Zebra Technologies (ZBRA) 10-K risk factor changes: FY2018 vs FY2017

| • | [removed: Foreign governments may impose] [added: Imposition of] burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions; |

| • | A [removed: government controlled] [added: government-controlled] exchange rate and limitations on the convertibility of currencies, including the Chinese yuan; |

We have grown rapidly over the last several years through [removed: the Acquisition] [added: acquisition] and worldwide growth.

| • | The failure of acquired entities to meet or exceed expected [removed: returns] [added: operating results or cash flows] could result in impairment of goodwill or intangible assets acquired; |

| • | The [removed: acquired entities’] ability to implement internal controls and accounting systems necessary to be compliant with requirements applicable to public companies subject to SEC reporting, which could result in misstated financial reports; and |

To the extent of a violation of a third-party’s patent or other intellectual property right, we may be prevented from operating our business as planned, and may be required to pay damages, to obtain a license, if available, or to [removed: use a non-infringing method, if possible, to accomplish our objectives.]

We currently use [removed: third party] [added: third-party] and/or open source operating systems and associated application ecosystems in certain of our products.

[removed: 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 example, General Data Protection Regulation effective May 2018.

These laws may result in burdensome or inconsistent requirements affecting the collection, use, storage, transfer and disclosure of our [removed: third party] [added: third-party] and employee personal data.

Such design or manufacturing defects may occur not only in our own designed products but also in components provided by [removed: third party] [added: third-party] suppliers.

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

These [removed: proposals could] [added: actions will] result in increased customs duties and [added: will likely result in] the renegotiation of some U.S. trade agreements.

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

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

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

Many countries [added: have recently adopted or] are [removed: adopting] [added: considering the adoption of] 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, [removed: which, if enacted,] [added: which] 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: Although the] [added: The] U.K. [removed: has] formally notified the E.U. of its intention to withdraw, [added: with] such notice [removed: only triggered] [added: triggering] a two-year period ending in March [removed: 2019 to negotiate the terms of the withdrawal,] [added: 2019,] which [removed: period] could be followed by a transition period.

[added: Our European business involves cross border transactions between the U.K. and the E.U.] The future trade relationship between the U.K. and the E.U. could adversely impact Zebra’s operations in the region by increasing [removed: costs on or] importation requirements [removed: on] [added: or disrupting] shipments between [removed: our distribution center in] the [removed: Netherlands and customers in] [added: E.U. to] the U.K. or [removed: between our facility in the U.K. and customers in the E.U.][added: vice versa.]

Recovery of [removed: front loaded capital expenditures in] [added: front-loaded costs incurred on] long-term managed services contracts with customers is dependent on the [removed: continued viability of such customers.]

[removed: Over the last several years we] [added: We] have outsourced portions of certain business operations such as repair, distribution, engineering services and information technology services and may outsource additional business operations, which limits our control over these business operations and exposes us to additional risk as a result of the actions of our outsource partners.

If one of our suppliers or subcontractors fails to procure necessary license rights to trademarks, copyrights, or patents, legal action could be taken against us that could impact the [removed: saleability] [added: salability] of the Company’s products and expose us to financial obligations to a third-party.

[removed: As the Company refines] [added: Any changes to] our channel [removed: program,] [added: program may cause] some of our third-party dealers, distributors or resellers [removed: may] [added: to] 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.

[removed: If credit pressures or other financial difficulties result in insolvency for third-party] [added: 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 cases, has caused, a negative impact on our financial results.

Although we carry business interruption insurance to cover lost sales and profits in an amount [removed: it considers] [added: that we consider] adequate, in the event of supply disruption, this insurance does not cover all possible situations.

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

If demand for our products or services increases from our current expectations or if suppliers are unable [added: or unwilling] to meet our demand for other reasons, including as a result of natural disasters or financial issues, we could experience an interruption in supplies or a significant increase in the price of supplies that could have a negative impact on our business.

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

Our operations and the products we manufacture and/or sell are subject to a wide range of product regulatory and safety, consumer, [removed: worker safety, and environmental laws and regulations.]

In addition, we anticipate that [removed: it] [added: we] will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiency, and providing additional accessibility.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our businesses, including, but not limited to, revenue recognition, asset impairment, [added: business acquisition purchase price allocations,] impairment of goodwill and other intangible assets, inventories, [removed: customer rebates and other customer consideration,] tax matters, and litigation and other contingent liabilities are highly complex and involve many subjective assumptions, estimates, and judgments.

[removed: At] [added: As of] December 31, [removed: 2017, the remaining principal amount] [added: 2018, we had $1.6 billion] of [removed: indebtedness was $2.2 billion,] [added: outstanding debt,] gross of unamortized discounts and debt issuance costs.

Our [removed: substantial level of] indebtedness could have important consequences, including the following:

| • | We plan to use a substantial portion of cash flow from operations to pay interest and principal on our indebtedness, which may reduce the funds available [removed: to ourselves] for other purposes, such as acquisitions and capital expenditures; |

Our use of derivative financial instruments to reduce interest rate risk may result in added volatility in our [removed: quarterly] operating results.

Under generally accepted accounting principles, [added: changes in] the fair values of the swap [removed: contracts, which will either be amounts receivable from or payable to counterparties,] [added: contracts] are reflected [removed: as either assets or liabilities on] [added: in] our Consolidated [removed: Balance Sheets.][added: Statements of Operations as a component of “Other, net” if not hedged.]

Consequently, these [removed: swap contracts] [added: swaps] introduce [removed: complexity] [added: additional volatility] to our operating results.

[removed: The restrictions] [added: Our indebtedness] could adversely affect our [removed: ability to:][added: business.]

[added: In addition, we may not be able to effect] any of these actions, if necessary, on commercially reasonable terms or at all.

The terms of anticipated or future debt instruments may limit or prevent us [removed: from taking any of these actions.]

| • | Managing parties to whom we have outsourced portions of our business operations; |

use a non-infringing method, if possible, to accomplish our objectives.

The governing bodies in such jurisdictions have adopted or are considering adopting

The U.S. government has imposed customs duties on various imports from China that are intended to address trade imbalances.

In response to such actions, China has instituted customs duties on certain U.S. goods.

Other governments could also institute customs duties on U.S. goods similar to China’s actions in response to the U.S. government’s customs duties.

Based on the current products affected, we do not anticipate such increase in customs duties to materially impact the Company’s financial performance.

During such two-year period, the U.K. has been negotiating the terms of the withdrawal.

The terms of the U.K.’s withdrawal from the E.U. and resulting impacts to Zebra’s operations are currently uncertain and could adversely affect the Company’s financial performance.

continued viability of such customers.

Additionally, transitioning activities between new or existing outsource partners or across different geographies as well as insourcing activities could result in additional cost, time and management attention in order to effectively manage the transition which could negatively impact our financial results.

If credit pressures or other financial difficulties result in insolvency for third-

worker safety, and environmental laws and regulations.

from taking any of these actions.

We have organized the risk factors into two sections: (1) Risks related to our business; and (2) Risks related to our Indebtedness.

Risks related to our business

| | |

| --- | --- |

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

Given the level of uncertainty over which provisions will be enacted, the Company cannot predict with certainty the impact of the proposals.

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.

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

A significant portion of our business involves cross border transactions throughout the region.

delivery of quality materials, parts, and components, as well as services and software from our suppliers.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to document and test our internal controls over financial reporting and to report on our assessment as to the effectiveness of these controls.

Any negative reports concerning our internal controls

could adversely affect our future results of operations and financial condition.

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

We cannot be certain that any remedial measures we take will ensure appropriate implementation and maintenance of adequate internal controls over the financial reporting processes and reporting in the future.

We may incur significant additional costs in order to ensure we adequately remediate any weaknesses identified in our internal control environment, which, in turn, would reduce our earnings.

Implementing any remedial measures may be complicated by the limited timeframe in which to implement such measures, and the possibility that implementation of such measures may require a substantial amount of work and time by our personnel.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.

If we are unable to conclude that we have effective internal controls over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified report regarding the effectiveness of our internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements.

Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the SEC, or other regulatory authorities.

In addition, failure to comply with our reporting obligations with the SEC may cause an event of default to occur under the Debt Agreements, or similar instruments governing any debt we or our subsidiaries incur in the future.

For example, implementing future accounting guidance related to revenue, accounting for leases and other areas could require us to make significant changes to our accounting systems, impact to existing Credit Agreements and could result in adverse changes to our financial statements.

Risks Related to our Indebtedness

In connection with the Acquisition, we incurred substantial debt obligations.

Our total outstanding debt for borrowed money was approximately $3.25 billion on October 27, 2014.

In addition, subject to restrictions in agreements governing our existing and future indebtedness, we may incur additional indebtedness.

Despite our indebtedness, we may need to incur substantially more indebtedness and take other actions that could further exacerbate the risk associated with our existing indebtedness.

In addition to our current financing activities, we may need to incur substantially more indebtedness in the future, resulting in higher leverage.

Subject to the limits contained in our Debt Agreements, we may incur additional indebtedness from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.

To the extent we incur additional indebtedness, the risks associated with our substantial indebtedness will be exacerbated.

We record our fair value change in our Consolidated Statements of Operations, as a component of “Other, net” if not hedged.

Restrictive covenants in the Debt Agreements may limit our current and future operations, particularly our ability to respond to changes in our business or to pursue our business strategies.

The Debt Agreements contain, and instruments governing any future indebtedness may contain, a number of restrictive covenants that impose significant operating and financial restrictions, including restrictions on our ability to take actions that we believe may be in our interest.

We expect these covenants will limit our ability to:

| • | incur additional indebtedness or guarantees; |

We provide products and services in over 180 countries, with [removed: 114] [added: 109] facilities and approximately [removed: 7,000] [added: 7,400] employees worldwide.

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 [removed: Africa;] [added: Africa (“EMEA”);] Asia-Pacific; and Latin America.

For the year ended December 31, [removed: 2017,] [added: 2018,] the Company recorded [removed: $3.7] [added: $4.2] billion of [removed: net] [added: Net] sales in its consolidated statements of operations, of which approximately [removed: 48.3%] [added: 48.4%] were attributable to North America; approximately [removed: 32.8%] [added: 33.4%] were attributable to [removed: Europe, Middle East, and Africa (“EMEA”);] [added: EMEA;] and other foreign locations accounted for the remaining [removed: 18.9%.][added: 18.2%.]

[added: Relative] Net sales attributable [removed: from] [added: to] each region [removed: are relatively consistent] [added: is comparable] with the prior year period.

[removed: In] [added: On] October [added: 27,] 2014, the Company acquired [removed: the] Enterprise [removed: business (“Enterprise”),] from [removed: Motorola Solutions, Inc. (“MSI”) (the “Acquisition”)] [added: MSI] and began integration activities focused on creating “One Zebra”.

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

The Company substantially completed its integration [removed: activities,] [added: activities in fiscal year 2017,] including the implementation of a common enterprise resource planning system and has exited the last TSAs with MSI.

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

Actions under the Productivity Plan [removed: include] [added: included] organizational design changes, process improvements and automation.

Exit and restructuring costs are not included in the operating results of our segments as they [removed: are] [added: do] not [removed: deemed to] impact the specific segment measures as reviewed by our Chief Operating Decision Maker and [added: therefore are reported as a component of Corporate eliminations.]

See Note [removed: 15,] [added: 18,] Segment Information [removed: and] [added: &] Geographic Data in the Notes to Consolidated Financial [removed: Statements included in this Form 10-K for further information.][added: Statements.]

Total exit and restructuring charges of [removed: $12] [added: $23] million life-to-date [removed: and year-to-date] specific to the Productivity Plan have been recorded through December 31, [removed: 2017] [added: 2018] and [removed: relate to] [added: include] severance and related benefits, lease exit costs and other expenses.

Total exit and restructuring charges of $69 million life-to-date specific to the Acquisition Plan have been recorded through December 31, [removed: 2017] [added: 2018] and include severance and related benefits, lease exit costs and other expenses.

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

See Note [removed: 5,] [added: 8,] Costs Associated with Exit and Restructuring Activities in the Notes to Consolidated Financial Statements [removed: included in this Form 10-K] for further information.

[removed: The Company is in the process of analyzing the impact of] [added: During 2017,] the [removed: Tax Cut and Jobs Act (“TCJA” or “the Act”) signed into law on December 22, 2017 and has] [added: Company] provisionally [removed: provided] [added: recognized an] income tax expense of $72 [removed: million, including] [added: million associated with the Act, comprised of one-time transition tax of $37 million and $35 million] remeasurement of its net [added: U.S.] deferred tax assets [removed: at 21% of $35 million and] [added: based on] the [removed: one-time transition tax] [added: federal statutory rate] of [removed: $37 million.][added: 21%.]

See Note [removed: 12,] [added: 14,] Income Taxes in the Notes to Consolidated Financial Statements [removed: included in this Form 10-K] for further information.

Based on current operations, [removed: we estimate that] the Company [removed: will be] [added: is] subject to the Global Intangible Low-Taxed Income and the Deduction for Foreign-Derived Intangible Income provisions [added: (collectively referred to as “GILTI”)] of the [removed: Act.][added: Act, for which we recorded income tax expense of $10 million in 2018.]

We [removed: estimate that] [added: are not currently subject to] the new limitations which defer U.S. interest deductions in excess of 30% of [removed: Adjusted Taxable Income will not be applicable.][added: adjusted taxable income or the Base Erosion Anti-Avoidance Tax (“BEAT”).]

Additionally, the Company [removed: will] [added: is] no longer [removed: be] able to deduct [added: performance-based] compensation for its covered employees which exceeds the limitation under [added: amended] Internal Revenue Code Section 162(m).

Results of Operations: Year Ended [removed: 2017] [added: 2018] versus [removed: 2016] [added: 2017] and Year Ended [removed: 2016] [added: 2017] versus [removed: 2015][added: 2016]

| | Year Ended December 31, | | | | | | | | | | | | Percent Change [removed: 2017] [added: 2018] vs [removed: 2016] [added: 2017] | | | Percent Change [removed: 2016] [added: 2017] vs [removed: 2015] [added: 2016] | |

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | | | | | |

| Net sales | $ | [removed: 3,722] [added: 4,218] | | | $ | [removed: 3,574] [added: 3,722] | | | $ | [removed: 3,650] [added: 3,574] | | | [removed: 4.1] [added: 13.3] | % | | [removed: (2.1] [added: 4.1] | [removed: )%] [added: %] |

| Gross profit | [removed: $] [added: 1,981] | [removed: 1,710] | | | [removed: $] [added: 1,710] | [removed: 1,642] | | | [removed: $] [added: 1,642] | [removed: 1,644] | | | [removed: 4.1] [added: 15.8] | % | | [removed: (0.1] [added: 4.1] | [removed: )%] [added: %] |

| Operating expenses | [removed: 1,388] [added: 1,371] | | | | [removed: 1,562] [added: 1,388] | | | | [removed: 1,607] [added: 1,562] | | | | [removed: (11.1] [added: (1.2] | )% | | [removed: (2.8] [added: (11.1] | )% |

| Operating income | $ | [removed: 322] [added: 610] | | | $ | [removed: 80] [added: 322] | | | $ | [removed: 37] [added: 80] | | | [removed: 302.5] [added: 89.4] | % | | [removed: 116.2] [added: 302.5] | % |

| Gross margin | [removed: 45.9] [added: 47.0] | | % | | 45.9 | | % | | [removed: 45.0] [added: 45.9] | | % | | | | | | |

| Europe, Middle East, and Africa | [removed: $] [added: 1,409] | [removed: 1,221] | | | [removed: $] [added: 1,221] | [removed: 1,138] | | | [removed: $] [added: 1,138] | [removed: 1,194] | | | [removed: 7.3] [added: 15.4] | % | | [removed: (4.7] [added: 7.3] | [removed: )%] [added: %] |

| Latin America | [removed: 235] [added: 248] | | | | [removed: 214] [added: 235] | | | | [removed: 219] [added: 214] | | | | [removed: 9.8] [added: 5.5] | % | | [removed: (2.3] [added: 9.8] | [removed: )%] [added: %] |

| Asia-Pacific | [removed: 468] [added: 520] | | | | [removed: 483] [added: 468] | | | | [removed: 463] [added: 483] | | | | [removed: (3.1] [added: 11.1] | [removed: )%] [added: %] | | [removed: 4.3] [added: (3.1] | [removed: %] [added: )%] |

| North America | [removed: 1,798] [added: $] | [added: 2,041] | | | [removed: 1,739] [added: $] | [added: 1,798] | | | [removed: 1,774] [added: $] | [added: 1,739] | | | [removed: 3.4] [added: 13.5] | % | | [removed: (2.0] [added: 3.4] | [removed: )%] [added: %] |

| Total Net sales | $ | [removed: 3,722] [added: 4,218] | | | $ | [removed: 3,574] [added: 3,722] | | | $ | [removed: 3,650] [added: 3,574] | | | [removed: 4.1] [added: 13.3] | % | | [removed: (2.1] [added: 4.1] | [removed: )%] [added: %] |

| Selling and marketing | $ | [removed: 448] [added: 483] | | | $ | [removed: 444] [added: 448] | | | $ | [removed: 494] [added: 444] | | | [removed: 0.9] [added: 11.5] | % | | [removed: (10.1] [added: 12.0] | [removed: )%] [added: %] | [added: | 12.4 | % |]

| Research and development | [added: 444 | | | |] 389 | | | | 376 | | | | [removed: 394 |] [added: 10.5] | [added: %] | | [removed: 3.5] [added: 10.5] | % | | [removed: (4.6] [added: 10.5] | [removed: )%] [added: %] |

| General and administrative | [added: 328 | | | |] 301 | | | | 307 | | | | [removed: 283 |] [added: 7.8] | [added: %] | | [removed: (2.0] [added: 8.1] | [removed: )%] [added: %] | | [removed: 8.5] [added: 8.6] | % |

| Amortization of intangible assets | [added: 97 | | | |] 184 | | | | 229 | | | | [removed: 251 |] [added: NM] | | | [removed: (19.7] [added: NM] | [removed: )%] | | [removed: (8.8] [added: NM] | [removed: )%] |

| Acquisition and integration costs | [added: 8 | | | |] 50 | | | | 125 | | | | [removed: 145 |] [added: NM] | | | [removed: (60.0] [added: NM] | [removed: )%] | | [removed: (13.8] [added: NM] | [removed: )%] |

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

| Exit and restructuring costs | [added: 11 | | | |] 16 | | | | 19 | | | | [removed: 40 |] [added: NM] | | | [removed: (15.8] [added: NM] | [removed: )%] | | [removed: (52.5] [added: NM] | [removed: )%] |

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

On August 14, 2018, the Company completed its tender offer to acquire all outstanding common stock of Xplore for $6.00 per share.

In connection with this acquisition, the Company paid $87 million in cash, which included $72 million for the net assets acquired, a $9 million payment of Xplore debt, as well as $6 million of other Xplore transaction-related obligations.

The operating results of Xplore are included within the Company’s EVM segment beginning August 14, 2018, contributing approximately 1% to our consolidated Net sales growth in 2018.

The Xplore acquisition was accounted for under the acquisition method of accounting for business combinations and the preliminary opening balance sheet was included in the Company’s Consolidated Balance Sheet and operating results beginning August 14, 2018.

The Company substantially completed all initiatives

under the Acquisition Plan as of December 31, 2017, and substantially completed all initiatives under the Productivity Plan as of December 31, 2018.

Charges related to the Productivity Plan for the year ended December 31, 2018 and 2017 were $11 million and $12 million, respectively.

Enacted on December 22, 2017, the Tax Cut and Jobs Act (“TCJA” or “the Act”) reduced the U.S. federal corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred.

However, the application of the interest limitations and BEAT regime may apply in the future, depending on changes in the Company’s business model or the level of taxable income in any given year.

These impacts are included in the calculation of the Company’s effective tax rate.

During 2018, the Company finalized its analysis of the Act, including the one-time transition tax and measurement of net deferred tax assets, and recorded a $3 million income tax benefit for the year ended December 31, 2018 as a result of differences between its final analysis and provisional analysis from the prior year.

The final analysis included both federal and state tax effects based on legislative pronouncements through December 31, 2018.

The Company also utilized a total of $28 million of available net operating losses, research and development credits, alternative minimum tax credits, and foreign tax credits, in order to reduce its future cash payments for the one-time transition tax, resulting in a net liability for the one-time transition tax of $6 million, of which $1 million has been classified as a short term liability and $5 million as a long term liability.

The final one-time transition tax installment payment will be made in 2024.

| | Year Ended December 31, | | | | | | | | | | | | Percent Change 2018 vs 2017 | | | Percent Change 2017 vs 2016 | |

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

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

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

| | Year Ended December 31, | | | | | | | | | | | | As Percentage of Net sales | | | | | | | |

| | Year Ended December 31, | | | | |

| | 2018 | | | 2017 | |

| Impact of Xplore acquisition (2) | (0.6 | )% | | — | % |

| (1) | Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. dollar. This impact is calculated by translating, for certain currencies, the current period results at the currency exchange |

rates used in the comparable prior year period, rather than the exchange rates in effect during the current period.

| (2) | For purposes of computing Organic Net sales, amounts directly attributable to the Xplore acquisition (included in our consolidated results beginning August 14, 2018) will be excluded for 12 months following the acquisition date. |

2018 compared to 2017

Net sales growth was also positively impacted by currency changes, primarily in the EMEA region, as well as the inclusion of Xplore.

Consolidated Organic Net sales growth was 11.1%.

Gross margin improvement was driven by higher margins in both the EVM and AIT segments primarily due to operational efficiencies, favorable business mix as well as favorable foreign currency changes.

As a percentage of Net sales, operating costs continue trending favorably primarily due to lower intangible asset amortization expense and acquisition and integration charges.

The lower amortization expense results from certain acquired intangible assets becoming fully amortized in 2017.

Additionally, the Company had lower acquisition and integration charges in the current year as the Enterprise business integration activities were substantially completed during 2017.

Current operating costs reflect higher compensation costs, which include the impact of higher incentive-based compensation associated with financial performance, a $13 million pretax charge related to a legal settlement included within general and administrative expense, investments to accelerate organic growth, as well as the inclusion of Xplore.

Total Other expenses, net was $86 million for the current year, compared to $234 million for the prior year.

The decrease was primarily due to $81 million reduction of debt extinguishment and modification costs versus the prior year.

The current year also benefited from lower outstanding debt and interest rates, a $10 million gain on sale of certain investments, and a $6 million increase in interest rate swap gains.

The Company recognized income tax expense of $103 million and $71 million for the years ended December 31, 2018 and 2017, respectively.

The decrease in the effective tax rate in the current year versus the prior year is primarily due to favorable year-over-year impacts of U.S. Tax Reform, changes in valuation allowances, U.S. impacts of the Enterprise acquisition as well as uncertain tax benefits, partially offset by the benefits of net foreign deferred tax asset remeasurements and intercompany asset transfers recorded in the prior year as well as reduced year-over-year favorability of foreign income taxes.

a common enterprise resource planning system, associated with the Enterprise acquisition.

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.

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

therefore are reported as a component of Corporate, eliminations.

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.

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

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):

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

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

| | 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.

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

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

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

| Total International | 1,924 | | | | 1,835 | | | | 1,876 | | | | 4.9 | % | | (2.2 | )% |

| | December 31, | | | | |

(1) The Company sold the wireless LAN business in October 2016.

Other non-operating expenses decreased $5 million to $6 million for the year ended December 31, 2017.

This decrease is driven by long-term investment impairments of $1 million in the current year compared to $7 million in the prior year.

The Company’s effective tax rate was higher than the federal statutory rate of 35% primarily due to deferred income taxed on the outbound transfer of U.S. assets, an increase in uncertain tax benefits, increased valuation allowance for its foreign deferred tax assets, foreign non-deductible expenses, the one-time transition tax and remeasurement of its net U.S. deferred tax assets under U.S. tax reform.

These increases were partially offset by the benefit of lower tax rates in foreign jurisdictions, recognition of deferred tax assets on intercompany asset transfers, the generation of tax credits in the current year, and deductions from vesting of equity compensation.

2016 compared to 2015

Net sales decreased by $76 million or 2.1% compared with the prior year period.

The decline in net sales is due to lower hardware sales in North America, EMEA, and Latin America, including the unfavorable impact of foreign currency changes, partially offset by higher hardware sales in Asia-Pacific.

The decline in hardware sales is largely attributable to lower sales of barcode printer, data capture, wireless LAN products, and location solutions.

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.

The reduction in operating expenses as a percentage of net sales reflects the Company’s continued focus on improving operating efficiency and controlling expenses.

Selling and marketing expenses were lower compared to the prior year due to the full-year impact of staff reductions implemented in 2015 and lower discretionary expenses and promotional spending.

The decrease in research and development costs was primarily due to a reduction in headcount and other third-party resources, the impact from the divestiture of the wireless LAN business, and shifting of headcount to lower cost engineering locations.

The increase in general and administrative costs was primarily due to higher IT related expenses, including increased support and maintenance costs for IT infrastructure and business systems as we exit transition services agreements with Motorola Solutions, and increased legal fees and litigation related expenses.

The decrease in amortization of intangibles was due to impairment charges taken in the current year along with other intangible assets becoming fully amortized.

Impairment of goodwill and other intangibles of $62 million was recorded during the third quarter related to the wireless LAN business divestiture.

The Company has made significant progress on its integration activities associated with the Acquisition, including exiting many transition services agreements with Motorola Solutions.

This has resulted in a decline in acquisition and integration costs compared to the prior year period.

Exit and restructuring costs were lower due to a reduced level of restructuring activity as the Company progresses with its restructuring plan related to the Acquisition, partially offset by expenses associated with the Company’s divestiture of its wireless LAN business.

The Company conducts business in multiple currencies throughout the world, thus has exposure to movements in foreign exchange rates with regard to non-functional denominated revenue, cash assets, and cash liabilities.

As a result of these exposures, the Company recognized a foreign exchange loss of $5 million for 2016.

As of December 31, [removed: 2017,] [added: 2018,] we had [removed: $2.2] [added: $1.6] billion of debt outstanding under our debt facilities, which bears interest determined by reference to a variable rate index.

A one percentage point increase or decrease in interest rates [removed: on the various debt instruments we hold] would increase or decrease [removed: the] annual interest expense [removed: we recognize and the cash we pay for interest expense] by approximately [removed: $22] [added: $8] million.

This amount [removed: excludes] [added: is inclusive of] the impact of [removed: any] associated derivative contracts.

[removed: To mitigate this risk, we entered into] [added: This amount includes the impact of an associated] forward interest rate [removed: swaps] [added: swap outstanding as of December 31, 2018, which was entered into] to [removed: hedge] [added: mitigate] the interest rate risk associated with the variable interest payments on our debt facilities.

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

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

We are exposed to fluctuations in foreign currency exchange rates, primarily with respect to the Euro, British Pound Sterling, Czech koruna, [removed: Brazilian real, Canadian dollar,] Australian dollar, [removed: Singapore dollar, Japanese yen,] [added: Mexican peso,] and [removed: Swedish krona.][added: Chinese yuan.]

A [removed: 1%] [added: one percentage point] increase or decrease in exchange rates relative to the U.S. dollar would increase or decrease our pre-tax income by approximately [removed: $2] [added: $1] million.

These transactions are typically [removed: three months] [added: one month] in maturity and are not designated as hedges.

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.

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

We provide products and services in over 180 countries, with [removed: 114] [added: 109] facilities and approximately [removed: 7,000] [added: 7,400] employees worldwide.

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

In October 2014, the Company acquired the Enterprise business (“Enterprise”), excluding its iDEN or Integrated Digital Enhanced Network Business, from Motorola Solutions, Inc. (“MSI”) for $3.45 billion in [removed: cash (the “Acquisition”).][added: cash.]

The Company funded the [removed: Acquisition] [added: acquisition of Enterprise] through a combination of [removed: cash on hand of $250 million,] the sale of [removed: 7.25%] [added: $1.1 billion] senior notes due [removed: 2022] in [removed: an aggregate principal amount of $1.05 billion (the “Senior Notes”), and] [added: 2022,] a credit agreement with various lenders that provided a [removed: term loan of] $2.2 billion [removed: (the “Term Loan”)] [added: term loan] due [removed: 2021.][added: in 2021, and cash on hand.]

[removed: During] [added: In] 2017, the Company executed a debt restructuring [removed: program,] [added: program to lower its cost of debt,] which included [removed: entering into an Amended and Restated Credit Agreement (“A&R Credit Agreement”) facility and] [added: amending its credit facilities, establishing] a [removed: receivables financing facility which resulted in the redemption of the Senior Notes] [added: Receivables Financing Facility] and [removed: a lower cost of debt.][added: fully redeeming the $1.1 billion senior notes.]

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

During 2017, the Company substantially completed its integration activities, including the implementation of a common enterprise resource planning system, associated with the [removed: Acquisition.][added: Enterprise acquisition.]

On October 28, 2016, the Company concluded [removed: its Asset Purchase Agreement with] [added: the sale of] Extreme Networks, [removed: Inc. (“Extreme”) whereby the Company sold] [added: Inc.,] its wireless LAN (“WLAN”) [removed: business (“Divestiture Group”)] [added: business,] for [removed: a gross purchase price] [added: net proceeds] of [removed: $55] [added: $39] million.

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

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

Various sports teams utilize our [added: Zebra] MotionWorks® sports solution to track the location and movement of personnel and objects in real-time during sporting events, as well as in training and practice activities.

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

Our products incorporate both Android™ and Microsoft® Windows® operating systems and support [removed: local-] [added: local-area] and wide-area voice and data communications.

We believe that secular technology trends, particularly in [removed: enterprise mobility,] [added: IoT,] cloud computing, [added: automation,] and [removed: IoT] [added: mobility] are transforming our customers’ businesses and our industry and provide us with significant new opportunities to create value for our customers and for the Company.

We plan to drive growth through [removed: expansion] [added: expansion, organically or inorganically,] in adjacent market segments that share similar technology needs with our core markets.

We intend to continue to improve profitability [added: and cash flow generation] through operational execution and increased productivity derived from continuous business process improvement, cost management, and [removed: further operating leverage as we grow our business.][added: focus on working capital efficiency.]

The need for companies to improve productivity and implement their strategies, as well as the secular trends around IoT, cloud computing, [added: automation,] and mobility, are some of the factors that are creating growth opportunities for established and new competitors.

Data Capture and RFID: Competitors that provide a broad portfolio of barcode scanning products that are suitable for [removed: the majority of] [added: most] global market applications include Datalogic and Honeywell.

[removed: In addition, we] [added: We] also compete against smaller companies that focus on limited product subsets or specific [removed: regions] [added: regions,] including Fujian Newland and Impinj.

We have had three customers that each accounted for 10% or more of our [added: Net] sales over the past three years.

No end-user has accounted for 10% or more of our [added: Net] sales during these years.

See Note [removed: 15,] [added: 18,] Segment Information [removed: and] [added: &] Geographic Data in the Notes to [removed: the] Consolidated Financial Statements [removed: included in this Form 10-K] for further information.

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |

| Customer A | [removed: 21.3] [added: 20.3] | % | | [removed: 20.1] [added: 21.3] | % | | [removed: 19.4] [added: 20.1] | % |

| Customer B | [removed: 14.2] [added: 15.7] | % | | [removed: 13.2] [added: 14.2] | % | | [removed: 12.7] [added: 13.2] | % |

| Customer C | [removed: 13.2] [added: 14.1] | % | | [removed: 12.4] [added: 13.2] | % | | [removed: 11.6] [added: 12.4] | % |

Sales: We sell our products, solutions, and services primarily through distributors (two-tier distribution), value added resellers [removed: (“VAR”),] [added: (“VARs”),] independent software vendors (“ISVs”), direct marketers, and OEMs.

In addition, certain products are manufactured in accordance with procurement regulations and various international trade agreements, and remain eligible for sale to the [removed: United States] [added: U.S.] government.

Production facilities for our supplies products are located in the [removed: United States] [added: U.S.] and Western Europe.

Research and development expenditures for the years ended [added: 2018,] 2017, [removed: 2016,] and [removed: 2015] [added: 2016] were [added: $444 million,] $389 million, [added: and] $376 million, [removed: and $394 million respectively,] or [added: 10.5%,] 10.5% [removed: of net sales for 2017] and [removed: 2016 and 10.8%] [added: 10.5%] of [removed: net sales in 2015.][added: Net sales, respectively.]

We have more than [removed: 1,500] [added: 1,900] engineers worldwide focused on strengthening and broadening our extensive portfolio of products and solutions.

They are used in a broad range of applications, ranging from supermarket checkout to industrial warehouse optimization to patient management in [added: hospitals.]

We rely on a combination of trade secrets, patents, trademarks, copyrights, and contractual rights to establish and protect our innovations, and hold a large portfolio of intellectual property rights in the [removed: United States] [added: U.S.] and other countries.

As of December 31, [removed: 2017,] [added: 2018,] the Company owned approximately [removed: 1,600] [added: 1,800] trademark registrations and trademark applications, and [removed: approximately 4,300] [added: over 4,400] patents and patent applications, worldwide.

Our success depends more upon our extensive know-how, deep understanding of end-user processes and [removed: workflows,] [added: work-flows,] innovative culture, technical leadership and marketing and sales abilities.

Some portions of our business, primarily in [removed: Europe and] [added: Europe,] China, [added: and India] are subject to labor laws that differ significantly from those in the [removed: United States.][added: U.S. In Europe, for example, it is common for a works council to represent employees when discussing matters such as compensation, benefits, restructurings and layoffs.]

We manufacture and market products in spectrum bands already made available by regulatory [removed: bodies-] [added: bodies,] these include voice and data infrastructure, mobile radios, and portable or hand-held devices.

During [removed: 2017,] [added: 2018,] compliance with U.S. federal, state and local, and foreign laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment did not have a material effect on our business or results of operations.

Acquisition of Xplore Business

On August 14, 2018, the Company acquired all outstanding equity interests of Xplore Technologies Corporation (“Xplore”), for $87 million in cash, which included, $72 million for the net assets acquired, a $9 million payment of Xplore debt as well as $6 million of other Xplore transaction-related obligations.

The Xplore business designs, integrates, markets and sells rugged tablets that are primarily used by industrial, government, and field service organizations.

The acquisition of Xplore is intended to expand the Company’s portfolio of mobile computing devices to serve a wider range of customers.

See Note 5, Business Acquisition and Divestiture in the Notes to Consolidated Financial Statements.

Disposition

See Note 5, Business Acquisition and Divestiture in the Notes to Consolidated Financial Statements.

In 2018, the Company executed a second debt restructuring program, which included entering into Amendment No. 1 to the “A&R Credit Agreement” (“Amendment No. 1”) that included an increase to the credit facility and partial extinguishment of the term loan, further lowering the cost of debt.

See Note 11, Long-Term Debt in the Notes to Consolidated Financial Statements.

Enhance financial strength and flexibility

Our marketing organization includes regional and channel marketing teams that interface closely with customers, partners, and sellers.

Our marketing organization also includes teams that support global strategies and communications, including portfolio marketing, digital marketing, marketing operations and communications, and strategic marketing functions.

As of December 31, 2018, the Company had approximately 7,400 employees.

Available Information

Our website address is www.zebra.com.

The information on our website is not, and shall not be deemed to be, a part of this annual report Form 10-K or incorporated into any other filings we make with the Securities and Exchange Commission (the “SEC”).

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, are made available free of charge on the Investor Relations page of our website as soon as reasonably practicable after we electronically file them with or furnish them to the SEC.

Dispositions

See Note 3, Business Combinations and Divestitures.

Our operations consist of two segments.

These applications require

Continuously improve operating efficiency to expand profitability

Improve cash flow generation and achieve debt leverage target

Our primary balance sheet priority is to expand operating cash flow generation through growth in the business, margin expansion, and maintaining a strong focus on working capital efficiency.

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

Our marketing organization includes global corporate marketing, strategic marketing, regional marketing, product marketing, global demand center, and channel marketing functions.

Our corporate marketing function manages our brand, public relations, and other communications activities.

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

Regional marketing encompasses field and channel marketing, demand generation, and sales enablement.

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

Our global demand center leads content development and digital marketing, including our website and social media.

The global channel team develops and executes channel strategy and operations.

hospitals.

As of December 31, 2017, the Company employed approximately 7,000 persons.

In Europe, for example, it is common for a works council to represent employees when discussing matters such as compensation, benefits, restructurings and layoffs.

See Note [removed: 10,] [added: 12, Commitments and] Contingencies in the Notes to Consolidated Financial [removed: Statements included in this Form 10-K.][added: Statements.]

For the fiscal year ended December 31, [removed: 2017][added: 2018]

As of February [removed: 15, 2018,] [added: 7, 2019,] there were [removed: 53,250,033] [added: 53,870,497] 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: 17, 2018,] [added: 16, 2019,] are incorporated by reference into Part III of this report, as indicated herein.

| Item 1. | | [removed: [Business](#s2E63DF859D555E99BB8D889D2EAC9AAE)] [added: [Business](#s1A3CFC4F9433542E887498449CC26367)] | [removed: [3](#s2E63DF859D555E99BB8D889D2EAC9AAE)] [added: [4](#s1A3CFC4F9433542E887498449CC26367)] |

| Item 1A. | | [Risk [removed: Factors](#sD501EA913F7853C09ABB23C04AEE5228)] [added: Factors](#s9F4E3985A8D459CABC8785CBF8B6CF56)] | [removed: [10](#sD501EA913F7853C09ABB23C04AEE5228)] [added: [12](#s9F4E3985A8D459CABC8785CBF8B6CF56)] |

| Item 1B. | | [Unresolved Staff [removed: Comments](#sA4875FFC122B58C9876E816713814A64)] [added: Comments](#s6A79F0A750155B39BD056E957C8B7014)] | [removed: [20](#sA4875FFC122B58C9876E816713814A64)] [added: [20](#s6A79F0A750155B39BD056E957C8B7014)] |

| Item 2. | | [removed: [Properties](#s6E836908A7325EA6A2E7C0CEF6B2BEC0)] [added: [Properties](#sFBA50AF858C858C0B161155E5E6F0FFF)] | [removed: [20](#s6E836908A7325EA6A2E7C0CEF6B2BEC0)] [added: [20](#sFBA50AF858C858C0B161155E5E6F0FFF)] |

| Item 3. | | [Legal [removed: Proceedings](#s5692043DD879521EB250B6A9A40D294D)] [added: Proceedings](#sA742CDF25CCD598EB768C2DA0B9F6E31)] | [removed: [20](#s5692043DD879521EB250B6A9A40D294D)] [added: [20](#sA742CDF25CCD598EB768C2DA0B9F6E31)] |

| Item 4. | | [Mine Safety [removed: Disclosures](#s154D88D75D4E5894AFACB9E8F17DE4E2)] [added: Disclosures](#sD6C6D0EF8BA15EBA8CF797B21ABE55C8)] | [removed: [20](#s154D88D75D4E5894AFACB9E8F17DE4E2)] [added: [20](#sD6C6D0EF8BA15EBA8CF797B21ABE55C8)] |

| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s44CF5EEFB0AF5FAD996FDC15763B4975)] [added: Securities](#s9E0C837FDB7A52DA8F9321ABF8B173EB)] | [removed: [21](#s44CF5EEFB0AF5FAD996FDC15763B4975)] [added: [21](#s9E0C837FDB7A52DA8F9321ABF8B173EB)] |

| Item 6. | | [Selected Financial [removed: Data](#s02CFDCFF701357C9BDF0F4267C0FA7D2)] [added: Data](#sFE09534B55A75C2FA552FB549FAF8203)] | [removed: [23](#s02CFDCFF701357C9BDF0F4267C0FA7D2)] [added: [23](#sFE09534B55A75C2FA552FB549FAF8203)] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s0C625FFAAEE75952B925F8172E14DFDD)] [added: Operations](#sD3AC348E62D95BAFB8906269DDBD733E)] | [removed: [24](#s30E32566EE5C5967836F3A24F68F73F6)] [added: [24](#sD3AC348E62D95BAFB8906269DDBD733E)] |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sDE480D695AD657349C8B783003935225)] [added: Risk](#s99C1B6B99BA45D17855F9F6A4547E7DA)] | [removed: [35](#sDE480D695AD657349C8B783003935225)] [added: [34](#s99C1B6B99BA45D17855F9F6A4547E7DA)] |

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#s0EE3E36D6CB656AB9B665561CA5B5A69)] [added: Data](#s3620159BDFB8586DAA5F5DE9280F4B22)] | [removed: [36](#s0EE3E36D6CB656AB9B665561CA5B5A69)] [added: [35](#s3620159BDFB8586DAA5F5DE9280F4B22)] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosures](#s4A95A0E1AE665DC780160E054555D3EC)] [added: Disclosures](#s65C3A2F4CD1D59BE82DF0BC136D64F81)] | [removed: [36](#s4A95A0E1AE665DC780160E054555D3EC)] [added: [72](#s65C3A2F4CD1D59BE82DF0BC136D64F81)] |

| Item 9A. | | [Controls and [removed: Procedures](#s9B7546C81B435FE38AE02F0295F38EC3)] [added: Procedures](#s14C3FE88697E591DB2EE34A34912EF17)] | [removed: [36](#s9B7546C81B435FE38AE02F0295F38EC3)] [added: [72](#s14C3FE88697E591DB2EE34A34912EF17)] |

| Item 9B. | | [Other [removed: Information](#sCFFB7D4A5E30564A911681ADB2D0D89C)] [added: Information](#sA738E2B09AB25847B35CF914A05F89D2)] | [removed: [38](#sCFFB7D4A5E30564A911681ADB2D0D89C)] [added: [74](#sA738E2B09AB25847B35CF914A05F89D2)] |

| [PART [removed: III](#sFD0E86991D2C517F889229FED768A32E)] [added: III](#s27F73030667E53A4AEE5EC95370B5ED7)] | | | |

| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#s93093FE412A353879E5478049B9399EC)] [added: Governance](#sB5AE6A37078756E6869BA0A8F32577F6)] | [removed: [39](#s93093FE412A353879E5478049B9399EC)] [added: [75](#sB5AE6A37078756E6869BA0A8F32577F6)] |

| Item 11. | | [Executive [removed: Compensation](#s8A002A36623D57D280CD96020B3F9E01)] [added: Compensation](#sD142CDA502EC55F7B3FAF5AB83F0FCFC)] | [removed: [39](#s8A002A36623D57D280CD96020B3F9E01)] [added: [75](#sD142CDA502EC55F7B3FAF5AB83F0FCFC)] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sB248AD5F96945C5DB6761F1D2DD84CE4)] [added: Matters](#s141F2BAC4B29548C969A7F20DEC8FCBB)] | [removed: [39](#sB248AD5F96945C5DB6761F1D2DD84CE4)] [added: [75](#s141F2BAC4B29548C969A7F20DEC8FCBB)] |

| Item 13. | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s13971587A3AD5D13B0B2C2317EFBBF35)] [added: Independence](#sEB20F5EB0B675A2797E5718CA3ED35AE)] | [removed: [39](#s13971587A3AD5D13B0B2C2317EFBBF35)] [added: [75](#sEB20F5EB0B675A2797E5718CA3ED35AE)] |

| Item 14. | | [Principal Accounting Fees and [removed: Services](#s8E09CD2FEA8552FAA797CDF6EB4BB59F)] [added: Services](#s601FDADACAEB5561A59C6E06118E2DF7)] | [removed: [39](#s8E09CD2FEA8552FAA797CDF6EB4BB59F)] [added: [75](#s601FDADACAEB5561A59C6E06118E2DF7)] |

| Item 15. | | [Exhibits, Financial Statement [removed: Schedules](#s1162AA2A921E598FA82CF1EB988E65A1)] [added: Schedules](#s75A00F4F8B8057F5AE384A92E46456BC)] | [removed: [40](#s1162AA2A921E598FA82CF1EB988E65A1)] [added: [76](#s75A00F4F8B8057F5AE384A92E46456BC)] |

The forward-looking statements include, but are not limited to, the Company’s financial outlook for the first quarter and full year of [removed: 2018.][added: 2019.]

| • | The Company’s ability to purchase sufficient materials, parts, and components to meet customer demand, particularly [removed: in light of] [added: considering] global economic conditions, |

10-K 1 a10k12312018zebra.htm 10-K

The aggregate market value of the shares of Class A Common Stock held by non-affiliates of the registrant, computed by reference to the closing price of such stock as of the last business day of the registrant’s most recently completed second quarter, was $7.6 billion.

| [PART I](#s93780B16C38D5200B0DACE33C1DCF964) | | | |

| [PART II](#s728005B64BC35624A5AEB0989C9C493C) | | | |

| | | [Overview](#s2963478520275B43864AD0356D5A8D5B) | [24](#s2963478520275B43864AD0356D5A8D5B) |

| | | [Results of Operations](#s7FB9997267F05858B6757294C4493419) | [26](#s7FB9997267F05858B6757294C4493419) |

| | | [Critical Accounting Policies and Estimates](#sEE5E194CAB665352BFBB8F882B194B8C) | [30](#sEE5E194CAB665352BFBB8F882B194B8C) |

| | | [Recently Issued Accounting Pronouncements](#sBB69B1630B2F5CD78D2CE5F6FCB66548) | [30](#sBB69B1630B2F5CD78D2CE5F6FCB66548) |

| | | [Liquidity and Capital Resources](#s6FDD05DCB1575E898A4443D6473F9831) | [30](#s6FDD05DCB1575E898A4443D6473F9831) |

| | | [Contractual Obligations](#s82A67786D69C5396856C06091A6B7534) | [32](#s82A67786D69C5396856C06091A6B7534) |

| | | [Report of Independent Registered Public Accounting Firm](#s6B6107730D4659F1BC526C774D2B9D76) | [36](#s6B6107730D4659F1BC526C774D2B9D76) |

| | | [Consolidated Balance Sheets](#s8D1E056FCE8B50608BBE26D50F4F1BB6) | [37](#s8D1E056FCE8B50608BBE26D50F4F1BB6) |

| | | [Consolidated Statements of Operations](#sAECF5072137650239F7ED0FA49CC581F) | [38](#sAECF5072137650239F7ED0FA49CC581F) |

| | | [Consolidated Statements of Comprehensive Income (Loss)](#s37EB6857C3C85510BA3C9BDC993D4A78) | [39](#s37EB6857C3C85510BA3C9BDC993D4A78) |

| | | [Consolidated Statements of Stockholders’ Equity](#s5938789F1741504E8D6D98EC545EBE76) | [40](#s5938789F1741504E8D6D98EC545EBE76) |

| | | [Consolidated Statements of Cash Flows](#s797D2A88F5C4558CAFEC4C2CEF0CF082) | [41](#s797D2A88F5C4558CAFEC4C2CEF0CF082) |

| | | [Notes to Consolidated Financial Statements](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6) | [42](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6) |

| | | [Note 1: Description of Business and Basis of Presentation](#s08A54FC243245131A1B63E53A4AEEF14) | [42](#s08A54FC243245131A1B63E53A4AEEF14) |

| | | [Note 2: Significant Accounting Policies](#s30CAED9F634050699BF9DF6A832844E3) | [42](#s30CAED9F634050699BF9DF6A832844E3) |

| | | [Note 3: Revenues](#seacefafefcd6447c8e9eb32adfb2e173) | [47](#seacefafefcd6447c8e9eb32adfb2e173) |

| | | [Note 4: Inventories](#sf33d584fe915410d8b52f23113b87bce) | [49](#sf33d584fe915410d8b52f23113b87bce) |

| | | [Note 5: Business Acquisition and Divestiture](#s6AE218294132542AAE33B50E7614C660) | [49](#s6AE218294132542AAE33B50E7614C660) |

| | | [Note 6: Goodwill and Other Intangibles, net](#sE32C04F9A04B546FA993998995450C23) | [50](#sE32C04F9A04B546FA993998995450C23) |

| | | [Note 7: Property, Plant and Equipment](#scd434bb15bd8405dbba91a7e6fc0372f) | [51](#scd434bb15bd8405dbba91a7e6fc0372f) |

| | | [Note 8: Costs Associated with Exit and Restructuring Activities](#s52D0FFFAF4C7546CBE4FE678FDA816D3) | [52](#s52D0FFFAF4C7546CBE4FE678FDA816D3) |

| | | [Note 9: Fair Value Measurements](#sFD233CFA252A5B0FB94BB40B3C93A4EB) | [52](#sFD233CFA252A5B0FB94BB40B3C93A4EB) |

| | | [Note 10: Derivative Instruments](#sBCD5EC53B1A051BAA6054DD4DD5B620B) | [53](#sBCD5EC53B1A051BAA6054DD4DD5B620B) |

| | | [Note 11: Long-Term Debt](#s83C4DED935B75CC789ED72E06C947927) | [56](#s83C4DED935B75CC789ED72E06C947927) |

| | | [Note 12: Commitments and Contingencies](#s5F216F89BF465A0289209B5D87B9FB5D) | [59](#s5F216F89BF465A0289209B5D87B9FB5D) |

| | | [Note 13: Share-Based Compensation](#s8335ECA224B8565F9B25220A41ADF8F2) | [60](#s8335ECA224B8565F9B25220A41ADF8F2) |

| | | [Note 14: Income Taxes](#s2DF7319691BE58DAB6091162D5B8F94C) | [63](#s2DF7319691BE58DAB6091162D5B8F94C) |

| | | [Note 15: Earnings (Loss) Per Share](#s42D5E9E0CD35504E80A940E3BDF6201A) | [67](#s42D5E9E0CD35504E80A940E3BDF6201A) |

| | | [Note 16: Accumulated Other Comprehensive Income (Loss)](#s05AB6A889AD05F38A24F995119B42491) | [67](#s05AB6A889AD05F38A24F995119B42491) |

| | | [Note 17: Accounts Receivable Factoring](#s8cf7189d1dba4a2eb8da85eee0380074) | [68](#s8cf7189d1dba4a2eb8da85eee0380074) |

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

| | | [Note 18: Segment Information & Geographic Data](#sDFBE0BE63A035070B62C3E72363C5994) | [68](#sDFBE0BE63A035070B62C3E72363C5994) |

| | | [Note 19: Supplementary Financial Information](#sD9E2C5A591FE5D40B0D65738D5F1AF97) | [70](#sD9E2C5A591FE5D40B0D65738D5F1AF97) |

| | | [Note 20: Subsequent Event](#s0798b53a7a874393baf7877da89e45ea) | [71](#s0798b53a7a874393baf7877da89e45ea) |

| [PART IV](#s6DBBD7A1B19E509C892F3821EA169A3D) | | | |

| Item 16. | | [Form 10-K Summary](#sab49a96ac9534f79ba9936b2b32d1880) | [78](#sab49a96ac9534f79ba9936b2b32d1880) |

10-K 1 a10k12312017zebra.htm 10-K

As of July 1, 2017, the aggregate market value of the registrant’s Class A Common held by non-affiliates was approximately $5,260,632,176.

The closing price of the Class A Common Stock on June 30, 2017, as reported on the Nasdaq Stock Market, was $100.52 per share.

| | | | |

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

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

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

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

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

| [CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE](#sD711D3DB9F3150C589438A79A79D62C8) | | | |

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

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

| [Index to Exhibits](#s636901EEB310514B95DE554B9371E6F6) | | | F-[38](#s636901EEB310514B95DE554B9371E6F6) |

None.

Not applicable.

As of December 31, [removed: 2017,] [added: 2018,] the Company owned three laboratory and warehouse facilities located in Holtsville, NY, Preston, UK, and Mississauga, Ontario, Canada.

As of December 31, [removed: 2017,] [added: 2018,] the Company had a total of [removed: 111] [added: 106] leased facilities with locations spread globally; [removed: 32] [added: 30] of which are located in the U.S. and [removed: 79] [added: 76] are located in 45 other countries.

The following table shows the high and low trade prices for each fiscal quarter in [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] as reported by the NASDAQ Stock Market, LLC.

| [removed: 2017] [added: 2018] | | High | | | | Low | | | | [removed: 2016] [added: 2017] | | High | | | | Low | | |

| First Quarter | | $ | [removed: 93.61] [added: 147.99] | | | $ | [removed: 81.02] [added: 102.75] | | | First Quarter | | $ | [removed: 70.30] [added: 93.61] | | | $ | [removed: 52.14] [added: 81.02] | |

| Second Quarter | | [removed: 109.30] [added: 161.72] | | | | [removed: 86.82] [added: 130.79] | | | | Second Quarter | | [removed: 68.49] [added: 109.30] | | | | [removed: 48.51] [added: 86.82] | | |

| Third Quarter | | [removed: 109.89] [added: 179.47] | | | | [removed: 94.78] [added: 136.16] | | | | Third Quarter | | [removed: 71.61] [added: 109.89] | | | | [removed: 46.13] [added: 94.78] | | |

| Fourth Quarter | | [removed: 117.44] [added: 184.75] | | | | [removed: 101.49] [added: 140.95] | | | | Fourth Quarter | | [removed: 88.00] [added: 117.44] | | | | [removed: 62.91] [added: 101.49] | | |

At February [removed: 15, 2018,] [added: 7, 2019,] the last reported price for the Class A common stock was [removed: $120.54] [added: $176.79] per share, and there were [removed: 134] [added: 125] registered stockholders of record for Zebra’s Class A common stock.

We did not purchase shares of Zebra Class A common stock during [removed: 2017] [added: 2018] as part of the purchase plan program.

This graph compares the cumulative annual change since December 31, [removed: 2012,] [added: 2013,] 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: 2012.][added: 2013.]

[removed: ][added: ]

Source: The NASDAQ Stock Market, LLC

In addition, we had approximately 29,049 stockholders who owned our stock in street name.

| Consolidated Statements of Operations(1) | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Total Net sales | | $ | [removed: 3,722] [added: 4,218] | | | $ | [removed: 3,574] [added: 3,722] | | | $ | [removed: 3,650] [added: 3,574] | | | $ | [removed: 1,671] [added: 3,650] | | | $ | [removed: 1,038] [added: 1,671] | |

| Gross profit | | [removed: 1,710] [added: 1,981] | | | | [removed: 1,642] [added: 1,710] | | | | [removed: 1,644] [added: 1,642] | | | | [removed: 778] [added: 1,644] | | | | [removed: 503] [added: 778] | | |

| Net income (loss) | | $ | [removed: 17] [added: 421] | | | $ | [removed: (137] [added: 17] | [removed: )] | | $ | [removed: (158] [added: (137] | ) | | $ | [removed: 32] [added: (158] | [added: )] | | $ | [removed: 134] [added: 32] | |

| Basic earnings (loss) per share | | $ | [removed: 0.33] [added: 7.86] | | | $ | [removed: (2.65] [added: 0.33] | [removed: )] | | $ | [removed: (3.10] [added: (2.65] | ) | | $ | [removed: 0.64] [added: (3.10] | [added: )] | | $ | [removed: 2.65] [added: 0.64] | |

| Diluted earnings (loss) per share | | $ | [removed: 0.32] [added: 7.76] | | | $ | [removed: (2.65] [added: 0.32] | [removed: )] | | $ | [removed: (3.10] [added: (2.65] | ) | | $ | [removed: 0.63] [added: (3.10] | [added: )] | | $ | [removed: 2.63] [added: 0.63] | |

| Basic | | [removed: 53,021,761] [added: 53,591,655] | | | | [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] | | |

| Diluted | | [removed: 53,688,832] [added: 54,299,812] | | | | [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] | | |

| Consolidated Balance Sheets(1) | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Cash and cash equivalents, investments and marketable securities | | $ | [removed: 62] [added: 44] | | | $ | [removed: 156] [added: 62] | | | $ | [removed: 192] [added: 156] | | | $ | [removed: 418] [added: 192] | | | $ | [removed: 416] [added: 418] | |

| Total Assets | | [removed: 4,275] [added: 4,339] | | | | [removed: 4,632] [added: 4,275] | | | | [removed: 5,040] [added: 4,632] | | | | [removed: 5,539] [added: 5,040] | | | | [removed: 1,120] [added: 5,539] | | |

| Long-term liabilities | | [removed: 2,441] [added: 1,703] | | | | [removed: 2,891] [added: 2,441] | | | | [removed: 3,252] [added: 2,891] | | | | [removed: 3,346] [added: 3,252] | | | | [removed: 15] [added: 3,346] | | |

| Total Stockholders’ Equity | | [removed: 834] [added: 1,335] | | | | [removed: 792] [added: 834] | | | | [removed: 893] [added: 792] | | | | [removed: 1,040] [added: 893] | | | | [removed: 959] [added: 1,040] | | |

| (1) | Includes the [added: Xplore business from its date of acquisition, August 14, 2018 and the] Enterprise business from its date of acquisition, October 27, 2014. |

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

| | |

| | Page |

| Financial Statements | |

| [Report of Independent Registered Public Accounting Firm](#s6B6107730D4659F1BC526C774D2B9D76) | [36](#s6B6107730D4659F1BC526C774D2B9D76) |

| [Consolidated Balance Sheets as of December 31, 2018 and 2017](#s8D1E056FCE8B50608BBE26D50F4F1BB6) | [37](#s8D1E056FCE8B50608BBE26D50F4F1BB6) |

| [Consolidated Statements of Operations for the years ended December 31, 2018, 2017, and 2016](#sAECF5072137650239F7ED0FA49CC581F) | [38](#sAECF5072137650239F7ED0FA49CC581F) |

| [Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017, and 2016](#s37EB6857C3C85510BA3C9BDC993D4A78) | [39](#s37EB6857C3C85510BA3C9BDC993D4A78) |

| [Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017, and 2016](#s5938789F1741504E8D6D98EC545EBE76) | [40](#s5938789F1741504E8D6D98EC545EBE76) |

| [Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016](#s797D2A88F5C4558CAFEC4C2CEF0CF082) | [41](#s797D2A88F5C4558CAFEC4C2CEF0CF082) |

| [Notes to Consolidated Financial Statements](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6) | [42](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6) |

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Zebra Technologies Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zebra Technologies Corporation (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, 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 States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, 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 14, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company‘s financial statements based on our audits.

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.

We conducted our audits in accordance with the standards of the PCAOB.

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

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.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

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

Chicago, Illinois

February 14, 2019

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

| | | | | | | | |

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

| | | | | | | | |

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

| | 2018 | | | | 2017 | | |

| Assets | | | | | | | |

The financial statements and schedules of Zebra are annexed to this report as pages F-2 through F-37.

An index to such materials appears on page F-1.

None.

Not applicable.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

Based on this assessment and those criteria, our management believes that, as of December 31, [removed: 2017,] [added: 2018,] our internal control over financial reporting is effective.

Ernst & Young LLP’s report is included on page [removed: 37] [added: 73] of this [removed: report on Form 10-K.][added: report.]

There were no changes in the Company’s internal control over financial reporting during the fourth quarter of [removed: 2017,] [added: 2018,] 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.

We have audited Zebra Technologies Corporation’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] 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).

In our opinion, Zebra Technologies Corporation (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Zebra Technologies Corporation as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] and the related notes and financial statement schedule listed in [added: the] Index [added: at] Item 15 and our report dated February [removed: 22, 2018] [added: 14, 2019] expressed an unqualified opinion thereon.

February 14, 2019

February 22, 2018

The Code of Ethics is posted on the Investor Relations – [removed: Corporate] Governance page of Zebra’s Internet web site, www.zebra.com, and is available for download.

[removed: INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE][added: Index to Consolidated Financial Statements and Schedules]

| | [removed: Page] | [added: | PAGE |]

| Financial Statements | | [added: | |]

| [added: | |] [Report of Independent Registered Public Accounting [removed: Firm](#sFF67C2B9BB1E5CEC8D11CE26A1C03DF5)] [added: Firm](#s6B6107730D4659F1BC526C774D2B9D76)] | [removed: F-[2](#sFF67C2B9BB1E5CEC8D11CE26A1C03DF5)] [added: [36](#s6B6107730D4659F1BC526C774D2B9D76)] |

| [added: | |] [Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016](#s582815D559FC56109EA4C6327B84EF35)] [added: 2017](#s8D1E056FCE8B50608BBE26D50F4F1BB6)] | [removed: F-[3](#s582815D559FC56109EA4C6327B84EF35)] [added: [37](#s8D1E056FCE8B50608BBE26D50F4F1BB6)] |

| [added: | |] [Consolidated Statements of Operations for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#s25A563AE7DDB562C98C6DCFE09532AED)] [added: 2016](#sAECF5072137650239F7ED0FA49CC581F)] | [removed: F-[4](#s25A563AE7DDB562C98C6DCFE09532AED)] [added: [38](#sAECF5072137650239F7ED0FA49CC581F)] |

| [added: | |] [Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#s0137C738F2645ABEA07BE9088071A7F3)] [added: 2016](#s37EB6857C3C85510BA3C9BDC993D4A78)] | [removed: F-[5](#s0137C738F2645ABEA07BE9088071A7F3)] [added: [39](#s37EB6857C3C85510BA3C9BDC993D4A78)] |

| [added: | |] [Consolidated Statements of Stockholders’ Equity for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#sD1DD7A967CCA5DC7ACFCD201F71775CA)] [added: 2016](#s5938789F1741504E8D6D98EC545EBE76)] | [removed: F-[6](#sD1DD7A967CCA5DC7ACFCD201F71775CA)] [added: [40](#s5938789F1741504E8D6D98EC545EBE76)] |

| [added: | |] [Consolidated Statements of Cash Flows for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#s5858D3030D5B5733BD812BC82D96CA1D)] [added: 2016](#s797D2A88F5C4558CAFEC4C2CEF0CF082)] | [removed: F-[7](#s5858D3030D5B5733BD812BC82D96CA1D)] [added: [41](#s797D2A88F5C4558CAFEC4C2CEF0CF082)] |

| [added: | |] [Notes to Consolidated Financial [removed: Statements](#sFDF600B0927D5BA78030E94ECDFDD579)] [added: Statements](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6)] | [removed: F-[8](#sFDF600B0927D5BA78030E94ECDFDD579)] [added: [42](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6)] |

| Financial Statement Schedule | | [added: | |]

| [added: | |] [Schedule II - Valuation and Qualifying [removed: Accounts](#s32DD1EFFFE1C524C8C6AF267BEEAED2B)] [added: Accounts](#sA5E289AEC6B75AE1B8975E26E7638BD4)] | [removed: F-[37](#s32DD1EFFFE1C524C8C6AF267BEEAED2B)] [added: [80](#sA5E289AEC6B75AE1B8975E26E7638BD4)] |

All other financial statement schedules are omitted because they are not applicable [removed: or the required information is shown in] [added: to] the [removed: consolidated financial statements or related notes.][added: Company.]

| [removed: Amortization expense] [added: (20) | Incorporated by reference from Annual Report on Form 10-K] for the year ended December 31, 2017 | [removed: | | | | $ | 184 | | | | | |]

| [removed: Amortization expense] [added: (17) | Incorporated by reference from Annual Report on Form 10-K] for the year ended December 31, 2016 | [removed: | | | | $ | 229 | | | | | |]

| 3.1(i) | (3 | ) | [removed: | |] [Restated Certificate of Incorporation of the Company.](http://www.sec.gov/Archives/edgar/data/877212/000119312512337313/d390190dex31i.htm) |

| 3.1(ii) | [removed: (13] [added: (12] | ) | [removed: | |] [Amended and Restated By-laws of Zebra Technologies Corporation, as amended as of January 7, 2013.](http://www.sec.gov/Archives/edgar/data/877212/000119312513008940/d465246dex3ii.htm) |

| 4.1 | [removed: | |] [added: (20] | [added: )] | [Specimen stock certificate representing Class A Common [removed: Stock.](https://www.sec.gov/Archives/edgar/data/877212/000087721218000011/a41specimentstockcertifica.htm)] [added: Stock.](http://www.sec.gov/Archives/edgar/data/877212/000087721218000011/a41specimentstockcertifica.htm)] |

| 10.1 | [removed: (5] [added: (19] | ) | [removed: | |] [Employment Agreement between the Company and Hugh Gagnier dated [removed: December 12, 2007. +](http://www.sec.gov/Archives/edgar/data/877212/000119312507266486/dex101.htm)] [added: June 1, 2018. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/a10-8xemploymentagreementx.htm)] |

| [removed: 10.2] [added: 10.3] | (4 | ) | [removed: | | [Amendment] [added: [Form of Amendment] No. 1 to Employment Agreement [added: by and] between the Company and [removed: Hugh Gagnier] [added: certain executive officers] dated December 30, [removed: 2008. +](http://www.sec.gov/Archives/edgar/data/877212/000119312509000911/dex102.htm)] [added: 2008.+](http://www.sec.gov/Archives/edgar/data/877212/000119312509000911/dex103.htm)] |

| [removed: 10.3] [added: 10.2] | [removed: (18] [added: (17] | ) | [removed: | |] [Employment Agreement between Olivier Leonetti and the Company dated October 31, 2016. +](http://www.sec.gov/Archives/edgar/data/877212/000087721217000009/a103leonettiemploymentagre.htm) |

| [removed: 10.4] [added: 10.12] | [removed: (4] [added: (6] | ) | [removed: | |] [Form of Amendment [removed: No. 1] to Employment Agreement [removed: by and] between [removed: the Company] [added: Zebra Technologies Corporation] and [removed: certain] executive [removed: officers dated December 30, 2008.+](http://www.sec.gov/Archives/edgar/data/877212/000119312509000911/dex103.htm)] [added: officers. +](http://www.sec.gov/Archives/edgar/data/877212/000119312510249606/dex101.htm)] |

| [removed: 10.5] [added: 10.4] | [removed: (18] [added: (17] | ) | [removed: | |] [Form of indemnification agreement between Zebra Technologies Corporation and each director and executive officer.](http://www.sec.gov/Archives/edgar/data/877212/000087721217000009/a106formindemnificationagr.htm) |

| [removed: 10.6] [added: 10.5] | [removed: (11] [added: (10] | ) | [removed: | |] [Form of Director Stock Option Agreement (1-Year Vesting) under the 2006 Incentive Compensation Plan for awards granted to directors on or after May 22, 2008 and prior to December 2, 2008. +](http://www.sec.gov/Archives/edgar/data/877212/000119312508124603/dex104.htm) |

| [removed: 10.7] [added: 10.6] | [removed: (12] [added: (11] | ) | [removed: | |] [Amendment to outstanding Stock Option Agreements under the 2006 Incentive Compensation Plan, dated December 2, 2008. +](http://www.sec.gov/Archives/edgar/data/877212/000119312508249479/dex102.htm) |

| [removed: 10.8] [added: 10.7] | [removed: (8] [added: (7] | ) | [removed: | |] [2006 Incentive Compensation Plan. +](http://www.sec.gov/Archives/edgar/data/877212/000119312506111078/dex101.htm) |

| [removed: 10.9] [added: 10.8] | [removed: (12] [added: (11] | ) | [removed: | |] [Amendment to the 2006 Incentive Compensation Plan dated December 2, 2008. +](http://www.sec.gov/Archives/edgar/data/877212/000119312508249479/dex101.htm) |

| [removed: 10.10] [added: 10.9] | [removed: (15] [added: (14] | ) | [removed: | |] [2011 Long-Term Incentive Plan (Amended and Restated as of May 15, 2014). +](http://www.sec.gov/Archives/edgar/data/877212/000119312514295692/d733093dex101.htm) |

| [removed: 10.11 | |] [added: 10.10] | [added: (20] | [added: )] | [2015 Long-Term Incentive Plan. [removed: *+](https://www.sec.gov/Archives/edgar/data/877212/000087721218000011/a1011exhibit2015ltip.htm)] [added: +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000011/a1011exhibit2015ltip.htm)] |

| [removed: 10.13] [added: 10.11] | [removed: (10] [added: (9] | ) | [removed: | |] [2005 Executive Deferred Compensation Plan, as amended. +](http://www.sec.gov/Archives/edgar/data/877212/000119312508097377/dex104.htm) |

| 10.14 | [removed: (7] [added: (8] | ) | [removed: | | [Form of Amendment to Employment] [added: [Letter] Agreement between Zebra Technologies Corporation and [removed: executive officers. +](http://www.sec.gov/Archives/edgar/data/877212/000119312510249606/dex101.htm)] [added: Anders Gustafsson dated as of May 6, 2010. +](http://www.sec.gov/Archives/edgar/data/877212/000119312510110577/dex1011.htm)] |

| [removed: 10.15] [added: 10.13] | [removed: (9] [added: (8] | ) | [removed: | |] [Amended and Restated Employment Agreement between Zebra Technologies Corporation and Anders Gustafsson dated as of May 6, 2010. +](http://www.sec.gov/Archives/edgar/data/877212/000119312510110577/dex1010.htm) |

| [removed: 10.17] [added: 10.15] | [removed: (9] [added: (8] | ) | [removed: | |] [Form of 2010-2011 time-vested stock appreciation rights agreement for employees other than CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000119312510110577/dex102.htm) |

| [removed: 10.18] [added: 10.16] | [removed: (6] [added: (5] | ) | [removed: | |] [Form of 2012 time-vested stock appreciation rights agreement for employees other than CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000119312512328162/d358276dex101.htm) |

| [removed: 10.19] [added: 10.17] | [removed: (16] [added: (15] | ) | [removed: | |] [Form of 2013-16 time-vested stock appreciation rights agreement for employees other than CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000119312513195324/d506191dex101.htm) |

| [removed: 10.20] [added: 10.18] | [removed: (19] [added: (18] | ) | [removed: | |] [Form of 2017 time-vested stock appreciation rights agreement for employees other than CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721217000018/a101exhibit10-1x2017saroth.htm) |

| [removed: 10.21] [added: 10.20] | [removed: (9] [added: (8] | ) | [removed: | |] [Form of 2010 time-vested stock appreciation rights agreement for CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000119312510110577/dex105.htm) |

| [removed: 10.22] [added: 10.21] | [removed: (6] [added: (5] | ) | [removed: | |] [Form of 2011-12 time-vested stock appreciation rights agreement for CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000119312512328162/d358276dex104.htm) |

| [removed: 10.23] [added: 10.22] | [removed: (16] [added: (15] | ) | [removed: | |] [Form of 2013-16 time-vested stock appreciation rights agreement for CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000119312513195324/d506191dex104.htm) |

| [removed: 10.24] [added: 10.23] | [removed: (19] [added: (18] | ) | [removed: | |] [Form of 2017 time-vested stock appreciation rights agreement for CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721217000018/a102exhibit10-2x2017saragr.htm) |

| 10.19 | (19 | ) | [Form of 2018 stock appreciation rights agreement for employees other than the CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/exhibit10-2x2018saragreeme.htm) |

| 10.24 | (19 | ) | [Form of 2018 stock appreciation rights agreement for CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/a10-5xformof2018stockappre.htm) |

| 10.30 | (19 | ) | [Form of 2018 time-vested restricted stock agreement for employees other than the CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/a10-32018timexvestedrestri.htm) |

| 10.32 | (19 | ) | [Form of 2018 performance-vested restricted stock agreement for employees other than CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/exhibit10-12018performance.htm) |

| 10.34 | (19 | ) | [Form of 2018 time-vested restricted stock agreement for CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/a10-6xformof2018timexveste.htm) |

| 10.36 | (19 | ) | [Form of 2018 performance-vested restricted stock agreement for CEO. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/a10-4xformof2018performanc.htm) |

| 10.38 | (19 | ) | [Amendment No. 1, dated May 31, 2018, to the Amended and Restated Credit Agreement of July 26, 2017 (originally dated as of October 27, 2014), by and among Zebra, the lenders and issuing banks party thereto, JPMorgan Chase Bank, N.A., and Morgan Stanley Senior Funding, Inc.](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/a10-7xamendmentno1toamende.htm) |

| 10.43 | | | [Master Accounts Receivable Purchase Agreement dated December 19, 2018 among Zebra Technologies Europe Limited, Zebra Technologies Corporation, and MUFG Bank, Ltd.*](https://www.sec.gov/Archives/edgar/data/877212/000087721219000011/a1043marpa.htm) |

The financial statements and schedule filed as part of this report are listed in the accompanying Index to Financial Statements and Schedule.

The exhibits filed as a part of this report are listed in the accompanying Index to Exhibits.

SIGNATURES

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 22nd day of February 2018.

| |

| --- |

| ZEBRA TECHNOLOGIES CORPORATION |

| By: /s/ Anders Gustafsson |

| Anders Gustafsson |

| Chief Executive Officer |

Pursuant to the requirements of the Securities and Exchange Act of 1934, the report has been signed below by the following persons in the capacities and on the dates indicated.

| | | |

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

| Signature | Title | Date |

| /s/ Anders Gustafsson Anders Gustafsson | Chief Executive Officer and Director (Principal Executive Officer) | February 22, 2018 |

| /s/ Olivier Leonetti Olivier Leonetti | Chief Financial Officer (Principal Financial Officer) | February 22, 2018 |

| /s/ Colleen O’Sullivan Colleen O’Sullivan | Vice President, Chief Accounting Officer (Principal Accounting Officer) | February 22, 2018 |

| /s/ Michael A. Smith Michael A. Smith | Director and Chairman of the Board of Directors | February 22, 2018 |

| /s/ Andrew K. Ludwick Andrew K. Ludwick | Director | February 22, 2018 |

| /s/ Ross W. Manire Ross W. Manire | Director | February 22, 2018 |

| /s/ Richard L. Keyser Richard L. Keyser | Director | February 22, 2018 |

| /s/ Janice M. Roberts Janice M. Roberts | Director | February 22, 2018 |

| /s/ Chirantan J. Desai Chirantan J. Desai | Director | February 22, 2018 |

| /s/ Frank B. Modruson Frank B. Modruson | Director | February 22, 2018 |

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

| | |

| --- | --- |

| The following financial statement schedule is included herein: | |

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Zebra Technologies Corporation

Opinion on the Financial Statements

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 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 States) (PCAOB), the Company's internal control over financial reporting as of December 31, 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 22, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company‘s management.

Our responsibility is to express an opinion on the Company‘s financial statements based on our audits.

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.

We conducted our audits in accordance with the standards of the PCAOB.

None.

SIGNATURES

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 14th day of February 2019.

| |

| --- |

| |

| ZEBRA TECHNOLOGIES CORPORATION |

| By: /s/ Anders Gustafsson |

| Anders Gustafsson |

| Chief Executive Officer |

Pursuant to the requirements of the Securities and Exchange Act of 1934, the report has been signed below by the following persons in the capacities and on the dates indicated.

| | | |

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

| | | |

| Signature | Title | Date |

| /s/ Anders Gustafsson Anders Gustafsson | Chief Executive Officer and Director (Principal Executive Officer) | February 14, 2019 |

| | | |

| | | |

| /s/ Olivier Leonetti Olivier Leonetti | Chief Financial Officer (Principal Financial Officer) | February 14, 2019 |

| | | |

| /s/ Colleen O’Sullivan Colleen O’Sullivan | Vice President, Chief Accounting Officer (Principal Accounting Officer) | February 14, 2019 |

| | | |

| /s/ Michael A. Smith Michael A. Smith | Director and Chairman of the Board of Directors | February 14, 2019 |

| | | |

| /s/ Andrew K. Ludwick Andrew K. Ludwick | Director | February 14, 2019 |

| | | |

| /s/ Ross W. Manire Ross W. Manire | Director | February 14, 2019 |

| | | |

| /s/ Richard L. Keyser Richard L. Keyser | Director | February 14, 2019 |

| | | |

| /s/ Janice M. Roberts Janice M. Roberts | Director | February 14, 2019 |

| | | |

| /s/ Chirantan J. Desai Chirantan J. Desai | Director | February 14, 2019 |

| | | |

| /s/ Frank B. Modruson Frank B. Modruson | Director | February 14, 2019 |

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

Schedule II

Valuation and Qualifying Accounts

(In millions)

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