legacy Zebra of $10 million related to organizational redesign.

As a percentage of sales, operating expenses, excluding the Enterprise business, were 32.3% for the year ended December 31, 2015 compared to 31.0% for the year ended December 31, 2014 primarily due to additional investments made to support business growth in the sales, research and development, and administrative functions, and exit and restructuring costs.

The Company recognized a foreign exchange loss of $23 million for 2015 as a result of changes in the value of non-US dollar assets and liabilities primarily related to the Enterprise business that were not hedged during the period.

As of December 31, [removed: 2016,] [added: 2017,] we had [removed: $1.7] [added: $2.2] billion of debt outstanding under our [removed: Term Loan,] [added: debt facilities,] which bears interest determined by reference to a variable rate index.

A one percentage point increase or decrease in interest rates on the various debt instruments we hold would increase or decrease the annual interest expense we recognize and the cash we pay for interest expense by approximately [removed: $17] [added: $22] million.

To mitigate this risk, we entered into forward interest rate swaps to hedge the interest rate risk associated with the variable interest payments on our [removed: Term Loan that was used to fund the acquisition of Enterprise.][added: debt facilities.]

Refer to Note [removed: 8] [added: 7,] Derivative Instruments in the Notes to Consolidated Financial Statements included in this Form 10-K for further [removed: discussions] [added: discussion] of hedging activities.

We provide products and services in over [removed: 170] [added: 180] countries throughout the world and, therefore, at times are exposed to risk based on movements in foreign exchange rates.

See Note [removed: 8] [added: 7,] Derivative Instruments [added: in the Notes to the Consolidated Financial Statements included in this Form 10-K] for further discussions of hedging activities.

We are exposed to interest rate volatility with regard to existing debt issuances.

Primary exposures include LIBOR rates.

From time to time, we use interest rate derivative contracts including interest rate swaps to hedge our exposure to the impact of interest rate changes on existing debt and future debt issuances to reduce the volatility of our financing costs and, based on current and projected market conditions, achieve a desired proportion of fixed versus floating-rate debt.

Generally, under these swaps, we agree with a counterparty to exchange floating-rate for fixed-rate interest amounts with an agreed upon notional principal amount.

We are exposed to fluctuations in foreign currency exchange rates, primarily with respect to the Euro, British Pound Sterling, Czech koruna, Brazilian real, Canadian dollar, Australian dollar, Singapore dollar, Japanese yen, and Swedish krona.

In general, we are a net receiver of foreign currencies and therefore benefit from a weakening of the U.S. dollar and are adversely affected by a strengthening of the U.S. dollar.

A 1% increase or decrease in exchange rates relative to the U.S. dollar would increase or decrease our pre-tax income by approximately $2 million.

This amount excludes the impact of any associated derivative contracts, which would largely offset this foreign exchange exposure.

We enter into foreign currency forward contracts to hedge against the effect of exchange rate fluctuations on the Consolidated Balance Sheets of certain entities with exposures denominated in foreign currencies.

These transactions are typically three months in maturity and are not designated as hedges.

Historically, we mitigated interest rate risk on marketable security investments with an investment policy and use of outside professional investment managers; our objective was to achieve stable and predictable targeted rates of return and to provide the liquidity necessary for the operations of our business.

In connection with the acquisition of Enterprise, Zebra incurred significant debt, including variable rate debt (subject to interest rate caps).

The following table sets forth the impact of a hypothetical ten percent (plus or minus) movement in the dollar/pound, dollar/euro, euro/pound, dollar/Czech koruna, dollar/Brazilian real, dollar/Canadian dollar, dollar/Malaysian ringgit, dollar/Australian dollar, and dollar/Singapore dollar rates measured as if Zebra did not engage in the selective hedging practices described above.

The risk is increased through additional exposure as it relates to the euro, pound, Czech koruna, Brazilian real, Canadian dollar, Malaysian ringgit, Australian dollar, and Singapore dollar denominated assets and liabilities.

(in millions, except per share data)

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | December 31, | | | | | | |

| Foreign exchange | 2016 | | | | 2015 | | |

| Dollar/Pound | | | | | | | |

| Effect on Pretax Income | $ | — | | | $ | 1 | |

| Effect on Diluted EPS (after tax) | — | | | | 0.01 | | |

| Dollar/Euro | | | | | | | |

| Effect on Pretax Income | $ | 19 | | | $ | 13 | |

| Effect on Diluted EPS (after tax) | 0.24 | | | | 0.16 | | |

| Euro/Pound | | | | | | | |

| Effect on Pretax Income | $ | 1 | | | $ | 1 | |

| Effect on Diluted EPS (after tax) | 0.01 | | | | 0.02 | | |

| Dollar/Czech Koruna | | | | | | | |

| Effect on Diluted EPS (after tax) | 0.01 | | | | 0.01 | | |

| Dollar/Brazilian Real | | | | | | | |

| Dollar/Canadian dollar | | | | | | | |

| Dollar/Malaysian Ringgit | | | | | | | |

| Effect on Pretax Income | $ | 1 | | | $ | — | |

| Effect on Diluted EPS (after tax) | 0.01 | | | | — | | |

| Dollar/Australian Dollar | | | | | | | |

| Dollar/Singapore Dollar | | | | | | | |

We design, manufacture, and sell a broad range of AIDC products, including: mobile computers, barcode scanners, RFID readers, specialty printers for barcode labeling and personal identification, real-time location systems (“RTLS”), related accessories and supplies, such as self-adhesive labels and other consumables, and [added: software] utilities and [removed: application software.][added: applications.]

We also provide a full range of services, including maintenance, technical support, [removed: repair and] [added: repair,] managed [added: and professional] services, including cloud-based subscriptions.

End-users of our products and services include [removed: those in the retail,] [added: retail and e-commerce,] transportation and logistics, manufacturing, health care, hospitality, warehouse and distribution, energy and utilities, [added: government,] and education [removed: industries] [added: enterprises] around the world.

[added: We provide] our products and services globally through a direct sales force and extensive network of channel [removed: partners.]

We provide products and services in over [removed: 170] [added: 180] countries, with [removed: approximately 120] [added: 114] facilities and [removed: 6,500] [added: approximately 7,000] employees worldwide.

Through innovative application of our technologies, we are leading an evolution of the AIDC market into Enterprise Asset Intelligence [removed: (“EAI”) solutions.][added: (“EAI”).]

Specifically, EAI encompasses solutions which “sense” information from enterprise assets, including packages moving through a supply chain, equipment in a factory, workers in [added: a] warehouse, and shoppers in a store.

Operational data from enterprise assets, including status, location, utilization, [removed: or] [added: and] preferences, is then analyzed to provide actionable insights.

Finally, with the benefits of mobility, these insights can be delivered to the right [removed: worker] [added: user] at the right time to drive more effective actions.

While [added: traditional] AIDC solutions sporadically capture limited amounts of data and populate static enterprise systems, EAI solutions continuously analyze real-time data from many sources to generate actionable insights.

With [added: this] expanded mobility, end-users are able to consume or act upon dynamic enterprise data and information anytime and anywhere.

[removed: Enterprise is an industry] [added: We are a market] leader in [added: the key technologies of Enterprise Asset Intelligence, including] mobile [removed: computing] [added: computing, barcode] and [removed: advanced] [added: card printing,] data [removed: capture technologies and services, which complement the Company’s printing] [added: capture,] and RFID [removed: products.][added: readers.]

The Company funded the Acquisition through a combination of cash on hand of $250 million, the sale of 7.25% senior notes due 2022 in an aggregate principal amount of $1.05 billion (the “Senior Notes”), and a [removed: new] credit agreement with various lenders that provided a term loan of $2.2 billion (the “Term Loan”) due 2021.

Since closing the Acquisition in October 2014, integration activities by the Company have focused on creating “One Zebra” by integrating the operations of Enterprise [removed: with Zebra] to create a single business with common sales, service, supply chain, marketing, finance, information technology (“IT”), and other functions.

Our [added: integration] priorities [removed: have] centered on maintaining business continuity while identifying and implementing cost synergies, operating efficiencies, and integration of functional organizations and processes.

Another key focus of the integration [removed: has been] [added: was] to conclude MSI-provided transition service agreements (“TSAs”) related primarily to IT support services.

These TSAs [removed: are] [added: were] an interim measure to continue the operations of the Enterprise business without disruption while integration activities [removed: are in process.][added: were completed.]

See Note [removed: 3] [added: 3,] Business Combinations and Divestitures.

[removed: Our operations consist] [added: In January 2018, the Company changed the names] of [removed: two] [added: the reportable] segments [removed: -] [added: to better reflect business operations:] (1) [added: Asset Intelligence & Tracking (“AIT”), formerly] Legacy Zebra, comprised of barcode and card printing, location solutions, supplies, and [removed: services] [added: services;] and (2) [added: Enterprise Visibility & Mobility (“EVM”), formerly] Enterprise, comprised of mobile computing, data capture, RFID, and services.

[removed: These applications require] high levels of data accuracy, speed, and reliability.

Location Solutions: The Company offers a range of RTLS and [removed: services,] [added: services] which incorporate active and passive RFID and other tracking technologies to [removed: provide visibility into the location] [added: enable users to locate, track, manage,] and [removed: movement] [added: optimize the utilization] of enterprise assets and personnel.

We provide substantially all elements of the location solution, including [removed: asset] tags, [removed: call tags,] sensors, exciters, middleware software, and application software.

Our [added: location] solutions are deployed primarily in [removed: industrial] manufacturing, [removed: process industries,] aerospace, transportation and logistics, sports, and healthcare [removed: environments.][added: industries.]

We promote the use of genuine Zebra branded supplies with [removed: its] [added: our] printing equipment.

Services: We provide a full range of maintenance, technical support, [removed: repair,] and [removed: managed] [added: repair] services.

[removed: These offerings include multiple service levels and typically] [added: They] are [added: typically] contracted through multi-year service agreements.

We also provide [added: managed and professional] services [removed: strategically aligned to the way businesses] [added: including those which help customers] manage their devices and related software applications.

We provide our services directly and [removed: also] through our [added: global] network of [removed: partners to extend the geographic reach of our service offerings.][added: partners.]

Mobile Computing: We design, manufacture, and sell rugged and enterprise-grade mobile computing products in a variety of specialized form factors and [removed: features for specific] [added: designs to meet a wide variety of] enterprise applications.

The [removed: devices collect and decode] [added: Company’s data capture products capture business-critical information by decoding] barcodes and [removed: images] [added: images,] and transmit the resulting data to enterprise systems for analysis and timely decision making.

Services: We provide a full range of maintenance, technical support, [removed: repair] and [removed: managed services, including cloud-based subscriptions.][added: repair services.]

An industry leader focused solely on [removed: Enterprise Asset Intelligence][added: improving enterprise operations]

We believe these customer relationships and [removed: a] [added: our] strong partner network are critical [removed: parts of] [added: to] our success and would be difficult for a new market entrant to replicate.

We leverage our strong commitment to innovation and deep industry-specific expertise to deliver end-to-end solutions [removed: across targeted] [added: to a wide array of] industries, with a broad portfolio of products and services.

In addition, we believe we have strong brand recognition with a reputation in the industry as a trusted and strategic [removed: partner and supplier.][added: partner.]

We believe the size and scope of our operations, including market [removed: leadership;] [added: leadership,] product development [removed: investment;] [added: investment,] portfolio [removed: breadth;] [added: breadth,] and global distribution, give us advantages over our competitors.

We believe we have the largest installed base of [removed: products,] [added: products] compared with other companies in our industry.

Leverage our [added: market] leadership position and innovation to [removed: drive profitable growth in] [added: profitably grow] our core business

We expect to achieve this by leveraging our broad portfolio of solutions and product innovation and [removed: becoming] [added: continuing to be] a [removed: more] strategic partner to [removed: our] end customers.

We also expect to drive growth by capitalizing on technology transitions occurring in the industry, including the transition to [removed: more modern mobile] [added: the Android™] operating [removed: systems] [added: system] in mobile computing and transitions in data capture to newer technologies involving 2D imaging and RFID.

partners.

During 2017, the Company executed a debt restructuring program, which included entering into an Amended and Restated Credit Agreement (“A&R Credit Agreement”) facility and a receivables financing facility which resulted in the redemption of the Senior Notes and a lower cost of debt.

During 2017, the Company substantially completed its integration activities, including the implementation of a common enterprise resource planning system, associated with the Acquisition.

The Company also exited the TSAs with MSI.

Our operations consist of two segments.

Asset Intelligence & Tracking

These applications require

Our offerings include cloud-based subscriptions and multiple service levels.

Enterprise Visibility & Mobility

We also provide managed and professional services that, among other things, help customers design, test, and deploy our solutions as well as manage their mobility devices, software applications and workflows.

Our offerings include cloud-based subscriptions and multiple service levels.

They are typically contracted through multi-year service agreements.

We provide our services directly and through our global network of partners.

Our leadership position enables us to work with and support customers globally, in a variety of industries, who are focused on implementing leading-edge solutions.

Increase our opportunity for growth through expansion in adjacent market segments

We plan to drive growth through expansion in adjacent market segments that share similar technology needs with our core markets.

We will focus specifically on segments where our products and solutions, workflow expertise, and customer and industry relationships will enable us to provide significant value to end users.

Our primary capital allocation priority is achievement of our target debt leverage ratio.

For some applications, we compete with companies that provide tablets and smart phones.

Strategic marketing includes vertical marketing, ISV strategy and business intelligence.

Product marketing manages our product launches and lifecycle go-to-market strategy.

hospitals.

Our RFID products include fixed readers, RFID enabled mobile computers, and RFID sleds.

We provide

Acquisition of Enterprise Business

Its products include rugged and enterprise-grade mobile computers, barcode scanners and RFID readers, WLAN solutions, and accessories, software, and services that are associated with these products.

Enterprise service revenues include sales arising from maintenance, repair, product support, system installation and integration services, and other services.

The Acquisition expanded the Company’s product lines with complementary products that together are employed by customers to obtain greater visibility and insights into their operations.

It enables us to deliver end-to-end solutions supporting the IoT in targeted industries.

The expanded capabilities of the combined company make us a more valued strategic supplier to end-users, as well as a more important supplier of products and solutions to our channel partners.

A $250 million revolving credit facility (the “Revolving Credit Facility”) was included as part of the new credit agreement (the Senior Notes and, together with the Term Loan and Revolving Credit Facility, the “Debt Agreements”).

During 2016, significant progress was made in the areas of culture development and integration of IT infrastructure and business systems, including those to support our global network of channel partners and our Asia-Pacific regional operations.

These efforts resulted in the elimination of more than 75% of our TSAs, driven by Enterprise IT applications.

In addition, the Company consolidated legacy channel programs of the Legacy Zebra and Enterprise businesses that culminated into the launch of the Company’s PartnerConnect channel program in April 2016.

Additional business system integration work remains including completion of the implementation of a common enterprise resource planning (“ERP”) system.

Until such time that the Company is able to complete its transition to common systems, Legacy Zebra and Enterprise will continue to operate largely on separate systems, including separate ERP systems.

The IT integration, when completed, will result in a modernized and right-sized IT network and streamlined business processes.

Completion of the IT integration, including a common ERP system, is expected before the end of 2017 and will enable us to terminate the remaining TSAs.

As a result of our integration efforts, we expect a more efficient and cost effective IT infrastructure, improved operational efficiency, and reduced operating costs.

Legacy Zebra

Our solutions enable users to locate, track, manage, and optimize the utilization of high-value assets, equipment, and people.

Applications for our location solutions span a broad array of industries where tracking assets, transactions, and people are critical.

Enterprise

The Company’s data capture products allow the capture of business critical information simply, quickly, and accurately.

We also provide services strategically aligned to the way enterprise businesses manage their mobility devices and related software applications.

This includes services that help customers design, test, and deploy our solutions.

We also assist customers in modernizing their mobile user experiences and increasing the efficiency of their operations by migrating legacy applications to newer architectures or redesigning user software applications, workflows, and backend system integrations.

We focus on key technologies of Enterprise Asset Intelligence, including mobile computing; barcode and card printing; data capture; RFID; and location solutions.

We believe we are the market leader in mobile computing, barcode printing, data capture, and UHF RFID readers.

In addition, we plan

Integrate and optimize the combined company as one seamless, focused company

We are integrating, optimizing, and reshaping the Company into a seamless, focused company with a high-performance culture characterized by a common purpose and shared set of values.

Our plans include developing and delivering new offerings that integrate various devices, software, and services into complete, end-to-end solutions for our customers and partners.

We also expect to continue to position ourselves for additional operating efficiencies driven by a common IT platform and operating model enhancements.

We also intend to increase profitability through growing our business by delivering innovative end-to-end solutions that provide significant value to our customers.

Our capital allocation priority will continue to be the reduction of debt.

We also compete with companies engaged in the design, manufacture, and marketing of devices for broader consumer and commercial applications, including notebook computers and tablets, smart phones, cordless phones, and cellular/wired infrastructure equipment.

These competitors include Code Corporation, Fujian, Impinj, Newland, and Opticon.

Solutions marketing includes product and industry marketing.

Business intelligence provides fact-based insights into our markets, competitors, customers, and partners.

We maintain the services of JDMs for certain products.

10.5% of net sales for 2016, 10.8% of net sales for 2015 and 9.0% of net sales in 2014.

Customers benefit by utilizing the choice or combination of asset tracking products that can be “application matched” based on ISO/IEC 24730-2, Cisco CCX Wi-Fi, precision GPS, beacons and ultra-wideband (“UWB”) technologies.

See Note [removed: 11] [added: 10,] Contingencies in the Notes to Consolidated Financial Statements included in this Form 10-K.

For the fiscal year ended December 31, [removed: 2016][added: 2017]

Yes [removed: X] [added: ý] No [added: ¨]

Yes [added: ¨] No [removed: X][added: ý]

See definitions of “accelerated filer,” “large accelerated [removed: filer” and] [added: filer”,] “smaller reporting [added: company”, and “emerging growth] company” in Rule 12b-2 of the Securities [removed: Act)] [added: Act] (Check one):

| [added: |] Large accelerated filer [removed: X] | [added: ý |] Accelerated filer | [added: ¨ |]

| [added: |] Non-accelerated filer [added: | ¨] (Do not check if [removed: a] smaller reporting company) | Smaller reporting company | [added: ¨ |]

As of July [removed: 2, 2016,] [added: 1, 2017,] the aggregate market value of [removed: each of] the registrant’s Class A Common held by non-affiliates was approximately [removed: $2,589,001,121.][added: $5,260,632,176.]

The closing price of the Class A Common Stock on [removed: July 1, 2016,] [added: June 30, 2017,] as reported on the Nasdaq Stock Market, was [removed: $49.82] [added: $100.52] per share.

As of February [removed: 20, 2017,] [added: 15, 2018,] there were [removed: 52,877,247] [added: 53,250,033] shares of Class A Common Stock, par value $.01 per share, outstanding.

Certain sections of the registrant’s Notice of Annual Meeting of Stockholders and Proxy Statement for its Annual Meeting of Stockholders to be held on May [removed: 18, 2017,] [added: 17, 2018,] are incorporated by reference into Part III of this report, as indicated herein.

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| Item 1A. | | [Risk [removed: Factors](#sAE6923A025A75C2683616CA37812FCE0)] [added: Factors](#sD501EA913F7853C09ABB23C04AEE5228)] | [removed: [10](#sAE6923A025A75C2683616CA37812FCE0)] [added: [10](#sD501EA913F7853C09ABB23C04AEE5228)] |

| Item 1B. | | [Unresolved Staff [removed: Comments](#sF248B4A9A0D251E288945896408B9AEE)] [added: Comments](#sA4875FFC122B58C9876E816713814A64)] | [removed: [21](#sF248B4A9A0D251E288945896408B9AEE)] [added: [20](#sA4875FFC122B58C9876E816713814A64)] |

| Item 2. | | [removed: [Properties](#sCA6CBCA7E6225A02AE5163AEA13125BD)] [added: [Properties](#s6E836908A7325EA6A2E7C0CEF6B2BEC0)] | [removed: [21](#sCA6CBCA7E6225A02AE5163AEA13125BD)] [added: [20](#s6E836908A7325EA6A2E7C0CEF6B2BEC0)] |

| Item 3. | | [Legal [removed: Proceedings](#s7074CA0EFA8C5D4991BDB38FBAD29FAF)] [added: Proceedings](#s5692043DD879521EB250B6A9A40D294D)] | [removed: [21](#s7074CA0EFA8C5D4991BDB38FBAD29FAF)] [added: [20](#s5692043DD879521EB250B6A9A40D294D)] |

| Item 4. | | [Mine Safety [removed: Disclosures](#s03B893A724645AAA96402EFCF7F8017D)] [added: Disclosures](#s154D88D75D4E5894AFACB9E8F17DE4E2)] | [removed: [21](#s03B893A724645AAA96402EFCF7F8017D)] [added: [20](#s154D88D75D4E5894AFACB9E8F17DE4E2)] |

| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s49903918C33B53519DCA75F0B242E708)] [added: Securities](#s44CF5EEFB0AF5FAD996FDC15763B4975)] | [removed: [22](#s49903918C33B53519DCA75F0B242E708)] [added: [21](#s44CF5EEFB0AF5FAD996FDC15763B4975)] |

| Item 6. | | [Selected Financial [removed: Data](#sA19411721B155140BD758DC4113E70AD)] [added: Data](#s02CFDCFF701357C9BDF0F4267C0FA7D2)] | [removed: [24](#sA19411721B155140BD758DC4113E70AD)] [added: [23](#s02CFDCFF701357C9BDF0F4267C0FA7D2)] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sE71EF619EDB55CCBBC6D6959131FAA5F)] [added: Operations](#s0C625FFAAEE75952B925F8172E14DFDD)] | [removed: [26](#s37700F096D2F51D7B85C255A559702C6)] [added: [24](#s30E32566EE5C5967836F3A24F68F73F6)] |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s959F8D9A34135946B5CD557752723E1F)] [added: Risk](#sDE480D695AD657349C8B783003935225)] | [removed: [36](#s959F8D9A34135946B5CD557752723E1F)] [added: [35](#sDE480D695AD657349C8B783003935225)] |

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#s7189459ED1265A98A167AC400AA129E7)] [added: Data](#s0EE3E36D6CB656AB9B665561CA5B5A69)] | [removed: [38](#s7189459ED1265A98A167AC400AA129E7)] [added: [36](#s0EE3E36D6CB656AB9B665561CA5B5A69)] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosures](#s62F3050081965BEE83FF5FA83D6495AF)] [added: Disclosures](#s4A95A0E1AE665DC780160E054555D3EC)] | [removed: [38](#s62F3050081965BEE83FF5FA83D6495AF)] [added: [36](#s4A95A0E1AE665DC780160E054555D3EC)] |

| Item 9A. | | [Controls and [removed: Procedures](#s71CAE3A0852454378A42084B97FF7FC5)] [added: Procedures](#s9B7546C81B435FE38AE02F0295F38EC3)] | [removed: [38](#s71CAE3A0852454378A42084B97FF7FC5)] [added: [36](#s9B7546C81B435FE38AE02F0295F38EC3)] |

| Item 9B. | | [Other [removed: Information](#s05F1D6AB063B540984F4A7EA1A2C1000)] [added: Information](#sCFFB7D4A5E30564A911681ADB2D0D89C)] | [removed: [41](#s05F1D6AB063B540984F4A7EA1A2C1000)] [added: [38](#sCFFB7D4A5E30564A911681ADB2D0D89C)] |

| [PART [removed: III](#s1E1ED363F7195D0CAAB0B8430E1EFD43)] [added: III](#sFD0E86991D2C517F889229FED768A32E)] | | | |

| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#sB55FC4C8E8505986A8FF2BDC36090BF2)] [added: Governance](#s93093FE412A353879E5478049B9399EC)] | [removed: [42](#sB55FC4C8E8505986A8FF2BDC36090BF2)] [added: [39](#s93093FE412A353879E5478049B9399EC)] |

| Item 11. | | [Executive [removed: Compensation](#sCC4FE82906EF51F1830B7BF7C8D188A0)] [added: Compensation](#s8A002A36623D57D280CD96020B3F9E01)] | [removed: [42](#sCC4FE82906EF51F1830B7BF7C8D188A0)] [added: [39](#s8A002A36623D57D280CD96020B3F9E01)] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s44ED1594287B524FA2821D2E61B1BC63)] [added: Matters](#sB248AD5F96945C5DB6761F1D2DD84CE4)] | [removed: [42](#s44ED1594287B524FA2821D2E61B1BC63)] [added: [39](#sB248AD5F96945C5DB6761F1D2DD84CE4)] |

| Item 13. | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s8E66658C54115A89B4501E4F28F56B66)] [added: Independence](#s13971587A3AD5D13B0B2C2317EFBBF35)] | [removed: [42](#s8E66658C54115A89B4501E4F28F56B66)] [added: [39](#s13971587A3AD5D13B0B2C2317EFBBF35)] |

| Item 14. | | [Principal Accounting Fees and [removed: Services](#s231503B87F635C8ABC2745EED4725885)] [added: Services](#s8E09CD2FEA8552FAA797CDF6EB4BB59F)] | [removed: [42](#s231503B87F635C8ABC2745EED4725885)] [added: [39](#s8E09CD2FEA8552FAA797CDF6EB4BB59F)] |

| Item 15. | | [Exhibits, Financial Statement [removed: Schedules](#s908EE95E7A8C510C8ECC97E0E73FC21A)] [added: Schedules](#s1162AA2A921E598FA82CF1EB988E65A1)] | [removed: [43](#s908EE95E7A8C510C8ECC97E0E73FC21A)] [added: [40](#s1162AA2A921E598FA82CF1EB988E65A1)] |

| [CONSOLIDATED FINANCIAL STATEMENTS AND [removed: SCHEDULE](#s7C7DF1C12B92552B99A0AF00AF9D5236)] [added: SCHEDULE](#sD711D3DB9F3150C589438A79A79D62C8)] | | | |

| [Index to Consolidated Financial Statements and [removed: Schedule](#s7C7DF1C12B92552B99A0AF00AF9D5236)] [added: Schedule](#sD711D3DB9F3150C589438A79A79D62C8)] | | | [removed: F-[1](#s7C7DF1C12B92552B99A0AF00AF9D5236)] [added: F-[1](#sD711D3DB9F3150C589438A79A79D62C8)] |

| [Index to [removed: Exhibits](#s9EDC498F43EC576FBC09419C91642AD6)] [added: Exhibits](#s636901EEB310514B95DE554B9371E6F6)] | | | [removed: F-[37](#s9EDC498F43EC576FBC09419C91642AD6)] [added: F-[38](#s636901EEB310514B95DE554B9371E6F6)] |

The forward-looking statements include, but are not limited to, the Company’s financial outlook for the first quarter and full year of [removed: 2017.][added: 2018.]

| • | Access to cash and cash equivalents held outside the [removed: United States,] [added: U.S.,] |

10-K 1 a10k12312017zebra.htm 10-K

Yes ý No ¨

Yes ý No ¨

Yes ý No ¨

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| | | | Emerging growth company | ¨ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to section 13(a) of the Exchange Act.

Yes ¨ No ý

| [PART I](#s724440284E0E5393A2CAB452E5BFFA61) | | | |

| [PART II](#s733E075155825CFAACEF039BC5DD01D1) | | | |

| [PART IV](#s8C16758FDE355F3CA0251947800CAEC0) | | | |

| [SIGNATURES](#s41F8E75911655A5CA6372FE33591D2CD) | | | |

| Signatures | | | [41](#s41F8E75911655A5CA6372FE33591D2CD) |

| [EXHIBITS](#s636901EEB310514B95DE554B9371E6F6) | | | |

| • | Success of integrating acquisitions, |

10-K 1 a10k12312016zebra.htm 10-K

| | |

| --- | --- |

\[ X \]

| [PART I](#s9A838066029D517FA4BB8006DAD6FC5B) | | | |

| [PART II](#sB0AA9BDE3ECA568CB851B23908D98DE4) | | | |

| [PART IV](#sB2527D71B448576CB016071390BB827B) | | | |

| [SIGNATURES](#s1C4AFE206E5C5A1689610111048974A3) | | | |

| Signatures | | | [44](#s1C4AFE206E5C5A1689610111048974A3) |

| [EXHIBITS](#s9EDC498F43EC576FBC09419C91642AD6) | | | |

| • | Success of integrating acquisitions, including the Enterprise business we acquired in October 2014 from Motorola Solutions, Inc., |

As of December 31, [removed: 2016, we] [added: 2017, the Company] owned [removed: 3 lab] [added: three laboratory] and warehouse facilities located [removed: in:] [added: in] Holtsville, [removed: NY;] [added: NY,] Preston, [removed: UK;] [added: UK,] and Mississauga, Ontario, Canada.

The Company [removed: operates 8] [added: leases seven] facilities for the purposes of manufacturing, production, and [removed: warehousing, 5] [added: warehousing; five] of which are located in the [removed: United States] [added: U.S.] and [removed: 3] [added: two] are located in other countries.

As of December 31, 2017, the Company had a total of 111 leased facilities with locations spread globally; 32 of which are located in the U.S. and 79 are located in 45 other countries.

As of December 31, 2016, the Company leased 115 office facilities, 33 of which were located in the United States and 82 were located in other countries.

Our Class A common stock is traded on the NASDAQ Stock [removed: Market] [added: Market, LLC] under the symbol [removed: ZBRA.][added: “ZBRA”.]

The following table shows the high and low trade prices for each fiscal quarter in [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] as reported by the NASDAQ Stock [removed: Market.][added: Market, LLC.]

| [removed: 2016] [added: 2017] | | High | | | | Low | | | | [removed: 2015] [added: 2016] | | High | | | | Low | | |

| First Quarter | | $ | [removed: 70.30] [added: 93.61] | | | $ | [removed: 52.14] [added: 81.02] | | | First Quarter | | $ | [removed: 92.48] [added: 70.30] | | | $ | [removed: 74.40] [added: 52.14] | |

| Second Quarter | | [removed: 68.49] [added: 109.30] | | | | [removed: 48.51] [added: 86.82] | | | | Second Quarter | | [removed: 119.47] [added: 68.49] | | | | [removed: 88.41] [added: 48.51] | | |

| Third Quarter | | [removed: 71.61] [added: 109.89] | | | | [removed: 46.13] [added: 94.78] | | | | Third Quarter | | [removed: 117.00] [added: 71.61] | | | | [removed: 71.95] [added: 46.13] | | |

| Fourth Quarter | | [removed: 88.00] [added: 117.44] | | | | [removed: 62.91] [added: 101.49] | | | | Fourth Quarter | | [removed: 83.02] [added: 88.00] | | | | [removed: 63.92] [added: 62.91] | | |

Source: The NASDAQ Stock [removed: Market][added: Market, LLC]

At February [removed: 20, 2017,] [added: 15, 2018,] the last reported price for the Class A common stock was [removed: $85.99] [added: $120.54] per share, and there were [removed: 140] [added: 134] registered stockholders of record for Zebra’s Class A common stock.

In addition, we had approximately [removed: 25,868] [added: 29,049] stockholders who owned our stock in street name.

We did not purchase shares of Zebra Class A common stock during [removed: 2016] [added: 2017] as part of the purchase plan program.

In November 2011, our Board authorized the purchase of up to [removed: an additional] 3,000,000 shares under the purchase plan program [removed: and the] [added: with a] maximum [removed: number] of [added: 665,475] shares [removed: that may yet be purchased under the program is 665,475.][added: remaining available for purchase.]

This graph compares the cumulative annual change since December 31, [removed: 2011,] [added: 2012,] of the total stockholder return of Zebra Technologies Corporation Class A common stock with the cumulative return on the following published indices: (i) the RDG Technology Composite; and (ii) the NASDAQ Composite Market Index, during the same period.

The comparison assumes that $100 was invested in each of the Company’s Class A common stock, the stocks comprising the RDG Technology Composite and the stocks comprising the NASDAQ Composite Market Index on December 31, [removed: 2011.][added: 2012.]

[removed: ][added: ]

| [added: Total] Net sales | | $ | [removed: 3,574] [added: 3,722] | | | $ | [removed: 3,650] [added: 3,574] | | | $ | [removed: 1,671] [added: 3,650] | | | $ | [removed: 1,038] [added: 1,671] | | | $ | [removed: 996] [added: 1,038] | |

| Gross profit | | [removed: 1,642] [added: 1,710] | | | | [removed: 1,644] [added: 1,642] | | | | [removed: 778] [added: 1,644] | | | | [removed: 503] [added: 778] | | | | [removed: 491] [added: 503] | | |

| [removed: (Loss)] [added: Net] income [removed: from continuing operations, net of tax] [added: (loss)] | | [removed: (137] [added: $] | [added: 17] | [removed: )] | | [removed: (158] [added: $] | [added: (137] | ) | | [removed: 32] [added: $] | [added: (158] | [added: )] | | [removed: 134] [added: $] | [added: 32] | | | [removed: 122] [added: $] | [added: 134] | |

| Basic earnings [added: (loss)] per [removed: share:] [added: share] | | [added: $] | [added: 0.33] | | | [added: $] | [added: (2.65] | [added: )] | | [added: $] | [added: (3.10] | [added: )] | | [added: $] | [added: 0.64] | | | [added: $] | [added: 2.65] | |

| Diluted earnings [added: (loss)] per [removed: share:] [added: share] | | [added: $] | [added: 0.32] | | | [added: $] | [added: (2.65] | [added: )] | | [added: $] | [added: (3.10] | [added: )] | | [added: $] | [added: 0.63] | | | [added: $] | [added: 2.63] | |

| Weighted average shares [removed: outstanding] [added: outstanding:] | | | | | | | | | | | | | | | | | | | | |

| Basic | | [removed: 51,579,112] [added: 53,021,761] | | | | [removed: 50,996,297] [added: 51,579,112] | | | | [removed: 50,789,173] [added: 50,996,297] | | | | [removed: 50,692,942] [added: 50,789,173] | | | | [removed: 51,566,468] [added: 50,692,942] | | |

| Diluted | | [removed: 51,579,112] [added: 53,688,832] | | | | [removed: 50,996,297] [added: 51,579,112] | | | | [removed: 51,379,698] [added: 50,996,297] | | | | [removed: 51,063,189] [added: 51,379,698] | | | | [removed: 51,843,051] [added: 51,063,189] | | |

| | | [added: December 31,] | | | | [removed: December 31,] | | | | | | | | | | | | | | |

| [added: Consolidated] Balance [removed: Sheet(1)] [added: Sheets(1)] | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Cash and cash equivalents, investments and marketable securities | | $ | [removed: 156] [added: 62] | | | $ | [removed: 192] [added: 156] | | | $ | [removed: 418] [added: 192] | | | $ | [removed: 416] [added: 418] | | | $ | [removed: 394] [added: 416] | |

| Total [removed: assets] [added: Assets] | | [removed: 4,632] [added: 4,275] | | | | [removed: 5,040] [added: 4,632] | | | | [removed: 5,539] [added: 5,040] | | | | [removed: 1,120] [added: 5,539] | | | | [removed: 968] [added: 1,120] | | |

| Long-term liabilities | | [removed: 2,891] [added: 2,441] | | | | [removed: 3,252] [added: 2,891] | | | | [removed: 3,346] [added: 3,252] | | | | [removed: 15] [added: 3,346] | | | | [removed: 14] [added: 15] | | |

| [added: Total] Stockholders’ [removed: equity] [added: Equity] | | [removed: 792] [added: 834] | | | | [removed: 893] [added: 792] | | | | [removed: 1,040] [added: 893] | | | | [removed: 959] [added: 1,040] | | | | [removed: 857] [added: 959] | | |

| Consolidated Statements of Operations(1) | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | |

| | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | |

| Net (Loss)/Income(1) | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | |

| Cost of sales | | 1,932 | | | | 2,006 | | | | 893 | | | | 535 | | | | 505 | | |

| Acquisition and integration costs | | 125 | | | | 145 | | | | 127 | | | | 5 | | | | 3 | | |

| Exit and restructuring costs | | 19 | | | | 40 | | | | 6 | | | | 6 | | | | 1 | | |

| Other operating expenses | | 1,418 | | | | 1,422 | | | | 556 | | | | 332 | | | | 323 | | |

| Total operating expenses | | 1,562 | | | | 1,607 | | | | 689 | | | | 343 | | | | 327 | | |

| Operating income | | 80 | | | | 37 | | | | 89 | | | | 160 | | | | 164 | | |

| (Loss) income from continuing operations before income taxes | | (129 | | ) | (2) | (180 | | ) | (2) | 17 | | | (2) | 164 | | | | 164 | | |

| Income from discontinued operations, net of tax(3) | | — | | | | — | | | | — | | | | — | | | | 1 | | |

| Net (loss) income | | $ | (137 | ) | | $ | (158 | ) | | $ | 32 | | | $ | 134 | | | $ | 123 | |

| (Loss) income from continuing operations | | $ | (2.65 | ) | | $ | (3.10 | ) | | $ | 0.64 | | | $ | 2.65 | | | $ | 2.36 | |

| Income from discontinued operations(3) | | — | | | | — | | | | — | | | | — | | | | 0.02 | | |

| Net (loss) income | | $ | (2.65 | ) | | $ | (3.10 | ) | | $ | 0.64 | | | $ | 2.65 | | | $ | 2.38 | |

| (Loss) income from continuing operations | | $ | (2.65 | ) | | $ | (3.10 | ) | | $ | 0.63 | | | $ | 2.63 | | | $ | 2.35 | |

| Net (loss) income | | $ | (2.65 | ) | | $ | (3.10 | ) | | $ | 0.63 | | | $ | 2.63 | | | $ | 2.37 | |

| Working capital(4) | | 273 | | | | 439 | | | | 719 | | | | 635 | | | | 616 | | |

| | |

| --- | --- |

| (2) | 2016 includes interest expense of $193 million, accelerated loan discount amortization of $3 million due to debt refinancing, and a minimal impact from forward swaps. See Note 9 Long-Term Debt for further information on debt refinancing amendments. 2015 includes interest expense of $197 million and forward swaps gain of $4 million. 2014 includes interest expense of $57 million and forward swaps loss of $5 million. |

| (3) | Income from discontinued operations is related to a reversal of amounts previously reserved, which were part of the finalization of the accounting for the sale of Navis, LLC and Proveo AG during 2011. |

| (4) | Calculated as current assets minus current liabilities. |

The financial statements and schedules of Zebra are annexed to this report as pages F-2 through [removed: F-36.][added: F-37.]

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2016.][added: 2017.]

Based on this assessment and those criteria, our management believes that, as of December 31, [removed: 2016,] [added: 2017,] our internal control over financial reporting is effective.

Ernst & Young LLP’s report is included on page [removed: 40] [added: 37] of this report on Form 10-K.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls [added: must be considered relative to their costs.]

[removed: The] [added: To the Shareholders and the] Board of Directors [removed: and Stockholders] of [added: Zebra Technologies Corporation]

We have audited Zebra Technologies [removed: Corporation and subsidiaries’ (“the Company”)] [added: Corporation’s] internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

[removed: Zebra Technologies Corporation’s] [added: The Company’s] management is responsible for maintaining effective internal control over financial [removed: reporting,] [added: reporting] and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

In our opinion, Zebra Technologies Corporation [removed: and subsidiaries] [added: (the “Company”)] maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the consolidated balance sheets of [added: the] Zebra Technologies Corporation [removed: and subsidiaries] as of December 31, [removed: 2016 and 2015,] [added: 2017] and [added: 2016,] the related consolidated statements of operations, comprehensive income (loss), [removed: stockholders' equity] [added: stockholders’ equity,] and cash [removed: flows] [added: flows,] for each of the three years in the period ended December 31, [removed: 2016,] [added: 2017,] and [added: the related notes and financial statement schedule listed in Index Item 15 and] our report dated February [removed: 27, 2017] [added: 22, 2018] expressed an unqualified opinion thereon.

There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2017, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Opinion on Internal Control over Financial Reporting

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control Over Financial Reporting

February 22, 2018

In the first quarter of 2015, the Company identified a material weakness related to the process to prepare and review its quarterly and annual income tax provision as a result of the increased complexity in the legal entity structure of the business following the Enterprise acquisition.

A material weakness is a deficiency, or combination of deficiencies, in the internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The impact of this material weakness contributed to the restatement of our consolidated financial statements for the year-ended December 31, 2015, the three-months ended April 2016, and the three and six months ended July 2, 2016.With the identification of the material weakness associated with the preparation and review process of our quarterly and annual tax provision in 2015, we began implementing a remediation plan to address these issues.

This plan included the implementation of improved and documented processes and procedures, as well as hiring additional accounting and tax professionals.

During the fourth quarter of 2016, we successfully completed the testing necessary to conclude that the material weakness has been remediated.

Except as noted above, there have been no other changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

must be considered relative to their costs.

Zebra Technologies Corporation:

February 27, 2017

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized, on the [removed: 27th] [added: 22nd] day of February [removed: 2017.][added: 2018.]

| /s/ Anders Gustafsson Anders Gustafsson | Chief Executive Officer and Director (Principal Executive Officer) | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Olivier Leonetti Olivier Leonetti | Chief Financial Officer (Principal Financial Officer) | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Colleen O’Sullivan Colleen O’Sullivan | [added: Vice President,] Chief Accounting Officer [added: (Principal Accounting Officer)] | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Michael A. Smith Michael A. Smith | Director and Chairman of the Board of Directors | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Andrew K. Ludwick Andrew K. Ludwick | Director | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Ross W. Manire Ross W. Manire | Director | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Richard L. Keyser Richard L. Keyser | Director | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Janice M. Roberts Janice M. Roberts | Director | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Chirantan J. Desai Chirantan J. Desai | Director | February [removed: 27, 2017] [added: 22, 2018] |

| /s/ Frank B. Modruson Frank B. Modruson | Director | February [removed: 27, 2017] [added: 22, 2018] |

| [Report of Independent Registered Public Accounting [removed: Firm](#sDC1016277D255160B60A349164BB03E3)] [added: Firm](#sFF67C2B9BB1E5CEC8D11CE26A1C03DF5)] | [removed: F-[2](#sDC1016277D255160B60A349164BB03E3)] [added: F-[2](#sFF67C2B9BB1E5CEC8D11CE26A1C03DF5)] |

| [Consolidated Balance Sheets as of December 31, [removed: 2016] [added: 2017] and [removed: 2015](#sAC4F31DA7B285AE6859E00EFB3DB2666)] [added: 2016](#s582815D559FC56109EA4C6327B84EF35)] | [removed: F-[3](#sAC4F31DA7B285AE6859E00EFB3DB2666)] [added: F-[3](#s582815D559FC56109EA4C6327B84EF35)] |

| [Consolidated Statements of Operations for the [removed: year] [added: years] ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#sCE03BCC101D05A459B246D6783190610)] [added: 2015](#s25A563AE7DDB562C98C6DCFE09532AED)] | [removed: F-[4](#sCE03BCC101D05A459B246D6783190610)] [added: F-[4](#s25A563AE7DDB562C98C6DCFE09532AED)] |

| [Consolidated Statements of Comprehensive [removed: (Loss)] Income [added: (Loss)] for the [removed: year] [added: years] ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#s9BAD7C0378EA50E88B93568C09A8D2B1)] [added: 2015](#s0137C738F2645ABEA07BE9088071A7F3)] | [removed: F-[5](#s9BAD7C0378EA50E88B93568C09A8D2B1)] [added: F-[5](#s0137C738F2645ABEA07BE9088071A7F3)] |

| [Consolidated Statements of Stockholders’ Equity for the [removed: year] [added: years] ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#s4B07E782BF6E5B15B1FD64876B203621)] [added: 2015](#sD1DD7A967CCA5DC7ACFCD201F71775CA)] | [removed: F-[6](#s4B07E782BF6E5B15B1FD64876B203621)] [added: F-[6](#sD1DD7A967CCA5DC7ACFCD201F71775CA)] |

| [Consolidated Statements of Cash Flows for the [removed: year] [added: years] ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#sBA5718A3CEA655B0994AA0F4F36E8BDB)] [added: 2015](#s5858D3030D5B5733BD812BC82D96CA1D)] | [removed: F-[7](#sBA5718A3CEA655B0994AA0F4F36E8BDB)] [added: F-[7](#s5858D3030D5B5733BD812BC82D96CA1D)] |

| [Notes to Consolidated Financial [removed: Statements](#s9371313EB0355D1FA669AD54EE9BFFB8)] [added: Statements](#sFDF600B0927D5BA78030E94ECDFDD579)] | [removed: F-[8](#s9371313EB0355D1FA669AD54EE9BFFB8)] [added: F-[8](#sFDF600B0927D5BA78030E94ECDFDD579)] |

| [Schedule II - Valuation and Qualifying [removed: Accounts](#sE82801D42B6E555DA7B71703235A1FB0)] [added: Accounts](#s32DD1EFFFE1C524C8C6AF267BEEAED2B)] | [removed: F-[36](#sE82801D42B6E555DA7B71703235A1FB0)] [added: F-[37](#s32DD1EFFFE1C524C8C6AF267BEEAED2B)] |

To the [added: Shareholders and the] Board of Directors [removed: and Stockholders] of [added: Zebra Technologies Corporation]

We have audited the accompanying consolidated balance sheets of Zebra Technologies Corporation [removed: and subsidiaries (“the Company”)] [added: (the “Company“)] as of December 31, [removed: 2016 and 2015,] [added: 2017] and [added: 2016,] the related consolidated statements of operations, comprehensive income (loss), stockholders’ [removed: equity] [added: equity,] and cash flows for each of the three years in the period ended December 31, [removed: 2016.][added: 2017, and the related notes and financial statement schedule listed in Index Item 15 (collectively referred to as the “consolidated financial statements“).]

These financial statements [removed: and schedule] are the responsibility of the [removed: Company’s] [added: Company‘s] management.

Our responsibility is to express an opinion on [removed: these] [added: the Company‘s] financial statements [removed: and schedule] based on our audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material [removed: misstatement.][added: misstatement, whether due to error or fraud.]

[removed: An audit includes] [added: Such procedures included] examining, on a test basis, evidence [removed: supporting] [added: regarding] the amounts and disclosures in the financial statements.

[removed: An audit] [added: Our audits] also [removed: includes assessing] [added: included evaluating] the accounting principles used and significant estimates made by management, as well as evaluating the overall [added: presentation of the] financial [removed: statement presentation.][added: statements.]

In our opinion, the [added: consolidated] financial statements [removed: referred to above] present fairly, in all material respects, the [removed: consolidated] financial position of [removed: Zebra Technologies Corporation and subsidiaries] [added: the Company] at December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the [removed: consolidated] results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2016,] [added: 2017,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States), Zebra Technologies Corporation and subsidiaries’] [added: States) (PCAOB), the Company's] internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 27, 2017] [added: 22, 2018] expressed an unqualified opinion thereon.

| | December 31, [added: 2017] | | | | | | | [added: | | | |]

| | [added: 2017 | | | |] 2016 | | | | 2015 | | |

| Cash and cash equivalents | $ | [removed: 156] [added: 62] | | | $ | [removed: 192] [added: 156] | |

| Accounts receivable, net | [removed: 625] [added: 479] | | | | [removed: 671] [added: 625] | | |

| Inventories, net | [removed: 345] [added: 458] | | | | [removed: 397] [added: 345] | | |

| Income tax receivable | [removed: 32] [added: 40] | | | | [removed: 4] [added: 32] | | |

| Prepaid expenses and other current assets | [removed: 64] [added: 24] | | | | [removed: 70] [added: 64] | | |

| Total Current assets | [removed: 1,222] [added: 1,063] | | | | [removed: 1,334] [added: 1,222] | | |

| Property, plant and equipment, net | [removed: 292] [added: 264] | | | | [removed: 298] [added: 292] | | |

| Goodwill | [removed: 2,458] [added: 2,465] | | | | [removed: 2,490] [added: 2,458] | | |

| Other intangibles, net | [removed: 480] [added: 299] | | | | [removed: 757] [added: 480] | | |

Opinion on the Financial Statements

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We have served as the Company’s auditor since 2005.

February 22, 2018

| Current portion of long-term debt | $ | 51 | | | $ | — | |

| Cumulative effect of change in accounting principle | | — | | | — | | | | — | | | | — | | | | (9 | | ) | | — | | | | (9 | | ) |

| Balance at December 31, 2017 | | 53,236,095 | | | $ | 1 | | | $ | 257 | | | $ | (620 | ) | | $ | 1,248 | | | $ | (52 | ) | | $ | 834 | |

| Net income (loss) | $ | 17 | | | $ | (137 | ) | | $ | (158 | ) |

| Debt extinguishment costs | 65 | | | | — | | | | — | | |

| Payments of debt extinguishment costs | (65 | | ) | | — | | | | — | | |

Zebra Technologies Corporation and its wholly-owned subsidiaries (“Zebra” or the “Company”) is a global leader providing innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry.

We design, manufacture, and sell a broad range of products that capture and move data.

We also provide a full range of services, including maintenance, technical support, repair, and managed services, including cloud-based subscriptions.

End-users of our products and services include those in retail and e-commerce, transportation and logistics, manufacturing, healthcare, hospitality, warehouse and distribution, energy and utilities, and education industries around the world.

We provide our products and services globally through a direct sales force and an extensive network of channel partners.

During 2017, the Company initiated a receivables financing facility of up to $180 million.

See Note 8, Long-Term Debt for further information.

Manufactured inventory cost includes materials, labor, and manufacturing overhead.

Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values.

Inventory provisions are based on forecasted demand, experience with specific customers, the age and nature of the inventory, and the ability to redistribute inventory to other programs or to rework into other consumable inventory.

| Raw material | $ | 116 | | | $ | 111 | |

| Finished goods | 341 | | | | 233 | | |

| | 2017 | | | | 2016 | | |

| | 641 | | | | 598 | | |

The Company has elected consolidated tax filings in certain of its jurisdictions which may allow the group to offset one member’s income with losses of other members in the current period and on a carryover basis.

The Company classifies its balance sheet tax accounts adopting a jurisdictional netting principle for those countries where a consolidated tax return election is in place.

The Tax Cut and Jobs Act (“TCJA” or “the Act”) enacted on December 22, 2017 contains provisions related to the taxation of certain foreign earnings under the Global Intangible Low-Taxed Income (“GILTI”) regime which is effective for tax years beginning on or after January 1, 2018.

Under guidance issued by the Financial Accounting Standards Board on January 10, 2018, companies must account for the impact of the GILTI tax as either a temporary difference in the book and tax basis of assets giving rise to the GILTI income, net of a foreign tax credit, or as a charge to tax expense in the year GILTI income is included in the U.S. tax return.

The Company has elected to treat its GILTI inclusions as a charge to tax expense in the year included in its U.S. tax return.

The effects of changes in tax rates and laws on deferred tax balances are recorded as a component of tax expense related to continuing operations for the period in which the law was enacted, even if the assets and liabilities related to items of accumulated other comprehensive income (“AOCI”).

In other words, backward tracing of the income tax effects of items originally recognized through AOCI is prohibited.

On February 7, 2018, the Financial Accounting Standards Board issued guidance requiring the reclassification to retained earnings of tax effects stranded in accumulated AOCI due to tax reform.

The guidance requires that these changes be effective with fiscal years beginning on or after December 15, 2018 but allows

companies to early adopt the provision.

The Company plans to adopt this provision with its fiscal year beginning January 1, 2018.

The Company’s long-term investments are accounted for using the cost method.

These investments are included in Other long-term assets on the Consolidated Balance Sheets.

For these type of revenue arrangements, we apply the guidance in ASC 605,

Zebra Technologies Corporation

Our audits also included the financial statement schedule listed in Index at Item 15.

Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

February 27, 2017

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance at December 31, 2013 | | 50,349,546 | | | $ | 1 | | | $ | 143 | | | $ | (679 | ) | | $ | 1,503 | | | $ | (9 | ) | | $ | 959 | |

| Additional tax benefit resulting from exercise of options | | — | | | — | | | | 6 | | | | — | | | | — | | | | — | | | | 6 | | |

| Excess tax benefit from share-based compensation | (3 | | ) | | (12 | | ) | | (6 | | ) |

| Proceeds from sales of investments and marketable securities | — | | | | 25 | | | | 644 | | |

| Excess tax benefit from share-based compensation | 3 | | | | 12 | | | | 6 | | |

Zebra Technologies Corporation and its wholly-owned subsidiaries (“Zebra” or the “Company”) designs, manufactures, sells, and supports a broad range of direct thermal and thermal transfer label printers, radio frequency identification printer/encoders, dye sublimation card printers, real-time locating solutions, related accessories, and support software.

These products are used principally in automatic identification (auto ID), data collection and personal identification applications and are distributed world-wide through a network of resellers, distributors and end-users representing a wide cross-section of industrial, service, and government organizations.

Enterprise is an industry leader in mobile computing and advanced data capture technologies and services, which complement Zebra’s printing and radio frequency identification device (“RFID”) products.

Enterprise products include rugged and enterprise-grade mobile computers; laser, imaging and radio frequency identification based data capture products; wireless LAN (“WLAN”) solutions and software; and applications that are associated with these products and services.

Enterprise service revenues include revenues arising from maintenance, integration services and device and network management.

| • | April 2, |

| • | July 2, |

| • | October 1, and |

| • | December 31. |

Manufactured inventories consist of the following costs: components, direct labor and manufacturing overhead.

We review inventory quantities on hand and record a provision for excess and obsolete inventory based on forecasts of product demand and production requirements or historical consumption when appropriate.

| Raw material | $ | 172 | | | $ | 178 | |

| Finished goods | 254 | | | | 274 | | |

| Inventories, gross | 427 | | | | 452 | | |

| Inventory reserves | (82 | | ) | | (55 | | ) |

| | 598 | | | | 554 | | |

If a

During the fourth quarter of 2016, the Company voluntarily changed the date of its annual goodwill impairment testing for its Specialty Printing Group reporting unit from the last business day of May to the first day of the fourth quarter.

This voluntary change is preferable under the circumstances as it results in better alignment with the Company’s other reporting units’ testing dates.

The voluntary change in accounting principle related to the annual testing date will not delay, accelerate, or avoid an impairment charge.

This change is not applied retrospectively as it is impracticable to do so because retrospective application would require application of significant estimates and assumptions with the use of hindsight.

Accordingly, the change will be applied prospectively.

Amortization of Debt Issuance Costs.

The Company capitalizes costs incurred in connection with borrowings or establishment of credit facilities.

These costs are amortized over the life of the borrowing or life of the credit facility using the effective interest method.

customer on a standalone basis.

Printers are warranted for 1 year against defects in material and workmanship.

Thermal printheads are warranted for 6 months and batteries are warranted for 1 year.

| Acquisition | — | | | | — | | | | 21 | | |