Zebra Technologies (ZBRA) 10-K risk factor changes: FY2019 vs FY2018

Investors should carefully consider the risks, uncertainties, and other factors described below, as well as other disclosures in [added: this report, including] Management’s Discussion and Analysis of Financial Condition and Results of Operations, because they could have a material adverse effect on our business, financial condition, operating results, cash flows, and growth prospects.

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

| • | Fluctuating foreign currency rates could restrict sales, increase costs of purchasing, and [removed: impact] [added: affect] collection of receivables outside of the U.S.; |

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

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

| [removed: •] [added: ▪] | Restrictions on the export or import of technology may reduce or eliminate the ability to sell [removed: in] [added: in,] or purchase [removed: from] [added: from,] certain markets; |

| [removed: •] [added: ▪] | Political and economic instability may reduce demand for our products or put our non-U.S. assets at risk; |

| [removed: •] [added: ▪] | [removed: Potentially limited] [added: Limited] intellectual property protection in certain countries may limit recourse against [removed: infringing] [added: infringement] on our products or [added: may] cause us to refrain from selling in certain geographic territories; |

| [removed: •] [added: ▪] | Staffing may be difficult [removed: along with] [added: including] higher [removed: turnover at international operations;] [added: than anticipated turnover;] |

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

| [removed: •] [added: ▪] | Transportation delays and customs related delays [removed: that] may affect production and distribution of our products; |

| [removed: •] [added: ▪] | Effectively managing and overseeing operations that are distant and remote from corporate [removed: headquarters may be difficult;] [added: headquarters;] and |

| [removed: •] [added: ▪] | Integration and enforcement of laws varies significantly among jurisdictions and may change [removed: significantly] over time. |

[removed: The] [added: *The] Company may not be able to continue to develop products or solutions to address user needs effectively in an industry characterized by ongoing [removed: change.][added: change.* To be successful, we must adapt to rapidly changing technological and application needs by continually improving our products, as well as introducing new products and services, to address user demands.]

[removed: The] [added: *The] Company participates in a competitive industry, which may become more competitive.

Competitors may be able to respond more quickly to new or emerging technology and changes in customer [removed: requirements.][added: requirements.* We face significant competition in developing and selling our products and solutions.]

We cannot assure we will be able to compete successfully against current or future [removed: competitors.][added: competitors or technologies.]

Increased competition in mobile computing products, data capture products, [added: radio frequency identification devices (“RFID”),] printers, or supplies may result in price reductions, lower gross profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and customer support.

[removed: The] [added: *The] Company is vulnerable to the potential difficulties associated with the increase in the complexity of our [removed: business.][added: business*.]

| • | [removed: Increased] [added: Managing] administrative and operational [removed: burden;] [added: burdens;] |

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

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

| • | [removed: Attract, develop] [added: Attracting, developing] and [removed: retain] [added: retaining] individuals with the requisite technical expertise to develop new technologies and introduce new products and solutions. |

[removed: Inability] [added: *Inability] to consummate future acquisitions at appropriate prices could negatively impact our growth rate and stock [removed: price.][added: price.* Our ability to expand revenues, earnings, and cash flow depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and to realize anticipated synergies.]

[removed: The] [added: *The] Company could encounter difficulties in any acquisition it undertakes, including unanticipated integration problems and business disruption.

Acquisitions could also dilute stockholder value and adversely affect operating [removed: results.][added: results.* We may acquire or make investments in other businesses, technologies, services, or products.]

| • | The [added: inheritance of known, and the] discovery of [removed: unanticipated] [added: unknown,] issues or liabilities; |

| • | Future acquisitions could result in [added: changes such as] potentially dilutive issuances of equity [removed: securities or] [added: securities,] the incurrence of debt and contingent [removed: liabilities.] [added: liabilities, and goodwill impairment charges.] |

[removed: Infringement] [added: *Infringement] by the Company or our suppliers on the proprietary rights of others could put us at a competitive disadvantage, and any related litigation could be time consuming and [removed: costly.][added: costly.* Third parties may claim that we or our suppliers violated their intellectual property rights.]

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 [added: use a non-infringing method, if possible, to accomplish our objectives.]

Also, as new technologies [removed: emerge] [added: emerge,] the intellectual property rights of parties in such technologies can be uncertain.

[removed: The] [added: *The] inability to protect intellectual property could harm our reputation, and our competitive position may be materially [removed: damaged.][added: damaged.* Our intellectual property is valuable and provides us with certain competitive advantages.]

Despite these precautions, third parties may be able to copy or reproduce aspects of our intellectual property and our products or, without authorization, to misappropriate and use [removed: information, which] [added: information] we regard as trade secrets.

Furthermore, efforts to enforce or protect our proprietary rights may be ineffective and could result in the invalidation or narrowing of the scope of our intellectual property and [removed: incurring] [added: may cause us to incur] substantial litigation costs.

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

Such parties ceasing continued development of the operating [removed: system] [added: systems] or restricting our access to such operating [removed: system] [added: systems] could adversely impact our business and financial [removed: results.][added: results.* We are dependent on third-parties’ continued development of operating systems, software application ecosystem infrastructures, and such third-parties’ approval of our implementations of their operating systems and associated applications.]

[removed: As a result, our] [added: Our] financial results could be negatively impacted [removed: because] [added: by] a resulting shift away from the operating systems we currently use and the associated applications ecosystem could be costly and difficult.

[removed: “Phishing”] [added: Phishing] and other types of attempts to obtain unauthorized information or access are often sophisticated and difficult to detect or defeat.

A cybersecurity incident, including deliberate attacks and unintentional events, may lead to a material disruption of our core business systems, the loss or corruption of confidential business [removed: information] [added: information,] and/or the disclosure of personal data that in each case could result in an adverse business [removed: impact,] [added: impact] as well [removed: as,] [added: as] possible damage to our brand.

While we continue to perform security due diligence, there is always the possibility of a significant [removed: breach affecting the confidentiality, integrity, and availability of our systems and/or data.][added: breach.]

No priority or significance is intended by, nor should be attached to, the order in which the risk factors appear.

General Business and Industry Risks

| • | Managing stakeholder interests including customer, investor and employee social responsibility matters; |

| • | Managing the integration of acquisitions; |

Operational Risks

| ▪ | Geopolitical uncertainty or turmoil could negatively affect our operations or those of our customers or suppliers; |

*Cybersecurity incidents could disrupt business operations.* We rely on information technology systems throughout the Company to keep financial records, process orders, manage inventory, coordinate shipments to distributors and customers, maintain confidential and proprietary information, and other technical activities, and operate other critical functions such as internet connectivity, network communications, and email.

Despite our implementation of a variety of security measures, there is no assurance that such actions will be sufficient to prevent a cybersecurity incident.

Any failure on the part of us or our third-party service providers to maintain the security of data we are required to protect, including

via the penetration of our network security and the misappropriation of confidential and proprietary information, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings, and private litigation with potentially large costs, and also result in deterioration in our suppliers’, distributors’, and customers’ confidence in us and other competitive disadvantages, and therefore could have a material adverse effect on our business, financial condition, and results of operations.

Although we maintain insurance related to cybersecurity risks, there can be no assurance that our insurance coverage will cover the particular cyber incident at issue or that such coverage will be sufficient.

The Company’s operations and facilities are subject to catastrophic loss due to fire, flood, terrorism, or other natural or man-made disasters.

If any of our facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue, and result in large expenses to repair or replace the facility.

Following an interruption to our business, the Company could require substantial recovery time, experience significant expenditures to resume operations, and lose significant sales.

If such a disruption were to occur, we could breach agreements, our reputation could be harmed, and our business and operating results could be adversely affected.

On January 31, 2020, the U.K. formally withdrew from the E.U. After withdrawal, the U.K. and E.U. entered into a transition period that is due to end on December 31, 2020.

The terms of the U.K.’s

*We rely on third-party dealers, distributors, and resellers to sell many of our products, and their failure to effectively bring our products to market may negatively affect our results of operation and financial results.* In addition to our own sales force, we offer our products through a variety of third-party dealers, distributors, and resellers who may also market other products that compete with our products.

From time to time we may diversify our product sourcing footprint, similar to the actions we are currently taking with our efforts to reduce our reliance on Chinese-based manufacturing, which may result in additional costs.

Financial and Market Risks

The Company commenced efforts to diversify its product sourcing footprint in order to reduce its reliance on Chinese-based manufacturing and mitigate the impacts of related customs duties.

Failure to effectively manage transition activities associated with product sourcing diversification may negatively impact our results of operations and financial performance.

China, to take actions with respect to U.S. imports or U.S. investment activities in their respective countries.

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Legal and Regulatory Risks

Compliance may require changes in services, business practices, or internal systems that result in

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To be successful, we must adapt to rapidly changing technological and application needs by continually improving our products, as well as introducing new products and services, to address user demands.

We face significant competition in developing and selling our products and solutions.

Our ability to expand revenues, earnings, and cash flow depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and to realize anticipated synergies.

We may acquire or make investments in other businesses, technologies, services, or products.

Third parties may claim that we or our suppliers violated their intellectual property rights.

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

Our intellectual property is valuable and provides us with certain competitive advantages.

We are dependent on third-parties’ continued development of operating systems, software application ecosystem infrastructures, and such third-parties’ approval of our implementations of their operating system and associated applications.

Cybersecurity incidents could disrupt business operations.

As part of our operations, the Company collects, uses, stores, and transfers personal data of third parties and employees in and across jurisdictions.

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

We may be subject to product liability claims, which could include claims for property or economic damage or personal injury, in the event our products present actual or apparent design or manufacturing defects.

Our software may contain undetected errors, defects, or bugs.

The future success of the Company is substantially dependent on the continued services and continuing contributions of senior management and other key personnel.

Terrorist attacks or war could lead to further economic instability and adversely affect the Company’s stock price, operations, and profitability.

The terrorist attacks that occurred in the United States on September 11, 2001 caused major instability in the U.S. and other financial markets.

Since then, a number of significant acts of terrorism have occurred, and war continues in the Middle East, all of which may contribute to instability in financial markets.

Additional acts of terrorism and current and future war risks could have a similar impact.

Any such attacks could, among other things, cause further instability in financial markets and could directly, or indirectly through reduced demand, negatively affect our facilities and operations or those of our customers or suppliers.

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

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

We are subject to, and may become subject to, ongoing tax examinations in various jurisdictions.

Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates.

General disruption of financial markets and a related general economic downturn could adversely affect our business and financial condition through a reduction in demand for our products by our customers.

A natural disaster may cause supply disruptions that could adversely affect our business and results of operations.

Zebra maintains its European regional headquarters and a label converting facility in the U.K. and has significant operations and sales throughout Europe.

The U.K. formally notified the E.U. of its intention to withdraw, with such notice triggering a two-year period ending in March 2019, which could be followed by a transition period.

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

We are exposed to risks under large, multi-year system and solutions and services contracts that may negatively impact our business.

We enter into large, multi-year system and solutions and services contracts with our customers.

continued viability of such customers.

If our initial cost estimates are incorrect, we can lose money on these contracts.

We engage subcontractors on many of our contracts and as we expand our global solutions and services business, our use of subcontractors has and will continue to increase.

When we outsource certain business operations, we are not able to directly control these activities.

It is our policy to require suppliers, subcontractors, distributors, resellers, and third-party sales representatives (“TPSRs”) to operate in compliance with applicable laws, rules, and regulations regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark and copyright licensing.

We rely on third-party dealers, distributors, and resellers to sell many of our products.

In addition to our own sales force, we offer our products through a variety of third-party dealers, distributors, and resellers.

These third-parties may also market other products that compete with our products.

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

We are not able to exercise direct control over the assembly or related operations of certain of our products.

[removed: Overview][added: Overview]

[removed: The Company] [added: Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”)] is a global leader respected for innovative [removed: EAI] [added: Enterprise Asset Intelligence (“EAI”)] solutions in the automatic [removed: information] [added: identification] and data capture solutions industry.

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

We provide products and services in [removed: over] [added: approximately] 180 countries, with [removed: 109] [added: 124] facilities and approximately [removed: 7,400] [added: 8,200] employees worldwide.

[removed: Asset] [added: Asset] Intelligence & Tracking [added: Segment (“AIT”)]

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

[removed: Enterprise] [added: Enterprise] Visibility & Mobility [added: Segment (“EVM”)]

For the year ended December 31, [removed: 2018,] [added: 2019,] the Company [removed: recorded $4.2] [added: generated $4.5] billion of Net [removed: sales in its consolidated statements of operations,] [added: sales,] of which approximately [removed: 48.4%] [added: 50.4%] were attributable to North America; approximately [removed: 33.4%] [added: 32.6%] were attributable to EMEA; and [added: approximately 17.0% were attributable to] other foreign [removed: locations accounted for the remaining 18.2%.][added: locations.]

[added: |] Acquisition and [removed: Integration][added: integration costs | 22 | | | | 8 | | | | 50 | | | | NM | | | NM | | | NM | |]

On August 14, 2018, the Company completed its tender offer to acquire all outstanding common stock of Xplore [added: Technologies Corporation (“Xplore”)] for $6.00 per share.

[removed: The Xplore acquisition was] [added: Acquisitions are] accounted for under the acquisition method of accounting for business [removed: combinations and the preliminary opening balance sheet was] [added: combinations, with results] included in the Company’s [removed: Consolidated Balance Sheet and] operating results beginning [removed: August 14, 2018.][added: on each respective acquisition date.]

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

Our integration priorities centered on maintaining business continuity while identifying and implementing cost synergies, operating efficiencies, and integration of functional organizations and [removed: processes.][added: processes, in addition to concluding MSI-provided transition service agreements (“TSAs”).]

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

The [added: 2017] Productivity [removed: Plan] [added: Plan, focused on organizational design changes, process improvements, and automation,] built upon the exit and restructuring initiatives specific to the October 2014 Enterprise acquisition (the “Acquisition Plan”).

The Company substantially completed all initiatives [added: under the 2017 Productivity Plan and the Acquisition Plan in fiscal 2018 and 2017, respectively.]

[added: When reviewing the Company’s results, our Chief Operating Decision Maker does not include] Exit and restructuring costs [removed: are not included] in the operating results of our [removed: segments as they do not impact the specific segment measures] [added: segments;] as [removed: reviewed by our Chief Operating Decision Maker and therefore] [added: such, these costs] are reported as a component of [removed: Corporate eliminations.][added: Corporate.]

See Note [removed: 18, Segment Information & Geographic Data] [added: 9, *Exit and Restructuring Costs*] in the Notes to Consolidated Financial Statements.

[removed: Charges related] [added: Exit and restructuring charges relating] to the [added: 2017] Productivity Plan [removed: for the year ended December 31, 2018 and 2017] were [added: $2 million,] $11 million and $12 [removed: million,] [added: million for fiscal 2019, 2018 and 2017,] respectively.

[removed: Charges related to] [added: Exit and restructuring charges for] the [removed: Acquisition] [added: 2019 Productivity] Plan [added: were $8 million] for the [removed: periods] [added: year] ended December 31, [removed: 2017 and 2016, were $4 million and $19 million, respectively.][added: 2019.]

See Note [removed: 8, Costs Associated with Exit and Restructuring Activities] [added: 16, *Income Taxes*] in the Notes to Consolidated Financial Statements for further information.

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

Based on current operations, the Company is subject to the Global Intangible Low-Taxed [removed: Income] [added: Income, Base Erosion Anti-Avoidance Tax,] and the Deduction for Foreign-Derived Intangible Income provisions [removed: (collectively referred to as “GILTI”)] of the Act, for which we recorded income tax expense of [added: $12 million and] $10 million [removed: in 2018.][added: for the years ended December 31, 2019 and 2018, respectively.]

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

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

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

During 2017, the Company provisionally recognized an income tax expense of $72 million associated with the Act, comprised of [added: a] one-time transition tax of $37 million and $35 million remeasurement of its net U.S. deferred tax assets based on the federal statutory rate of 21%.

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 [removed: for the year ended December 31, 2018] as a result of differences between its final analysis and provisional analysis from the prior year.

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 [added: substantially] reduce its [removed: future] cash payments for the one-time transition [removed: 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.][added: tax.]

See Note [removed: 14, Income Taxes] [added: 16, *Income Taxes*] in the Notes to Consolidated Financial Statements for further information.

[removed: Results] [added: Results] of Operations: Year [removed: Ended 2018 versus 2017 and] [added: Ended 2019 versus 2018 and] Year [removed: Ended 2017 versus 2016][added: Ended 2018 versus 2017]

[removed: Consolidated] [added: Consolidated] Results of [removed: Operations][added: Operations]

| | [removed: Year] [added: Year] Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | [removed: Percent] [added: Percent] Change [removed: 2018] [added: 2019] vs [removed: 2017] [added: 2018] | | | [removed: Percent] [added: Percent] Change [removed: 2017] [added: 2018] vs [removed: 2016] [added: 2017] | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | | | | | |

| Net sales | $ | [removed: 4,218] [added: 4,485] | | | $ | [removed: 3,722] [added: 4,218] | | | $ | [removed: 3,574] [added: 3,722] | | | [removed: 13.3] [added: 6.3] | % | | [removed: 4.1] [added: 13.3] | % |

| Gross profit | [removed: 1,981] [added: 2,100] | | | | [removed: 1,710] [added: 1,981] | | | | [removed: 1,642] [added: 1,710] | | | | [removed: 15.8] [added: 6.0] | % | | [removed: 4.1] [added: 15.8] | % |

| Operating expenses | [removed: 1,371] [added: 1,408] | | | | [removed: 1,388] [added: 1,371] | | | | [removed: 1,562] [added: 1,388] | | | | [removed: (1.2] [added: 2.7] | [removed: )%] [added: %] | | [removed: (11.1] [added: (1.2] | )% |

| Operating income | $ | [removed: 610] [added: 692] | | | $ | [removed: 322] [added: 610] | | | $ | [removed: 80] [added: 322] | | | [removed: 89.4] [added: 13.4] | % | | [removed: 302.5] [added: 89.4] | % |

| [removed: Gross margin] [added: *Gross margin*] | [removed: 47.0] [added: *46.8*] | | [removed: %] [added: *%*] | | [removed: 45.9] [added: *47.0*] | | [removed: %] [added: *%*] | | [removed: 45.9] [added: *45.9*] | | [removed: %] [added: *%*] | | [added: *(20) bps*] | | | [added: *110 bps*] | |

| North America | $ | [removed: 2,041] [added: 2,261] | | | $ | [removed: 1,798] [added: 2,041] | | | $ | [removed: 1,739] [added: 1,798] | | | [removed: 13.5] [added: 10.8] | % | | [removed: 3.4] [added: 13.5] | % |

This section generally discusses fiscal 2019 and 2018 items and year-over-year comparisons between 2019 and 2018.

Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 are not included herein.

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for this discussion.

Our customers have traditionally benefited from proven solutions that increase productivity and improve efficiency and asset utilization.

The Company is poised to drive, and capitalize on, the evolution of the data capture industry into the broader EAI industry, based on important technology trends like the Internet of Things (“IoT”), ubiquitous mobility, automation and cloud computing.

EAI solutions offer additional benefits to our customers including real-time, data-driven insights that improve operational visibility and drive workflow optimization.

Acquisitions and Integration

Recent acquisitions contributed 1.9% to the current year consolidated Net sales growth.

On November 5, 2019, the Company acquired Cortexica Vision Systems Limited (“Cortexica”), a provider of computer vision-based artificial intelligence solutions primarily serving the retail industry, for $7 million in cash.

Additionally, we incurred approximately $2 million of acquisition-related costs in 2019, which primarily included third-party transaction and advisory fees and are reflected within Acquisition and integration costs on the Consolidated Statements of Operations.

The operating results of Cortexica are included within the EVM segment.

On May 31, 2019, the Company acquired Profitect, Inc. (“Profitect”), a provider of prescriptive analytics primarily serving the retail industry.

The Company’s total purchase consideration was $79 million, which consisted of $75 million in cash paid, net of cash acquired, and the fair value of the Company’s existing minority ownership interest in Profitect of $4 million, as

remeasured upon acquisition.

Included within Other, net on the Consolidated Statements of Operations is a $4 million gain resulting from the remeasurement of the Company’s previously held ownership interest in Profitect.

Additionally, we incurred $13 million of acquisition-related costs in 2019, which primarily consisted of payments to settle Profitect employee stock option awards, as well as third party transaction and advisory fees.

Those acquisition-related costs are included within Acquisition and integration costs on the Consolidated Statements of Operations.

The operating results of Profitect are included within the EVM segment.

On February 21, 2019, the Company acquired Temptime Corporation (“Temptime”), a developer and manufacturer of temperature-monitoring labels and devices.

In connection with this acquisition, the Company paid $180 million in cash, net of cash acquired.

Additionally, we incurred $3 million of acquisition-related costs in 2019, which primarily included third-party transaction and advisory fees and are reflected within Acquisition and integration costs on the Consolidated Statements of Operations.

The operating results of Temptime are included within the AIT segment.

Additionally, we incurred $8 million of acquisition-related costs in 2018, which primarily included third-party transaction and advisory fees, and $2 million of system integration costs in 2019.

These costs are reflected within Acquisition and integration costs on the Consolidated Statements of Operations.

The operating results of Xplore are included within the EVM segment.

In the fourth quarter of 2019, the Company committed to certain organizational changes designed to generate operational efficiencies (collectively referred to as the “2019 Productivity Plan”), which are incremental to the Company’s 2017 exit and restructuring program (the “2017 Productivity Plan”).

The organizational design changes under the 2019 Productivity Plan will principally occur within the North America and EMEA regions, relate primarily to employee severance and related benefits, and are expected to be substantially completed in fiscal 2020.

Estimated remaining costs to be incurred in fiscal 2020 under the 2019 Productivity Plan are expected to be up to $10 million.

Exit and restructuring charges relating to the Acquisition Plan were $4 million for fiscal 2017.

Cumulative costs associated with the 2017 Productivity Plan and the Acquisition Plan were $25 million and $69 million, respectively, and primarily consisted of severance and related benefits and lease exit costs.

exceeds the limitation under amended Internal Revenue Code Section 162(m).

During 2019, there were no retroactive law changes that impacted the 2018 reassessment.

Other Developments

In 2019, the Company incurred $5 million related to efforts to diversify its product sourcing footprint, to include sourcing products from Taiwan, Vietnam, and Malaysia, thereby reducing its reliance on Chinese-based manufacturing and the impacts of related customs duties (“tariffs”) on U.S. imports from China.

These costs are primarily reflected within Operating expense on the Consolidated Statements of Operations.

The Company anticipates incurring additional one-time operating costs of up to $25 million by the middle of fiscal year 2020 as well as incremental equipment purchases of approximately $10 million to $15 million.

As a result of these actions, along with certain U.S. pricing actions and based on current economic and operating conditions, the Company expects to substantially mitigate the ongoing financial impacts of Chinese tariffs.

In December 2019, a strain of the coronavirus surfaced in Wuhan, China.

In January 2020, a broad number of governmental and commercial efforts commenced to contain the spread of the virus in China.

As a result, many of our supply chain partners in China temporarily suspended or modified their business operations beyond the normal Chinese Lunar New Year shutdown.

Benefits of our solutions include improved efficiency and workflow management, increased productivity and asset utilization, real-time, actionable enterprise information, and better customer experiences.

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

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.

Another key focus of the integration was to exit MSI-provided TSAs related primarily to IT systems and support services.

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

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

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

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

Total exit and restructuring charges of $23 million life-to-date specific to the Productivity Plan have been recorded through December 31, 2018 and 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, 2018 and include severance and related benefits, lease exit costs and other expenses.

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

| Europe, Middle East, and Africa | 1,409 | | | | 1,221 | | | | 1,138 | | | | 15.4 | % | | 7.3 | % |

| Acquisition and integration costs | 8 | | | | 50 | | | | 125 | | | | NM | | | NM | | | NM | |

| Impairment of goodwill and other intangibles | — | | | | — | | | | 62 | | | | NM | | | NM | | | NM | |

| Impact of Wireless LAN divestiture (3) | — | % | | 3.2 | % |

| Corporate, eliminations (4) | — | % | | (0.2 | )% |

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

In addition, we exclude the impact of the company’s foreign currency hedging program in both the current and prior year periods.

| (3) | The Company sold the WLAN business in October 2016. The Company excludes the impact of the Net sales of this business in 2016 when computing Organic Net sales growth. |

| (4) | Amounts included in Corporate, eliminations consist of purchase accounting adjustments not reported in segments related to the Enterprise acquisition. |

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

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.

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 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.

2017 compared to 2016

Net sales increased by $148 million or 4.1% compared with the prior year period.

The increase in Net sales was due to higher hardware sales in North America, EMEA, and Latin America, offset by lower hardware sales in Asia-Pacific.

The increase in hardware sales was largely attributable to increased sales of mobile computing, data capture, and barcode printing products, partially offset by the impact of the divestiture of the WLAN business in October 2016.

Services sales were lower primarily due to the impact of the WLAN divestiture.

Organic net sales growth was 6.5%, reflecting growth in all four geographic regions, most notably in EMEA, North America, and Latin America.

Gross margin was 45.9% in both the current and prior year periods.

This reflects an increase in gross margin in the EVM segment primarily due to changes in business mix and operational efficiencies, offset by lower AIT segment gross margin driven primarily by higher overhead and service costs, as well as increased customer sales incentives.

Operating expenses for the year ended December 31, 2017 and 2016, were $1.4 billion, or 37.3% of Net sales, and $1.6 billion, or 43.7% of Net sales, respectively.

The reduction in operating expenses was primarily due to impairment charges related to the disposal of the Company’s WLAN business in the prior year, lower acquisition and integration costs, and lower amortization of intangible assets.

During 2017, the Company substantially completed its integration activities, including the implementation of

Zebra is [added: primarily] exposed to the following types of market risk: interest rates and foreign currency.

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

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

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

As of December 31, [removed: 2018,] [added: 2019,] we had [removed: $1.6] [added: approximately $1.3] 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 would increase or decrease annual interest expense by approximately [removed: $8] [added: $5] million.

Refer to Note [removed: 10, Derivative Instruments] [added: 11, *Derivative Instruments*] in the Notes to Consolidated Financial Statements for further discussion of [removed: hedging] [added: these risk mitigation] activities.

[removed: Foreign] [added: Foreign] Exchange [removed: Risk][added: Risk]

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

See Note [removed: 10, Derivative Instruments] [added: 11, *Derivative Instruments*] in the Notes to Consolidated Financial Statements 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 [removed: koruna, Australian dollar, Mexican peso,] [added: Koruna, Brazilian Real] and Chinese [removed: yuan.][added: Yuan.]

Primary exposures include the London Inter-bank Offered Rate (“LIBOR”).

The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced in 2017 that it intends to phase out LIBOR by the end of 2021.

Some of the Company’s contracts with respect to its borrowings and interest rate swap contracts already contain comparable alternative reference rates that would automatically take effect upon the phasing out of LIBOR.

For certain other contracts that do not already contain sufficient alternative reference rate provisions, the Company anticipates negotiating comparable replacement reference rates with its counterparties.

This exposure includes the impact of associated forward interest rate swaps outstanding as of December 31, 2019.

Exposure to variable interest may increase or decrease, to the extent that the Company’s borrowings under its Revolving Credit Facility or Receivables Financing Facilities increase or decrease, respectively.

Primary exposures include LIBOR rates.

This amount includes the impact of an associated forward interest rate swap outstanding as of December 31, 2018, which was entered into to mitigate the interest rate risk associated with the variable interest payments on our debt facilities.

[removed: The Company][added: The Company]

We are a global leader [added: providing Enterprise Asset Intelligence (“EAI”) solutions] in the Automatic Identification and Data Capture (“AIDC”) [removed: market.][added: industry.]

The Company’s solutions are proven to help our customers and end-users achieve their mission critical strategic business objectives, including improved operational efficiency, optimized workflows, increased asset utilization, [added: improved regulatory compliance,] and better customer experiences.

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

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

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

We provide products and services in [removed: over] [added: approximately] 180 countries, with [removed: 109] [added: 124] facilities and approximately [removed: 7,400] [added: 8,200] employees worldwide.

[removed: Specifically, EAI] [added: Through innovative application of our technologies, we are leading an evolution of the traditional AIDC market into EAI, which] encompasses solutions [removed: which “sense”] [added: that sense] information from enterprise assets, including packages moving through a supply chain, equipment in a factory, workers in a warehouse, and shoppers in a store.

The evolution of the AIDC market [removed: toward a more strategically oriented EAI focus] is being driven by strong underlying secular trends in technology.

These trends include [added: the] internet of things (“IoT”), cloud-based data analytics, and [removed: mobility.][added: mobility, as well as artificial intelligence and automation.]

[removed: EAI] [added: Newer] solutions, which include these smart, connected devices, capture a much broader range of information than is possible with traditional AIDC solutions and communicate this information in real-time.

[removed: Finally, the] [added: The] continued rapid growth of mobile devices and applications are [added: also] significantly expanding mobile computing use cases [removed: to levels of near ubiquity] in the enterprise.

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

See Note 5, [removed: Business Acquisition and Divestiture] [added: *Business Acquisitions*] in the Notes to Consolidated Financial Statements.

[removed: Integration of Enterprise Business][added: Enterprise Business]

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

Our integration priorities centered on maintaining business continuity while identifying and implementing cost synergies, operating efficiencies, and integration of functional organizations and [removed: processes.][added: processes, in addition to concluding MSI-provided transition service agreements (“TSAs”).]

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

[removed: Operations][added: Operations]

Our operations consist of two [added: reportable] segments: (1) Asset Intelligence & Tracking (“AIT”), [added: primarily] comprised of barcode and card printing, [added: supplies, services,] location solutions, [removed: supplies,] and [removed: services;] [added: retail solutions;] and (2) Enterprise Visibility & Mobility (“EVM”), [added: primarily] comprised of mobile computing, data capture, RFID, and services.

[removed: Asset] [added: Asset] Intelligence & [removed: Tracking][added: Tracking]

[removed: Barcode] [added: *Barcode] and Card [removed: Printing:] [added: Printing:*] We design, manufacture, and sell printers, which produce high-quality labels, wristbands, tickets, receipts, and plastic cards on demand.

Plastic cards are used for secure, reliable personal identification (e.g. state identification [removed: cards and] [added: cards,] drivers’ licenses, [added: and] healthcare [removed: IDs),] [added: identification cards),] access control (e.g. employee or student building access), and financial cards (e.g. credit, debit and ATM cards) by financial institutions.

Our RFID [removed: printers/encoders] [added: printers and encoders] are used to print and encode passive RFID labels.

[removed: Supplies:] [added: *Supplies:*] We produce and sell stock and customized thermal labels, receipts, ribbons, plastic cards, and [removed: wristbands] [added: RFID tags] suitable for use with our printers, and also wristbands which can be imaged in most commercial laser printers.

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

[removed: We] [added: Our supplies business] also [removed: provide a family of] [added: includes temperature-monitoring labels, as well as] self-laminating wristbands for use in laser printers.

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

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

[removed: Enterprise] [added: Enterprise] Visibility & [removed: Mobility][added: Mobility]

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

Industrial applications include inventory management in warehouses and distribution centers; field mobility applications include field service, post and parcel, and direct store delivery; and retail and customer facing applications include e-commerce, omnichannel, mobile point of sale, inventory look-up, [removed: and] staff [removed: collaboration.][added: collaboration, and analytics.]

Our mobile computing products often incorporate barcode scanning, global position system [removed: (“GPS”)] and RFID features, and other sensory capabilities.

[removed: Data] [added: *Data] Capture and [removed: RFID:] [added: RFID:*] We design, manufacture, and sell barcode scanners, image capture devices, and RFID readers.

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

[removed: Our] [added: Our] Competitive [removed: Strengths][added: Strengths]

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

We are a market leader in the key technologies of [removed: Enterprise Asset Intelligence,] [added: EAI,] including mobile computing, barcode and card printing, data capture, and RFID readers.

[removed: High] [added: High] entry and switching [removed: barriers][added: barriers]

On a global basis, we have long-standing relationships with [removed: end customers] [added: end-users] and with our extensive network of channel partners.

extensive network of channel partners.

Computer vision solutions, which enable the automatic extraction and understanding of useful information from a digital image or video, are also driving the expansion of intelligent automation, which leverages our sense-analyze-act framework to improve workflows with or without a human operator.

Zebra Technologies Corporation is incorporated under the laws of the State of Delaware as the successor to an Illinois corporation, Data Specialties, Inc., organized in 1969.

We changed our name from Data Specialties, Inc. to Zebra Technologies Corporation on December 9, 1986.

Our principal executive offices are located at 3 Overlook Point, Lincolnshire, Illinois 60069.

Acquisitions

*Cortexica:* On November 5, 2019, the Company acquired Cortexica Vision Systems Limited (“Cortexica”) for $7 million in cash.

Additionally, we incurred $2 million of acquisition-related costs in 2019.

Cortexica is a provider of computer vision-based artificial intelligence solutions primarily serving the retail industry, expanding upon the Company’s initiative to advance our solutions offerings.

The operating results of Cortexica are included within the EVM segment beginning November 5, 2019.

*Profitect:* On May 31, 2019, the Company acquired Profitect, Inc. (“Profitect”) for total purchase consideration of $79 million, which consisted of $75 million in cash paid, net of cash acquired, and the fair value of the Company’s existing minority ownership interest in Profitect of $4 million, as remeasured upon acquisition.

The Company also incurred $13 million of acquisition-related costs in 2019, primarily related to the settlement of Profitect employee stock option awards.

The Profitect business is a provider of prescriptive analytics primarily serving the retail industry.

In acquiring Profitect, the Company seeks to enhance its existing software solutions within the retail industry, with possible future applications in other industries.

The operating results of Profitect are included within the EVM segment beginning May 31, 2019.

*Temptime:* On February 21, 2019, the Company acquired Temptime Corporation (“Temptime”) for $180 million in cash, net of cash acquired.

Additionally, we incurred $3 million of acquisition-related costs in 2019.

The Temptime business is a developer and manufacturer of temperature-monitoring labels and devices.

The Company intends to expand Temptime’s product offerings within the healthcare industry, with possible future applications in other industries involving temperature-sensitive products.

The operating results of Temptime are included within the AIT segment beginning February 21, 2019.

Additionally, we incurred $8 million of acquisition-related costs in 2018 and $2 million of system integration costs in 2019.

The operating results of Xplore are included within the EVM segment beginning August 14, 2018.

*Retail Solutions:* The Company provides a range of physical inventory management solutions with application in the retail industry, including solutions for full store physical inventories, cycle counts, and analytics.

These solutions include the use of barcode scanners or RFID readers, along with connected software.

*Services:* We provide a full range of maintenance, technical support, and repair services.

Over time, we have developed and delivered improved, targeted end-to-end solutions for our customers.

We remain committed to leveraging our technology portfolio and expertise in the industries that we service to continue to develop innovative solutions that meet the key needs of our customers.

Our EAI vision is for every asset and worker to be connected, visible, and optimally utilized.

In 2019, we commenced efforts to further diversify our product sourcing footprint to Taiwan, Vietnam, and Malaysia, thereby reducing reliance on Chinese-based manufacturing.

Also included within our supplies business are temperature monitoring labels, which incorporate chemical indicators that are designed to change color upon exceeding predefined time and/or temperature thresholds.

partners.

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

The broad availability of wireless and internet connectivity also supports the adoption and deployment of the Company’s solutions to enable organizations to collect more data in real-time on the location, movement, and condition of their assets.

Acquisition of Xplore Business

Disposition

On October 28, 2016, the Company concluded the sale of Extreme Networks, Inc., its wireless LAN (“WLAN”) business, for net proceeds of $39 million.

The Company funded the acquisition of Enterprise through a combination of the sale of $1.1 billion senior notes due in 2022, a credit agreement with various lenders that provided a $2.2 billion term loan due in 2021, and cash on hand.

In 2017, the Company executed a debt restructuring program to lower its cost of debt, which included amending its credit facilities, establishing a Receivables Financing Facility and fully redeeming the $1.1 billion senior notes.

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.

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

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

These wristbands are marketed under the LaserBand® name.

We operate supplies production facilities located in the United States and Western Europe.

We supplement our in-house production capabilities with those of third-party manufacturers to offer genuine Zebra supplies, principally in Asia.

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

See Note [removed: 12, Commitments] [added: 14, *Commitments] and [removed: Contingencies] [added: Contingencies*] in the Notes to Consolidated Financial Statements.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington, D. C. 20549][added: Washington, D.C. 20549]

[removed: FORM 10-K][added: FORM 10-K]

[added: | ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE] SECURITIES EXCHANGE ACT OF [removed: 1934][added: 1934 |]

| [removed: ý] [added: ☐] | [removed: ANNUAL] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

| | [removed: For] [added: For] the transition period [removed: from to] [added: from to] |

[removed: COMMISSION] [added: COMMISSION] FILE [removed: NUMBER 000-19406][added: NUMBER 000-19406]

[removed: Zebra] [added: Zebra] Technologies [removed: Corporation][added: Corporation]

| [removed: Delaware] [added: Delaware] | [removed: 36-2675536] [added: 36-2675536] |

[removed: 3] [added: 3] Overlook [removed: Point, Lincolnshire, IL 60069][added: Point, Lincolnshire, IL 60069]

Registrant’s telephone number, including area code: [removed: (847) 634-6700][added: (847) 634-6700]

| [removed: Title] [added: Title] of [removed: Each Class] [added: each class] | | [removed: Name] [added: Trading Symbol(s) | | Name] of [removed: Exchange] [added: exchange] on which [removed: Registered] [added: registered] |

| Class A Common Stock, par value $.01 per share | | [added: ZBRA | |] The NASDAQ Stock Market, LLC |

Indicate by check mark if the registrant is a well-known seasoned [removed: issuer (as] [added: issuer, as] defined in Rule 405 of the Securities [removed: Act).][added: Act.]

Yes [removed: ý] [added: ☒] No [removed: ¨][added: ☐]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the [removed: Securities] [added: Exchange] Act.

Yes [removed: ¨] [added: ☐] No [removed: ý][added: ☒]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such [removed: reports)] [added: reports),] and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T [removed: (§232.405] [added: (§ 232.405] of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated [removed: filer or] [added: filer,] a smaller reporting [added: company, or an emerging growth] company.

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

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

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

| | | | Emerging growth company | [removed: ¨] [added: ☐] |

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

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, [added: June 29, 2019,] was [removed: $7.6] [added: $11.2] billion.

As of February [removed: 7, 2019,] [added: 4, 2020,] there were [removed: 53,870,497] [added: 54,008,653] shares of Class A Common Stock, par value $.01 per share, outstanding.

[removed: Documents] [added: Documents] Incorporated by [removed: Reference][added: Reference]

Certain sections of the [removed: registrant’s Notice of Annual Meeting of Stockholders and Proxy Statement] [added: Registrant’s definitive proxy statement] for its Annual Meeting of Stockholders to be held on May [removed: 16, 2019,] [added: 14, 2020,] are incorporated by reference into Part III of this report, as indicated herein.

[removed: ZEBRA] [added: ZEBRA] TECHNOLOGIES CORPORATION AND [removed: SUBSIDIARIES][added: SUBSIDIARIES]

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

[removed: | [PART I](#s93780B16C38D5200B0DACE33C1DCF964) | | | |][added: PART I]

| Item 1. | | [removed: [Business](#s1A3CFC4F9433542E887498449CC26367)] [added: [Business](#s781AB18F40CD509AB0218CEF21FF7946)] | [removed: [4](#s1A3CFC4F9433542E887498449CC26367)] [added: [4](#s781AB18F40CD509AB0218CEF21FF7946)] |

| Item 1A. | | [Risk [removed: Factors](#s9F4E3985A8D459CABC8785CBF8B6CF56)] [added: Factors](#s8E6682AA11AB56D280DE6B73C593E853)] | [removed: [12](#s9F4E3985A8D459CABC8785CBF8B6CF56)] [added: [12](#s8E6682AA11AB56D280DE6B73C593E853)] |

| Item 1B. | | [Unresolved Staff [removed: Comments](#s6A79F0A750155B39BD056E957C8B7014)] [added: Comments](#s995C0F1C637859C08FB321B1B114440A)] | [removed: [20](#s6A79F0A750155B39BD056E957C8B7014)] [added: [20](#s995C0F1C637859C08FB321B1B114440A)] |

| Item 2. | | [removed: [Properties](#sFBA50AF858C858C0B161155E5E6F0FFF)] [added: [Properties](#s8A5FCE0D97AF5C848C66B913262B40E1)] | [removed: [20](#sFBA50AF858C858C0B161155E5E6F0FFF)] [added: [20](#s8A5FCE0D97AF5C848C66B913262B40E1)] |

| Item 3. | | [Legal [removed: Proceedings](#sA742CDF25CCD598EB768C2DA0B9F6E31)] [added: Proceedings](#s8FA582BEF16B5A599E7A92616DA8BF71)] | [removed: [20](#sA742CDF25CCD598EB768C2DA0B9F6E31)] [added: [20](#s8FA582BEF16B5A599E7A92616DA8BF71)] |

| Item 4. | | [Mine Safety [removed: Disclosures](#sD6C6D0EF8BA15EBA8CF797B21ABE55C8)] [added: Disclosures](#s461EEAD8F7005D798F22E22E85677851)] | [removed: [20](#sD6C6D0EF8BA15EBA8CF797B21ABE55C8)] [added: [21](#s461EEAD8F7005D798F22E22E85677851)] |

OR

Yes ☒ No ☐

Yes ☒ No ☐

| | | | | |

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

| | | | | |

Yes ☐ No ☒

The definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.

YEAR ENDED DECEMBER 31, 2019

TABLE OF CONTENTS

| [PART II](#s7BEE804D180B55BF8FF1EACBDBA7FC31) | | | |

| | | [Overview](#s05A22B8F545E5C67BF191D23BD6DF095) | [25](#s05A22B8F545E5C67BF191D23BD6DF095) |

| | | [New Accounting Pronouncements](#sF8998F6FE7745A60936B2918A8A58FA5) | [31](#sF8998F6FE7745A60936B2918A8A58FA5) |

| | | [Non-GAAP Measures](#s2b04671cad954c799b64c2e2b61c0c15) | [34](#s2b04671cad954c799b64c2e2b61c0c15) |

| | | [Note 1: Description of Business](#s170B2ADD7E7352DE8AD42373C41E6C2B) | [44](#s170B2ADD7E7352DE8AD42373C41E6C2B) |

| | | [Note 5: Business Acquisitions](#sB059D2E9932E5821B5395955309DF51C) | [50](#sB059D2E9932E5821B5395955309DF51C) |

| | | [Note 8: Investments](#sdcd28ba5ebb14a4daedd51fb2b75f617) | [54](#sdcd28ba5ebb14a4daedd51fb2b75f617) |

| | | [Note 13: Leases](#s463143db5e484935ab60b247e363add8) | [60](#s463143db5e484935ab60b247e363add8) |

| [PART IV](#s7EA99D7EF28B57498DDB2DF2C1514D53) | | | |

| [Signatures](#s29AB895A713E5B1C96510BDAB3A4546A) | | | [82](#s29AB895A713E5B1C96510BDAB3A4546A) |

10-K 1 a10k12312018zebra.htm 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

OR

| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

| | | |

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

INDEX

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

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

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

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

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

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

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

| [Signatures](#sAF7EBE9D53D75CAA86CBA05F9235EF12) | | | [79](#sAF7EBE9D53D75CAA86CBA05F9235EF12) |

As of December 31, [removed: 2018,] [added: 2019,] the Company owned three laboratory and warehouse facilities located in [removed: Holtsville, NY, Preston, UK,] [added: the U.S., U.K.,] and [removed: Mississauga, Ontario,] Canada.

As of December 31, [removed: 2018,] [added: 2019,] the Company had a total of [removed: 106] [added: 121] leased facilities with locations spread globally; [removed: 30] [added: 35] of which are located in the U.S. and [removed: 76] [added: 86] are located in [removed: 45] other countries.

We generally consider the productive capacity of [removed: the plants] [added: our facilities] to be adequate and sufficient for our requirements.

See Note 13, *Leases* in the Notes to Consolidated Financial Statements for further details related to the Company’s lease arrangements.

The Company leases seven facilities for the purposes of manufacturing, production, and warehousing; five of which are located in the U.S. and two are located in other countries.

[removed: PART II][added: PART II]

[removed: At] [added: As of] February [removed: 7, 2019,] [added: 4, 2020,] the last reported price for the [added: Company’s] Class A [removed: common stock] [added: Common Stock] was [removed: $176.79] [added: $247.87] per share, and there were [removed: 125] [added: 112] registered stockholders of record for Zebra’s Class A [removed: common stock.][added: Common Stock.]

[removed: Dividend Policy][added: Dividend Policy]

[removed: Treasury Shares][added: Treasury Shares]

[removed: Stock] [added: Stock] Performance [removed: Graph][added: Graph]

[removed: This] [added: The following] graph compares the cumulative [removed: annual change since December 31, 2013, of the] total stockholder [removed: return of] [added: return, calculated on a dividend-reinvested basis, in] Zebra Technologies Corporation Class A [removed: common stock with the cumulative return on the following published indices: (i)] [added: Common Stock,] the RDG Technology [removed: Composite;] [added: Composite,] and [removed: (ii)] the NASDAQ Composite Market [removed: Index, during] [added: Index for] the [removed: same period.][added: five years ended December 31, 2019.]

The comparison assumes that $100 was invested in each of the Company’s Class A [removed: common stock, the stocks comprising] [added: Common Stock,] the RDG Technology Composite and the [removed: stocks comprising the] NASDAQ Composite Market Index [added: as of the market close] on December 31, [removed: 2013.][added: 2014.]

[removed: ][added: ]

Stock Information

The following table sets forth information with respect to repurchases of the Company’s common stock for the three months ended December 31, 2019.

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

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

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

| Period | | Total Number of Shares Purchased | | | Average Price Paid per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1) | | |

| September 29, 2019 - October 26, 2019 | | 136,824 | | | $ | 196.15 | | | 136,824 | | | $ | 953 | |

| October 27, 2019 - November 23, 2019 | | — | | | — | | | | — | | | 953 | | |

| November 24, 2019 - December 31, 2019 | | — | | | — | | | | — | | | 953 | | |

| Total | | 136,824 | | | $ | 196.15 | | | 136,824 | | | $ | 953 | |

| (1) | On July 30, 2019, the Company announced that its Board of Directors authorized a share repurchase program for up to an aggregate amount of $1 billion of its outstanding shares of common stock. The share repurchase program supersedes the Company’s prior share repurchase program, which was authorized in November 2011 and under which the Company had not repurchased any shares. Repurchases may be effected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. As of December 31, 2019, the remaining amount authorized for repurchases under the program, which does not have a stated expiration date, was approximately $953 million. |

Note that historic stock price performance is not necessarily indicative of future stock price performance.

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

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

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

| Value at each year-end of $100 initial investment made on December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | |

| | | 12/14 | | | | 12/15 | | | | 12/16 | | | | 12/17 | | | | 12/18 | | | | 12/19 | | |

| Zebra Technologies Corporation | | $ | 100.00 | | | $ | 89.98 | | | $ | 110.79 | | | $ | 134.09 | | | $ | 205.70 | | | $ | 329.98 | |

| RDG Technology Composite | | $ | 100.00 | | | $ | 103.42 | | | $ | 118.01 | | | $ | 161.58 | | | $ | 162.31 | | | $ | 238.96 | |

| NASDAQ Composite | | $ | 100.00 | | | $ | 106.96 | | | $ | 116.45 | | | $ | 150.96 | | | $ | 145.67 | | | $ | 200.49 | |

| | |

| --- | --- |

Stock Information: Price Range and Common Stock

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

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

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

| 2018 | | High | | | | Low | | | | 2017 | | High | | | | Low | | |

| First Quarter | | $ | 147.99 | | | $ | 102.75 | | | First Quarter | | $ | 93.61 | | | $ | 81.02 | |

| Second Quarter | | 161.72 | | | | 130.79 | | | | Second Quarter | | 109.30 | | | | 86.82 | | |

| Third Quarter | | 179.47 | | | | 136.16 | | | | Third Quarter | | 109.89 | | | | 94.78 | | |

| Fourth Quarter | | 184.75 | | | | 140.95 | | | | Fourth Quarter | | 117.44 | | | | 101.49 | | |

In November 2011, our Board authorized the purchase of up to 3,000,000 shares under the purchase plan program with a maximum of 665,475 shares remaining available for purchase.

The November 2011 authorization does not have an expiration date.

We did not purchase shares of Zebra Class A common stock during 2018 as part of the purchase plan program.

The comparison assumes that all dividends were reinvested at the end of the month in which they were paid.

[removed: FIVE] [added: FIVE] YEAR SUMMARY OF SELECTED CONSOLIDATED FINANCIAL [removed: DATA][added: DATA]

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

| [removed: Consolidated] [added: Consolidated] Statements of [removed: Operations(1)] [added: Operations (1)] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| [removed: Total] Net sales | | $ | [removed: 4,218] [added: 4,485] | | | $ | [removed: 3,722] [added: 4,218] | | | $ | [removed: 3,574] [added: 3,722] | | | $ | [removed: 3,650] [added: 3,574] | | | $ | [removed: 1,671] [added: 3,650] | |

| Gross profit | | [removed: 1,981] [added: 2,100] | | | | [removed: 1,710] [added: 1,981] | | | | [removed: 1,642] [added: 1,710] | | | | [removed: 1,644] [added: 1,642] | | | | [removed: 778] [added: 1,644] | | |

| Net income (loss) | | $ | [removed: 421] [added: 544] | | | $ | [removed: 17] [added: 421] | | | $ | [removed: (137] [added: 17] | [removed: )] | | $ | [removed: (158] [added: (137] | ) | | $ | [removed: 32] [added: (158] | [added: )] |

| Basic earnings (loss) per share | | $ | [removed: 7.86] [added: 10.08] | | | $ | [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: )] |

| Diluted earnings (loss) per share | | $ | [removed: 7.76] [added: 9.97] | | | $ | [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: )] |

| Basic | | [removed: 53,591,655] [added: 53,991,249] | | | | [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] | | |

| Diluted | | [removed: 54,299,812] [added: 54,594,417] | | | | [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: December 31,] [added: December 31,] | | | | | | | | | | | | | | | | | | |

| [removed: Consolidated] [added: Consolidated] Balance [removed: Sheets(1)] [added: Sheets (1)] | | [removed: 2018] [added: 2019 (2)] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Cash and cash [removed: equivalents, investments and marketable securities] [added: equivalents] | | $ | [removed: 44] [added: 30] | | | $ | [removed: 62] [added: 44] | | | $ | [removed: 156] [added: 62] | | | $ | [removed: 192] [added: 156] | | | $ | [removed: 418] [added: 192] | |

| Total Assets | | [removed: 4,339] [added: 4,711] | | | | [removed: 4,275] [added: 4,339] | | | | [removed: 4,632] [added: 4,275] | | | | [removed: 5,040] [added: 4,632] | | | | [removed: 5,539] [added: 5,040] | | |

| Long-term liabilities | | [removed: 1,703] [added: 1,468] | | | | [removed: 2,441] [added: 1,703] | | | | [removed: 2,891] [added: 2,441] | | | | [removed: 3,252] [added: 2,891] | | | | [removed: 3,346] [added: 3,252] | | |

| Total Stockholders’ Equity | | [removed: 1,335] [added: 1,839] | | | | [removed: 834] [added: 1,335] | | | | [removed: 792] [added: 834] | | | | [removed: 893] [added: 792] | | | | [removed: 1,040] [added: 893] | | |

| (1) | Includes the Cortexica, Profitect, Temptime, and Xplore businesses, effective upon their respective dates of acquisition during 2019 and 2018. See Note 5, *Business Acquisitions* in the Notes to Consolidated Financial Statements for further details related to these acquisitions. |

| (2) | Reflects the Company’s adoption of Accounting Standards Codification (“ASC”) Topic 842, *Leases* (“ASC 842”). See Note 2, *Significant Accounting Policies* for additional information related to the Company’s adoption of ASC 842. |

| | |

| --- | --- |

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

[removed: INDEX] [added: INDEX] TO CONSOLIDATED FINANCIAL [removed: STATEMENTS][added: STATEMENTS]

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

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

| [Consolidated Balance Sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017](#s8D1E056FCE8B50608BBE26D50F4F1BB6)] [added: 2018](#s2B6220ECEEB159F4B38505E41239B890)] | [removed: [37](#s8D1E056FCE8B50608BBE26D50F4F1BB6)] [added: [39](#s2B6220ECEEB159F4B38505E41239B890)] |

| [Consolidated Statements of Operations for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#sAECF5072137650239F7ED0FA49CC581F)] [added: 2017](#s57BAA10A30A95F29820480E0D8147F57)] | [removed: [38](#sAECF5072137650239F7ED0FA49CC581F)] [added: [40](#s57BAA10A30A95F29820480E0D8147F57)] |

| [Consolidated Statements of Comprehensive Income [removed: (Loss)] for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s37EB6857C3C85510BA3C9BDC993D4A78)] [added: 2017](#sD9EFDE428E005B61930B26CA37E21503)] | [removed: [39](#s37EB6857C3C85510BA3C9BDC993D4A78)] [added: [41](#sD9EFDE428E005B61930B26CA37E21503)] |

| [Consolidated Statements of Stockholders’ Equity for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s5938789F1741504E8D6D98EC545EBE76)] [added: 2017](#s6F2F2C3593C157E2ACE0CBA34D762F66)] | [removed: [40](#s5938789F1741504E8D6D98EC545EBE76)] [added: [42](#s6F2F2C3593C157E2ACE0CBA34D762F66)] |

| [Consolidated Statements of Cash Flows for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s797D2A88F5C4558CAFEC4C2CEF0CF082)] [added: 2017](#sE7AFF75263D15B5C84B47F7B7E0DE18C)] | [removed: [41](#s797D2A88F5C4558CAFEC4C2CEF0CF082)] [added: [43](#sE7AFF75263D15B5C84B47F7B7E0DE18C)] |

[removed: | [Notes to Consolidated Financial Statements](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6) | [42](#s5C4D3EDDBE2A53C08C6CD91211BFA1F6) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

[removed: Report] [added: | [Report] of Independent Registered Public Accounting [removed: Firm][added: Firm](#sE99CAB927CF55A96871A29EF9BA22948) | [37](#sE99CAB927CF55A96871A29EF9BA22948) |]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of Zebra Technologies Corporation [added: and subsidiaries] (the “Company”) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of operations, comprehensive [removed: income (loss),] [added: income,] stockholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] 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, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] 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, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 14, 2019] [added: 13, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: ZEBRA] [added: ZEBRA] TECHNOLOGIES CORPORATION AND [removed: SUBSIDIARIES][added: SUBSIDIARIES]

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEETS][added: SHEETS]

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

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | [added: | 2017 | | |]

| Cash and cash equivalents | $ | [removed: 44] [added: 30] | | | $ | [removed: 62] [added: 44] | |

| Accounts receivable, net of allowances for doubtful accounts of [added: $2 million and] $3 million as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively | [removed: 520] [added: 613] | | | | [removed: 479] [added: 520] | | |

| Inventories, net | [removed: 520] [added: 474] | | | | [removed: 458] [added: 520] | | |

| Income tax receivable | [removed: 24] [added: 32] | | | | [removed: 40] [added: 24] | | |

| Prepaid expenses and other current assets | [removed: 54] [added: 46] | | | | [removed: 24] [added: 54] | | |

| Total Current assets | [removed: 1,162] [added: 1,195] | | | | [removed: 1,063] [added: 1,162] | | |

| Property, plant and equipment, net | [removed: 249] [added: 259] | | | | [removed: 264] [added: 249] | | |

| Goodwill | [removed: 2,495] [added: 2,622] | | | | [removed: 2,465] [added: 2,495] | | |

| Other intangibles, net | [removed: 232] [added: 275] | | | | [removed: 299] [added: 232] | | |

| [removed: Long-term deferred] [added: Deferred] income taxes | [removed: 114] [added: 127] | | | | [removed: 119] [added: 114] | | |

| Other long-term assets | [removed: 87] [added: 126] | | | | [removed: 65] [added: 87] | | |

| Total Assets | $ | [removed: 4,339] [added: 4,711] | | | $ | [removed: 4,275] [added: 4,339] | |

| Current portion of long-term debt | $ | [removed: 157] [added: 197] | | | $ | [removed: 51] [added: 157] | |

| Accounts payable | 552 | | | | [removed: 424] [added: 552] | | |

| Accrued liabilities | [removed: 322] [added: 379] | | | | [removed: 296] [added: 322] | | |

| Deferred revenue | [removed: 210] [added: 238] | | | | [removed: 186] [added: 210] | | |

| Income taxes payable | [removed: 60] [added: 38] | | | | [removed: 43] [added: 60] | | |

| Total Current liabilities | [removed: 1,301] [added: 1,404] | | | | [removed: 1,000] [added: 1,301] | | |

| Long-term debt | [removed: 1,434] [added: 1,080] | | | | [removed: 2,176] [added: 1,434] | | |

| [removed: Long-term deferred] [added: Deferred] income taxes | [removed: 8] [added: —] | | | | [removed: —] [added: 8] | | |

| Long-term deferred revenue | [removed: 172] [added: 221] | | | | [removed: 148] [added: 172] | | |

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Income Taxes

| Description of the Matter | As discussed in Note 16 of the financial statements, the Company earns a significant amount of its operating income across multiple jurisdictions and the Company’s organizational structure and transactional flows are designed to reflect strategic and operational business imperatives that change over time. As the Company operates in a multinational tax environment and incurs income tax obligations in a number of jurisdictions, complexities and uncertainties can arise in the application of complex tax regulations to the Company’s multinational operations. Auditing the application of taxation legislation to the Company’s affairs is inherently complex, highly specialized and requires judgment. These factors impact the Company’s estimation of tax exposures, valuation allowances and income tax provisions. |

| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s identification of and accounting for the tax impact of changes in the business or significant changes in tax laws. This included controls over the Company’s evaluation of tax law changes, the evaluation of cross-jurisdictional transactions and the Company’s tax technical assessment over those changes and/or transactions. We involved our tax professionals in the Company’s major operating jurisdictions to assist in the evaluation of the Company’s tax obligations. We evaluated the Company’s transactional flows to assess whether they aligned with the Company’s strategic and operational shifts. We made inquiries of management and inspected internally - and externally-prepared documentation to understand current disputes and uncertain tax positions. We assessed the completeness of the tax matters identified and evaluated the Company’s assessment regarding the related status, potential exposure and risk of loss. We assessed the consistency of assumptions used in estimating provisions for key tax exposures and evaluated the adequacy of the Company’s disclosures of tax and ongoing tax matters. |

| Right-of-use lease asset | 107 | | | | — | | |

| Long-term lease liabilities | 100 | | | | — | | |

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

| Net income | $ | 544 | | | $ | 421 | | | $ | 17 | |

| Changes in unrealized gains and losses on forward interest rate swap hedging transactions | — | | | | 9 | | | | 6 | | |

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

| Repurchase of common stock | | (237,886 | ) | | — | | | | — | | | | (47 | | ) | | — | | | | — | | | | (47 | | ) |

| Balance at December 31, 2019 | | 54,002,932 | | | $ | 1 | | | $ | 339 | | | $ | (689 | ) | | $ | 2,232 | | | $ | (44 | ) | | $ | 1,839 | |

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

| Net income | $ | 544 | | | $ | 421 | | | $ | 17 | |

| Payments for repurchases of common stock | (47 | | ) | | — | | | | — | | |

| Unremitted cash collections from servicing factored receivables | 33 | | | | — | | | | — | | |

Raw material inventories largely consist of supplies used in repair operations.

*Leases*

The Company recognizes Right-of-Use (“ROU”) assets and lease liabilities for its lease commitments with terms greater than one year.

Contractual options to extend or terminate lease agreements are reflected in the lease term when they are reasonably certain to be exercised.

The initial measurements of new ROU assets and lease liabilities are based on the present value of future lease payments over the lease term as of the commencement date.

In determining future lease payments, the Company has elected not to separate lease and non-lease components.

As the Company’s lease arrangements do not provide an implicit interest rate, we apply the Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments.

Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, transaction currency of the lease, and the Company’s credit risk relative to risk-free market rates.

The Company’s ROU assets also include any initial direct costs incurred and exclude lease incentives.

The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.

All leases of the Company are classified as operating leases, with lease expense being recognized on a straight-line basis.

Revenues are primarily comprised of sales of hardware, services, and supplies.

The Company also generates revenues from its solutions and software offerings, primarily licenses and maintenance.

We are typically the principal in all elements of our transactions and record Net sales and Cost of sales on a gross basis.

Results for reporting periods beginning after January 1, 2019 are reported under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 840, *Leases* (“ASC 840”).

The impact of the adoption of ASC 842 to the Company’s Consolidated Balance Sheets as of January 1, 2019 was as follows (in millions):

| Right-of-use assets | — | | | | 110 | | | | 110 | | |

| Long-term lease liabilities | — | | | | 103 | | | | 103 | | |

(1) Reflects an adjustment related to prepaid and accrued rent balances, which are included in the measurement of ROU assets.

(2) Reflects the current portion of the lease liabilities.

As a result of the transition, there was no impact to the Company’s Consolidated Statements of Operations or Cash Flows for the year ended December 31, 2019, compared to what would have been reported in accordance with ASC 840.

| | |

| --- | --- |

February 14, 2019

| | | | | | | | |

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

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

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

| Balance at December 31, 2015 | | 52,161,851 | | | $ | 1 | | | $ | 194 | | | $ | (631 | ) | | $ | 1,377 | | | $ | (48 | ) | | $ | 893 | |

| Additional tax benefit resulting from exercise of options | | — | | | — | | | | 3 | | | | — | | | | — | | | | — | | | | 3 | | |

| Net loss | | — | | | — | | | | — | | | | — | | | | (137 | | ) | | — | | | | (137 | | ) |

| Impairment of goodwill, intangibles and other assets | — | | | | — | | | | 62 | | |

| Proceeds from the sale of long-term investments | 2 | | | | — | | | | — | | |

| Taxes paid related to net share settlement of equity awards | (11 | | ) | | (5 | | ) | | (8 | | ) |

The Company reclassified $41 million of costs from Accrued liabilities to Accounts payable on the Consolidated Balance Sheets for the year ended December 31, 2017 to conform to the current year presentation.

This reclassification was made to the Consolidated Balance Sheets to more accurately present these current liabilities.

A similar reclassification was made to the Consolidated Statement of Cash Flows resulting in a change to Accounts payable and Accrued liabilities within Net cash provided by operating activities for the years ended December 31, 2017 and 2016.

The Company held investments in equity securities in the amount of $25 million as of December 31, 2018 and 2017, respectively.

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

During the fiscal year ended December 31, 2018, the Company recognized a pre-tax gain upon the sale of investments in equity securities totaling $10 million.

Our financial assets and liabilities that require recognition and fair value

Under ASC 606, revenue is recognized upon the transfer of control of goods or services under a five-step model, whereas under ASC 605 revenue was recognized under a risk and reward-based model.

The adoption of ASC 606 did not have a material effect on the Company’s consolidated financial statements or results of operations.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet related to the adoption of ASC 606 were as follows (in millions):

| Inventories, net (1) | $ | 458 | | | $ | (3 | ) | | $ | 455 | |

| Long-term deferred income taxes (3) | 119 | | | | (5 | | ) | | 114 | | |

| Long-term deferred revenue (6) | 148 | | | | (6 | | ) | | 142 | | |

| Stockholders’ Equity: | | | | | | | | | | | |

| Retained earnings | 1,248 | | | | 19 | | | | 1,267 | | |

| (1) | Reflects an adjustment of $(3) million related to changes in revenue recognition patterns. |

| (2) | Reflects an adjustment of $7 million related to the recognition of contract assets. |

| (3) | Reflects the income tax effect of $(5) million related to the adjustments made for the adoption of ASC 606. |

| (4) | Reflects an adjustment of $12 million related to the capitalization of costs to obtain contracts (primarily comprised of sales commissions associated with longer term support service contracts). |

| (5) | Reflects an adjustment of $(3) million related to reallocation of revenue between performance obligations and $1 million related to changes in the timing of revenue recognition. |

| (6) | Reflects an adjustment of $(6) million related to reallocation of revenue between performance obligations. |

Under the modified retrospective method of adoption, we are required to disclose the impact to the Consolidated Financial Statements had we continued to follow our accounting policies under the previous revenue recognition guidance.

Had the Company applied the previous revenue recognition guidance, revenue would have been $4 million lower for the year ended December 31, 2018.

ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments.

There are two transition methods available under the new standard dependent upon the type of financial instrument, either cumulative effect or prospective.

Earlier adoption is permitted only for annual periods after December 15, 2018.

Management has assessed the impact of the new standard and determined, based on current operations, that there will not be a material impact to the Company’s consolidated financial statements and disclosures upon adoption in the first quarter of 2020.

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]

[removed: Management’s] [added: Management’s] Report on Internal Control over Financial [removed: Reporting][added: Reporting]

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018.][added: 2019.]

Based on this assessment and those criteria, our management believes that, as of December 31, [removed: 2018,] [added: 2019,] our internal control over financial reporting is effective.

Ernst & Young LLP’s report is included [removed: on page 73] [added: in the latter portion] of this [removed: report.][added: Item 9A.]

[removed: Changes] [added: Changes] in Internal Control over Financial [removed: Reporting][added: Reporting]

There were no changes in the Company’s internal control over financial reporting during the fourth quarter of [removed: 2018,] [added: 2019,] 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.

[removed: Inherent] [added: Inherent] Limitations on the Effectiveness of [removed: Controls][added: Controls]

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: Opinion] [added: Opinion] on Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited Zebra Technologies [removed: Corporation’s] [added: Corporation and subsidiaries] internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] 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: 2018,] [added: 2019,] 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: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of operations, comprehensive [removed: income (loss),] [added: income,] stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes and financial statement schedule listed in the Index at Item 15 and our report dated February [removed: 14, 2019] [added: 13, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Definition] [added: Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting]

February 13, 2020

February 14, 2019

[removed: PART III][added: PART III]

We have adopted a Code of Ethics for Senior Financial Officers [added: (“Code of Ethics”)] that applies to Zebra’s Chief Executive Officer, Chief Financial Officer and the Chief Accounting Officer.

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

Any waiver from the Code of Ethics and any amendment to the Code of Ethics will be disclosed on such page of Zebra’s web [removed: site][added: site.]

All other information in response to this item is incorporated by reference from the Proxy Statement sections entitled “Corporate Governance,” “Election of Directors,” [removed: “Board and Committees] [added: “Committees] of the Board,” “Executive Officers,” and [removed: “Section] [added: “Delinquent Section] 16(a) [removed: Beneficial Ownership Reporting Compliance.”][added: Reports.”]

The information in response to this item is incorporated by reference from the Proxy Statement sections entitled “Compensation Discussion and [removed: Analysis-Executive Summary,” “Compensation Discussion and] Analysis,” “Executive Compensation,” “Director Compensation,” [removed: “Compensation] [added: “Executive Compensation – Compensation] Committee Interlocks and Insider Participation” and “Compensation Committee Report.”

The information in response to this item is incorporated by reference from the Proxy Statement sections entitled “Ownership of our Common Stock” and [removed: “Equity] [added: “Executive] Compensation [added: – Equity Compensation] Plan Information.”

The information in response to this item is incorporated by reference from the Proxy Statement [removed: section] [added: sections] entitled “Corporate [removed: Governance.”][added: Governance – Related Party Transactions,” “Corporate Governance – Director Independence,” “Election of Directors,” and “Committees of the Board.”]

[removed: PART IV][added: PART IV]

[removed: Index] [added: *Index] to Consolidated Financial [removed: Statements and Schedules][added: Statements*]

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

| [removed: Financial Statements] | | [added: [Notes to Consolidated Financial Statements](#sEE3B561F54C551EEA5A58023C3E7B782)] | [added: [44](#sEE3B561F54C551EEA5A58023C3E7B782)] |

| | | [Report of Independent Registered Public Accounting [removed: Firm](#s6B6107730D4659F1BC526C774D2B9D76)] [added: Firm](#sE99CAB927CF55A96871A29EF9BA22948)] | [removed: [36](#s6B6107730D4659F1BC526C774D2B9D76)] [added: [37](#sE99CAB927CF55A96871A29EF9BA22948)] |

| | | [Consolidated Balance Sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017](#s8D1E056FCE8B50608BBE26D50F4F1BB6)] [added: 2018](#s2B6220ECEEB159F4B38505E41239B890)] | [removed: [37](#s8D1E056FCE8B50608BBE26D50F4F1BB6)] [added: [39](#s2B6220ECEEB159F4B38505E41239B890)] |

| | | [Consolidated Statements of Operations for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#sAECF5072137650239F7ED0FA49CC581F)] [added: 2017](#s57BAA10A30A95F29820480E0D8147F57)] | [removed: [38](#sAECF5072137650239F7ED0FA49CC581F)] [added: [40](#s57BAA10A30A95F29820480E0D8147F57)] |

| | | [Consolidated Statements of Comprehensive Income [removed: (Loss)] for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s37EB6857C3C85510BA3C9BDC993D4A78)] [added: 2017](#sD9EFDE428E005B61930B26CA37E21503)] | [removed: [39](#s37EB6857C3C85510BA3C9BDC993D4A78)] [added: [41](#sD9EFDE428E005B61930B26CA37E21503)] |

| | | [Consolidated Statements of Stockholders’ Equity for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s5938789F1741504E8D6D98EC545EBE76)] [added: 2017](#s6F2F2C3593C157E2ACE0CBA34D762F66)] | [removed: [40](#s5938789F1741504E8D6D98EC545EBE76)] [added: [42](#s6F2F2C3593C157E2ACE0CBA34D762F66)] |

| | | [Consolidated Statements of Cash Flows for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s797D2A88F5C4558CAFEC4C2CEF0CF082)] [added: 2017](#sE7AFF75263D15B5C84B47F7B7E0DE18C)] | [removed: [41](#s797D2A88F5C4558CAFEC4C2CEF0CF082)] [added: [43](#sE7AFF75263D15B5C84B47F7B7E0DE18C)] |

[removed: |] [added: *Index to] Financial Statement [removed: Schedule | | | |][added: Schedules*]

| | | [Schedule II - Valuation and Qualifying [removed: Accounts](#sA5E289AEC6B75AE1B8975E26E7638BD4)] [added: Accounts](#s607D6FE7F9CC5B3BB8CEFFA7CE16810D)] | [removed: [80](#sA5E289AEC6B75AE1B8975E26E7638BD4)] [added: [83](#s607D6FE7F9CC5B3BB8CEFFA7CE16810D)] |

[added: | | |] All other financial statement schedules are omitted because they are not applicable to the Company. [added: | |]

[removed: Index] [added: *Index] to [removed: Exhibits][added: Exhibits*]

| 3.1(i) | [removed: (3] | [removed: ) |] [Restated Certificate of Incorporation of the Company.](http://www.sec.gov/Archives/edgar/data/877212/000119312512337313/d390190dex31i.htm) | [added: | 8-K | | 3.1(i) | | August 16, 2012 | | |]

| 3.1(ii) | [removed: (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) | [added: | 8-K | | 3(ii) | | January 10, 2013 | | |]

| 4.1 | [removed: (20] | [removed: ) |] [Specimen stock certificate representing Class A Common Stock.](http://www.sec.gov/Archives/edgar/data/877212/000087721218000011/a41specimentstockcertifica.htm) | [added: | 10-K | | 4.1 | | December 31, 2017 | | |]

| 10.1 | [removed: (19] | [removed: ) |] [Employment Agreement between the Company and [removed: Hugh Gagnier] [added: Michael H. Terzich,] dated [removed: June 1, 2018. +](http://www.sec.gov/Archives/edgar/data/877212/000087721218000032/a10-8xemploymentagreementx.htm)] [added: November 16, 2007. +](http://www.sec.gov/Archives/edgar/data/877212/000119312509040579/dex1025.htm)] | [added: | 10-K | | 10.25 | | December 31, 2008 | | |]

| 10.2 | [removed: (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) | [added: | 10-K | | 10.3 | | December 31, 2016 | | |]

| 10.3 | [removed: (4] | [removed: ) |] [Form of Amendment No. 1 to Employment Agreement by and between the Company and certain executive officers dated December 30, 2008.+](http://www.sec.gov/Archives/edgar/data/877212/000119312509000911/dex103.htm) | [added: | 8-K | | 10.3 | | January 5, 2009 | | |]

| 10.4 | [removed: (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) | [added: | 10-K | | 10.6 | | December 31, 2016 | | |]

| 10.5 | [removed: (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) | [added: | 8-K | | 10.4 | | May 29, 2008 | | |]

| 10.6 | [removed: (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) | [added: | 8-K | | 10.2 | | December 8, 2008 | | |]

| 10.7 | [removed: (7] | [removed: ) |] [2006 Incentive Compensation Plan. +](http://www.sec.gov/Archives/edgar/data/877212/000119312506111078/dex101.htm) | [added: | 8-K | | 10.1 | | May 15, 2006 | | |]

| 10.8 | [removed: (11] | [removed: ) |] [Amendment to the 2006 Incentive Compensation Plan dated December 2, 2008. +](http://www.sec.gov/Archives/edgar/data/877212/000119312508249479/dex101.htm) | [added: | 8-K | | 10.1 | | December 8, 2008 | | |]