Zebra Annual Report 2017

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FY2017 Annual Report · Zebra

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Annual Report 2017

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zebra.com

NA and Corporate Headquarters
+1 847 634 6700

Asia-Pacific Headquarters
+65 6858 0722

EMEA Headquarters
+44 1628 556000

Latin America Headquarters
+1 754 260 2100

ZEBRA and the stylized Zebra head are trademarks of ZIH
Corp, registered in many jurisdictions worldwide. All other
trademarks are the property of their respective owners.
©2018 ZIH Corp and/or its affiliates. All rights reserved.

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Zebra has an intimate understanding of operational workflows in the key industries that we serve.
Our expertise enables us to help our customers drive performance and successfully address
increased demands in the marketplace:

• Retail shoppers want more convenience and flexibility in how they purchase and receive goods

• Transportation companies need to deliver in hours, rather than days

• Patients demand a higher quality of care at a lower cost

• Manufacturers are increasing efficiencies across their value chains

Enterprise Asset Intelligence (EAI) is integral to our strategic focus at Zebra, and makes our
solutions unique. Our devices and intelligent infrastructures sense information about assets,
products, and processes. This information, including status and location, is then analyzed to
provide actionable real-time insights to reduce friction in workflows, improve productivity, and
enable greater insight into business operations. Savanna, our cloud-based data intelligence
platform, is an essential component of our overall offering, powering the analytics behind our
data-driven solutions. This EAI framework provides a digital view of the entire enterprise and
ultimately gives a performance edge to front line employees.

To Our Investors

In 2017, we strengthened our value proposition and delivered solid operating performance.
• We completed the integration of our Enterprise Visibility & Mobility business, including a global Enterprise Resource Planning
(ERP) system implementation. It represents more than two-and-a-half years of commitment and focus by the entire Zebra team
and concludes our transition to One Zebra.

• We continued to extend our market leadership and deliver innovative solutions that have resonated with our partners and

customers, providing them increased visibility into business operations to achieve higher levels of growth, productivity, and
service. Enhancements to our broad portfolio of products and solutions included:

− Additions and refreshes to the industry’s broadest and most mature offering of enterprise-grade Android™-powered mobile

computing devices

− Expansion of our leading portfolio of next-generation 2D data capture devices

− Being first in the industry to offer a full portfolio of smart, connected printers with unrivaled manageability though our Link-OS

operating system

− New innovative solutions, such as SmartLens™ for Retail, and SmartPack™ Trailer, that further our vision and aspire to transform

workflows in key vertical markets that we serve

• Strong profitable growth, combined with disciplined working capital management, generated the cash necessary to pay

down $454 million of debt principal, exceeding our 2017 debt reduction goal by more than 50 percent. We also completed a
comprehensive debt restructuring that reduced our average interest rate by approximately two percentage points, generating
more than $45 million of annualized interest savings.

We remain focused on our key priorities to build upon our industry leadership and drive shareholder value.
• First, we are extending our lead in the core business through our unmatched scale, innovation, and relationships with customers
and partners. These are competitive differentiators in our traditional markets, and fostering them is crucial to our ongoing success.

• Second, we are committing our focus and resources to drive growth in attractive adjacent markets that leverage the strength of

our core. We continually evaluate opportunities where we are underpenetrated, as well as other emerging areas.

• Third, we are advancing our EAI vision by leveraging Zebra’s deep knowledge of workflows, and capitalizing on key technology

trends in mobility, cloud computing, and the proliferation of smart tools.

• Our fourth area of focus is to further enhance Zebra’s financial strength by increasing cash flow and optimizing our capital structure.

In closing, I’d like to express my gratitude for the dedication of our employees and the support of our partners and customers.
In 2017, we extended our market leadership and exceeded our financial targets. We are encouraged by our momentum into 2018
and are well positioned for continued success.

Sincerely,

Anders Gustafsson

Board of Directors

Michael A. Smith, Chairman 1,2,3
Chairman and Chief Executive Officer
FireVision, LLC

Richard L. Keyser 2,3
Chairman Emeritus (Retired)
W. W. Grainger, Inc.

Anders Gustafsson
Chief Executive Officer
Zebra Technologies Corporation

Chirantan J. Desai 2
Chief Product Officer
ServiceNow

Andrew K. Ludwick 1
Chief Executive Officer
Bay Networks (Retired)

Ross W. Manire 1,3
Chief Executive Officer
ExteNet Systems, Inc.

Frank B. Modruson 1
Chief Information Officer (Retired)
Accenture

Janice M. Roberts 2
Partner
Benhamou Global Ventures

1 - Member of Audit Committee
2 - Member of Compensation Committee
3 - Member of Nominating and Governance Committee

Executive Officers

Anders Gustafsson
Chief Executive Officer

Olivier C. Leonetti
Chief Financial Officer

William J. Burns
Senior Vice President,
Enterprise Visibility and Mobility

Michael Cho
Senior Vice President,
Corporate Development

Hugh K. Gagnier
Senior Vice President,
Asset Intelligence and Tracking

Jeffrey F. Schmitz
Senior Vice President,
Chief Marketing Officer

Joachim Heel
Senior Vice President,
Global Sales

Michael H. Terzich
Senior Vice President,
Chief Administrative Officer

Jim L. Kaput
Senior Vice President, General Counsel
and Corporate Secretary

Colleen M. O’Sullivan
Vice President,
Chief Accounting Officer

Stockholder Information

Global Corporate Headquarters
Zebra Technologies Corporation
Three Overlook Point
Lincolnshire, Illinois 60069
U. S. A. Phone: +1 847 634-6700
Fax +1 847 913-8766

Annual Meeting
Zebra’s Annual Meeting of Stockholders
will be held on May 17, 2018, at 10:30 a.m.
(Central Time) in Lincolnshire, Illinois.

Independent Auditors
Ernst & Young LLP Chicago, Illinois

Investor Relations
Investors are invited to learn more
about Zebra Technologies Corporation
by accessing the company’s website at
investors.zebra.com

Transfer Agent and Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233-5000

Overnight Delivery:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202

Telephone:
+1 800 522-6645 or +1 201 680-6578

TDD for hearing impaired:
+1 800 231-5469 or +1 201 680-6610

Website:
www.computershare.com/investor

Form 10-K
The Zebra Technologies Corporation Form
10-K Report filed with the Securities and
Exchange Commission is incorporated
in this annual report. The Code of Ethics
for Senior Financial Officers is posted
on Zebra’s website. Please contact the
Investor Relations Department at the
Corporate Headquarters for additional
copies of the Form 10-K, or visit our
website to view an online version of the
Form 10-K, or the Code of Ethics for
Senior Financial Officers.

Equal Employment Opportunities/
Affirmative Action
It is the policy of Zebra Technologies
Corporation to provide equal opportunities
and affirmative action in all areas of its
employment practices without regard to
race, religion, national origin, sex, age,
ancestry, citizenship, disability, veteran
status, marital status, sexual orientation
or any other reason prohibited by law.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from

COMMISSION FILE NUMBER 000-19406

Zebra Technologies Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

36-2675536
(I.R.S. Employer
Identification No.)

3 Overlook Point, Lincolnshire, IL 60069

(Address of principal executive offices)

(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Class A Common Stock, par value $.01 per share

Name of Exchange on which Registered
The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities

Act). Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Securities Act. Yes  No 

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 reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any,

every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes  No 

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. Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a

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

Large accelerated filer
Non-accelerated filer



 (Do not check if smaller reporting company)


Accelerated filer
Smaller reporting company 
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition

period for complying with any new or revised financial accounting standards pursuant to section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act).

Yes  No 

As of July 1, 2017, the aggregate market value of the registrant’s Class A Common held by non-affiliates was

approximately $5,260,632,176. The closing price of the Class A Common Stock on June 30, 2017, as reported on the Nasdaq
Stock Market, was $100.52 per share.

As of February 15, 2018, there were 53,250,033 shares of Class A Common Stock, par value $.01 per share, outstanding.

Certain sections of the registrant’s Notice of Annual Meeting of Stockholders and Proxy Statement for its Annual Meeting

of Stockholders to be held on May 17, 2018, are incorporated by reference into Part III of this report, as indicated herein.

Documents Incorporated by Reference

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INDEX

Business

PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.

Properties
Legal Proceedings
Mine Safety Disclosures

PART II
Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

PART IV
Item 15.

Exhibits, Financial Statement Schedules

SIGNATURES
Signatures

CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Index to Consolidated Financial Statements and Schedule

EXHIBITS
Index to Exhibits

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PART I

References in this document to “the Company,” “we,” “us,” or “our” refer to Zebra Technologies Corporation and its
subsidiaries, unless the context specifically indicates otherwise.

Safe Harbor
Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation
Reform Act of 1995 and are highly dependent upon a variety of important factors, which could cause actual results to differ
materially from those expressed or implied in such forward-looking statements. When used in this document and documents
referenced, the words “anticipate,” “believe,” “intend,” “estimate,” “will,” and “expect” and similar expressions as they relate
to the Company or its management are intended to identify such forward-looking statements but are not the exclusive means of
identifying these statements. The forward-looking statements include, but are not limited to, the Company’s financial outlook
for the first quarter and full year of 2018. These forward-looking statements are based on current expectations, forecasts and
assumptions and are subject to the risks and uncertainties inherent in the Company’s industry, market conditions, general
domestic and international economic conditions, and other factors. These factors include:

• Market acceptance of the Company’s products and solution offerings and competitors’ offerings and the potential

effects of technological changes,

• The effect of global market conditions, including North America; Europe, Middle East, and Africa; Latin America; and

Asia-Pacific regions in which we do business,

• The impact of foreign exchange rates due to the large percentage of our sales and operations being outside the United

States (“U.S.”),

• Our ability to control manufacturing and operating costs,
• Risks related to the manufacturing of the Company’s products and conducting business operations in non-U.S.

countries, including the risk of depending on key suppliers who are also in non-U.S. countries,

• The Company’s ability to purchase sufficient materials, parts, and components to meet customer demand, particularly

in light of global economic conditions,

• The availability of credit and the volatility of capital markets, which may affect our suppliers, customers, and

ourselves,

Interest rate and financial market conditions,

• Success of integrating acquisitions,
•
• Access to cash and cash equivalents held outside the U.S.,
• The effect of natural disasters on our business,
• The impact of changes in foreign and domestic governmental policies, laws, or regulations,
• The outcome of litigation in which the Company may be involved, particularly litigation or claims related to

infringement of third-party intellectual property rights, and
• The outcome of any future tax matters or tax law changes.

We encourage readers of this report to review Item 1A, “Risk Factors,” in this report for further discussion of issues that could
affect the Company’s future results. We undertake no obligation, other than as may be required by law, to publicly update or
revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any
other reason after the date of this report.

Item 1.

Business

The Company
We are a global leader in the Automatic Identification and Data Capture (“AIDC”) market. The AIDC market consists of mobile
computing, data capture, radio frequency identification devices (“RFID”), barcode printing, and other automation products and
services. 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, and better
customer experiences.

We design, manufacture, and sell a broad range of AIDC products, including: mobile computers, barcode scanners, RFID
readers, specialty printers for barcode labeling and personal identification, real-time location systems (“RTLS”), related
accessories and supplies, such as self-adhesive labels and other consumables, and software utilities and applications. We also
provide a full range of services, including maintenance, technical support, repair, managed and professional services, including
cloud-based subscriptions. End-users of our products and services include retail and e-commerce, transportation and logistics,
manufacturing, health care, hospitality, warehouse and distribution, energy and utilities, government, and education enterprises
around the world. We provide our products and services globally through a direct sales force and extensive network of channel
partners. We provide products and services in over 180 countries, with 114 facilities and approximately 7,000 employees
worldwide.

Through innovative application of our technologies, we are leading an evolution of the AIDC market into Enterprise Asset
Intelligence (“EAI”). Specifically, EAI encompasses solutions which “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. Operational
data from enterprise assets, including status, location, utilization, and preferences, is then analyzed to provide actionable
insights. Finally, with the benefits of mobility, these insights can be delivered to the right user at the right time to drive more
effective actions. As a result, our solutions and technologies enable enterprises to “sense, analyze, and act” more effectively to
improve operational effectiveness and achieve critical business objectives.

The evolution of the AIDC market toward a more strategically oriented EAI focus is being driven by strong underlying secular
trends in technology. These trends include internet of things (“IoT”), cloud-based data analytics, and mobility. The IoT is
enabling a proliferation of smart, connected devices. EAI 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. Cloud computing and expanded data analytics are allowing enterprises to make better business decisions through
improved timeliness and visibility to information and workflows. While traditional AIDC solutions sporadically capture limited
amounts of data and populate static enterprise systems, EAI solutions continuously analyze real-time data from many sources to
generate actionable insights. Finally, the continued rapid growth of mobile devices and applications are significantly expanding
mobile computing use cases to levels of near ubiquity in the enterprise. With this expanded mobility, end-users are able to
consume or act upon dynamic enterprise data and information anytime and anywhere. 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.

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

The Company funded the Acquisition through a combination of cash on hand of $250 million, the sale of 7.25% senior notes
due 2022 in an aggregate principal amount of $1.05 billion (the “Senior Notes”), and a credit agreement with various lenders
that provided a term loan of $2.2 billion (the “Term Loan”) due 2021. During 2017, the Company executed a debt restructuring
program, which included entering into an Amended and Restated Credit Agreement (“A&R Credit Agreement”) facility and a
receivables financing facility which resulted in the redemption of the Senior Notes and a lower cost of debt.

Since closing the Acquisition in October 2014, integration activities by the Company have focused on creating “One Zebra” by
integrating the operations of Enterprise to create a single business with common sales, service, supply chain, marketing,
finance, information technology (“IT”), and other functions. Our integration priorities centered on maintaining business
continuity while identifying and implementing cost synergies, operating efficiencies, and integration of functional organizations
and processes. Another key focus of the integration was to 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.

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

Dispositions
On October 28, 2016, the Company concluded its Asset Purchase Agreement with Extreme Networks, Inc. (“Extreme”)
whereby the Company sold its wireless LAN (“WLAN”) business (“Divestiture Group”) for a gross purchase price of $55
million. See Note 3, Business Combinations and Divestitures.

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

Asset Intelligence & Tracking
Barcode and Card Printing: We design, manufacture, and sell printers, which produce high-quality labels, wristbands, tickets,
receipts, and plastic cards on demand. Our customers use our printers in a wide range of applications, including routing and
tracking, patient safety, transaction processing, personal identification, and product authentication. These applications require
high levels of data accuracy, speed, and reliability. They also include specialty printing for receipts and tickets for improved
customer service and productivity gains. Plastic cards are used for secure, reliable personal identification (e.g. state
identification cards and drivers’ licenses, healthcare IDs), access control (e.g. employee or student building access), and
financial cards (e.g. credit, debit and ATM cards) by financial institutions. Our RFID printers/encoders are used to print and
encode passive RFID labels. We offer a wide range of accessories and options for our printers, including vehicle mounts and
battery chargers.

Supplies: We produce and sell stock and customized thermal labels, receipts, ribbons, plastic cards, and wristbands suitable for
use with our printers, and also wristbands which can be imaged in most commercial laser printers. We support our printing
products, resellers, and end-users with an extensive line of superior quality, high-performance supplies optimized to a particular
end-user’s needs. We promote the use of genuine Zebra branded supplies with our printing equipment. We also provide a family
of self-laminating wristbands for use in laser printers. 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.

Services: We provide a full range of maintenance, technical support, and repair services. We also provide managed and
professional services including those which help customers manage their devices and related software applications. Our
offerings include cloud-based subscriptions and multiple service levels. They are typically contracted through multi-year
service agreements. We provide our services directly and through our global network of partners.

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.
We provide substantially all elements of the location solution, including tags, sensors, exciters, middleware software, and
application software. Our location solutions are deployed primarily in manufacturing, aerospace, transportation and logistics,
sports, and healthcare industries. Various sports teams utilize our MotionWorks® sports solution to track the location and
movement of personnel and objects in real-time during sporting events, as well as in training and practice activities.

Enterprise Visibility & Mobility
Mobile Computing: We design, manufacture, and sell rugged and enterprise-grade mobile computing products 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, and staff collaboration. Our products incorporate both Android™ and Microsoft® Windows® operating systems and
support local- and wide-area voice and data communications. Our mobile computing products often incorporate barcode
scanning, global position system (“GPS”) and RFID features, and other sensory capabilities. We also provide related software
tools, utilities, and applications.

Data Capture and RFID: We design, manufacture, and sell barcode scanners, image capture devices, and RFID readers. Our
portfolio of barcode scanners includes laser scanning and imager products and form factors, including fixed, handheld, and
embedded original equipment manufacturer (“OEM”) modules. The Company’s data capture products capture business-critical
information by decoding barcodes and images, and transmit the resulting data to enterprise systems for analysis and timely
decision making. Common applications include asset identification and tracking and workflow management in a variety of
industries, including retail, transportation and logistics, manufacturing, and healthcare. Our RFID line of data capture products
is focused on ultra-high frequency (“UHF”) technology. These RFID devices comply with the electronic product code (“EPC”)
global Generation 2 UHF standard and similar standards around the world. We also provide related accessories.

Services: We provide a full range of maintenance, technical support, and repair services. We also provide managed and
professional services that, among other things, help customers design, test, and deploy our solutions as well as manage their
mobility devices, software applications and workflows. Our offerings include cloud-based subscriptions and multiple service
levels. They are typically contracted through multi-year service agreements. We provide our services directly and through our
global network of partners.

Our Competitive Strengths
The following are core competitive strengths that we believe enable us to differentiate ourselves from our competitors:

An industry leader focused solely on improving enterprise operations
We are a market leader in the key technologies of Enterprise Asset Intelligence, including mobile computing, barcode and card
printing, data capture, and RFID readers. We also provide related software, services, and accessories. Our leadership position
enables us to work with and support customers globally, in a variety of industries, who are focused on implementing leading-
edge solutions.

High entry and switching barriers
On a global basis, we have long-standing relationships with end customers and with our extensive network of channel partners.
We believe these customer relationships and our strong partner network are critical to our success and would be difficult for a
new market entrant to replicate. We believe a significant portion of our products are deployed with specialized product
performance and software application requirements, which could result in high switching costs.

Commitment to innovation and deep industry-specific expertise
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.

Highly diversified business mix
We are highly diversified across business segments, end markets, geographies, customers, and suppliers. Additionally, we have
strong recurring business in services and supplies driven by an extensive global installed base of products.

Global reach and brand
We sell to customers directly and through our network of channel partners around the world. This global presence gives us the
capability to supply our customers with products, solutions, and services no matter the location of their operations. In addition,
we believe we have strong brand recognition with a reputation in the industry as a trusted and strategic partner.

Scale advantages
We believe the size and scope of our operations, including market leadership, product development investment, portfolio
breadth, and global distribution, give us advantages over our competitors. We believe we have the largest installed base of
products compared with other companies in our industry. These characteristics enable us to compete successfully, achieve
economies of scale, and develop industry-leading solutions.

Our Business Strategies

Leverage our market leadership position and innovation to profitably grow our core business

We expect to drive revenue growth by continuing to outpace our competition in our core businesses, including mobile
computing, data capture, barcode printing, and services. We expect to achieve this by leveraging our broad portfolio of
solutions and product innovation and continuing to be a strategic partner to end customers. We also expect to drive growth by
capitalizing on technology transitions occurring in the industry, including the transition to the Android™ operating system in
mobile computing and transitions in data capture to newer technologies involving 2D imaging and RFID. This includes
increased focus on market segments and geographies that offer share-gain opportunities. In addition, we plan to leverage our
market-leading installed base to accelerate growth in attach-oriented products, including services, supplies, and accessories.
Our global channel partner network is vital to helping us achieve these goals. As such, we will ensure that we provide the
necessary value and support for our partners to be successful.

Drive our Enterprise Asset Intelligence vision
We believe that secular technology trends, particularly in enterprise mobility, cloud computing, and IoT are transforming our
customers’ businesses and our industry and provide us with significant new opportunities to create value for our customers and
for the Company. We expect to capitalize on these trends, and in particular the proliferation of smart connected sensors and
devices in our core market segments, by providing end-to-end solutions that integrate these sensors and devices with cloud-
based workflows and analytics applications. These solutions will enable increased visibility into the enterprise, real-time,
actionable information, and improved customer experiences. Our solutions will also increasingly include common features,
functions, and user experiences to drive additional competitive differentiation.

Increase our opportunity for growth through expansion in adjacent market segments
We plan to drive growth through expansion in adjacent market segments that share similar technology needs with our core
markets. We will focus specifically on segments where our products and solutions, workflow expertise, and customer and
industry relationships will enable us to provide significant value to end users.

Continuously improve operating efficiency to expand profitability
We intend to continue to improve profitability through operational execution and increased productivity derived from
continuous business process improvement, cost management, and further operating leverage as we grow our business.

Improve cash flow generation and achieve debt leverage target
Our primary balance sheet priority is to expand operating cash flow generation through growth in the business, margin
expansion, and maintaining a strong focus on working capital efficiency. Our primary capital allocation priority is achievement
of our target debt leverage ratio.

Competition
We operate in a highly competitive environment. The need for companies to improve productivity and implement their
strategies, as well as the secular trends around IoT, cloud computing, and mobility, are some of the factors that are creating
growth opportunities for established and new competitors.

Key competitive factors include the design, breadth and quality of products and services, price, product performance, durability,
product and service availability, warranty coverage, brand recognition, company relationships with customers and channel
partners, and company reputation. We believe we compete effectively with respect to these factors.

Mobile Computing: Competitors in mobile computing include companies that have historically served enterprises with
ruggedized devices. For some applications, we compete with companies that provide tablets and smart phones. Competitors
include: Datalogic, Honeywell, and Panasonic.

Data Capture and RFID: Competitors that provide a broad portfolio of barcode scanning products that are suitable for the
majority of global market applications include Datalogic and Honeywell. In addition, we also compete against smaller
companies that focus on limited product subsets or specific regions including Fujian Newland and Impinj.

Barcode and Card Printing: We consider our direct competition in printing to be producers of on-demand thermal transfer and
direct thermal label printing systems, RFID printer/encoders, and mobile printers. We also compete with companies engaged in

the design, manufacture, and marketing of printing systems that use technologies such as ink-jet, direct marking and laser
printing, as well as card printers based on ink-jet, thermal transfer, embossing, film-based systems, encoders, laser engraving,
and large-scale dye sublimation printers. In addition, service bureaus, which provide centralized services, compete for end-user
business and provide an alternative to our card printing solutions. Competitors include: Fargo Electronics (a unit of HID
Global), Honeywell, Sato, and Toshiba TEC.

Location Solutions: We compete with a diverse group of companies marketing location solutions that are primarily based on
active RFID technologies. Competitors include: Cisco, Impinj, and Stanley Healthcare.

Supplies: The supplies industry is highly fragmented with competition comprised of numerous companies of various sizes
around the world.

Customers
End-users of our products are diversified across a wide variety of industries, including retail and e-commerce, transportation
and logistics, manufacturing, and healthcare industries. We have had three customers that each accounted for 10% or more of
our sales over the past three years. All three of these customers are distributors and not end-users of our products. No end-user
has accounted for 10% or more of our sales during these years. See Note 15, Segment Information and Geographic Data in the
Notes to the Consolidated Financial Statements included in this Form 10-K for further information.

Customer A
Customer B
Customer C

Year Ended December 31,
2016

2015

2017

21.3%
14.2%
13.2%

20.1%
13.2%
12.4%

19.4%
12.7%
11.6%

Sales and Marketing
Sales: We sell our products, solutions, and services primarily through distributors (two-tier distribution), value added resellers
(“VAR”), independent software vendors (“ISVs”), direct marketers, and OEMs. We also sell directly to a select number of
customers through our direct sales force. Distributors purchase our products and sell to VARs, ISVs and others, thereby
increasing the distribution of our products globally. VARs, ISVs, OEMs, and systems integrators provide customers with a
variety of hardware, accessories, software applications, and services. VARs and ISVs typically customize solutions for specific
end-user applications using their industry, systems, and applications expertise. Some OEMs resell the Zebra-manufactured
products under their own brands as part of their own product offering. Because these sales channels provide specific software,
configuration, installation, integration, and support services to end-users within various industry segments, these relationships
are highly valued by end-users and allow our products to reach customers in a wide array of industries around the world. We
believe that the breadth of our distributor and channel partner network is a competitive differentiator and enhances our ability to
compete. Finally, we experience some seasonality in sales, depending upon the geographic region and industry served.

Marketing: Our marketing function aligns closely with sales and product management functions to market our products and to
deliver and promote solutions that address the needs of our customers and partners. Our marketing organization includes global
corporate marketing, strategic marketing, regional marketing, product marketing, global demand center, and channel marketing
functions. Our corporate marketing function manages our brand, public relations, and other communications activities. Strategic
marketing includes vertical marketing, ISV strategy and business intelligence. Regional marketing encompasses field and
channel marketing, demand generation, and sales enablement. Product marketing manages our product launches and lifecycle
go-to-market strategy. Our global demand center leads content development and digital marketing, including our website and
social media. The global channel team develops and executes channel strategy and operations.

Manufacturing and Outsourcing
Final assembly of our hardware products is performed by third-parties, including electronics manufacturing services companies
(“EMS”) and joint design manufacturers (“JDMs”). Our products are produced primarily in facilities located in China, Mexico,
and Brazil. These JDMs or manufacturers produce our products to our design specifications. We maintain control over portions
of the supply chain, including supplier selection and price negotiations for key components. The manufacturers purchase the

components and subassemblies used in the production of our products. Our products are shipped to regional distribution
centers, operated by 3rd party logistics providers (“3PL’s”) or the Company. A portion of products are reconfigured at the
distribution centers through firmware downloads, packaging, and customer specific customization before they are shipped to
customers. In addition, certain products are manufactured in accordance with procurement regulations and various international
trade agreements, and remain eligible for sale to the United States government. Production facilities for our supplies products
are located in the United States and Western Europe. We also supplement our in-house production capabilities with those of
third-party manufacturers to offer our supplies, principally in Asia.

Research and Development
The Company devotes significant resources to developing innovative solutions for our target markets and ensuring that our
products and services maintain high levels of reliability and provide value to end-users. Research and development
expenditures for the years ended 2017, 2016, and 2015 were $389 million, $376 million, and $394 million respectively, or
10.5% of net sales for 2017 and 2016 and 10.8% of net sales in 2015. We have more than 1,500 engineers worldwide focused
on strengthening and broadening our extensive portfolio of products and solutions.

Our Technology
Mobile Computing: Our mobile computing products incorporate a wide array of advanced technologies in rugged, ergonomic
enclosures to meet the needs of specific use cases. These purpose-built devices couple hardened industry-standard operating
systems with specialized hardware and software features to satisfy a customer’s mission-critical applications. Purpose-built
rugged housings ensure reliable operations for targeted use cases, surviving years of rough handling and harsh environments.
Specialized features such as advanced data capture technologies, voice and video collaboration tools, and advanced battery
technologies enable our customers to work more efficiently and better serve their customers. A broad portfolio of enterprise
accessories further tailors mobile computers to meet a wide variety of enterprise use cases. Our mobile computers are offered
with software tools and services that support application development, device configuration, and field support to facilitate
smooth and rapid deployment and ensure maximum customer return on investment.

Data Capture and RFID: Our data capture products allow businesses to track business critical information simply, quickly, and
accurately by providing critical visibility into business processes and performance and enabling real-time action in response to
the information. These products include barcode scanners in a variety of form factors, including fixed and handheld scanners
and standalone modules designed for integration into third-party OEM devices. Our scanners incorporate a variety of
technologies including area imagers, linear imagers, lasers, and read linear, and two-dimensional barcodes. They are used in a
broad range of applications, ranging from supermarket checkout to industrial warehouse optimization to patient management in
hospitals. The design of these products reflects the diverse needs of these markets, with different ergonomics, multiple
communication protocols, and varying levels of ruggedness.

Our RFID products include fixed readers, RFID enabled mobile computers, and RFID sleds. These utilize passive Ultra High
Frequency (“UHF”) to provide high speed, non-line of sight data capture from hundreds or thousands of RFID tags in near real-
time. Using the Electronic Product Code (“EPC”) standard, end-users across multiple industries take advantage of RFID
technology to track high-value assets, monitor shipments, and drive increased retail sales though improved inventory accuracy.
We also offer mobile computers that support high frequency (“HF”) near-field communications (“NFC”) and low frequency
(“LF”) radio technologies.

Barcode and Card Printing: All of the Company’s printers and print engines incorporate thermal printing technology. This
technology creates an image by heating certain pixels of an electrical printhead to selectively image a ribbon or heat-sensitive
substrate. Thermal printing benefits applications requiring simple and reliable operations, yet it is flexible enough to support a
wide range of specialty label materials and associated inks. Our dye-sublimation thermal card printers produce full-color,
photographic quality images that are well-suited for driver’s licenses, access and identification cards, transaction cards, and on-
demand photographs. Many of our printers also incorporate RFID technology that can encode data into passive RFID
transponders embedded in a label or card.

The Company’s printers integrate company-designed mechanisms, electrical systems, and firmware. Enclosures of metal or
high-impact plastic ensure the durability of our printers. Special mechanisms optimize handling of labels, ribbons, and plastic

cards. Fast, high-current electrical systems provide consistent image quality. Firmware supports serial, parallel, Ethernet, USB,
Bluetooth, or 802.11 wireless communications with appropriate security protocols. Printing instructions can be received as a
proprietary language such as Zebra Programming Language II (“ZPL II®”), as a print driver-provided image, or as user-defined
XML. These features make our printers easy to integrate into virtually all common computer systems.

Location Solutions: Our RTLS solutions use active and passive RFID technologies, beacons, and other tracking technologies to
locate, track, manage, and optimize high-value assets, equipment, and people. We offer a range of scalable RTLS technologies
that generate precise, on-demand information about the physical location and status of high-valued assets. In addition, we offer
a selection of RTLS infrastructure products that receive tag transmissions and provide location and motion calculations,
database and system management functions and asset visibility. The flexible infrastructure supports large tag populations and
coverage areas that range from small to large.

Supplies: Our supplies business includes thermal labels, receipts, ribbons, plastic cards and wristbands suitable for use with our
printers, and wristbands which can be imaged in most commercial laser printers. Our wristbands incorporate multi-layer form
technology to ensure trouble-free printing, wearer comfort, and reliable barcode reading, even when exposed to harsh chemical
environments. We offer many thermal label, card, and receipt materials, and matching ribbons for diverse applications that may
require meeting unique or precise specifications, including chemical or abrasion resistance, extreme temperatures, exceptional
image quality, or long life.

Intellectual Property
We rely on a combination of trade secrets, patents, trademarks, copyrights, and contractual rights to establish and protect our
innovations, and hold a large portfolio of intellectual property rights in the United States and other countries. As of
December 31, 2017, the Company owned approximately 1,600 trademark registrations and trademark applications, and
approximately 4,300 patents and patent applications, worldwide. We continue to actively seek to obtain patents and trademarks,
whenever possible and practical, to secure intellectual property rights in our innovations.

We believe that our intellectual property will continue to provide us with a competitive advantage in our core product areas as
well as provide leverage for future technologies. We also believe that we are not dependent upon any single patent or select
group of patents. Our success depends more upon our extensive know-how, deep understanding of end-user processes and
workflows, innovative culture, technical leadership and marketing and sales abilities. Although we do not rely only on patents
or other intellectual property rights to protect or establish our market position, we will enforce our intellectual property rights
when and where appropriate.

Employees
As of December 31, 2017, the Company employed approximately 7,000 persons. Some portions of our business, primarily in
Europe and China, are subject to labor laws that differ significantly from those in the United States. In Europe, for example, it
is common for a works council to represent employees when discussing matters such as compensation, benefits, restructurings
and layoffs. We consider our relations with our employees to be very good.

Regulatory Matters

Wireless Regulatory Matters
Our business is subject to certain wireless regulatory matters.

The use of wireless voice, data, and video communications systems requires radio spectrum, which is regulated by government
agencies throughout the world. In the U.S., the Federal Communications Commission (“FCC”) and the National
Telecommunications and Information Administration (“NTIA”) regulate spectrum use by non-federal entities and federal
entities, respectively. Similarly, countries around the world have one or more regulatory bodies that define and implement the
rules for use of the radio spectrum, pursuant to their respective national laws and international coordination under the
International Telecommunications Union. We manufacture and market products in spectrum bands already made available by
regulatory bodies- these include voice and data infrastructure, mobile radios, and portable or hand-held devices. Consequently,
our results of operations could be positively or negatively affected by the rules and regulations adopted from time-to-time by
the FCC, NTIA, or regulatory agencies in other countries. Our products operate both on licensed and unlicensed spectrum. The

availability of additional radio spectrum may provide new business opportunities, and consequently, the loss of available radio
spectrum may result in the loss of business opportunities. Regulatory changes in current spectrum bands may also provide
opportunities or may require modifications to some products so they can continue to be manufactured and marketed.

Other Regulatory Matters
Some of our operations use substances regulated under various federal, state, local, and international laws governing the
environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water,
the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. Certain products are
subject to various federal, state, local, and international laws governing chemical substances in electronic products. During
2017, compliance with U.S. federal, state and local, and foreign laws regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment did not have a material effect on our business or results of operations.

Item 1A.

Risk Factors

Investors should carefully consider the risks, uncertainties, and other factors described below, as well as other disclosures in
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. These risks are not the
only risks we face. Our business operations could also be affected by additional factors that are not presently known to us or
that we currently consider to be immaterial.

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

Risks related to our business

The Company has substantial operations and sells a significant portion of our products outside of the U.S. and purchases
important components, including final products, from suppliers located outside the U.S. Shipments to non-U.S. customers are
expected to continue to account for a material portion of net sales. We also expect to continue the use of third-party contract
manufacturing services with non-U.S. production and assembly operations for our products.

Risks associated with operations, sales, and purchases outside the United States include:

• Fluctuating foreign currency rates could restrict sales, increase costs of purchasing, and impact collection of receivables

outside of the U.S.;

• Volatility in foreign credit markets may affect the financial well-being of our customers and suppliers;
• Violations of anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery Act could result in

large fines and penalties;

• Adverse changes in, or uncertainty of, local business laws or practices, including the following:

• Foreign governments may impose burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions;
• Restrictions on the export or import of technology may reduce or eliminate the ability to sell in or purchase from

certain markets;

• Political and economic instability may reduce demand for our products or put our non-U.S. assets at risk;
• Potentially limited intellectual property protection in certain countries may limit recourse against infringing on our

products or cause us to refrain from selling in certain geographic territories;
• Staffing may be difficult along with higher turnover at international operations;
• A government controlled exchange rate and limitations on the convertibility of currencies, including the Chinese

yuan;

• Transportation delays and customs related delays that may affect production and distribution of our products;
• Effectively managing and overseeing operations that are distant and remote from corporate headquarters may be

•

difficult; and
Integration and enforcement of laws varies significantly among jurisdictions and may change significantly over
time.

The Company may not be able to continue to develop products or solutions to address user needs effectively in an industry
characterized by ongoing 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.

The Company’s industry is characterized by:

• Evolving industry standards;
• Frequent new product and service introductions;
• Evolving distribution channels;
•
• Changing customer demands; and
• Changing security protocols.

Increasing demand for customized product and software solutions;

Future success will depend on our ability to effectively and economically adapt in this evolving environment. We could incur
substantial costs if we must modify our business to adapt to these changes, and may even be unable to adapt to these changes.

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 requirements. We face significant competition in
developing and selling our products and solutions. To remain competitive, we believe we must continue to effectively and
economically provide:

• Technologically advanced systems that satisfy user demands;
• Superior customer service;
• High levels of quality and reliability; and
• Dependable and efficient distribution networks.

We cannot assure we will be able to compete successfully against current or future competitors. Increased competition in
mobile computing products, data capture products, 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. Some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or
companies that produce complementary products, which may create additional pressures on our competitive position in the
marketplace.

The Company is vulnerable to the potential difficulties associated with the increase in the complexity of our business. We have
grown rapidly over the last several years through the Acquisition and worldwide growth. This growth has caused increased
complexities in the business. We believe our future success depends in part on our ability to manage our growth and increased
complexities of our business. The following factors could present difficulties to us:

• Managing our distribution channel partners;
• Managing our contract manufacturing and supply chain;
• Manufacturing an increased number of products;
•
Increased administrative and operational burden;
• Maintaining and improving information technology infrastructure to support growth;
•
•
• Attract, develop and retain individuals with the requisite technical expertise to develop new technologies and introduce

Increased logistical problems common to complex, expansive operations;
Increasing international operations; and

new products and solutions.

Inability to consummate future acquisitions at appropriate prices could negatively impact our growth rate and stock 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. Acquisitions can be difficult to identify and

consummate due to competition among prospective buyers and the need to satisfy applicable closing conditions and obtain
antitrust and other regulatory approval on acceptable terms.

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 results. We may acquire or
make investments in other businesses, technologies, services, or products. An acquisition may present business issues which are
new to us. The process of integrating any acquired business, technology, service, or product into our operations may result in
unforeseen operating difficulties and expenditures. Integration of an acquired company also may consume considerable
management time and attention, which could otherwise be available for ongoing operations and the further development of our
existing business. These and other factors may result in benefits of an acquisition not being fully realized.

Acquisitions also may involve a number of risks, including:

• Difficulties and uncertainties in retaining the customers or other business relationships from the acquired entities;
• The loss of key employees of acquired entities;
• The ability of acquired entities to fulfill their customers’ obligations;
• The discovery of unanticipated issues or liabilities;
• Pre-closing and post-closing acquisition-related earnings charges could adversely impact operating results and cash

flows in any given period, and the impact may be substantially different from period to period;

• The failure of acquired entities to meet or exceed expected returns could result in impairment of goodwill or intangible

assets acquired;

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

• Future acquisitions could result in potentially dilutive issuances of equity securities or the incurrence of debt and

contingent liabilities.

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 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
use a non-infringing method, if possible, to accomplish our objectives. Any of these claims, with or without merit, could result
in costly litigation and divert the attention of key personnel. If such claims are successful, they could result in costly judgments
or settlements. Also, as new technologies emerge the intellectual property rights of parties in such technologies can be
uncertain. As a result, our products involving such technologies may have higher risk of claims of infringement of the
intellectual proprietary rights of third parties.

The inability to protect intellectual property could harm our reputation, and our competitive position may be materially
damaged. Our intellectual property is valuable and provides us with certain competitive advantages. We use copyrights, patents,
trademarks, trade secrets, and contracts to protect these proprietary rights. 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
information, which we regard as trade secrets. Additionally, the intellectual property rights we obtain may not be sufficient to
provide us with a competitive advantage and may be successfully challenged, invalidated, circumvented, or infringed. In any
infringement litigation that the Company may undertake to protect our intellectual property, any award of monetary damages
may be unlikely or very difficult to obtain, and any such award we may receive may not be commercially valuable.
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 incurring substantial litigation costs. Because of the substantial amount
of discovery required in connection with intellectual property litigation, there is a risk that some of the Company’s confidential
information could be compromised by disclosure during this type of litigation. Some aspects of our business and services also
rely on technologies, software, and content developed by or licensed from third parties, and we may not be able to maintain our
relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.

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 system or restricting our access to such operating
system could adversely impact our business and financial 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 system and associated applications. If such parties cease to continue development or support of such operating
systems or restrict our access to such operating systems, we would be required to change our strategy for such devices. As a
result, our financial results could be negatively impacted because a resulting shift away from the operating systems we currently
use and the associated applications ecosystem could be costly and difficult. A strategy shift could increase the burden of
development on the Company and potentially create a gap in our portfolio for a period of time, which could competitively
disadvantage us.

Cybersecurity incidents could disrupt business operations. Like many companies, we continually strive to meet industry
information security standards relevant to our business. We periodically perform vulnerability assessments, remediate
vulnerabilities, review log/access, perform system maintenance, manage network perimeter protection, implement and manage
disaster recovery testing, and provide periodic educational sessions to our employees to foster awareness of schemes to access
sensitive information. A cybersecurity incident could include an attempt to gain unauthorized access to digital systems for
purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. “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 information and/or the disclosure of personal data that in each
case could result in an adverse business impact, as well as, possible damage to our brand. This could also lead to a public
disclosure or theft of private intellectual property and a possible loss of customer confidence.

While we have experienced and expect to continue to experience these types of threats and incidents, there have been no
material incidents incurred to-date at the Company. If our core business operations, or that of one of our third-party service
providers, were to be breached, this could affect the confidentiality, integrity, and availability of our systems and data. While we
continue to perform security due diligence, there is always the possibility of a significant breach affecting the confidentiality,
integrity, and availability of our systems and/or data.

Our products that are deployed in customer environments also have the possibility of being breached, which could result in
damage to a customer’s confidentiality, integrity, and availability of the customer’s data and systems. It is possible that such a
breach could result in delays in, or loss of market acceptance of, our products and services; diversion of our resources; injury to
our reputation; increased service and warranty expenses; and payment of damages. To date, we have had no material incidents
related to the security on our products.

Laws and regulations relating to the handling of personal data may result in increased costs, legal claims, or fines against the
Company. 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
laws and regulations regarding the collection, use, transfer, storage and disclosure of personal data obtained from third parties
and employees; for example, General Data Protection Regulation effective May 2018. These laws may result in burdensome or
inconsistent requirements affecting the collection, use, storage, transfer and disclosure of our third party and employee personal
data. Compliance may require changes in services, business practices, or internal systems that result in increased costs, lower
revenue, reduced efficiency, or greater difficulty in competing with foreign-based firms. Failure to comply with existing or new
rules may result in claims against the Company or significant penalties or orders to stop the alleged noncompliant activity.

We may incur liabilities as a result of product failures due to actual or apparent design or manufacturing defects. 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. Such design or manufacturing defects may occur not
only in our own designed products but also in components provided by third party suppliers. We generally have insurance
protection against property damage and personal injury liabilities and also seek to limit such risk through product design,
manufacturing quality control processes, product testing and contractual indemnification from suppliers. However, due to the

large and growing size of the Company’s installed product base, a design or manufacturing defect involving this large installed
product base could result in product recalls or customer service costs that could have material adverse effects on our financial
results.

Defects or errors in the Company’s software products could harm our reputation, result in significant cost to us, and impair our
ability to market such products. Our software may contain undetected errors, defects, or bugs. Although we have not suffered
significant harm from any errors, defects, or bugs to date, we may discover significant errors, defects, or bugs in the future that
we may not be able to correct or correct in a timely manner. It is possible that errors, defects, or bugs will be found in our
existing or future software products and related services with the possible results of delays in, or loss of market acceptance of,
our products and services, diversion of our resources, injury to our reputation, increased service and warranty expenses, and
payment of damages.

We depend on the ongoing services of our senior management and the ability to attract and retain key personnel. The future
success of the Company is substantially dependent on the continued services and continuing contributions of senior
management and other key personnel. The ability to attract, retain, and motivate highly skilled employees is important to our
long-term success. Competition for skill sets in certain functions within our industry is intense, and we may be unable to retain
key employees or attract, assimilate, or retain other highly qualified employees in the future. Any disruption in the services of
senior management or our ability to attract and retain key personnel may have a material adverse effect on our business and
results of operations.

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 impact of potential changes in customs and trade policies in the United States and the potential corresponding actions by
other countries in which the Company does business could adversely affect our financial performance. The U.S. government
has made proposals that are intended to address trade imbalances, which include encouraging increased production in the
United States. These proposals could result in increased customs duties and the renegotiation of some U.S. trade agreements.
The Company imports a significant percentage of our products into the United States, and an increase in customs duties with
respect to these imports could negatively impact the Company’s financial performance. If such customs duties are implemented,
it also may cause the U.S.’ trading partners to take actions with respect to U.S. imports or U.S. investment activities in their
respective countries. Any potential changes in trade policies in the United States and the potential corresponding actions by
other countries in which the Company does business could adversely affect the Company’s financial performance. Given the
level of uncertainty over which provisions will be enacted, the Company cannot predict with certainty the impact of the
proposals.

The effects of the Tax Cuts and Jobs Act on our business have not yet been fully analyzed and could have an adverse effect on
our results of operations. On December 22, 2017, U.S. President Donald Trump signed into law the Tax Cuts and Jobs Act (the
“TCJA”) that significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, includes
changes to U.S. federal corporate income tax rate, imposes significant additional limitations on the deductibility of interest,
allows for the accelerated expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of
taxation to a territorial system. We continue to analyze the impact the TCJA may have on the Company’s business.
Notwithstanding the reduction in the U.S federal corporate income tax rate, the overall impact of the TCJA is uncertain, and the
Company’s business and financial condition could be adversely affected. We describe the estimated impact of the TCJA on our
business where appropriate throughout this Form 10-K, and specifically in Note 12, Income Taxes in the Notes to the
Consolidated Financial Statements included in this Form 10-K.

Taxing authority challenges may lead to tax payments exceeding current reserves. We are subject to, and may become subject
to, ongoing tax examinations in various jurisdictions. As a result, we may record incremental tax expense based on expected
outcomes of such matters. In addition, we may adjust previously reported tax reserves based on expected results of these
examinations. Such adjustments could result in an increase or decrease to the Company’s effective tax rate and cash flows.
Future changes in tax law in various jurisdictions around the world and income tax holidays could have a material impact on
our effective tax rate, foreign rate differential, future income tax expense, and cash flows.

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. Forecasts of our income tax position and effective tax rate are complex, subject to
uncertainty and periodic updates because our income tax position for each year combines the effects of a mix of profits earned
and losses incurred by us in various tax jurisdictions with a broad range of income tax rates, as well as changes in the valuation
of deferred tax assets and liabilities, the impact of various accounting rules and changes to these rules and tax laws, the results
of examinations by various tax authorities, and the impact of any acquisition, business combination, disposition or other
reorganization, or financing transaction.

As a multinational corporation, we conduct our business in many countries and are subject to taxation in many jurisdictions.
The taxation of our business is subject to the application of multiple and sometimes conflicting tax laws and regulations, as well
as multinational tax conventions. Many countries are adopting revisions to their respective tax laws based on the on-going
reports issued by the Organization for Economic Co-operation and Development (“OECD”)/G20 Base Erosion and Profit
Shifting (“BEPS”) Project, which, if enacted, could materially impact our tax liability due to our organizational structure and
significant operations outside of the U.S. Our effective tax rate is highly dependent upon the geographic distribution of our
worldwide earnings or losses resulting from our structure and operating model, the tax regulations and tax holidays in each
geographic region, and the availability of tax credits and carry-forwards. The application of tax laws and regulations is subject
to legal and factual interpretation, judgment, and uncertainty. Tax laws themselves are subject to change as a result of changes
in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may
impose tax assessments or judgments against us that could materially impact our tax liability and/or our effective income tax
rate.

Economic conditions and financial market disruptions may adversely affect our business and results of operations. Adverse
economic conditions or reduced information technology spending may adversely impact our business. 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. If a slowdown were severe enough, it could require further
impairment testing and write-downs of goodwill and other intangible assets. Cost reduction actions may be necessary and might
lead to restructuring charges. A tightening of financial credit could adversely affect our customers, suppliers, outsourced
manufacturers, and channel partners (e.g., distributors and resellers) from obtaining adequate credit for the financing of
significant purchases. An economic downturn could also result in a decrease in or cancellation of orders for our products and
services; negatively impacting the ability to collect accounts receivable on a timely basis; result in additional reserves for
uncollectible accounts receivable; and require additional reserves for inventory obsolescence. Higher volatility and fluctuations
in foreign exchange rates for the U.S. dollar against currencies such as the euro, the British pound, the Chinese yuan, and the
Brazilian real could negatively impact product sales, margins, and cash flows.

A natural disaster may cause supply disruptions that could adversely affect our business and results of operations. Natural
disasters may occur in the future, and the Company is not able to predict to what extent or duration any such disruptions will
have on our ability to maintain ordinary business operations. The consequences of an unfortunate natural disaster may have a
material adverse effect on our business and results of operations.

Zebra could be adversely impacted by the United Kingdom’s withdrawal from the European Union. Zebra maintains its
European regional headquarters and a label converting facility in the U.K. and has significant operations and sales throughout
Europe. Although the U.K. has formally notified the E.U. of its intention to withdraw, such notice only triggered a two-year
period ending in March 2019 to negotiate the terms of the withdrawal, which period could be followed by a transition period.
Because the terms of the U.K.’s withdrawal are uncertain, we are unable at this time to determine the impact on Zebra’s
operations and business in the U.K. and Europe. Since the U.K.’s referendum in June 2016 to withdraw from the E.U., markets

have been more volatile, including fluctuations in the British pound, that could adversely impact Zebra’s operating costs in the
U.K. Such market volatility could also cause customers to alter or delay buying decisions that would adversely impact Zebra’s
sales in the U.K. and throughout Europe. A significant portion of our business involves cross border transactions throughout the
region. The future trade relationship between the U.K. and the E.U. could adversely impact Zebra’s operations in the region by
increasing costs on or importation requirements on shipments between our distribution center in the Netherlands and customers
in the U.K. or between our facility in the U.K. and customers in the E.U.

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. This exposes us to
risks, including among others: (i) technological risks, especially when the contracts involve new technology; (ii) financial risks,
including the estimates inherent in projecting costs associated with large, long-term contracts and the related impact on
operating results; and (iii) cyber security risk, especially in managed services contracts with customers that process personal
data. Recovery of front loaded capital expenditures in long-term managed services contracts with customers is dependent on the
continued viability of such customers. The insolvency of customers could result in a loss of anticipated future revenue
attributable to that program or product, which could have an adverse impact on our profitability.

We enter into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs. If our
initial cost estimates are incorrect, we can lose money on these contracts. Because many of these contracts involve new
technologies and applications and require the Company to engage subcontractors and can last multiple years, unforeseen events,
such as technological difficulties, fluctuations in the price of raw materials, problems with our subcontractors or suppliers and
other cost overruns, can result in the contract pricing becoming less favorable or even unprofitable to us and have an adverse
impact on our financial results. In addition, a significant increase in inflation rates could have an adverse impact on the
profitability of longer-term contracts.

We utilize the services of subcontractors to perform under many of our contracts and the inability of our subcontractors to
perform in a timely and compliant manner could negatively impact our performance obligations as the prime contractor. 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. Our subcontractors may further subcontract performance and may supply
third-party products and software. We may have disputes with our subcontractors, including disputes regarding the quality and
timeliness of work performed by the subcontractor or our subcontractors and the functionality, warranty and indemnities of
products, software, and services supplied by our subcontractor. We are not always successful in passing along customer
requirements to our subcontractors, and thus in some cases may be required to absorb contractual risks from our customers
without corresponding back-to-back coverage from our subcontractor. Our subcontractors may not be able to acquire or
maintain the quality of the materials, components, subsystems and services they supply, or secure preferred warranty and
indemnity coverage from their suppliers which might result in greater product returns, service problems, warranty claims and
costs and regulatory compliance issues and could harm our business, financial condition, and results of operations.

Over the last several years we have outsourced portions of certain business operations such as repair, distribution, engineering
services and information technology services and may outsource additional business operations, which limits our control over
these business operations and exposes us to additional risk as a result of the actions of our outsource partners. When we
outsource certain business operations, we are not able to directly control these activities. Our outsource partners may not
prioritize our business over that of their other customers and they may not meet our desired level of service, cost reductions, or
other metrics. In some cases, their actions may result in our being found to be in violation of laws or regulations like import or
export regulations. As many of our outsource partners operate outside of the U.S., our outsourcing activity exposes us to
information security vulnerabilities and increases our global risks. In addition, we are exposed to the financial viability of our
outsource partners. Once a business activity is outsourced, we may be contractually prohibited from, or may not practically be
able to, bring such activity back within the Company or move it to another outsource partner. The actions of our outsource
partners could result in reputational damage to us and could negatively impact our financial results.

Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business
practices could negatively impact our business. 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.
However, we do not control their labor and other business practices. If one of our suppliers, subcontractors, distributors,
resellers, or TPSRs violates labor or other laws or implements labor or other business practices that are regarded as unethical,
the shipment of finished products to us could be interrupted, orders could be canceled, relationships could be terminated, and
our reputation could be damaged. If one of our suppliers or subcontractors fails to procure necessary license rights to
trademarks, copyrights, or patents, legal action could be taken against us that could impact the saleability of the Company’s
products and expose us to financial obligations to a third-party. Any of these events could have a negative impact on our sales
and results of operations.

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. Failure of one or more of our dealers, distributors, or resellers to effectively promote
our products could affect our ability to bring products to market and have a negative impact on our results of operations. As the
Company refines our channel program, some of our third-party dealers, distributors or resellers may exit the program due to
modifications to the program structure, thereby reducing our ability to bring products to market and have a negative impact on
our results of operations.

Some of these third-parties are smaller and more likely to be impacted by a significant decrease in available credit that could
result from a weakness in the financial markets. If credit pressures or other financial difficulties result in insolvency for third-
party dealers, distributors, or retailers and we are unable to successfully transition end-customers to purchase our products from
other third-parties or from us directly, it may cause, and in some cases, has caused, a negative impact on our financial results.

Final assembly of certain of our products is performed by third-party electronics manufacturers. We may be dependent on these
third-party electronics manufacturers as a sole-source of supply for the manufacture of such products. A failure by such
manufacturers to provide manufacturing services to us as we require, or any disruption in such manufacturing services up to
and including a catastrophic shut-down, may adversely affect our business results. Because we rely on these third-party
electronics manufacturers to manufacture our products, we may incur increased business continuity risks. We are not able to
exercise direct control over the assembly or related operations of certain of our products. If these third-party manufacturers
experience business difficulties or fail to meet our manufacturing needs, then we may be unable to satisfy customer product
demands, lose sales, and be unable to maintain customer relationships. Longer production lead times may result in shortages of
certain products and inadequate inventories during periods of unanticipated higher demand. Without such third parties
continuing to manufacture our products, we may have no other means of final assembly of certain of our products until we are
able to secure the manufacturing capability at another facility or develop an alternative manufacturing facility. This transition
could be costly and time consuming.

Although we carry business interruption insurance to cover lost sales and profits in an amount it considers adequate, in the
event of supply disruption, this insurance does not cover all possible situations. In addition, the business interruption insurance
would not compensate us for the loss of opportunity and potential adverse impact, both short-term and long-term, on relations
with our existing customers going forward.

Our future operating results depend on our ability to purchase a sufficient amount of materials, parts, and components, as well
as services and software to meet the demands of customers. We source some of our components from sole source suppliers.
Any disruption to our suppliers or significant increase in the price of supplies could have a negative impact on our results of
operations. Our ability to meet customers’ demands depends, in part, on our ability to obtain in a timely manner an adequate
delivery of quality materials, parts, and components, as well as services and software from our suppliers. In addition, certain
supplies are available only from a single source or limited sources and we may not be able to diversify sources in a timely
manner. If demand for our products or services increases from our current expectations or if suppliers are unable to meet our
demand for other reasons, including as a result of natural disasters or financial issues, we could experience an interruption in
supplies or a significant increase in the price of supplies that could have a negative impact on our business. We have
experienced shortages in the past that have negatively impacted our results of operations and may experience such shortages in
the future. Credit constraints at our suppliers could cause us to accelerate payment of accounts payable by us, impacting our
cash flow.

In addition, our current contracts with certain suppliers may be canceled or not extended by such suppliers and, therefore, not
afford us with sufficient protection against a reduction or interruption in supplies. Moreover, in the event any of these suppliers
breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any
damages it may suffer.

The unfavorable outcome of any pending or future litigation, arbitration, or administrative action could have a material
adverse effect on our financial condition or results of operations. From time to time we are a party to litigation, arbitration, or
administrative actions. Our financial results and reputation could be negatively impacted by unfavorable outcomes to any
pending or future litigation or administrative actions, including those related to the Foreign Corrupt Practices Act, the U.K.
Bribery Act, or other anti-corruption laws. There can be no assurances as to the favorable outcome of any litigation or
administrative proceedings. In addition, it can be very costly to defend litigation or administrative proceedings and these costs
could negatively impact our financial results.

It is important that we are able to obtain many different types of insurance, and if we are not able to obtain insurance or
exhaust our coverage we may be forced to retain the risk. We have many types of insurance coverage and are also self-insured
for some risks and obligations. While the cost and availability of most insurance is stable, there are still certain types and levels
of insurance that remain difficult to obtain, such as professional liability insurance, which is expensive to obtain for the amount
of coverage often requested by certain customers. As we grow our global solutions and services business, we are being asked to
obtain higher amounts of professional liability insurance, which could result in higher costs to do business. Natural disasters
and certain risks arising from securities claims, professional liability, and public liability are potential self-insured events that
could negatively impact our financial results. In addition, while we maintain insurance for certain risks, the amount of our
insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs from
an accident, incident, or claim.

We are subject to a wide range of product regulatory and safety, consumer, worker safety, and environmental laws. Our
operations and the products we manufacture and/or sell are subject to a wide range of product regulatory and safety, consumer,
worker safety, and environmental laws and regulations. Compliance with such existing or future laws and regulations could
subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire
facilities, restrict what products and services we can offer, and generally impact our financial performance. Some of these laws
are environmental and relate to the use, disposal, remediation, emission and discharge of, and exposure to hazardous
substances. These laws often impose liability and can require parties to fund remedial studies or actions regardless of fault. We
continue to incur disposal costs and have ongoing remediation obligations. Environmental laws have tended to become more
stringent over time and any new obligations under these laws could have a negative impact on our operations or financial
performance.

Laws focused on the energy efficiency of electronic products and accessories; recycling of both electronic products and
packaging; reducing or eliminating certain hazardous substances in electronic products; and the transportation of batteries
continue to expand significantly. Laws pertaining to accessibility features of electronic products, standardization of connectors
and power supplies, the transportation of lithium-ion batteries, and other aspects are also proliferating. There are also
demanding and rapidly changing laws around the globe related to issues such as product safety, radio interference, radio
frequency radiation exposure, medical related functionality, and consumer and social mandates pertaining to use of wireless or
electronic equipment. These laws, and changes to these laws, could have a substantial impact on whether we can offer certain
products, solutions, and services, and on what capabilities and characteristics our products or services can or must include.

These laws impact our products and negatively affect our ability to manufacture and sell products competitively. We expect
these trends to continue. In addition, we anticipate that it will see increased demand to meet voluntary criteria related to
reduction or elimination of certain constituents from products, increasing energy efficiency, and providing additional
accessibility.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to document and test our internal controls over financial reporting
and to report on our assessment as to the effectiveness of these controls. Any negative reports concerning our internal controls
could adversely affect our future results of operations and financial condition. We may discover areas of our internal controls
that need improvement. We cannot be certain that any remedial measures we take will ensure appropriate implementation and

maintenance of adequate internal controls over the financial reporting processes and reporting in the future. We may incur
significant additional costs in order to ensure we adequately remediate any weaknesses identified in our internal control
environment, which, in turn, would reduce our earnings. Implementing any remedial measures may be complicated by the
limited timeframe in which to implement such measures, and the possibility that implementation of such measures may require
a substantial amount of work and time by our personnel.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm
our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective
internal controls over financial reporting, or if our independent registered public accounting firm is unable to provide us with an
unqualified report regarding the effectiveness of our internal controls over financial reporting, investors could lose confidence
in the reliability of our financial statements. Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could
potentially subject us to sanctions or investigations by the SEC, or other regulatory authorities. In addition, failure to comply
with our reporting obligations with the SEC may cause an event of default to occur under the Debt Agreements, or similar
instruments governing any debt we or our subsidiaries incur in the future.

We could be adversely impacted by changes in accounting standards and subjective assumptions, estimates and judgments by
management related to complex accounting matters. Generally accepted accounting principles and related accounting
pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our
businesses, including, but not limited to, revenue recognition, asset impairment, impairment of goodwill and other intangible
assets, inventories, customer rebates and other customer consideration, tax matters, and litigation and other contingent liabilities
are highly complex and involve many subjective assumptions, estimates, and judgments. Changes in these rules or their
interpretation or changes in underlying assumptions, estimates, or judgments could significantly change our reported or
expected financial performance or financial condition. New accounting guidance may also require systems and other changes
that could increase our operating costs and/or change our financial statements. For example, implementing future accounting
guidance related to revenue, accounting for leases and other areas could require us to make significant changes to our
accounting systems, impact to existing Credit Agreements and could result in adverse changes to our financial statements.

Risks Related to our Indebtedness
In connection with the Acquisition, we incurred substantial debt obligations. Our total outstanding debt for borrowed money
was approximately $3.25 billion on October 27, 2014. At December 31, 2017, the remaining principal amount of indebtedness
was $2.2 billion, gross of unamortized discounts and debt issuance costs. In addition, subject to restrictions in agreements
governing our existing and future indebtedness, we may incur additional indebtedness. Our substantial level of indebtedness
could have important consequences, including the following:

• We may experience difficulty in satisfying our obligations with respect to our existing indebtedness or future

indebtedness;

• Our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate

purposes may be impaired;

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

• We may be at a competitive disadvantage with reduced flexibility in planning for, or responding to, changing

conditions in the industry, including increased competition; and

• We may be more vulnerable to economic downturns and adverse developments in the business.

We expect to fund our expenses and to pay the principal and interest on our indebtedness from cash flow from operations. Our
ability to meet our expenses and to pay principal and interest on our indebtedness when due depends on our future performance,
which will be affected by financial, business, economic, and other factors. We will not be able to control many of these factors,
such as economic conditions in the markets where we operate and pressure from competitors.

Despite our indebtedness, we may need to incur substantially more indebtedness and take other actions that could further
exacerbate the risk associated with our existing indebtedness. At December 31, 2017, the remaining principal amount of
indebtedness was $2.2 billion, gross of unamortized discounts and debt issuance costs. In addition to our current financing
activities, we may need to incur substantially more indebtedness in the future, resulting in higher leverage. Subject to the limits

contained in our Debt Agreements, we may incur additional indebtedness from time to time to finance working capital, capital
expenditures, investments or acquisitions, or for other purposes. To the extent we incur additional indebtedness, the risks
associated with our substantial indebtedness will be exacerbated.

Our use of derivative financial instruments to reduce interest rate risk may result in added volatility in our quarterly operating
results. We do not hold or issue derivative financial instruments for trading purposes. However, we do utilize derivative
financial instruments to reduce interest rate risk associated with our indebtedness. To manage variable interest rate risk, we
entered into forward interest rate swap agreements, which will effectively convert a portion of our indebtedness into a fixed rate
loan. Under generally accepted accounting principles, the fair values of the swap contracts, which will either be amounts
receivable from or payable to counterparties, are reflected as either assets or liabilities on our Consolidated Balance Sheets. We
record our fair value change in our Consolidated Statements of Operations, as a component of “Other, net” if not hedged. The
associated impact on our quarterly operating results is directly related to changes in prevailing interest rates. If interest rates
increase, we would have a non-cash gain on the swaps, and vice versa in the event of a decrease in interest rates. Consequently,
these swap contracts introduce complexity to our operating results.

Restrictive covenants in the Debt Agreements may limit our current and future operations, particularly our ability to respond to
changes in our business or to pursue our business strategies. The Debt Agreements contain, and instruments governing any
future indebtedness may contain, a number of restrictive covenants that impose significant operating and financial restrictions,
including restrictions on our ability to take actions that we believe may be in our interest. We expect these covenants will limit
our ability to:

incur additional indebtedness or guarantees;

•
• pay dividends or make other distributions or repurchase or redeem our stock or prepay or redeem certain indebtedness;
•
•
•
•
•
•
• make loans, investments and/or acquisitions; and
•

sell or dispose of assets and issue capital stock of restricted subsidiaries;
incur liens or enter into sale-leaseback transactions;
enter into agreements restricting our subsidiaries’ ability to pay dividends;
enter into transactions with affiliates;
engage in new lines of business;
consolidate, merge or enter into other fundamental changes;

enter into amendments or modifications of certain material subordinated debt agreements or organizational documents.

Additionally, the debt instruments entered into to fund a portion of the Acquisition requires us to maintain in certain
circumstances compliance with a consolidated total secured net leverage ratio. Our ability to comply with this ratio may be
affected by events beyond our control, and we cannot assure you that we will meet this ratio. The restrictions could adversely
affect our ability to:

finance operations;

•
• make needed capital expenditures;
• make strategic acquisitions or investments or enter into alliances;
• withstand a future downturn in our business or the economy in general;
•
• plan for or react to market conditions or otherwise execute our business strategies.

engage in business activities, including future opportunities, that may be in our interest; and

A breach of any of the covenants contained in the Debt Agreements (including an inability to comply with the financial
maintenance covenants) that is not remedied within the applicable cure period, if any, would result in an event of default under
the Debt Agreements. If, when required, we are unable to repay or refinance our indebtedness or amend the covenants
contained in the Debt Agreements, or if a default otherwise occurs that is not cured or waived, the lenders or holders of our debt
could elect to declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and
payable or institute foreclosure proceedings against those assets that secure the borrowings. Should the outstanding obligations
be accelerated and become due and payable because of any failure to comply with the applicable covenants in the future, we
would be required to search for alternative measures to finance current and ongoing obligations of our business. There can be

no assurance that such financing will be available on acceptable terms, if at all. Any of these scenarios could adversely impact
our liquidity, financial condition and results of operations.

A significant amount of cash will be required to service our indebtedness. Our ability to make payments on and to refinance our
indebtedness and to fund working capital needs, general corporate expenditures and planned capital expenditures depends on
our ability to generate a significant amount of cash. This, to a certain extent, is subject to general economic, financial,
competitive, business, legislative, regulatory, and other factors that are beyond our control.

If our business does not generate sufficient cash flows from operations or if future borrowings are not available to us in an
amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs, we may need to refinance all or a
portion of our indebtedness on or before the maturity thereof, sell assets, reduce or delay capital investments, or seek to raise
additional capital, any of which could have a material adverse effect on our operations. In addition, we may not be able to affect
any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our
indebtedness will depend on the condition of the capital and debt markets and our financial condition at such time. Any
refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants,
which could further restrict business operations. The terms of anticipated or future debt instruments may limit or prevent us
from taking any of these actions. In addition, any failure to make scheduled payments of interest and/or principal on
outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to access
additional capital on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt
service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an
adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability
to satisfy the obligations in respect of our indebtedness.

Item 1B.

Unresolved Staff Comments

Not applicable.

Item 2.

Properties

Our corporate headquarters are located in Lincolnshire, Illinois; a northern suburb of Chicago. We also operate manufacturing,
production and warehousing, administrative, research, and sales facilities in other U.S. and international locations.

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

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

We generally consider the productive capacity of the plants to be adequate and sufficient for our requirements. The extent of
utilization of each manufacturing facility varies throughout the year.

Item 3.

Legal Proceedings

See Note 10, Contingencies in the Notes to Consolidated Financial Statements included in this Form 10-K.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

Stock Information: Price Range and Common Stock
Our Class A common stock is traded on the NASDAQ Stock Market, LLC under the symbol “ZBRA”. The following table
shows the high and low trade prices for each fiscal quarter in 2017 and 2016, as reported by the NASDAQ Stock Market, LLC.

2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High

Low

93.61 $
109.30
109.89
117.44

2016
First Quarter
Second Quarter

81.02
86.82
94.78 Third Quarter
Fourth Quarter
101.49

High

Low

70.30 $
68.49
71.61
88.00

52.14
48.51
46.13
62.91

Source: The NASDAQ Stock Market, LLC

At February 15, 2018, the last reported price for the Class A common stock was $120.54 per share, and there were 134
registered stockholders of record for Zebra’s Class A common stock. In addition, we had approximately 29,049 stockholders
who owned our stock in street name.

Dividend Policy
Since our initial public offering in 1991, we have not declared any cash dividends or distributions on our capital stock. We
currently do not anticipate paying any cash dividends in the foreseeable future.

Treasury Shares
We did not purchase shares of Zebra Class A common stock during 2017 as part of the purchase plan program.

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.

Stock Performance Graph

This graph compares the cumulative annual change since December 31, 2012, of the total stockholder return of Zebra
Technologies Corporation Class A common stock with the cumulative return on the following published indices: (i) the RDG
Technology Composite; and (ii) the NASDAQ Composite Market Index, during the same period. The comparison assumes that
$100 was invested in each of the Company’s Class A common stock, the stocks comprising the RDG Technology Composite
and the stocks comprising the NASDAQ Composite Market Index on December 31, 2012. The comparison assumes that all
dividends were reinvested at the end of the month in which they were paid.

Item 6.

Selected Financial Data

FIVE YEAR SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
(In millions, except shares and per share amounts)

Consolidated Statements of
Operations(1)

Total Net sales
Gross profit
Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share
Weighted average shares
outstanding:
Basic
Diluted

Year Ended December 31,

2017

2016

2015

2014

2013

3,722
1,710
17

0.33

3,574
1,642
(137)

(2.65)

3,650
1,644
(158)

1,671 $
778
32 $

(3.10)

0.64 $

0.32 $

(2.65) $

(3.10) $

0.63 $

1,038
503
134

2.65

2.63

53,021,761
53,688,832

51,579,112
51,579,112

50,996,297
50,996,297

50,789,173
51,379,698

50,692,942
51,063,189

December 31,

Consolidated Balance Sheets(1)

2017

2016

2015

2014

2013

Cash and cash equivalents,
investments and marketable
securities
Total Assets
Long-term liabilities
Total Stockholders’ Equity

156

192

4,275
2,441
834

4,632
2,891
792

5,040
3,252
893

418
5,539
3,346
1,040

416

1,120
15
959

(1)

Includes the Enterprise business from its date of acquisition, October 27, 2014.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Overview
The Company is a global leader respected for innovative EAI solutions in the automatic information 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; RFID readers; specialty printers for barcode labeling and personal identification; RTLS; related
accessories and supplies, such as self-adhesive labels and other consumables; and software utilities and applications. We also
provide a full range of services, including maintenance, technical support, and repair, managed and professional services,
including cloud-based subscriptions. End-users of our products and services include those in the retail and e-commerce,
transportation and logistics, manufacturing, healthcare, hospitality, warehouse and distribution, energy and utilities, government
and education enterprises around the world. 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. We provide
products and services in over 180 countries, with 114 facilities and approximately 7,000 employees worldwide.

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

Asset Intelligence & Tracking
The AIT segment is an industry leader in barcode printing and asset tracking technologies. Its major product lines include
barcode and card printers, supplies, services and location solutions. Industries served include retail and e-commerce,
transportation and logistics, manufacturing, healthcare, and other end markets within the following regions: North America;
Europe, Middle East, and Africa; Asia-Pacific; and Latin America.

Enterprise Visibility & Mobility
The EVM segment is an industry leader in automatic information and data capture solutions. Its major product lines include
mobile computing, data capture, RFID, and services. Industries served include retail and e-commerce, transportation and
logistics, manufacturing, healthcare, and other end markets within the following regions: North America; Europe, Middle East,
and Africa; Asia-Pacific; and Latin America.

Geographic Information
For the year ended December 31, 2017, the Company recorded $3.7 billion of net sales in its consolidated statements of
operations, of which approximately 48.3% were attributable to North America; approximately 32.8% were attributable to
Europe, Middle East, and Africa (“EMEA”); and other foreign locations accounted for the remaining 18.9%. Net sales
attributable from each region are relatively consistent with the prior year period.

Acquisition and Integration
In October 2014, the Company acquired the Enterprise business (“Enterprise”), from Motorola Solutions, Inc. (“MSI”) (the
“Acquisition”) and began integration activities focused on creating “One Zebra”. Our integration priorities centered on
maintaining business continuity while identifying and implementing cost synergies, operating efficiencies, and integration of
functional organizations and processes. Another key focus of the integration was to exit MSI-provided transition service
agreements (“TSAs”) related primarily to IT systems and support services. These TSAs were an interim measure to continue the
operations of the Enterprise business without disruption while integration activities were completed. The Company
substantially completed its integration activities, including the implementation of a common enterprise resource planning
system and has exited the last TSAs with MSI.

Restructuring Programs
In the first quarter 2017, the Company’s executive leadership approved an initiative to continue the Company’s efforts to
increase operational efficiency (the “Productivity Plan”). The Company expects the Productivity Plan to build upon the exit and
restructuring initiatives specific to the acquisition of the Enterprise business (“Enterprise”) from Motorola Solutions, Inc. in
October 2014, (the “Acquisition Plan”). Actions under the Productivity Plan include organizational design changes, process
improvements and automation. Implementation of actions identified through the Productivity Plan is expected to be
substantially complete by December 2018. Exit and restructuring costs are not included in the operating results of our segments
as they are not deemed to impact the specific segment measures as reviewed by our Chief Operating Decision Maker and
therefore are reported as a component of Corporate, eliminations. See Note 15, Segment Information and Geographic Data in
the Notes to Consolidated Financial Statements included in this Form 10-K for further information.

Total exit and restructuring charges of $12 million life-to-date and year-to-date specific to the Productivity Plan have been
recorded through December 31, 2017 and relate to severance and related benefits, lease exit costs and other expenses. Total
remaining charges associated with this plan are expected to be in the range of $8 million to $12 million with activities expected
to be substantially complete by the end of fiscal 2018.

Total exit and restructuring charges of $69 million life-to-date specific to the Acquisition Plan have been recorded
through December 31, 2017 and include severance and related benefits, lease exit costs and other expenses. Charges related to
the Acquisition Plan for the twelve-month period ended December 31, 2017 and 2016, were $4 million and $19 million,
respectively. The Company has substantially completed the activities associated with the Acquisition Plan.

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

Impact of U.S. Tax Reform
The Company is in the process of analyzing the impact of the Tax Cut and Jobs Act (“TCJA” or “the Act”) signed into law on
December 22, 2017 and has provisionally provided income tax expense of $72 million, including remeasurement of its net
deferred tax assets at 21% of $35 million and the one-time transition tax of $37 million. The one-time transition tax impact has
been reduced by approximately $10 million of income tax credit carryfowards, resulting in an estimated cash tax liability of $26
million, of which $2 million has been classified as a short term liability and $24 million as a long term liability, both to be
remitted over the next eight years as follows (in millions):

Unremitted Earnings
Payments

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

2017

2018

2019

2020

2021

2022

2023

2024

2 $

5 $

The Company expects that the greatest factor impacting its future effective tax rate is the federal reduction in the tax rate from
35% to 21%. Primarily due to uncertainties in the interpretation of the one-time transition tax rules and the determination of
cash or other specified assets, the December 31, 2017 effective tax rate could differ materially from the amount disclosed in the
financial statements. As permitted, the Company will update the estimates disclosed herein on a quarterly basis throughout
2018. See Note 12, Income Taxes in the Notes to Consolidated Financial Statements included in this Form 10-K for further
information.

The Company has reviewed the impact of other provisions of the Act which took effect on January 1, 2018 and after. Based on
current operations, we estimate that the Company will be subject to the Global Intangible Low-Taxed Income and the
Deduction for Foreign-Derived Intangible Income provisions of the Act. We estimate that the new limitations which defer U.S.
interest deductions in excess of 30% of Adjusted Taxable Income will not be applicable. Additionally, the Company will no
longer be able to deduct compensation for its covered employees which exceeds the limitation under Internal Revenue Code
Section 162(m).

Results of Operations: Year Ended 2017 versus 2016 and Year Ended 2016 versus 2015

Consolidated Results of Operations
(amounts in millions, except percentages)

Net sales

Gross profit
Operating expenses

Operating income

Gross margin

Year Ended December 31,

2017

2016

2015

3,722
1,710
1,388
322
45.9%

3,574
1,642
1,562
80
45.9%

3,650
1,644
1,607
37
45.0%

Percent
Change
2017 vs 2016

Percent
Change
2016 vs 2015

4.1 %

4.1 %
(11.1)%

302.5 %

(2.1)%

(0.1)%
(2.8)%

116.2 %

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

Year Ended December 31,

2017

2016

2015

Percent
Change
2017 vs 2016

Percent
Change
2016 vs 2015

Europe, Middle East, and Africa
Latin America
Asia-Pacific

Total International

North America

Total Net sales

1,221 $
235
468
1,924
1,798
3,722 $

1,138 $
214
483
1,835
1,739
3,574 $

1,194
219
463
1,876
1,774
3,650

7.3 %
9.8 %
(3.1)%
4.9 %
3.4 %
4.1 %

(4.7)%
(2.3)%
4.3 %
(2.2)%
(2.0)%
(2.1)%

Operating expenses are summarized below (amounts in millions, except percentages):

Year Ended December 31,

2017

2016

2015

Percent
Change
2017 vs 2016

Percent
Change
2016 vs 2015

Selling and marketing
Research and development
General and administrative
Amortization of intangible assets
Acquisition and integration costs
Impairment of goodwill and other
intangibles

Exit and restructuring costs
Total Operating expenses

448 $
389
301
184
50

—
16
1,388 $

444 $
376
307
229
125

19
1,562 $

494
394
283
251
145

—

40
1,607

0.9 %
3.5 %
(2.0)%
(19.7)%
(60.0)%

(100.0)%

(15.8)%
(11.1)%

(10.1)%
(4.6)%
8.5 %
(8.8)%
(13.8)%

NMF

(52.5)%
(2.8)%

Consolidated Organic Net sales growth:

Reported GAAP Consolidated Net sales growth
Adjustments:
Impact of Wireless LAN Net sales (1)
Impact of foreign currency translation (2)
Corporate, eliminations (3)

Consolidated Organic Net sales growth

December 31,

2017

2016

4.1 %

(2.1)%

3.2 %
(0.6)%
(0.2)%

6.5 %

1.4 %
1.3 %
(0.2)%

0.4 %

(1) The Company sold the wireless LAN business in October 2016. The Company excludes the impact of the net sales of this
business in the prior year period when computing organic net sales growth.
(2) Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations.
Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the
currency exchange rates used to convert the results for businesses where the functional currency is not the U.S.
dollar. This impact is calculated by translating, for certain currencies, the current period results at the currency exchange rates
used in the comparable prior year period, rather than the exchange rates in effect during the current period. In addition, we
exclude the impact of the company’s foreign currency hedging program in both the current and prior year periods.
(3) Amounts included in Corporate, eliminations consist of purchase accounting adjustments not reported in segments related to
the Acquisition.

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 wireless LAN business in October 2016. Services sales were lower
primarily due to the impact of the wireless LAN divestiture. Consolidated Organic Net sales growth was 6.5%, reflecting
growth in all four geographic regions, most notably in EMEA and North America, and Latin America.

Gross margin as a percent of sales was 45.9%, or flat compared to the prior year. This reflects an increase in gross margin in the
EVM segment primarily due to changes in business mix and improved product costs, offset by lower AIT segment gross margin
driven primarily by higher overhead and services costs, and 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 wireless LAN business in the prior year period, lower acquisition and integration costs, and lower
amortization of intangible assets. During 2017, the Company substantially completed its integration activities, including the
implementation of a common enterprise resource planning system, associated with the Acquisition. The Company also exited
the transition services agreements with Motorola Solutions. The decrease in amortization of intangible assets was due to certain
assets reaching full amortization in 2017. Exit and restructuring costs were also lower than the year-ago period due to the prior
year charges that included costs associated with the divestiture of the wireless LAN business. Research and development costs
were higher primarily due to increased incentive compensation expense associated with improved financial performance
partially offset by the impact of the divestiture of the wireless LAN business. General and administrative expenses were lower
compared to the prior year period due primarily to reduced facility and IT expenses, professional fees, and employee benefits
costs, as well as the impact of the divestiture of the wireless LAN business being offset partially by increased incentive
compensation expense associated with improved financial performance.

Operating income increased $242 million compared to the prior year. The increase was due to the decline in operating expenses
as well as the increase in sales and gross profit.

Interest expense was $227 million for the year ended December 31, 2017 compared to $193 million in the prior year. The
increase over the prior year was driven by the payments for early debt extinguishment of $65 million and accelerated

amortization of debt issuance costs related to the redemption of Senior Notes of $16 million offset, in part, by the impact of
early repayments of debt and lower interest rates.

Other non-operating expenses decreased $5 million to $6 million for the year ended December 31, 2017. This decrease is driven
by long-term investment impairments of $1 million in the current year compared to $7 million in the prior year.

The Company recognized tax expense of $71 million and $8 million for the period ending December 31, 2017 and 2016,
respectively. The Company’s effective tax rates were 80.7% and (6.2)% as of December 31, 2017 and 2016, respectively. The
Company’s effective tax rate was higher than the federal statutory rate of 35% primarily due to deferred income taxed on the
outbound transfer of U.S. assets, an increase in uncertain tax benefits, increased valuation allowance for its foreign deferred tax
assets, foreign non-deductible expenses, the one-time transition tax and remeasurement of its net U.S. deferred tax assets under
U.S. tax reform. These increases were partially offset by the benefit of lower tax rates in foreign jurisdictions, recognition of
deferred tax assets on intercompany asset transfers, the generation of tax credits in the current year, and deductions from
vesting of equity compensation.

2016 compared to 2015
Net sales decreased by $76 million or 2.1% compared with the prior year period. The decline in net sales is due to lower
hardware sales in North America, EMEA, and Latin America, including the unfavorable impact of foreign currency changes,
partially offset by higher hardware sales in Asia-Pacific. The decline in hardware sales is largely attributable to lower sales of
barcode printer, data capture, wireless LAN products, and location solutions. Organic net sales increased 0.4% compared to the
prior year period, reflecting growth in Asia-Pacific and North America, offset by declines in EMEA, and Latin America.

Gross margin as a percent of sales was 45.9% compared to the prior year period of 45.0%. This improvement in gross margin
reflects an increase in the EVM segment gross margin primarily due to lower services and hardware product costs. AIT segment
gross margin decreased primarily due to lower sales demand and the impact of incentive programs, including the concessions to
distributors of printer products imported into China, partially offset by product cost improvements.

Operating expenses for the year ended December 31, 2016 and 2015, were $1.6 billion, or 43.7% and 44.0% of net sales,
respectively. The reduction in operating expenses as a percentage of net sales reflects the Company’s continued focus on
improving operating efficiency and controlling expenses. Selling and marketing expenses were lower compared to the prior
year due to the full-year impact of staff reductions implemented in 2015 and lower discretionary expenses and promotional
spending. The decrease in research and development costs was primarily due to a reduction in headcount and other third-party
resources, the impact from the divestiture of the wireless LAN business, and shifting of headcount to lower cost engineering
locations. The increase in general and administrative costs was primarily due to higher IT related expenses, including increased
support and maintenance costs for IT infrastructure and business systems as we exit transition services agreements with
Motorola Solutions, and increased legal fees and litigation related expenses. The decrease in amortization of intangibles was
due to impairment charges taken in the current year along with other intangible assets becoming fully amortized. Impairment of
goodwill and other intangibles of $62 million was recorded during the third quarter related to the wireless LAN business
divestiture. The Company has made significant progress on its integration activities associated with the Acquisition, including
exiting many transition services agreements with Motorola Solutions. This has resulted in a decline in acquisition and
integration costs compared to the prior year period. Exit and restructuring costs were lower due to a reduced level of
restructuring activity as the Company progresses with its restructuring plan related to the Acquisition, partially offset by
expenses associated with the Company’s divestiture of its wireless LAN business.

Operating income increased $43 million or 116.2% compared to the prior year. The increase was primarily due to the decline in
operating expenses.

The Company conducts business in multiple currencies throughout the world, thus has exposure to movements in foreign
exchange rates with regard to non-functional denominated revenue, cash assets, and cash liabilities. As a result of these
exposures, the Company recognized a foreign exchange loss of $5 million for 2016.

Interest expense was $193 million for the year ended December 31, 2016, flat compared to the prior year. Early repayments of
debt resulted in accelerated amortization costs while debt refinancing savings were offset by closing costs of the refinancing.

Other non-operating expenses increased $10 million to $11 million for the year ended December 31, 2016. This increase is
driven by long-term investment impairments of $7 million and an increase in accelerated loan discount amortization of $3
million due to the debt refinancing. See Note 8, Long-Term Debt for further information on the debt refinancing amendments.

In the period ending December 31, 2016, the Company recognized tax expense of $8 million compared to a tax benefit of $22
million for 2015. The Company’s effective tax rates were (6.2)% and 12.2% as of December 31, 2016 and December 31, 2015,
respectively. The Company’s effective tax rate was lower than the federal statutory rate of 35% primarily due to deferred
income taxed on the outbound transfer of U.S. assets, pre-tax losses in the United States, and the rate differential between U.S.
and foreign jurisdictions.

Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each operating business segment as
detailed in Note 15, Segment Information and Geographic Data in the Notes to the Consolidated Financial Statements included
in this Form 10-K. The segment results exclude purchase accounting adjustments, amortization of intangible assets, acquisition
and integration costs, impairment of goodwill and intangibles, and exit and restructuring costs.

Asset Intelligence & Tracking Segment (“AIT”)
(amounts in millions, except percentages)

Year Ended December 31,

2017

2016

2015

$
$

1,311
640
380
260
48.8%

$
$

1,247
620
380
240
49.7%

$
$

1,286
654
396
258
50.9%

Percent
Change 2017
vs 2016

Percent
Change 2016
vs 2015

5.1%
3.2%
—%
8.3%

(3.0)%
(5.2)%
(3.9)%
(7.0)%

Net sales
Gross profit
Operating expenses
Operating income
Gross margin

AIT Organic Net sales growth:

AIT Reported GAAP Net sales growth
Adjustments:
Impact of foreign currency translations (1)

AIT Organic Net sales growth

December 31,

2017

2016

5.1 %

(3.0 )%

(0.5)%

4.6 %

1.8 %

(1.2)%

(1) Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations. Foreign currency
translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to
convert the results for businesses where the functional currency is not the U.S. dollar. This impact is calculated by translating,
for certain currencies, the current period results at the currency exchange rates used in the comparable prior year period, rather
than the exchange rates in effect during the current period. In addition, we exclude the impact of the company’s foreign
currency hedging program in both the current and prior year periods.

2017 compared to 2016
AIT net sales for the period ending December 31, 2017 increased $64 million or 5.1% compared to prior year period. The
increase in net sales was largely driven by higher sales of barcode and card printers, primarily in the EMEA and Asia-Pacific
regions. Sales of supplies and services were also higher than the prior year. The year-on-year growth also reflects a price
concession to distributors of barcode printer products imported into China in the third quarter of 2016. During 2017, no

additional price concession provisions were required and a reduction of the 2016 provision was recorded due to a change in
import classification for barcode printers. AIT organic Net sales growth for the year-ended December 31, 2017 was 4.6%.

Gross margin as a percentage of sales was 48.8% compared to 49.7% for comparable prior year period. The decrease in gross
margin reflects higher overhead costs, including freight and costs associated with our regional distribution center transitions,
higher services costs and increased customer sales incentives offset partially by lower provisions for price concessions to
distributors of barcode printer products imported into China.

Operating income increased 8.3% as a result of increased net sales and gross profit. Operating expenses were comparable to the
prior year period.

2016 compared to 2015
AIT net sales for the period ending December 31, 2016 decreased $39 million or 3.0% compared to prior year period. The
decline in net sales was primarily due to lower net sales of barcode printers and location solutions, and the unfavorable impact
of foreign currency changes, most notably in EMEA which was partially offset by an increase in sales of supplies. The barcode
printer sales decline was primarily due to lower sales in North America and EMEA. AIT organic net sales declined compared to
the prior year period by 1.2%.

Gross margin as a percentage of sales was 49.7% compared to 50.9% for comparable prior year period. The decrease in gross
margin included impacts from lower sales of barcode printers, the impact of incentive programs, including the concession to
distributors of printer products imported into China, costs associated with the relocation of North American distribution
operations, and the unfavorable impact of foreign currency changes. These factors were partially offset by manufacturing cost
improvements in supplies and lower hardware product costs.

Operating income declined 7.0% as a result of lower net sales and gross profit, partially offset by lower operating expenses.

Enterprise Visibility & Mobility Segment (“EVM”)
(amounts in millions, except percentages)

Year Ended December 31,

2017

2016

2015

$
$

2,414
1,073
758
315
44.4%

$
$

2,337
1,032
746
286
44.2%

$
$

2,380
1,010
774
236
42.4%

Percent
Change 2017
vs 2016

Percent
Change 2016
vs 2015

3.3 %
4.0 %
1.6 %
10.1 %

(1.8)%
2.2 %
(3.6)%
21.2 %

Net sales
Gross profit
Operating expenses
Operating income
Gross margin

EVM Organic Net sales growth:

EVM Reported GAAP Net sales growth
Adjustments:
Impact of Wireless LAN Net sales (1)
Impact of foreign currency translation (2)

EVM Organic Net sales growth

December 31,

2017

2016

3.3 %

(1.8)%

4.9 %
(0.7)%

7.5 %

2.2 %
0.9 %

1.3 %

(1) The Company sold the wireless LAN business in October 2016 and excludes the net sales of this business in the prior year
period when computing organic net sales growth.

(2) Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations. Foreign currency
translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to
convert the results for businesses where the functional currency is not the U.S. dollar. This impact is calculated by translating,
for certain currencies, the current period results at the currency exchange rates used in the comparable prior year period, rather
than the exchange rates in effect during the current period. In addition, the Company excludes the impact of it’s foreign
currency hedging program in both the current and prior year periods.

2017 compared to 2016
EVM net sales for the period ending December 31, 2017 increased $77 million or 3.3% compared to prior year period. The
increase in net sales was driven by higher sales of mobile computing and data capture products, primarily in the North America
and EMEA regions, partially offset by impact of the divestiture of the wireless LAN business in October 2016. EVM organic
net sales growth for the year-ended December 31, 2017 was 7.5%.

Gross margin for the year ended December 31, 2017 was 44.4% compared to 44.2% in the prior year period. The increase in
gross margin primarily reflects changes in business mix and improvements in hardware product costs.

Operating income increased 10.1% primarily as a result of higher sales and gross profit, partially offset by an increase in
operating expenses.

2016 compared to 2015
EVM net sales for the period ending December 31, 2016 decreased $43 million or 1.8% compared to prior year period. The
decline in net sales was primarily driven by lower sales of wireless LAN and data capture products and the unfavorable impact
of foreign currency changes in EMEA, partially offset by higher sales of mobile computing products. EVM organic net sales
increased compared to the prior year period by 1.3%.

Gross profit margin for the year ended December 31, 2016 was 44.2% compared to 42.4% in the prior year period. The
improvement in gross margin was due primarily to lower service and hardware product costs, including lower excess and
obsolescence expense. The prior year costs also included higher product rebranding expenses. This improvement was partially
offset by product mix and the unfavorable impact of foreign currency changes.

Operating income increased 21.2% primarily as a result of higher gross profit and lower operating expenses, partially offset by
lower sales.

Critical Accounting Policies and Estimates
Management prepared the consolidated financial statements of the Company under accounting principles generally accepted in
the United States of America. These principles require the use of estimates, judgments, and assumptions. We believe that the
estimates, judgments, and assumptions we used are reasonable based upon the information available at that time.
Our estimates and assumptions affect the reported amounts in our consolidated financial statements. See Note 2, Summary of
Significant Accounting Policies in the Notes to Consolidated Financial Statements included in this Form 10-K.

Recently Issued Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in this
Form 10-K.

Liquidity and Capital Resources
The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash
collections from our customers, capital expenditures, repatriation of foreign cash and investments, and acquisitions of third-
parties. Management believes that our existing capital resources and funds generated from operations are sufficient to meet
anticipated capital requirements and service our indebtedness. The following table summarizes our cash flow activities for the
years indicated (in millions):

Cash flow (used in) provided by:
Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash balances

Net decrease in cash and cash equivalents

Year Ended December 31,

2017

2016

2015

478 $
(51)
(517)
(4)
(94) $

380 $
(39)
(384)
7
(36) $

122
(148)
(161)
(15)
(202)

The change in our cash and cash equivalents balance is reflective of the following:

2017 vs. 2016
Cash flows from operations increased $98 million during 2017 to $478 million. This improvement was driven by an increase in
net earnings of $154 million, partially offset by a decline in working capital primarily related to higher inventory levels and
lower accounts payable. Net inventory increased primarily as a result of growth in the business and changes in product mix, an
increased backlog level compared to the prior year, and our recent transition to a new distribution model for our European
operations. In addition, the prior year working capital benefited from the successful renegotiation of longer payment terms with
vendors.

Net cash used in the purchase of property, plant and equipment declined $27 million as compared to the prior year, as capital
expenditures related to the Acquisition integration were substantially completed in 2016. The prior year investing activities also
included net cash proceeds of $39 million related to the sale of the wireless LAN business.

Net cash used in financing activities during 2017 consisted of proceeds related to the A&R Credit agreement for Term Loan A
of $688 million, a draw on the Revolving Credit Facility of $275 million, and proceeds related to the receivables financing
facility of $145 million. These proceeds were primarily used to redeem $1.1 billion in principal of the 7.25% Senior Notes,
maturing October 2022. The Company also had debt principal prepayments on Term Loan A and Term Loan B of $502 million
and on the receivables financing facility of $10 million. As part of the repricing of Term Loan B, a portion of the debt was
deemed to be modified and therefore, the Company included $263 million in proceeds from the issuance of long-term debt,
offset by $263 million in payments of long-term debt within the Consolidated Statements of Cash Flows.

2016 vs. 2015
Cash flows from operations increased $258 million during 2016 to $380 million. This improvement was driven by lower net
losses of $21 million, which included significant non-cash drivers of a lower deferred income tax benefit of $98 million and
asset impairment for goodwill, intangibles and other assets of $69 million, primarily related to the wireless LAN business
divestiture. Additionally, the Company had improved working capital related items of $90 million during 2016. Working capital
related improvements consisted primarily of accounts payable increases due to the Company successfully renegotiating longer
payment terms with vendors being partially offset by an increase in income tax cash outflows.

Net cash used in investing activities during 2016 included capital expenditures of $77 million compared to $122 million in
2015. The decrease consisted primarily of a reduction in integration and real estate related capital expenditures. This was offset
somewhat by the sale of the wireless LAN business resulting in net cash received of $39 million.

Net cash used in financing activities during 2016 consisted primarily of early debt principal repayments of $382 million under
the Term Loan compared to early debt principal repayments of $165 million in the comparable prior year period. Resulting
from the debt refinancing amendments entered into during fiscal 2016, the Company recognized $102 million of proceeds from
the issuance of long-term debt, offset by $102 million in payments of long-term debt within the Consolidated Statements of
Cash Flows. Additionally, proceeds received from the exercise of stock options and employee stock purchase plan purchases
(“ESPP”) were $11 million in 2016 compared to $17 million in 2015 reflecting decreased option exercises and stock purchase
plan purchases. The taxes paid related to the net share settlement of equity awards were $8 million in 2016 compared to $13
million in 2015 reflecting decreased stock exercises.

See Note 8, Long-Term Debt in the Notes to the Consolidated Financial Statements included in this Form 10-K for further
details.

The following table shows the carrying value of the Company’s debt (in millions):

Senior Notes
Term Loan B
Term Loan A
Revolving Credit Facility
Receivables Financing Facility

Total debt

Less: Debt issuance costs
Less: Unamortized discounts
Less: Current portion of long-term debt

Total long-term debt

December 31,

2017

2016

— $

1,160
679
275
135
2,249
(7)
(15)
(51)
2,176 $

1,050
1,653
—
—
—
2,703
(22)
(33)
—
2,648

Credit Facilities
On July 26, 2017, the Company entered into the A&R Credit Agreement, which amended, modified and added provisions to the
Company’s previous credit agreement. The A&R Credit Agreement provides for a Term Loan A of $688 million and increased
the existing Revolving Credit Facility from $250 million to $500 million. The Company incurred and capitalized debt issuance
costs of $5 million related to Term Loan A and the increased Revolving Credit Facility under the A&R Credit Agreement.

In addition, as part of the A&R Credit Agreement, the Company partially paid down and repriced its Term Loan B. The A&R
Credit Agreement also lowered the index rate spread for LIBOR loan from LIBOR + 250 bp to LIBOR + 200 bp for its Term
Loan B.

In accounting for the early termination and repricing of Term Loan B, the Company applied the provisions of ASC 470-
50, Modifications and Extinguishments (“ASC 470-50”). The evaluation of the accounting under ASC 470-50 was done on a
creditor by creditor basis in order to determine if the terms of the debt were substantially different and, as a result, whether to
apply modification or extinguishment accounting. The Company determined that the terms of the debt were not substantially
different for approximately 80.4% of the lenders, and applied modification accounting. For the remaining 19.6% of the lenders,
extinguishment accounting was applied. Certain lenders elected not to participate in the debt repricing, which resulted in a debt
principal prepayment of $75 million of the Company’s outstanding debt balance. The debt repricing transaction also resulted in
one-time pre-tax charges including third-party fees for arranger, legal and other services and accelerated discount and
amortization of debt issuance costs on the debt principal prepayment of approximately $6 million. These costs are reflected as
non-operating expenses in Other, net on the Company’s Consolidated Statements of Operations.

As of December 31, 2017, the Term Loan A interest rate was 3.35%, and the Term Loan B interest rate was 3.37%. Borrowings
under the Term Loan B, as amended, bear interest at a variable rate subject to a floor of 2.75%. The facility allows for interest
payments payable monthly or quarterly on Term Loan A and quarterly on Term Loan B. The Company has entered into interest
rate swaps to manage interest rate risk on its long-term debt on Term Loan B. See Note 7, Derivative Instruments in the Notes
to the Consolidated Financial Statements included in this Form 10-K.

27, 2021 (the “Term Loan B Maturity Date”). To the extent not previously paid, the Term Loans are due and payable on,
respectively, the Term Loan A Maturity Date and Term Loan B Maturity Date. At such time, the Company will be required to
repay all outstanding principal, accrued and unpaid interest and other charges in accordance with the A&R Credit Agreement.
Assuming the Company makes no further optional debt principal prepayments on Term Loan A, the outstanding principal as of
the Term Loan A Maturity Date will be approximately $498 million. Assuming the Company makes no further optional debt
principal prepayments on the Term Loan B, the outstanding principal as of the Term Loan B Maturity Date will be
approximately $1.2 billion.

The Revolving Credit Facility is available for working capital and other general corporate purposes including letters of credit.
The amount (including letters of credit) cannot exceed $500 million. As of December 31, 2017, the Company had letters of
credit totaling $5 million, which reduced funds available for other borrowings under the Revolving Credit Facility to $495
million. The Revolving Credit Facility will mature and the related commitments will terminate on July 27, 2021.

Borrowings under the Revolving Credit Facility bear interest at a variable rate plus an applicable margin. As of December 31,
2017, the Revolving Credit Facility had an average interest rate of 3.39%. The facility allows for interest payments payable
monthly or quarterly. As of December 31, 2017, the Company had borrowings of $275 million against the Revolving Credit
Facility. There were no borrowings against the Revolving Credit Facility in the prior year comparable period.

Senior Notes
During fiscal 2017, the Company used proceeds from Term Loan A, the Revolving Credit Facility and the receivables financing
facility to redeem $1.1 billion in outstanding principal of the 7.25% Senior Notes (the “Senior Notes”), maturing October 2022.
In accounting for the early termination of Senior Notes, the Company applied the provisions of ASC 470-50, Modifications and
Extinguishments (“ASC 470-50”). Based on the terms of the debt, the Company concluded extinguishment accounting was
appropriate to apply. The Company recognized a $65 million make whole premium, which was recorded as Interest expense,
net on the Company’s Consolidated Statements of Operations. The Company also recognized accelerated debt issuance costs of
$16 million which were recorded as Interest expense, net on the Company’s Consolidated Statements of Operations.

Receivables Financing Facility
On December 1, 2017, a wholly-owned, bankruptcy-remote, special-purpose entity (“SPE”) of the Company entered into the
Receivables Purchase Agreement, which provides for a receivables financing facility of up to $180 million. The SPE utilizes
the receivables financing facility in the normal course of business as part of its management of cash flows. Under its committed
receivables financing facility, a subsidiary of the Company sells its domestically originated accounts receivables at fair value,
on a revolving basis, to the SPE which was formed for the sole purpose of buying the receivables. The SPE, in turn, pledges a
valid and perfected first-priority security interest in the pool of purchased receivables to a financial institution for borrowing
purposes. The subsidiary retains an ownership interest in the pool of receivables that are sold to the SPE and services those
receivables. Accordingly, the Company has determined that these transactions do not qualify for sale accounting under ASC
860, Transfers and Servicing of Financial Assets, and has, therefore, accounted for the transactions as secured borrowings.

At December 31, 2017, the Company’s Consolidated Balance Sheets included $421 million of receivables that were pledged
and $135 million of associated liabilities. The SPE borrowed $145 million on the receivables financing facility and repaid $10
million in 2017. In 2017, the Company recorded expenses related to its receivables financing facility of $1 million as Interest
expense, net on the Company’s Consolidated Statements of Operations. The receivables financing facility will mature on
November 29, 2019.

Borrowings under the receivables financing facility bear interest at a variable rate plus an applicable margin. As
of December 31, 2017, the receivables financing facility had an average interest rate of 2.35% and requires monthly interest
payments.

Both the Revolving Credit Facility and receivables financing facility include terms and conditions that limit the incurrence of
additional borrowings and require that certain financial ratios be maintained at designated levels.

From January 1, 2018 through February 22, 2018, the Company made principal debt repayments of $63 million.

The company was in compliance with all covenants as of December 31, 2017 and is currently not aware of any events that
would cause non-compliance with any covenants in the future.

Summary of fiscal 2017 actions
The actions taken during fiscal 2017 resulted in net repayments of $454 million and included the following:

• Term Loan A borrowings of $688 million,
• Term Loan A debt principal payments of $9 million,
• Revolving Credit Facility borrowings of $275 million,
• Senior Note debt principal prepayments of $1.05 billion,
• Term Loan B debt principal prepayments of $493 million,
• Receivables financing facility borrowings of $145 million, and
• Receivables financing facility payments of $10 million.

Historically, significant portions of our cash inflows were generated by our operations. We currently expect this trend to
continue throughout 2018. We believe that our existing cash and investments, borrowings available under our Revolving Credit
Facility and receivables financing facility, together with cash flows expected from operations will be sufficient to meet expected
operating, capital expenditure and debt obligation requirements for the next 12 months.

Certain domestic subsidiaries of the Company (the “Guarantor Subsidiaries”) guarantee the Term Loans and the Revolving
Credit Facility on a senior basis: For the period ended December 31, 2017, the non-Guarantor Subsidiaries would have
(a) accounted for 57.3% of our total revenue and (b) held 86.9% or $4.3 billion of our total assets and approximately 87.6% or
$3.0 billion of our total liabilities including trade payables but excluding intercompany liabilities.

As of December 31, 2017, the Company’s cash position of $62 million included foreign cash and investments of $54 million.

Management believes that existing capital resources and funds generated from operations are sufficient to finance anticipated
capital requirements.

Contractual Obligations
Zebra’s contractual obligations as of December 31, 2017 were (in millions):

Payments due by period

Total

Less than 1
year

1-3 years

3-5 years

More than 5
years

Operating lease obligations
Deferred compensation liability
Long-term debt – principal payments
Interest payments
Payments on interest rate swaps
Purchase obligations

Total

138 $
15
2,249
286
46
357
3,091 $

32 $
—
51
80
8
357
528 $

47 $
—
230
153
24
—
454 $

23 $
—
1,968
53
14
—
2,058 $

36
15
—
—
—
—
51

Purchase obligations are for purchases made in the normal course of business to meet operational requirements, primarily raw
materials and finished goods.

Uncertain tax benefits of $51 million have been excluded from the above table. $20 million is a current liability as of December
31, 2017. The remainder is classified as long-term in nature as we cannot make a reasonably reliable estimate of the period of
cash settlement with the respective taxing authority. See Note 12, Income Taxes in the Notes to Consolidated Financial
Statements included in this Form 10-K for further information.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the sensitivity of income to changes in interest rates, commodity prices, and foreign currency changes. Zebra is
exposed to the following types of market risk: interest rates and foreign currency.

Interest Rate Risk
We are exposed to interest rate volatility with regard to existing debt issuances. Primary exposures include LIBOR rates. From
time to time, we use interest rate derivative contracts including interest rate swaps to hedge our exposure to the impact of
interest rate changes on existing debt and future debt issuances to reduce the volatility of our financing costs and, based on
current and projected market conditions, achieve a desired proportion of fixed versus floating-rate debt. Generally, under these
swaps, we agree with a counterparty to exchange floating-rate for fixed-rate interest amounts with an agreed upon notional
principal amount.

As of December 31, 2017, we had $2.2 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 on the various debt instruments
we hold would increase or decrease the annual interest expense we recognize and the cash we pay for interest expense by
approximately $22 million. This amount excludes the impact of any associated derivative contracts. To mitigate this risk, we
entered into forward interest rate swaps to hedge the interest rate risk associated with the variable interest payments on our debt
facilities. Refer to Note 7, Derivative Instruments in the Notes to Consolidated Financial Statements included in this Form 10-K
for further discussion of hedging activities.

Foreign Exchange Risk
We provide products and services in over 180 countries throughout the world and, therefore, at times are exposed to risk based
on movements in foreign exchange rates. On occasion, we invoice customers in their local currency and have a resulting foreign
currency denominated revenue transaction and accounts receivable. We also purchase certain raw materials and other items in
foreign currencies. We manage these risks using derivative financial instruments. See Note 7, Derivative Instruments in the
Notes to the Consolidated Financial Statements included in this Form 10-K for further discussions of hedging activities.

We are exposed to fluctuations in foreign currency exchange rates, primarily with respect to the Euro, British Pound Sterling,
Czech koruna, Brazilian real, Canadian dollar, Australian dollar, Singapore dollar, Japanese yen, and Swedish krona. In general,
we are a net receiver of foreign currencies and therefore benefit from a weakening of the U.S. dollar and are adversely affected
by a strengthening of the U.S. dollar. A 1% increase or decrease in exchange rates relative to the U.S. dollar would increase or
decrease our pre-tax income by approximately $2 million. This amount excludes the impact of any associated derivative
contracts, which would largely offset this foreign exchange exposure. We enter into foreign currency forward contracts to hedge
against the effect of exchange rate fluctuations on the Consolidated Balance Sheets of certain entities with exposures
denominated in foreign currencies. These transactions are typically three months in maturity and are not designated as hedges.

Item 8.

Financial Statements and Supplementary Data

The financial statements and schedules of Zebra are annexed to this report as pages F-2 through F-37. An index to such
materials appears on page F-1.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures

Not applicable.

Item 9A.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the
period covered by this Form 10-K. The evaluation was conducted under the supervision of our Disclosure Committee, and with
the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were
effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Form 10-K was recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) information
required to be disclosed by us in our reports that we file or furnish under the Exchange Act is accumulated and communicated
to our management, including our principal executive and principal financial officers, or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017.
In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control-Integrated Framework as released in 2013. Based on this assessment and those
criteria, our management believes that, as of December 31, 2017, our internal control over financial reporting is effective.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on Zebra’s internal
control over financial reporting. Ernst & Young LLP’s report is included on page 37 of this report on Form 10-K.

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

Inherent Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure
controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of
fraud, if any, within Zebra have been prevented or detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be

circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Report of Independent Registered Public Accounting Firm

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

Opinion on Internal Control over Financial Reporting

We have audited Zebra Technologies Corporation’s internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (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, 2017,
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, 2017 and 2016, the
related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of
the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in Index
Item 15 and our report dated February 22, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and

expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/Ernst & Young LLP

Chicago, Illinois

February 22, 2018

Item 9B.

Other Information

Not applicable.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

We have adopted a Code of Ethics for Senior Financial Officers 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 – Corporate Governance 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 site

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

Item 11.

Executive Compensation

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

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

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

Item 13.

Certain Relationships and Related Transactions, and Director Independence

The information in response to this item is incorporated by reference from the Proxy Statement section entitled “Corporate
Governance.”

Item 14.

Principal Accounting Fees and Services

The information in response to this item is incorporated by reference from the Proxy Statement section entitled “Fees of
Independent Auditors.”

PART IV

Item 15.

Exhibits, Financial Statements and Schedule

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

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

SIGNATURES

ZEBRA TECHNOLOGIES CORPORATION
By: /s/ Anders Gustafsson
Anders Gustafsson
Chief Executive Officer

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

Signature

/s/ Anders Gustafsson

Anders Gustafsson

/s/ Olivier Leonetti

Olivier Leonetti

/s/ Colleen O’Sullivan

Colleen O’Sullivan

/s/ Michael A. Smith

Michael A. Smith

/s/ Andrew K. Ludwick

Andrew K. Ludwick

/s/ Ross W. Manire

Ross W. Manire

/s/ Richard L. Keyser

Richard L. Keyser

/s/ Janice M. Roberts

Janice M. Roberts

/s/ Chirantan J. Desai

Chirantan J. Desai

/s/ Frank B. Modruson

Frank B. Modruson

Title

Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial Officer)

Vice President, Chief Accounting Officer
(Principal Accounting Officer)

Director and Chairman of the Board of
Directors

Director

Date

February 22, 2018

[This page intentionally left blank]

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

Financial Statements

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Operations for the years ended December 31, 2017, 2016, and 2015
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016,
and 2015
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017, 2016, and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016, and 2015
Notes to Consolidated Financial Statements

Financial Statement Schedule

The following financial statement schedule is included herein:
Schedule II - Valuation and Qualifying Accounts

Page

F-2
F-3
F-4
F-5

F-6
F-7
F-8

F-39

All other financial statement schedules are omitted because they are not applicable or the required information is shown in the
consolidated financial statements or related notes.

F-1

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zebra Technologies Corporation (the “Company“) as of
December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial
statement schedule listed in Index Item 15 (collectively referred to as the “consolidated financial statements“). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2017, in conformity with U.S. generally accepted accounting principles.

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

Basis for Opinion

These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on
the Company‘s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

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

Chicago, Illinois
February 22, 2018

F-2

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)

December 31,

2017

2016

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, net
Inventories, net
Income tax receivable
Prepaid expenses and other current assets

Total Current assets

Property, plant and equipment, net
Goodwill
Other intangibles, net
Long-term deferred income taxes
Other long-term assets
Total Assets
Liabilities and Stockholders' Equity
Current liabilities:

Current portion of long-term debt
Accounts payable
Accrued liabilities
Deferred revenue
Income taxes payable

Total Current liabilities

Long-term debt
Long-term deferred income taxes
Long-term deferred revenue
Other long-term liabilities
Total Liabilities
Stockholders’ Equity:

Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued
Class A common stock, $.01 par value; authorized 150,000,0000 shares;
issued 72,151,857 shares
Additional paid-in capital
Treasury stock at cost, 18,915,762 and 19,267,269 shares at December 31,
2017 and December 31, 2016, respectively
Retained earnings
Accumulated other comprehensive loss

Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity

See accompanying Notes to Consolidated Financial Statements.

F-3

62 $
479
458
40
24
1,063
264
2,465
299
119
65
4,275 $

51 $
383
337
186
43
1,000
2,176
—
148
117
3,441

—

1
257

(620)
1,248
(52)
834
4,275 $

156
625
345
32
64
1,222
292
2,458
480
113
67
4,632

—
413
323
191
22

949
2,648
3
124
116
3,840

—

210

(614)

1,240
(45)
792
4,632

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)

Year Ended December 31,

2017

2016

2015

3,223 $
499

3,722

3,056 $
518
3,574

1,677
335

2,012
1,710

448
389
301
184
50
—
16

1,388
322

(1)
(227)
(6)

(234)
88
71

17 $

0.33 $
0.32 $

1,593
339
1,932
1,642

444
376
307
229
125
62
19
1,562
80

(5)
(193)
(11)

(209)
(129)
8
(137 ) $

(2.65 ) $
(2.65 ) $

53,021,761

51,579,112

3,131
519

3,650

1,629
377

2,006
1,644

494
394
283
251
145
—
40

1,607
37

(23)
(193)
(1)

(217)
(180)
(22)

(158)

(3.10)
(3.10)
50,996,297

53,688,832

51,579,112

50,996,297

Net sales

Net sales of tangible products
Revenue from services and software

Total Net sales
Cost of sales:

Cost of sales of tangible products
Cost of services and software

Total Cost of sales
Gross profit
Operating expenses:

Selling and marketing
Research and development
General and administrative
Amortization of intangible assets
Acquisition and integration costs
Impairment of goodwill and other intangibles
Exit and restructuring costs

Total Operating expenses
Operating income
Other expenses:

Foreign exchange loss
Interest expense, net
Other, net

Total Other expenses
Income (loss) before income taxes
Income tax expense (benefit)

Net income (loss)

Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic weighted average shares outstanding
Diluted weighted average and equivalent shares
outstanding

$
$

See accompanying Notes to Consolidated Financial Statements.

F-4

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)

Year Ended December 31,
2016

2015

2017

Net income (loss)

17 $

(137) $

(158)

Other comprehensive income (loss), net of tax:

Unrealized (loss) gain on anticipated sales hedging
transactions
Unrealized gain (loss) on forward interest rate swaps hedging
transactions

Foreign currency translation adjustment

(15)

—

(4)

(6)

(7)

(26)

Comprehensive income (loss)

10 $

(134) $

(197)

See accompanying Notes to Consolidated Financial Statements.

F-5

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except share data)

Balance at December 31, 2014

51,654,337 $

1 $

147 $

(634) $

1,535 $

(9) $

1,040

Class A
Common
Stock
Shares

Class A
Common
Stock
Amount

Additional
Paid-in
Capital

Treasury
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total

Issuance of treasury shares upon exercise of stock
options, purchases under stock purchase plan and
grants of restricted stock awards, net of cancellations

Shares withheld related to net share settlement

Issuance of warrants exercisable for 250,000 shares,
exercise price $89.34, expiration April 5, 2017

Additional tax benefit resulting from exercise of
options

Share-based compensation

Net loss

Unrealized loss anticipated sales hedging
transactions (net of income taxes)

Unrealized loss on forward interest rate swaps
hedging transactions (net of income taxes)

Foreign currency translation adjustment

646,395

(138,881)

—

(13)

—

Balance at December 31, 2015

52,161,851 $

1 $

194 $

(631) $

Issuance of treasury shares upon exercise of stock
options, purchases under stock purchase plan and
grants of restricted stock awards, net of cancellations

Shares withheld related to net share settlement

Additional tax benefit resulting from exercise of
options

Share-based compensation

Net loss

Unrealized loss on anticipated sales hedging
transactions (net of income taxes)

Unrealized gain on forward interest rate swaps
hedging transactions (net of income taxes)

Foreign currency translation adjustment

817,943

(95,206)

—

(14)

—

(8)

—

Balance at December 31, 2016

52,884,588 $

1 $

210 $

(614) $

Cumulative effect of change in accounting principle

—

Issuance of treasury shares upon exercise of stock
options, purchases under stock purchase plan and
grants of restricted stock awards, net of cancellations

Shares withheld related to net share settlement

410,239

(58,732)

Share-based compensation

Net income

Unrealized loss on anticipated sales hedging
transactions (net of income taxes)

Unrealized gain on forward interest rate swaps
hedging transactions (net of income taxes)

Foreign currency translation adjustment

—

(6)

—

Balance at December 31, 2017

53,236,095 $

1 $

257 $

(620) $

See accompanying Notes to Consolidated Financial Statements.

—
—

—

—
—
(158 )

—

—
—
1,377 $

—
—

—
—
(137 )

—

—
—
1,240 $
(9 )

—
—
—
17

—

—
—
1,248 $

F-6

—

(6)

(7)

(26)

(48) $

—

(4)

(45) $

—

(13)

(158)

(6)

(7)

(26)

893

(8)

(137)

—

(4)

792

(9)

(6)

(15)

(52) $

834

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

Year Ended December 31,
2016

2015

2017

Cash flows from operating activities:

Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:

17 $

(137) $

(158)

Depreciation and amortization
Impairment of goodwill, intangibles and other assets
Amortization of debt issuance costs and discounts
Share-based compensation
Debt extinguishment costs
Deferred income taxes
Unrealized gain on forward interest rate swaps
Other, net
Changes in operating assets and liabilities:

Accounts receivable, net
Inventories, net
Other assets
Accounts payable
Accrued liabilities
Deferred revenue
Income taxes
Other operating activities

Cash flows from investing activities:

Net cash provided by operating activities

Acquisition of businesses, net of cash acquired
Purchases of property, plant and equipment
Proceeds from the sale of a business
Proceeds from the sale of long-term investments
Purchases of long-term investments
Purchases of investments and marketable securities
Proceeds from sales of investments and marketable securities

Net cash used in investing activities

Cash flows from financing activities:

Payments of debt issuance costs and discounts
Proceeds from issuance of long-term debt
Payments of long term-debt
Payments of debt extinguishment costs
Proceeds from exercise of stock options and stock purchase plan purchases
Taxes paid related to net share settlement of equity awards

Net cash used in financing activities

Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:

Income taxes paid
Interest paid

See accompanying Notes to Consolidated Financial Statements.

F-7

263
1
38
35
65
(9)
(2)
4

161
(110)
16
(40)
4
17
26
(8)
478

—
(50)
—
—
(1)
—
—
(51)

(5)
1,371
(1,825)
(65)
12
(5)
(517)
(4)
(94)
156
62 $

65 $
195 $

$
$

304
69
23
27
—
(44)
—
3

34
34
7
125
(29)
7
(41)
(2)
380

—
(77)
39
—
(1)
—
—
(39)

(5)
102
(484)
—
11
(8)
(384)
7
(36)
192
156 $

81 $
180 $

320
—
16
31
—
(142)
(4)
14

2
(13)
(7)
(21)
(5)
16
47
26
122

(52)
(122)
—
3
(1)
(1)
25
(148)

—
—
(165)
—
17
(13)
(161)
(15)
(202)
394
192

38
183

ZEBRA TECHNOLOGIES CORPORATIONAND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Description of Business
Zebra Technologies Corporation and its wholly-owned subsidiaries (“Zebra” or the “Company”) is a global leader providing
innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry.
We design, manufacture, and sell a broad range of products that capture and move data. We also provide a full range of
services, including maintenance, technical support, repair, and managed services, including cloud-based subscriptions. End-
users of our products and services include those in retail and e-commerce, transportation and logistics, manufacturing,
healthcare, hospitality, warehouse and distribution, energy and utilities, and education industries around the world. We provide
our products and services globally through a direct sales force and an extensive network of channel partners.

Note 2 Summary of Significant Accounting Policies
Principles of Consolidation. These accompanying consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States and include the accounts of Zebra and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Calendar. Zebra operates on a 4 week/4 week/5 week fiscal quarter, and each fiscal quarter ends on a Saturday. The
fiscal year always begins on January 1 and ends on December 31. This fiscal calendar results in some fiscal quarters being
either greater than or less than 13 weeks, depending on the days of the week on which those dates fall. During the 2017 fiscal
year, our quarter end dates were April 1, July 1, September 30, and December 31.

Use of Estimates. These consolidated financial statements were prepared using estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of estimates
include: cash flow projections and other assumptions included in our annual goodwill impairment test; loss contingencies;
product warranties; useful lives of our tangible and intangible assets; allowances for doubtful accounts; the recognition and
measurement of income tax assets and liabilities; and share-based compensation forfeiture rates. The Company bases its
estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the
circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents. Cash consists primarily of deposits with banks. In addition, the Company considers highly liquid
short-term investments with original maturities of less than three months to be cash equivalents. These highly liquid short-term
investments are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk
of a change in value because of changes in interest rates.

Included in the Company’s Cash and cash equivalents are amounts held by foreign subsidiaries. The Company had $54 million
and $98 million of foreign cash and cash equivalents included in the Company’s total cash positions of $62 million and $156
million as of December 31, 2017 and 2016, respectively.

Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable consist primarily of amounts due to us from
our customers in the course of normal business activities. Collateral on trade accounts receivable is generally not required. The
Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable. The allowance is based
on our assessment of known delinquent accounts. Accounts are written off against the allowance account when they are
determined to be no longer collectible. During 2017, the Company initiated a receivables financing facility of up to $180
million. See Note 8, Long-Term Debt for further information.

Inventories. Inventories are stated at the lower of a moving-average cost (which approximates cost on a first-in, first-out basis)
and net realizable value. Manufactured inventory cost includes materials, labor, and manufacturing overhead. Purchased
inventory cost also includes internal purchasing overhead costs.

F-8

Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values. Inventory provisions are
based on forecasted demand, experience with specific customers, the age and nature of the inventory, and the ability to
redistribute inventory to other programs or to rework into other consumable inventory.

The components of Inventories, net are as follows (in millions):

Raw material
Work in process
Finished goods

Inventories, net

December 31,

2017

2016

116 $
1
341
458 $

111
1
233
345

Property, Plant and Equipment. Property, plant and equipment is stated at cost. Depreciation is computed primarily using the
straight-line method over the estimated useful lives of the various classes of property, plant and equipment, which are 30 years
for buildings and range from 3 to 10 years for all other asset categories. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or estimated useful life of the asset.

Property, plant and equipment, net is comprised of the following (in millions):

Buildings
Land
Machinery and equipment
Furniture and office equipment
Software and computer equipment
Leasehold improvements
Projects in progress

Less accumulated depreciation

Property, plant and equipment, net

December 31,

2017

2016

54
8
233
19
235
69
23
641
(377)
264

51
10
226
15
197
64
35
598
(306)
292

Depreciation expense was $79 million, $75 million and $69 million for the periods ended December 31, 2017, 2016 and 2015,
respectively.

Income Taxes. The Company accounts for income taxes under the liability method in accordance with Accounting Standards
Codification (“ASC”) 740, Income Taxes. Accordingly, deferred income taxes are provided for the future tax consequences
attributable to differences between the carrying amounts of assets and liabilities for financial reporting and income tax
purposes. Deferred tax assets and liabilities are measured using tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. A valuation allowance is established when necessary to reduce deferred tax
assets to the amount that is more likely than not to be realized. The Company recognizes the benefit of tax positions when it is
more likely than not to be sustained on its technical merits. The Company recognizes interest and penalties related to income
tax matters as part of income tax expense. The Company has elected consolidated tax filings in certain of its jurisdictions which
may allow the group to offset one member’s income with losses of other members in the current period and on a carryover
basis. The Company classifies its balance sheet tax accounts adopting a jurisdictional netting principle for those countries
where a consolidated tax return election is in place.

The Tax Cut and Jobs Act (“TCJA” or “the Act”) enacted on December 22, 2017 contains provisions related to the taxation of
certain foreign earnings under the Global Intangible Low-Taxed Income (“GILTI”) regime which is effective for tax years
beginning on or after January 1, 2018. Under guidance issued by the Financial Accounting Standards Board on January 10,
2018, companies must account for the impact of the GILTI tax as either a temporary difference in the book and tax basis of
assets giving rise to the GILTI income, net of a foreign tax credit, or as a charge to tax expense in the year GILTI income is

F-9

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

The effects of changes in tax rates and laws on deferred tax balances are recorded as a component of tax expense related to
continuing operations for the period in which the law was enacted, even if the assets and liabilities related to items of
accumulated other comprehensive income (“AOCI”). In other words, backward tracing of the income tax effects of items
originally recognized through AOCI is prohibited. On February 7, 2018, the Financial Accounting Standards Board issued
guidance requiring the reclassification to retained earnings of tax effects stranded in accumulated AOCI due to tax reform. The
guidance requires that these changes be effective with fiscal years beginning on or after December 15, 2018 but allows
companies to early adopt the provision. The Company plans to adopt this provision with its fiscal year beginning January 1,
2018.

Goodwill. Goodwill is not amortized but is evaluated for impairment annually, or more frequently if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. If a
quantitative assessment is completed as part of our impairment analysis for a reporting unit, we may engage a third-party
appraisal firm to assist in the determination of estimated fair value for each reporting unit. This determination includes
estimating the fair value using both the income and market approaches. The income approach requires management to estimate
a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated
future cash flows and discount rates. The market approach estimates fair value using comparable marketplace fair value data
from within a comparable industry grouping. The fair value of the reporting unit is compared to the carrying amount of the
reporting unit. If a reporting unit is considered impaired, the impairment is recognized in the amount by which the carrying
amount exceeds the fair value of the reporting unit.

The determination of the fair value of the reporting units and the allocation of that value to individual assets and liabilities
within those reporting units requires us to make significant estimates and assumptions. These estimates and assumptions
primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for
acquisitions in the industries in which we compete; the discount rates; terminal growth rates; and forecasts of revenue,
operating income, depreciation and amortization and capital expenditures. The allocation requires several analyses to determine
the fair value of assets and liabilities including, among other things, customer relationships and trade names. Although we
believe our estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent
uncertainty involved in making such estimates.

Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on
either the fair value of the reporting units, the amount of any goodwill impairment charge, or both.

We also compare the sum of the estimated fair values of the reporting units to the Company’s total value as implied by the
market value of the Company’s securities. This comparison indicated that, in total, our assumptions and estimates were
reasonable. However, future declines in the overall market value of the Company’s securities may indicate that the fair value of
one or more reporting units has declined below its carrying value.

One measure of the sensitivity of the amount of goodwill impairment charges to key assumptions is the amount by which each
reporting unit “passed” (fair value exceeds the carrying amount) or “failed” (the carrying amount exceeds fair value) the first
step of the goodwill impairment test. See Note 4, Goodwill and Other Intangibles, net, for additional information.

Other Intangibles. Other intangible assets capitalized consist primarily of current technology, customer relationships, trade
names, unpatented technology, and patents and patent rights. These assets are recorded at cost and amortized on a straight-line
basis over the asset’s useful life which range from 3 years to 15 years.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of. The Company accounts for long-lived assets in
accordance with the provisions of ASC 360, Property, Plant and Equipment. The statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to the sum of the undiscounted cash flows expected to result from the use and the eventual
disposition of the asset. If such assets are impaired, the impairment to be recognized is measured by the amount by which the

F-10

carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.

Cost Method Investments. The Company’s long-term investments are accounted for using the cost method. These investments
are primarily in venture capital backed technology companies, where the Company's ownership interest is less than 20% of
each investee. Under the cost method of accounting, investments are carried at cost and are adjusted only for other-than-
temporary declines in fair value, certain distributions and additional investments. The Company held cost method investments
in the amount of $25 million as of December 31, 2017 and 2016. These investments are included in Other long-term assets on
the Consolidated Balance Sheets. The Company recognized impairments of $1 million during fiscal 2017 which were recorded
within Other expenses in the Consolidated Statements of Operations. There were $7 million of impairments to cost method
investments in fiscal 2016 and no impairments in fiscal 2015.

Revenue Recognition. Revenue includes sales of hardware, supplies and services (including repair services and product
maintenance service contracts, which typically occur over time, and professional services, which typically occur in the early
stages of a project). We enter into revenue arrangements that may consist of multiple deliverables of our hardware products and
services due to the needs of our customers. For these type of revenue arrangements, we apply the guidance in ASC 605,
Revenue Recognition to identify the separate units of accounting by determining whether the delivered items have value to the
customer on a standalone basis. Generally, there is no right of return for the hardware we sell. Allocation of arrangement
consideration to repair services, product maintenance services, and extended warranty is equal to the stated contractual rate for
such services, in accordance with the guidance in ASC 605-20. We also follow the accounting principles that establish a
hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific
objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of the selling
price (“BESP”). Generally, our agreements contain termination provisions whereby we are entitled to payment for delivered
equipment and services rendered through the date of the termination. Some of our agreements may also contain cancellation
provisions that in certain cases result in customer penalties. The Company recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred and title has passed to the customer, which typically happens at the point of shipment
provided that no significant obligations remain, the price is fixed and determinable and collectability of the sales price is
reasonably assured. For hardware sales, in addition to the criteria discussed above, revenue recognition incorporates allowances
for discounts, price protection, returns and customer incentives that can be reasonably estimated. In addition to cooperative
marketing and other incentive programs, the Company has arrangements with some distributors, which allow for price
protection and limited rights of return, generally through stock rotation programs. Under the price protection programs, the
Company gives distributors credits for the difference between the original price paid and the Company’s then current price.
Under the stock rotation programs, distributors are able to exchange certain products based on the number of qualified
purchases made during the period. We monitor and track these programs and record a provision for future payments or credits
granted as reductions of revenue based on historical experience. Recorded revenues are reduced by these allowances. The
Company enters into product maintenance and support agreements; revenues are deferred and then recognized ratably over the
service period and the cost of providing these services is expensed as incurred. The Company includes shipping and handling
charges billed to customers as revenue when the product ships; any costs incurred related to these services are included in cost
of sales. Taxing authorities may assess tax on the Company based on the gross receipts from customers, referred to as indirect
taxes. The Company’s policy is to record indirect taxes as a short-term liability and not as a component of gross revenue.

Research and Development Costs. Research and development costs (“R&D”) are expensed as incurred. These costs include:

• Salaries, benefits, and other R&D personnel related costs,
• Consulting and other outside services used in the R&D process,
• Engineering supplies,
• Engineering related information systems costs, and
• Allocation of building and related costs.

Advertising. Advertising is expensed as incurred. Advertising costs totaled $18 million, $18 million and $22 million for the
years ended December 31, 2017, 2016 and 2015, respectively.

Warranty. The Company generally provides warranty coverage of 1 year on mobile computers, printers and batteries. Advanced
data capture products are warrantied from 1 to 5 years, depending on the product. Thermal printheads are warrantied for 6

F-11

months and battery-based products, such as location tags, are covered by a 90-day warranty. A provision for warranty expense
is adjusted quarterly based on historical warranty experience.

The following table is a summary of the Company’s accrued warranty obligation (in millions):

Warranty reserve
Balance at the beginning of the year
Warranty expense
Warranty payments
Balance at the end of the year

Year Ended December 31,
2016

2015

2017

21 $
28
(31)
18 $

22 $
31
(32)
21 $

25
30
(33)
22

Fair Value of Financial Instruments. Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Our financial assets and liabilities that require
recognition under the accounting guidance generally include our available-for-sale investments, employee deferred
compensation plan investments, foreign currency derivatives, and interest rate swaps. In accordance with ASC 815, Derivatives
and Hedging, we recognize derivative instruments and hedging activities as either assets or liabilities on the Consolidated
Balance Sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for
depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. See Note 7, Derivative
Instruments for additional information on our derivatives and hedging activities.

The Company has foreign currency forwards to hedge certain foreign currency exposures and interest rate swaps to hedge a
portion of the variability in future cash flows on debt. We use broker quotations or market transactions, in either the listed or
over-the-counter markets to value our foreign currency exchange contracts and relevant observable market inputs at quoted
intervals, such as forward yield curves and the Company’s own credit risk to value our interest rate swaps.

The Company’s investments in marketable debt securities are classified as available-for-sale except for securities held in the
Company’s deferred compensation plans, which are considered to be trading securities. In general, we use quoted prices in
active markets for identical assets to determine fair value. If active markets for identical assets are not available to determine
fair value, then we use quoted prices for similar assets or inputs that are observable either directly or indirectly.

The carrying amounts of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-
term nature of these financial instruments. See Note 6, Fair Value Measurements for financial assets and liabilities carried at
fair value.

Share-Based Compensation. At December 31, 2017, the Company had a share-based compensation plan and an employee stock
purchase plan under which shares of our common stock were available for future grants and sales, and which are described
more fully in Note 11, Share-Based Compensation. We account for these plans in accordance with ASC 505, Equity and ASC
718, Compensation - Stock Compensation. The Company recognizes compensation costs using the straight-line method over the
vesting period upon grant of up to 4 years, net of estimated forfeitures.

The compensation expense and the related income tax benefit for share-based compensation were included in the Consolidated
Statements of Operations as follows (in millions):

Compensation costs and related income tax benefit
Cost of sales
Selling and marketing
Research and development
General and administration
Total compensation expense
Income tax benefit

Year Ended December 31,
2016

2015

2017

$
$

3 $
8
11
16
38 $
11 $

2 $
6
9
11
28 $
9 $

3
8
8
14
33
11

F-12

Foreign Currency Translation. The balance sheet accounts of the Company’s non-U.S. subsidiaries, those not designated as
U.S. dollar functional currency, are translated into U.S. dollars using the year-end exchange rate, and statement of earnings
items are translated using the average exchange rate for the year. The resulting translation gains or losses are recorded in
Stockholders’ equity as a cumulative translation adjustment, which is a component of Accumulated other comprehensive
income loss within the Consolidated Balance Sheets.

Acquisitions. We account for acquired businesses using the acquisition method of accounting. This method requires that the
purchase price be allocated to the identifiable assets acquired and liabilities assumed at their estimated fair values. The excess
of the purchase price over the identifiable assets acquired and liabilities assumed is recorded as goodwill.

The estimates used to determine the fair value of long-lived assets, such as intangible assets, can be complex and require
significant judgments. We use information available to us to make fair value determinations and engage independent valuation
specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets. While we use our
best estimates and assumptions as a part of the purchase price allocation process, our estimates are inherently uncertain and
subject to refinement. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash
flows from customer relationships, customer attrition rates, and discount rates. Management’s estimates of fair value are based
upon assumptions believed to be reasonable, but due to the inherent uncertainty during the measurement period, which may be
up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the
corresponding offset to goodwill.

Recently Adopted Accounting Pronouncement

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-
04, “Intangibles - Goodwill and Other (Topic 350).” The amendments of this ASU are effective for annual or any interim
goodwill impairment tests beginning after December 15, 2019, and early adoption is permitted for annual and interim goodwill
impairment testing dates after January 1, 2017. The amendments in this ASU simplify goodwill impairment testing by
eliminating the Step 2 procedure to determine the implied fair value of goodwill of a reporting unit which fails the Step 1
procedure. The implication of this update results in the amount by which a carrying amount exceeds the reporting unit’s fair
value to be recognized as an impairment charge in the interim or annual period identified. The standard is effective for public
companies in the first calendar quarter of 2020 with early adoption permitted on a prospective basis. The Company has adopted
this ASU on a prospective basis effective as of January 1, 2017 and has concluded that this pronouncement has no impact on its
consolidated financial statements or existing accounting policies.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805)- Clarifying the Definition of a Business,”
which clarifies the definition of a business when considering whether transactions should be accounted for as acquisitions (or
disposals) of assets or businesses. The clarified definition requires that when substantially all of the fair value of the gross assets
acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a
business. This definition reduces the number of transactions that need to be further evaluated as to be considered a business, an
asset must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to
create output. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2017. This
ASU should be applied prospectively on or after the effective date. No disclosures are required at transition. The Company
adopted this ASU on January 1, 2017, on a prospective basis, and there was no impact on the Company’s consolidated financial
statements or existing accounting policies.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than
Inventory.” This ASU allows for an entity to recognize the income tax consequences of an intra-entity transfer of an asset other
than inventory when the transfer occurs. Consequently, the amendments in this ASU eliminate the exception for an intra-entity
transfer of an asset other than inventory. The standard will be effective for public companies in the first calendar quarter of
2018, with early adoption permitted and on a modified retrospective basis as of the beginning of the period of adoption. The
Company adopted this ASU on January 1, 2017. The Company recorded a reduction to retained earnings for the prior period
catch-up of approximately $9 million for the unamortized prepaid tax on an intra-entity transfer of workforce in place. In the
first quarter of 2017, the Company also recorded a $12 million benefit related to an intercompany transfer of intellectual

F-13

property as a result of newly adopted accounting standards. The Company recognized no additional tax benefit in the fiscal year
ended December 31, 2017.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash
Receipts and Cash Payments.” This ASU provides clarification guidance on eight specific cash flow presentation issues that
have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs,
contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and
cash receipts from payments on beneficial interests in securitization transactions. The amendments in this ASU where
practicable will be applied retrospectively. The Company has retrospectively adopted this ASU during the third quarter 2017.
The Company has recognized $4 million in the current year as financing activities and reclassified $5 million in the prior year
of cash paid for debt issuance costs and discounts on the Consolidated Statements of Cash Flows from operating activities to
financing activities. There was no impact to the Consolidated Statements of Cash Flow in 2015.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting.” This ASU requires that entities recognize excess tax benefits and deficiencies related to
employee share-based payment transactions as income tax expense and benefit versus additional paid in capital. This ASU also
eliminates the requirement to reclassify excess tax benefits and deficiencies from operating activities to financing activities
within the Consolidated Statements of Cash Flows. The Company has adopted recognition of excess tax benefits and
deficiencies within income tax expense effective January 1, 2017 on a prospective basis. The Company has adopted
presentation of excess tax benefits and deficiencies within operating activities in the Consolidated Statements of Cash Flows
effective January 1, 2017 on a retrospective basis. The Company recognized $7 million as operating activities in the current
year and reclassified excess tax benefits of $3 million, and $12 million on the Consolidated Statements of Cash Flows from
financing activities to operating activities for the years ended December 31, 2016 and 2015, respectively. The Company has
reflected a tax benefit of $7 million for the year ending December 31, 2017, as a discrete item within the Consolidated
Statements of Operations under the new ASU.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which
changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value
for entities that measure inventory using first-in, first-out (FIFO) or average cost. Net realizable value is defined as the
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation. The Company has adopted this ASU effective January 1, 2017 on a prospective basis. There are no material
impacts to the Company's consolidated financial statements or disclosures resulting from the adoption of this ASU.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Several ASUs have been
issued since the issuance of ASU 2014-09 which modify certain sections of ASU 2014-09, and are intended to promote a more
consistent interpretation and application of the principles outlined in the new standard. The core principle of the new standard is
that a company should recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the
consideration which the entity expects to receive in exchange for those goods or services. The new standard also requires that
certain costs to obtain a contract, which have generally been expensed as incurred under the current guidance, will now be
capitalized and amortized in a pattern consistent with the transfer to the customer of the goods or services to which the asset
relates.

We completed the assessment and implementation phases of the process to adopt ASU 2014-09. We also completed updating
our accounting policy around revenue recognition and evaluating new disclosure requirements. We will continue to implement
and enhance appropriate changes to our business processes, systems, and controls, as necessary, to support recognition and
disclosure under the new standard. The new disclosure requirements will change the content and presentation of the financial
statement footnotes.

As a result of applying the provisions of the new standard, certain of our agreements will have different timing of revenue
recognition as compared to ASC 605, Revenue Recognition. We will adopt this new ASU on January 1, 2018 using the

F-14

modified retrospective approach. The Company expects to record an increase to retained earnings on its Consolidated Balance
Sheets of approximately $17 million to $20 million in the first quarter of 2018 due to the cumulative impact of adopting ASU
2014-09. The increase to retained earnings will result from the initial capitalization of previously expensed services sales
commissions, the impact of revenue recognized for open service contracts sold with other products, and the impact of different
revenue recognition timing patterns for open customer contract arrangements initiated before January 1, 2018. Additionally,
new disclosures of disaggregated revenue information by reportable segment, as well as new disclosures of remaining
performance obligations will be included in the Company’s filings beginning with the first quarter of fiscal 2018.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326) -Measurement of Credit Losses
on Financial Instruments.” The new standard requires the measurement and recognition of expected credit losses for financial
assets held at amortized cost. It replaces the existing incurred loss impairment model with an expected loss methodology, which
will result in more timely recognition of credit losses. There are two transition methods available under the new standard
dependent upon the type of financial instrument, either cumulative effect or prospective. The standard will be effective for the
Company in the first quarter of 2020. Earlier adoption is permitted only for annual periods after December 15, 2018.
Management is currently assessing the impact of adoption on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Subtopic 842).” This ASU increases the transparency and
comparability of organizations by recognizing lease assets and liabilities on the Consolidated Balance Sheets and disclosing key
quantitative and qualitative information about leasing arrangements. The principal difference from previous guidance is that the
lease assets and lease liabilities arising from operating leases were not previously recognized in the Consolidated Balance
Sheets. The recognition, measurement, presentation, and cash flows arising from a lease by a lessee have not significantly
changed. This standard will be effective for the Company in the first quarter of 2019, with early adoption permitted. In
transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented
using a modified retrospective approach, which includes a number of optional practical expedients that entities may elect to
apply. Management is currently assessing the impact of adoption on its consolidated financial statements. The impact of this
ASU is non-cash in nature and will not affect the Company’s cash position.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 amends various aspects of the recognition,
measurement, presentation, and disclosure for financial instruments. This ASU requires updates to the presentation of other
comprehensive income resulting from a change in instrument-specific credit risk. This standard will be effective for the
Company in the first quarter of 2018. Early adoption is prohibited for those provisions that apply to the Company. Amendments
should be applied by means of cumulative effect adjustment to the Consolidated Balance Sheets as of the beginning of the fiscal
year of adoption. The amendments related to equity securities without readily determinable fair values including disclosure
requirements should be applied prospectively to equity investments that exist as of the date of adoption of the ASU. The
impacts of adoption primarily relate to presentation, and there are no material impacts to the Company's consolidated financial
statements or disclosures resulting from the adoption of this ASU.

Note 3 Business Combinations and Divestitures
Acquisitions
On October 27, 2014, the Company completed the Acquisition from Motorola Solutions Inc. (“MSI”) for a purchase price of
$3.45 billion. During the year ended December 31, 2015, the Company paid additional consideration of $52 million to MSI,
which included a $2 million opening cash adjustment and settlement of working capital adjustments. The Acquisition enables
the Company to further sharpen its strategic focus on providing mission critical Enterprise Asset Intelligence solutions for its
customers.

Divestitures
On September 13, 2016, the Company entered into an Asset Purchase Agreement with Extreme Networks, Inc. to dispose of the
Company’s wireless LAN (“WLAN”) business (“Divestiture Group”) for a gross purchase price of $55 million. On October 29,
2016, the Company completed the disposition of the Divestiture Group and recorded net proceeds of $39 million. In 2017, the
Company and Extreme Networks, Inc. finalized the net working capital amounts for the Divestiture Group. The finalized
amount did not differ materially from the original estimate.

F-15

The Company incurred a non-cash pre-tax charge related to the disposal group during the third quarter of 2016. This charge,
which totaled $62 million, consisted of impairments of goodwill for $32 million and other intangibles for $30 million and is
shown separately on the Consolidated Statements of Operations for the year ended December 31, 2016.

WLAN operating results are reported in the EVM segment through the closing date of the WLAN divestiture of October 28,
2016. Within the fiscal year ended December 31, 2016 Consolidated Statement of Operations, the Company generated revenue
and gross profit from these assets of $106 million and $47 million, respectively.

Note 4 Goodwill and Other Intangibles, net
The balances and changes in Other Intangibles, net are as follows (in millions):

Amortized intangible assets
Current technology
Trade names
Unpatented technology
Patents and patent rights
Customer relationships

Total

Amortization expense for the year ended December 31, 2017

Amortized intangible assets
Current technology
Trade names
Unpatented technology
Patent and patent rights
Customer relationships

Total

Amortization expense for the year ended December 31, 2016

Gross Carrying
Amount

December 31, 2017
Accumulated
Amortization

Net Carrying
Amount

24 $
41
242
235
481
1,023 $
$

(23) $
(41)
(205)
(215)
(240)
(724) $
184

1
—
37
20
241
299

Gross Carrying
Amount

December 31, 2016
Accumulated
Amortization

Net Carrying
Amount

24 $
40
241
238
478
1,021 $
$

(21) $
(40)
(146)
(161)
(173)
(541) $
229

3
—
95
77
305
480

Estimated amortization expense for future periods is as follows (in millions):

Amount

For the year ended December 31, 2018
For the year ended December 31, 2019
For the year ended December 31, 2020
For the year ended December 31, 2021
For the year ended December 31, 2022
Thereafter
Total

96
83
39
37
31
13
299

There was no impairment of Other Intangible assets recorded during fiscal 2017. Impairment of Other Intangible assets of $30
million was recorded during fiscal 2016 related to the wireless LAN business divestiture which is reflected within the EVM
segment.

Changes in the net carrying value amount of goodwill were as follows (in millions):

F-16

Goodwill as of December 31, 2015
Impairment charge – wireless LAN divestiture
Goodwill as of December 31, 2016
Foreign exchange impact
Goodwill as of December 31, 2017

Total

2,490
(32)
2,458
7
2,465

As of December 31, 2017, goodwill totaled $2.3 billion for the EVM reportable segment and $154 million for the AIT
reportable segment.

There was no goodwill impairment recorded in fiscal 2017. Goodwill impairment of $32 million was recorded during fiscal
2016 related to the wireless LAN business divestiture which is reflected within the EVM segment.

The Company completed its annual goodwill impairment testing during the fourth quarter 2017. For all of the Company’s
reporting units, the estimated fair values exceeded the carrying values ranging from approximately 20% to 90%.

Note 5 Costs Associated with Exit and Restructuring
In the first quarter 2017, the Company’s executive leadership approved an initiative to continue the Company’s efforts to
increase operational efficiency (the “Productivity Plan”). The Company expects the Productivity Plan to build upon the exit and
restructuring initiatives specific to the acquisition of the Enterprise business (“Enterprise”) from Motorola Solutions, Inc. in
October 2014, (the “Acquisition Plan”). Actions under the Productivity Plan include organizational design changes, process
improvements and automation. Implementation of actions identified through the Productivity Plan is expected to be
substantially complete by December 2018. Exit and restructuring costs are not included in the operating results of our segments
as they are not deemed to impact the specific segment measures as reviewed by our Chief Operating Decision Maker and
therefore are reported as a component of Corporate, eliminations. See Note 15, Segment Information and Geographic Data.

The Company incurred total exit and restructuring costs as follows (in millions):

Type of Cost

Severance, stay bonuses, and other employee-related
expenses
Obligations for future lease payments
Total

Cumulative
costs incurred
through
December 31,
2017

Costs incurred
for the year
ended
December 31,
2017

Cumulative
costs incurred
through
December 31,
2016

69 $

12
81 $

15
1
16 $

11
65

A rollforward of the exit and restructuring accruals is as follows (in millions):

F-17

Balance at beginning of year
Charged to earnings
Cash paid
WLAN Divestiture
Balance at the end of year

Year Ended December 31,
2016
2017

10 $
16
(18)
—
8 $

15
19
(22)
(2)
10

Liabilities related to exit and restructuring activities are included in the following reported financial statement line items in the
Company’s Consolidated Balance Sheets (in millions):

Accrued liabilities
Other long-term liabilities
Total liabilities related to exit and restructuring activities

Year Ended December 31,
2016
2017

6 $
2
8 $

7
3
10

Settlement of the specified long-term balance will be completed by October 2023 due to the remaining obligation of non-
cancellable lease payments associated with the exited facilities.

Note 6 Fair Value Measurements
Financial assets and liabilities are to be measured using inputs from three levels of the fair value hierarchy in accordance with
ASC Topic 820, Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a fair value
hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

Level 1:

Level 2:
Level 3:

Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. The
fair value hierarchy gives the highest priority to Level 1 inputs. (e.g. U.S. Treasuries and money market funds).

Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest
priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize
the use of unobservable inputs to the extent possible. In addition, the Company considers counterparty credit risk in the
assessment of fair value.

The Company’s financial assets and liabilities carried at fair value as of December 31, 2017, are classified below (in millions):

Level 1

Level 2

Level 3

Total

Assets:

Money market investments related to the deferred
compensation plan

Total Assets at fair value

Liabilities:

Forward interest rate swap contracts(2)
Foreign exchange contracts(1)
Liabilities related to the deferred compensation plan

Total Liabilities at fair value

15 $

— $
2
15

17 $

— $

18 $
9
—

27 $

$
—
— $

— $
—
—
— $

18
11
15

F-18

The Company’s financial assets and liabilities carried at fair value as of December 31, 2016, are classified below (in millions):

Level 1

Level 2

Level 3

Total

Assets:

Foreign exchange contracts(1)
Money market investments related to the deferred
compensation plan

Total Assets at fair value

Liabilities:

Forward interest rate swap contracts(2)
Liabilities related to the deferred compensation plan

Total Liabilities at fair value

11 $

22 $

— $
11

11 $

12 $

—

12 $

27 $
—

27 $

— $

—
— $

— $
—
— $

27
11

(1) The fair value of foreign exchange contracts is calculated as follows:

a. Fair value of a collar or put option contract associated with forecasted sales hedges is calculated using bid and ask

rates for similar contracts.

b. Fair value of regular forward contracts associated with forecasted sales hedges is calculated using the period-end

exchange rate adjusted for current forward points.

c. Fair value of hedges against net assets is calculated at the period end exchange rate adjusted for current forward
points unless the hedge has been traded but not settled at period end (Level 2). If this is the case, the fair value is
calculated at the rate at which the hedge is being settled (Level 1). As a result, transfers from Level 2 to Level 1 of
the fair value hierarchy totaled $2 million and $11 million as of December 31, 2017 and 2016, respectively.

(2) The fair value of forward interest rate swap contracts is based upon a valuation model that uses relevant observable market
inputs at the quoted intervals, such as forward yield curves, and may be adjusted for the Company’s own credit risk and the
interest rate swap terms. See gross balance reporting in Note 7, Derivative Instruments.

Note 7 Derivative Instruments
In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign
currency exchange rates and interest rates. The Company uses derivative instruments to manage its exposure to such risks and
may elect to designate certain derivatives as hedging instruments under ASC 815, Derivatives and Hedging. The Company
formally documents all relationships between designated hedging instruments and hedged items as well as its risk management
objectives and strategies for undertaking the hedge transactions. The Company does not hold or issue derivatives for trading or
speculative purposes.

F-19

In accordance with ASC 815, Derivative and Hedging, the Company recognizes derivative instruments as either assets or
liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its
derivative instruments (in millions):

Asset (Liability) Derivatives

Consolidated Balance Sheets
Classification

Fair Value

December 31

2017

2016

Derivative instruments designated as hedges:

Foreign exchange contracts

Foreign exchange contracts
Forward interest rate swaps
Forward interest rate swaps

Total derivative instruments designated as hedges

Derivative instruments not designated as hedges:

Foreign exchange contracts

Foreign exchange contracts
Forward interest rate swaps
Forward interest rate swaps

Total derivative instruments not designated as hedges

Total Net Derivative Liability

Prepaid expenses and other current
assets

Accrued liabilities
Accrued liabilities
Other long-term liabilities

Prepaid expenses and other current
assets
Accrued liabilities
Accrued liabilities
Other long-term liabilities

—

(9)
(2)
(8)

(19) $

—

(2)
(1)
(7)

(10)

(29) $

—
(3)
(13)

(4)

—
(1)
(10)

—

(4)

The following table presents the net (losses) gains from changes in fair values of derivatives that are not designated as hedges
(in millions):

Net (Loss) Gain Recognized in Income

Year Ended December 31,

Consolidated
Statements of
Operations
Classification

Foreign exchange (loss)
gain
Interest expense and
other, net

2017

2016

2015

(24) $

—

(22) $

Derivative instruments not designated as
hedges:

Foreign exchange contracts

Forward interest rate swaps

Total net (loss) gain from derivative
instruments not designated as hedges

Credit and Market Risk Management
Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market
risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit
risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The
Company’s credit risk counterparties are commercial banks with expertise in derivative financial instruments. The Company
evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by
considering reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the

F-20

creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of
the Company’s credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer.

Foreign Currency Exchange Risk Management
The Company conducts business on a multinational basis in a wide variety of foreign currencies. Exposure to market risk for
changes in foreign currency exchange rates arises from euro denominated external revenues, cross-border financing activities
between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company realizes its objective of
preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures
with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign exchange
forward and option contracts.

The Company manages the exchange rate risk of anticipated euro denominated sales by using put options, forward contracts,
and participating forwards, all of which typically mature within twelve months of execution. The Company designates these
derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other
comprehensive loss on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized
gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statement of Operations. Realized (losses) or
gains were $(8) million, $(7) million, and $14 million for the periods ending December 31, 2017, 2016 and 2015, respectively.
As of December 31, 2017 and 2016, the notional amounts of the Company’s foreign exchange cash flow hedges were €389
million and €341 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined they
are highly effective.

The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to its
Brazilian real, British pound, Canadian dollar, Czech koruna, euro, Australian dollar, Swedish krona, Japanese yen and
Singapore dollars denominated net assets. These forward contracts typically mature within three months after execution.
Monetary gains and losses on these forward contracts are recorded in income each quarter and are generally offset by the
foreign exchange gains and losses related to their net asset positions. The notional values of these outstanding contracts are as
follows:

Notional balance of outstanding contracts (in millions):

British Pound/US dollar
Euro/US dollar
British Pound/Euro
Canadian Dollar/US dollar
Czech Koruna/US dollar
Brazilian Real/US dollar
Malaysian Ringgit/US dollar
Australian Dollar/US dollar
Swedish Krona/US dollar
Japanese Yen/US dollar
Singapore Dollar/US dollar

Net fair value (liability) asset of outstanding contracts (in millions)

Interest Rate Risk Management

December 31,

2017

2016

£
€
£
$
Kč
R$
RM
$
kr
¥
S$
$

13 £
108 €
5 £
12 $
361 Kč
34 R$
— RM
55 $
13 kr
151 ¥
4 S$
(2) $

3
148
8
13
147
56
16
50
7
48
15
11

On July 26, 2017, the Company entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”),
which amended, modified and added provisions to the Company’s previous credit agreement, provided for an additional term
loan of $687.5 million (“Term Loan A”) and increased the existing revolving credit facility (“Revolving Credit Facility”) from
$250 million to $500 million. See Note 8, Long-Term Debt. Borrowings under the existing term loan (“Term Loan B”), the new
Term Loan A, the Revolving Credit Facility and the receivables financing facility bear interest at a variable rate plus an

F-21

applicable margin. As a result, the Company is exposed to market risk associated with the variable interest rate payments on
both term loans.

The Company manages its exposure to changes in interest rates by utilizing interest rate swaps to hedge this exposure and to
achieve a desired proportion of fixed versus floating-rate debt, based on current and projected market conditions. The
Company does not enter into derivative instruments for trading or speculative purposes.

In December 2017, the Company entered into an $800 million forward long-term interest rate swap agreement to lock into a
fixed LIBOR interest rate base for debt facilities subject to monthly interest payments, including Term Loan A, the Revolving
Credit Facility and receivables financing facility. Under the terms of the agreement, $800 million in variable-rate debt will be
swapped for a fixed interest rate with net settlement terms due effective in December 2018. The changes in fair value of these
swaps are not designated as hedges and are recognized immediately as Interest expense, net on the Consolidated Statement of
Operations.

The Company has a floating-to-fixed interest rate swap, which was designated as a cash flow hedge. This swap was terminated
and the hedge accounting treatment was discontinued in 2014. This swap has $4 million to be amortized through Accumulated
other comprehensive loss on the Consolidated Balance Sheets and into Interest expense, net on the Consolidated Statements of
Operations through June 2021, of which $2 million will be amortized during 2018.

The Company has three interest rate swaps previously entered into with the purpose of converting floating-to-fixed rate debt.
The first swap was entered into with a syndicated group of commercial banks for the purpose of moving from floating-to-fixed
rate debt. The second swap largely offsets the first swap, moving from fixed-to-floating rate debt. Both of these instruments are
not designated as hedges and the changes in fair value are recognized in Interest expense, net on the Consolidated Statements of
Operations. The third swap entered into was an interest rate swap converting floating-to-fixed rate debt which was designated
as a cash flow hedge and receives hedge accounting treatment. All three swaps have a termination date in June 2021.

The changes in fair value of the active swap designated as a cash flow hedge are recognized in Accumulated other
comprehensive loss on the Consolidated Balance Sheets, with any ineffectiveness immediately recognized in earnings. At
December 31, 2017, the Company estimated that approximately $4 million in losses on the forward interest rate swap
designated as a cash flow hedge will be reclassified from Accumulated other comprehensive loss on the Consolidated Balance
Sheets into earnings during the next four quarters.

The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under
certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. The
following table presents the gross fair values and related offsetting counterparty fair values as well as the net fair value amounts
for interest rates swaps at December 31, 2017 (in millions):

Gross Fair
Value

Offsetting
Counterparty
Fair Value

Net Fair
Value in the
Consolidated
Balance
Sheets

4 $
1
1
3
1
1
—
11 $

4
2
2
2
2
2
4
18

Counterparty A
Counterparty B
Counterparty C
Counterparty D
Counterparty E
Counterparty F
Counterparty G
Total

8 $
3
3
5
3
3
4
29 $

F-22

The notional amount of the designated interest rate swaps effective in each year of the cash flow hedge relationships does not
exceed the principal amount of the Term Loan, which is hedged. The Company has reviewed its interest rate swap hedges for
effectiveness and determined they are all 100% effective.

The interest rate swaps have the following notional amounts per year (in millions):

Year 2018
Year 2019
Year 2020
Year 2021
Remainder
Notional balance of outstanding contracts

Note 8 Long-Term Debt
The following table shows the carrying value of the Company’s debt (in millions):

Senior Notes
Term Loan B
Term Loan A
Revolving Credit Facility
Receivables Financing Facility

Total debt

Less: Debt issuance costs
Less: Unamortized discounts
Less: Current portion of long-term debt

Total long-term debt

544
1,344
1,072
1,072
800
4,832

December 31,

2017

2016

— $

1,160
679
275
135
2,249
(7)
(15)
(51)
2,176 $

1,050
1,653
—
—
—
2,703
(22)
(33)
—
2,648

At December 31, 2017, the future maturities of long-term debt, excluding debt discounts and issuance costs, consisted of the
following (in millions):

2018
2019
2020
2021
2022
Thereafter

Total future maturities of long-term debt

51
174
56
1,968
—
—

2,249

The estimated fair value of our long-term debt approximated $1.8 billion at December 31, 2017 and $2.8 billion at
December 31, 2016. These fair value amounts exclude the Revolving Credit Facility and receivables financing facility as these
facilities are stated at fair value. These fair value amounts represent the estimated value at which the Company’s lenders could
trade its debt within the financial markets and does not represent the settlement value of these long-term debt liabilities to the
Company. The fair value of the long-term debt will continue to vary each period based on fluctuations in market interest rates,
as well as changes to the Company’s credit ratings. This methodology resulted in a Level 2 classification in the fair value
hierarchy.

F-23

the existing Revolving Credit Facility from $250 million to $500 million. The Company incurred and capitalized debt issuance
costs of $5 million related to Term Loan A and the increased Revolving Credit Facility under the A&R Credit Agreement.

The A&R Credit Agreement also requires the Company to prepay certain amounts in the event of certain circumstances or
transactions, as defined in the A&R Credit Agreement. The Company may make prepayments against the Term Loans, in whole
or in part, without premium or penalty. Under Term Loan A, the Company made debt principal prepayments of $9 million
during the year ended December 31, 2017. Under Term Loan B, the Company made debt principal prepayments of $493 million
during the year ended December 31, 2017. The Term Loan A, unless amended, modified, or extended, will mature on July 27,
2021 (the “Term Loan A Maturity Date”). The Term Loan B, unless amended, modified, or extended, will mature on October
27, 2021 (the “Term Loan B Maturity Date”). To the extent not previously paid, the Term Loans are due and payable on,
respectively, the Term Loan A Maturity Date and Term Loan B Maturity Date. At such time, the Company will be required to
repay all outstanding principal, accrued and unpaid interest and other charges in accordance with the A&R Credit Agreement.
Assuming the Company makes no further optional debt principal prepayments on Term Loan A, the outstanding principal as of
the Term Loan A Maturity Date will be approximately $498 million. Assuming the Company makes no further optional debt
principal prepayments on the Term Loan B, the outstanding principal as of the Term Loan B Maturity Date will be
approximately $1.2 billion.

F-24

appropriate to apply. The Company recognized a $65 million make whole premium, which was recorded as Interest expense,
net on the Company’s Consolidated Statements of Operations. The Company also recognized accelerated debt issuance costs of
$16 million which were recorded as Interest expense, net on the Company’s Consolidated Statements of Operations.

Summary of fiscal 2017 actions
The actions taken during fiscal 2017 resulted in net repayments of $454 million and included the following:

• Term Loan A borrowings of $688 million,
• Term Loan A debt principal payments of $9 million ,
• Revolving Credit Facility borrowings of $275 million,
• Senior Note debt principal prepayments of $1.1 billion,
• Term Loan B debt principal prepayments of $493 million,
• Receivables financing facility borrowings of $145 million, and
• Receivables financing facility payments of $10 million.

The Company was in compliance with all covenants as of December 31, 2017 and is currently not aware of any events that
would cause non-compliance with any covenants in the future.

From January 1, 2018 through February 22, 2018, the Company made principal debt repayments of $63 million.

Note 9 Lease Commitments

F-25

The Company leases certain manufacturing facilities, distribution centers, and sales offices under non-cancellable operating
leases. Rent expense under these leases was $34 million, $39 million and $45 million at December 31, 2017, 2016 and 2015,
respectively. Lease terms range from 1 to 15 years with break periods specified in the lease agreements.

The Company’s minimum future lease obligations under all non-cancellable operating leases as of December 31, 2017 are as
follows (in millions):

2018
2019
2020
2021
2022
2023 and thereafter
Total minimum future lease obligations

Future
Minimum
Payments

32
27
20
13
10
36
138

Note 10 Contingencies
The Company is subject to a variety of investigations, claims, suits, and other legal proceedings that arise from time to time in
the ordinary course of business, including but not limited to, intellectual property, employment, tort, and breach of contract
matters. The Company currently believes that the outcomes of such proceedings, individually and in the aggregate, will not
have a material adverse impact on its business, cash flows, financial position, or results of operations. Any legal proceedings are
subject to inherent uncertainties, and the Company’s view of these matters and its potential effects may change in the future.

In connection with the acquisition of the Enterprise business from Motorola Solutions, Inc., the Company acquired Symbol
Technologies, Inc., a subsidiary of Motorola Solutions (“Symbol”). A putative federal class action lawsuit, Waring v. Symbol
Technologies, Inc., et al., was filed on August 16, 2005 against Symbol Technologies, Inc. and two of its former officers in the
United States District Court for the Eastern District of New York by Robert Waring. After the filing of the Waring action,
several additional purported class actions were filed against Symbol and the same former officers making substantially similar
allegations (collectively, the New Class Actions”). The Waring action and the New Class Actions were consolidated for all
purposes and on April 26, 2006, the Court appointed the Iron Workers Local # 580 Pension Fund as lead plaintiff and approved
its retention of lead counsel on behalf of the putative class. On August 30, 2006, the lead plaintiff filed a Consolidated
Amended Class Action Complaint (the “Amended Complaint”), and named additional former officers and directors of Symbol
as defendants. The lead plaintiff alleges that the defendants misrepresented the effectiveness of Symbol’s internal controls and
forecasting processes, and that, as a result, all of the defendants violated Section 10(b) of the Securities Exchange Act of 1934
(the “Exchange Act”) and the individual defendants violated Section 20(a) of the Exchange Act. The lead plaintiff alleges that it
was damaged by the decline in the price of Symbol’s stock following certain purported corrective disclosures and seeks
unspecified damages. The court has certified a class of investors that includes those that purchased Symbol common stock
between March 12, 2004 and August 1, 2005. The parties have completed fact and expert discovery and they have agreed to a
schedule for the filing of dispositive motions, which is subject to the Court’s approval. Although the Court has entered a
scheduling order that currently requires the filing of a proposed joint pre-trial order by February 28, 2018, the parties are in the
process of negotiating a proposed amendment to that order. The parties have scheduled a mediation for March 15, 2018. The
current lead Directors and Officers (“D&O”) insurer previously maintained a position of not agreeing to reimburse defense
costs incurred by the Company in connection with this matter. The current D&O insurer is now required to advance defense
costs incurred by the Company in connection with this matter.

The Company establishes an accrued liability for loss contingencies related to legal matters when the loss is both probable and
estimable. In addition, for some matters for which a loss is probable or reasonably possible, an estimate of the amount of loss or
range of loss is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result
from the application of non-monetary remedies. Currently, the Company is unable to reasonably estimate the amount of
reasonably possible losses for the above-mentioned matter.

F-26

Unclaimed Property Voluntary Disclosure Agreement (“VDA”) and Audits: The Company is currently under audit by several
states related to its reporting of unclaimed property liabilities. Additionally, in December 2017, the Company entered into a
VDA with the State of Delaware. The Company has engaged an outside consultant to facilitate the assessment of the estimated
liability that may result from these activities, but has not progressed sufficiently in its assessment to quantify and record a
contingency reserve for any unreported unclaimed property liabilities.

Note 11 Share-Based Compensation
The Zebra Technologies Corporation Long-Term Incentive Plan (“2015 Plan”), provides for incentive compensation to the
Company’s non-employee directors, officers and employees. The awards available under the 2015 Plan include Stock
Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”), Performance Share Awards (“PSAs”), Cash-settled Stock
Appreciation Rights (“CSRs”), Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”). Non-qualified stock
options were available under the 2006 Long-Term Incentive Plan (“2006 Plan”). Non-qualified stock options are no longer
granted under the 2015 Plan. A total of 4.0 million shares became available for delivery under the 2015 Plan.

A summary of the equity awards authorized and available for future grants under the 2015 Plan is as follows:

Available for future grants at December 31, 2016
Newly authorized options
Granted
Cancellation and forfeitures
Plan termination
Available for future grants at December 31, 2017

2,164,297
—
(726,862)
—
—
1,437,435

Pre-tax share-based compensation expense recognized in the Consolidated Statements of Operations was $38 million, $28
million and $33 million for the years ended December 31, 2017, 2016 and 2015, respectively. Tax related benefits of $11
million, $9 million and $11 million were also recognized for the years ended December 31, 2017, 2016 and 2015, respectively.
As of December 31, 2017, total unearned compensation costs related to the Company’s share-based compensation plans was
$50 million, which will be amortized over the weighted average remaining service period of 2.2 years.

Stock Appreciation Rights (“SARs”)
A summary of the Company’s SARs outstanding under the 2015 Plan is as follows:

2017

2016

2015

SARs

Outstanding at beginning of year
Granted
Exercised
Forfeited
Expired

Weighted-
Average
Exercise
Price

56.15 1,397,611 $
98.87
48.66
75.38
108.20

627,971
(160,946)
(115,215)
(8,635)

1,740,786 $
402,029
(250,326)
(66,550)
(7,948)

Outstanding at end of year

1,817,991 $

65.73 1,740,786 $

Exercisable at end of year

874,942 $

50.86

828,754 $

Weighted-
Average
Exercise
Price

332,159
(179,702)
(45,441)
(1,547)

56.78 1,292,142 $
52.13
35.37
65.74
88.65
56.15 1,397,611 $
736,075 $
45.14

Weighted-
Average
Exercise
Price

42.20
107.31
40.71
75.26
47.11

56.78

35.90

The fair value of share-based compensation is estimated on the date of grant using a binomial model. Volatility is based on an
average of the implied volatility in the open market and the annualized volatility of the Company’s stock price over its entire
stock history. Grants in the table below include SARs that will be settled in the Class A common stock or cash.

The following table shows the weighted-average assumptions used for grants of SARs, as well as the fair value of the grants
based on those assumptions:

F-27

Expected dividend yield
Forfeiture rate
Volatility
Risk free interest rate
Range of interest rates
Expected weighted-average life (in years)
Fair value of SARs granted
Weighted-average grant date fair value of SARs granted
(per underlying share)

2017

2016

2015

0%
9.37%
35.49%
1.77%
0.71%-2.41%
4.13
$12.01

0%
9.01%
43.14%
1.29%
0.25%-1.75%
5.33
$12.65

0%
10.24%
33.98%
1.53%
0.02% - 2.14%
5.32
$11.63

$29.86

$20.18

$35.00

The following table summarizes information about SARs outstanding at December 31, 2017:

Aggregate intrinsic value (in millions)
Weighted-average remaining contractual term (in years)

Outstanding

70 $
6.1

Exercisable
47
4.7

The intrinsic value for SARs exercised in fiscal 2017, 2016 and 2015 was $14 million, $6 million and $11 million, respectively.
The total fair value of SARs vested in fiscal 2017, 2016 and 2015 was $8 million, $3 million and $8 million, respectively.

Cash received from the exercise of SARs in fiscal 2017 was $12 million compared to $6 million in the prior year. The related
tax benefit realized was $3 million in fiscal 2017 compared to $1 million in the prior year.

The Company’s SARs are expensed over the vesting period of the related award, which is typically 4 years.

Restricted Stock Awards (“RSAs”) and Performance Share Awards (“PSAs”)
The Company’s restricted stock grants consist of time-vested restricted stock awards (“RSAs”) and performance vested
restricted stock awards (“PSAs”). The RSAs and PSAs hold voting rights and therefore are considered participating securities.
The outstanding RSAs and PSAs are included as part of the Company’s Class A Common Stock outstanding. The RSAs and
PSAs vest at each vesting date subject to restrictions such as continuous employment except in certain cases as set forth in each
stock agreement. The Company’s restricted stock awards are expensed over the vesting period of the related award, which is
typically 3 years. Some awards, including those granted annually to non-employee directors as an equity retainer fee, were
vested upon grant. PSAs targets are set based on certain Company-wide financial metrics. Compensation cost is calculated as
the market date fair value on grant date multiplied by the number of shares granted.

The Company also issues stock awards to nonemployee directors. Each director receives an equity grant of shares every year
during the month of May. The number of shares granted to each director is determined by dividing the value of the annual grant
by the price of a share of common stock. In fiscal 2017, there were 12,488 shares granted to nonemployee directors compared
to 25,088 shares and 9,194 shares in fiscal 2016 and 2015, respectively. New directors in any fiscal year earned a prorated
amount. The shares vest immediately upon the grant date.

A summary of information relative to the Company’s restricted stock awards is as follows:

F-28

2017

2016

2015

Restricted Stock Awards

Outstanding at beginning of year

622,814 $

Granted
Released
Forfeited

199,629
(165,846)
(27,955)

Outstanding at end of year

628,642 $

Weighted-
Average
Grant Date
Fair Value

70.19

98.90
75.90
72.81

77.70

Weighted-
Average
Grant Date
Fair Value

77.68
51.93
59.39
70.50
70.19

691,621 $

185,782
(253,801)
(57,155)

566,447 $

60.06

107.17
51.95
75.11

77.68

566,447 $

389,193
(275,229)
(57,597)

622,814 $

The fair value of each performance award granted includes assumptions around the Company’s performance goals. A summary
of information relative to the Company’s performance awards is as follows:

2017

2016

2015

Performance Share Awards

Outstanding at beginning of year

379,226 $

Granted
Released
Forfeited

79,423
(2,029)
(190,873)

Outstanding at end of year

265,747 $

Weighted-
Average
Grant Date
Fair Value

70.14

98.97
62.70
73.09

77.04

Weighted-
Average
Grant Date
Fair Value

73.40
51.01
46.58
75.73
70.14

374,180 $

106,411
(120,000)
(27,961)

332,630 $

61.53

75.77
38.67
73.45

73.40

332,630 $

172,024
(111,325)
(14,103)

379,226 $

Other Award Types
The Company also has cash-settled compensation awards including cash-settled Stock Appreciation Rights (“CSRs”),
Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”) (the “Awards”) that are expensed over the vesting
period of the related award, which is not more than 4 years. Compensation cost is calculated at the market date fair value on
grant date multiplied by the number of share-equivalents granted and the fair value is remeasured at the end of each reporting
period. Share-based liabilities paid for these awards was $1.5 million in 2017 compared to $0.8 million in 2016. Share-
equivalents issued under these programs totaled 45,781, 95,210 and 11,618 in fiscal 2017, 2016 and 2015, respectively.

Non-qualified Stock Options
A summary of the Company’s options outstanding under the 2006 Plan is as follows:

Non-qualified Options

2017

2016

2015

Weighted-
Average
Exercise Price

Outstanding at beginning of
year
Granted
Exercised
Forfeited
Expired

Outstanding at end of year

Exercisable at end of year

154,551

$
—
(132,905)
—
(5,941)
15,705 $
15,705 $

35.96

—
36.86
—
41.25

26.34

204,434 $

—
(47,393)
—
(2,490)

154,551 $

36.66

—
38.60
—
43.35

35.96

415,960

—
(209,976)
—
(1,550)
204,434 $
204,434 $

40.19

—
43.53
—
51.62

36.66

The following table summarizes information about non-qualified stock options outstanding at December 31, 2017:

F-29

Aggregate intrinsic value (in millions)
Weighted-average remaining contractual term (in years)

Outstanding

1 $

0.70

Exercisable
1
0.70

There were no non-qualified stock options issued during the twelve months ended December 31, 2017.

The intrinsic value for non-qualified options exercised in fiscal 2017, 2016 and 2015 was $8 million, $2 million and $10
million, respectively. There were no non-qualified options vested in fiscal 2017, 2016 and 2015.

Cash received from the exercise of non-qualified options in fiscal 2017 was $5 million compared to $2 million in the prior year.
The related tax benefit realized was less than $2 million in fiscal 2017 compared to $1 million in the prior year.

Employee Stock Purchase Plan
The Zebra Technologies Corporation 2011 Employee Stock Purchase Plan (“2011 Plan”), which became effective in fiscal
2011, permits eligible employees to purchase common stock at 95% of the fair market value at the date of purchase. Employees
may make purchases by cash or payroll deductions up to certain limits. The aggregate number of shares that may be purchased
under this plan is 1,500,000 shares. At December 31, 2017, 922,972 shares were available for future purchase.

Note 12 Income Taxes
The geographical sources of income (loss) before income taxes were as follows (in millions):

United States
Outside United States
Total

Year Ended December 31,
2016

2017

2015

(152) $
240
88 $

(120) $
(9)
(129) $

(288)
108
(180)

Income tax expense (benefit) consisted of the following (in millions):

Current:

Federal
State
Foreign
Total current
Deferred:

Federal
State
Foreign

Total deferred
Total expense (benefit)

2017

Year Ended December 31,
2016

2015

10 $
8
62
80

20
(10)
(19)
(9)
71 $

14 $
6
31
51

(31)
(6)
(6)
(43)

8 $

84
4
32
120

(117)
(24)
(1)
(142)
(22)

The Company recognized tax expense of $71 million and $8 million for the years ended December 31, 2017 and 2016,
respectively. The Company’s effective tax rates were 80.7% and (6.2)% as of December 31, 2017 and 2016, respectively. The
Company’s effective tax rate was higher than the federal statutory rate of 35% primarily due to deferred income taxed on the
outbound transfer of U.S. assets, an increase in uncertain tax benefits, increased valuation allowance for its foreign deferred tax
assets, foreign non-deductible expenses, the one-time transition tax and remeasurement of its net U.S. deferred tax assets under
U.S. tax reform. These increases were partially offset by the benefit of lower tax rates in foreign jurisdictions, recognition of
deferred tax assets on intercompany asset transfers, the generation of tax credits in the current year, and deductions from
vesting of equity compensation.

A reconciliation between the Provision computed at the statutory rate and the Provision for income taxes is provided below:

F-30

Provision computed at statutory rate
U.S. Tax Reform - One-time transaction tax
Remeasurement of Deferred Taxes
Change in valuation allowance
US impact of Enterprise acquisition
Change in contingent income tax reserves
Foreign earnings subject to U.S. taxation
Foreign rate differential
Intra-entity transactions
State income tax, net of federal tax benefit
Tax credits
Equity compensation deductions
Return to provision and other true ups
Other
Provision for income taxes

2017

Year Ended December 31,
2016

2015

35.0%
41.8
(56.0)
96.4
12.9
14.0
2.0
(29.1)
(18.8)
(5.3)
(5.7)
(5.6)
(3.2)
2.3
80.7%

35.0 %
0.0
0.0
(1.0)
(14.1)
(1.6)
(6.6)
(16.0)
0.0
(1.0)
9.5
(0.4)
(3.7)
(6.3)
(6.2)%

35.0%
0.0
0.0
(8.3)
(26.7)
(3.3)
(3.9)
13.9
0.0
1.1
6.1
0.0
0.0
(1.7)
12.2%

The Company earns a significant amount of our operating income outside of the U.S., primarily in the United Kingdom,
Singapore, and Luxembourg, with statutory rates of 19%, 17%, and 27%, respectively. During 2017, the Company affirmed an
incentivized tax rate of 10% with the Singapore Economic Development Board with the Company’s commitment to make
increased investments in Singapore; this tax rate will expire on December 31, 2018, unless the Company applies for and is
granted an extension.

The Company has recognized $12 million of deferred tax benefit related to the impact of a sale of intangible assets within the
consolidated group where the tax basis of assets was stepped up to fair market value. With the Company’s adoption of ASU
2016-16, the tax impact of non-inventory intra-entity transfers of assets are recognized in the period in which the transfer
occurs. See Note 2, Summary of Significant Accounting Policies for further explanation.

Tax effects of temporary differences that resulted in deferred tax assets and liabilities are as follows (in millions):

F-31

Deferred tax assets:

Capitalized research expenditures
Deferred revenue
Tax credits
Net operating loss carryforwards
Other accruals
Inventory items
Capitalized software costs
Sales return/rebate reserve
Share-based compensation expense
Accrued bonus
Unrealized gains and losses on securities and investments
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:

Depreciation and amortization
Undistributed earnings
Total deferred tax liabilities
Net deferred tax assets

$
$

December 31,

2017

2016

32 $
21
31
338
20
20
14
33
12
1
8
(134)
396

275
2
277 $
119 $

58
57
33
35
31
27
25
27
15
11
4
(47)
276

165
1
166
110

At December 31, 2017, the Company has approximately $338 million (tax effected) of net operating losses (“NOLs”) and
approximately $30 million of credit carryforwards. Approximately $45 million of NOLs will expire beginning in 2033 thru
2037, and $24 million of credits will expire beginning in 2023 thru 2032. $293 million of NOLs and $6 million of credits have
no expiration date. The Company elected a fiscal unity regime for its Luxembourg group which allows the Company to offset
losses against other group member income. As a result of this election, the Company has remeasured the value of its deferred
tax assets and liabilities in Luxembourg at the statutory rate of 27%, giving rise to an increase of $290 million in its net
operating loss carryforwards, an increase of $66 million in valuation allowances, and an increase of $224 million in its
depreciation and amortization deferred tax liability.

Impact of U.S. Tax Reform
TCJA was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires
companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and
creates new taxes on certain foreign sourced earnings. At December 31, 2017, we have not completed our accounting for the
tax effects of enactment of the Act; however, in certain cases, as described below, we have made a reasonable estimate of the
effects on our existing deferred tax balances and the one-time transition tax. In other cases, we have not been able to make a
reasonable estimate and continue to account for those items based on our existing accounting under ASC 740, Income Taxes,
and the provisions of the tax laws that were in effect immediately prior to enactment. For the items for which we were able to
determine a reasonable estimate, we recognized a provisional amount of $72 million, which is included as a component of
income tax expense.

Provisional amounts
Deferred tax assets and liabilities: We remeasured U.S. deferred tax assets and liabilities based on the rates at which they are
expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Act and
refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new
deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance was $35
million.

Foreign Tax Effects

F-32

The one-time transition tax is based on our total post-1986 earnings and profits (“E&P”) that we previously deferred from U.S.
income taxes. We recorded a provisional amount for our one-time transition tax liability, resulting in an increase in income tax
expense of $37 million. We have not yet completed our calculation of the total post-1986 E&P for these foreign subsidiaries.
Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount
may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and
finalize the amounts held in cash or other specified assets. We have reduced our deferred tax asset for income tax credits by $10
million which is available to offset the one-time transition tax, resulting in an estimated cash tax liability of $26 million which
is to be remitted over the next eight years as follows:

Unremitted Earnings
Payments

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

2017

2018

2019

2020

2021

2022

2023

2024

2 $

5 $

The Company earns a significant amount of our operating income outside of the U.S. As of year-ended December 31, 2017, the
Company is indefinitely reinvested with respect to its U.S. directly-owned subsidiary earnings and therefore has not accrued
any withholding taxes on those earnings. However, certain foreign affiliate parent companies are not indefinitely reinvested and
the Company has recorded a deferred tax liability of $2 million for foreign withholding taxes on those earnings. The
Company’s policy considers its U.S. investment in directly-owned foreign affiliates to be indefinitely reinvested. Under the Act,
future unremitted foreign earnings will no longer be subject to tax when repatriated to its U.S. parent, but may be subject to
withholding taxes of the payor affiliate country. Additionally, gains and losses on taxable dispositions of U.S.-owned foreign
affiliates continue to be subject to U.S. tax. For the years ended December 31, 2017 and 2016, the Company has not recognized
deferred tax liabilities in the U.S. with respect to foreign withholding taxes or its outside basis differences in its directly-owned
foreign affiliates and quantification of the unrecognized deferred tax liability is not practical.

Performance-Based Executive Compensation
The Act amends the rules related to the exclusion of performance-based compensation under Internal Revenue Code 162(m).
The Company will no longer be able to claim a deduction for compensation accrued after January 1, 2018 for a covered
employee which exceeds $1 million, unless the compensation is earned in respect of a binding contract in existence on
November 2, 2017 (“Grandfathered Contracts”). The Company has estimated the remeasurement of the Section 162(m)
grandfathered deferred tax assets at 21% for its covered employees for equity award agreements issued and executed prior to
November 2, 2017, assuming that its benefit plan documents will fall within the grandfathered contract rules; should guidance
to the contrary be issued by U.S. Treasury, the Company would have to remeasure its grandfathered deferred tax assets at
$0. Additionally, the Company has determined that its short-term bonus plan will not qualify for the grandfathered contract
provisions, thus any deferred short-term bonus to be paid to covered employees in 2018 has been remeasured at a 0% rate.

The Company has not recorded an adjustment to its state and local current or deferred income tax provision as a result of the
Act. Guidance from state tax authorities which do not fully conform with the U.S. Internal Revenue Code is not available to
allow the Company to estimate the financial statement impact at this time.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):

Year ended December 31,

2017

2016

Balance at beginning of year
Additions for tax positions related to the current year
Additions for tax positions related to prior years
Reductions for tax positions related to prior years
Settlements for tax positions
Balance at end of year

42 $
—
11
(1)
(1)
51 $

40
2
2
(2)
—
42

At December 31, 2017 and December 31, 2016, there are $47 million and $40 million of unrecognized tax benefits that if
recognized would affect the annual effective tax rate. The Company continues to believe its positions are supportable, however,

F-33

the Company anticipates that $20 million of uncertain tax benefits may be paid within the next twelve months and, as such, is
reflected as a current liability within the Company’s Consolidated Balance Sheets. The Company is currently undergoing audits
of the 2013 through 2015 U.S. federal income tax returns. The Company is engaged in an inquiry from the UK Her Majesty’s
Revenue and Customs (“HMRC”) for the years 2012 and 2014. The tax years 2004 through 2016 remain open to examination
by multiple foreign and U.S. state taxing jurisdictions. Due to uncertainties in any tax audit outcome, the Company’s estimates
of the ultimate settlement of uncertain tax positions may change and the actual tax benefits may differ significantly from the
estimates.

The Company recognized $2 million of interest and/or penalties related to income tax matters as part of income tax expense for
the year ended December 31, 2017. The Company accrued $6 million and $4 million of interest and penalties accrued in the
Consolidated Balance Sheets as of December 31, 2017 and 2016.

Note 13 Earnings (Loss) Per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average
number of shares assuming dilution. Dilutive common shares outstanding is computed using the Treasury Stock method and in
periods of income, reflects the additional shares that would be outstanding if dilutive stock options were exercised for common
shares during the period.

Earnings (loss) per share were computed as follows (dollars in millions, except share data):

Basic:
Net income (loss)
Weighted-average shares outstanding(1)
Basic earnings (loss) per share

Diluted:
Net income (loss)
Weighted-average shares outstanding(1)

Dilutive shares(2)
Diluted weighted-average shares outstanding

Diluted earnings (loss) per share

Year Ended December 31,
2016

2015

2017

17 $

(137) $

53,021,761

51,579,112

0.33

(2.65) $

(158)
50,996,297
(3.10)

17
53,021,761

667,071

53,688,832
0.32

(137) $

51,579,112
—
51,579,112

(2.65) $

(158)
50,996,297
—
50,996,297
(3.10)

(1) In periods of net loss, restricted stock awards that are classified as participating securities are excluded from the weighted-
average shares outstanding computation.
(2) In periods of net loss, options are anti-dilutive and therefore excluded from the earnings (loss) per share calculation.

There were 259,142 outstanding options to purchase common shares that were anti-dilutive and excluded from the earnings per
share calculation as of December 31, 2017 compared to 1,391,567 and 1,421,506 excluded for the periods ended December 31,
2016 and 2015, respectively. Anti-dilutive securities consist primarily of stock appreciation rights (“SARs”) with an exercise
price greater than the average market closing price of the Class A common stock.

Note 14 Accumulated Other Comprehensive Income (Loss)
Stockholders’ equity includes certain items classified as other comprehensive income (loss), including:

• Unrealized (loss) gain on anticipated sales hedging transactions relate to derivative instruments used to hedge the
exposure related to currency exchange rates for forecasted Euro sales. These hedges are designated as cash flow
hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs.
See Note 7, Derivative Instruments for more details.

• Unrealized (loss) gain on forward interest rate swaps hedging transactions refer to the hedging of the interest rate
risk exposure associated with the variable rate commitment entered into for the Acquisition. See Note 7, Derivative
Instruments for more details.

F-34

• Foreign currency translation adjustment relates to the Company’s non-U.S. subsidiary companies that have been
designated a functional currency other than the U.S. dollar. The Company is required to translate the subsidiary
functional currency financial statements to dollars using a combination of historical, period-end, and average foreign
exchange rates. This combination of rates creates the foreign currency translation adjustment component of other
comprehensive income (loss).

The components of Accumulated other comprehensive income (loss) (“AOCI”) for each of the three years ended December 31
are as follows (in millions):

Unrealized
(loss) gain on
sales hedging

Unrealized
(loss) gain on
forward
interest rate
swaps

5 $

(8) $

Currency
translation
adjustments

(6 ) $

Total

Balance at December 31, 2014

Other comprehensive income (loss)
before reclassifications
Amounts reclassified from AOCI(1)
Tax benefit

Other comprehensive loss
Balance at December 31, 2015

Other comprehensive income (loss)
before reclassifications
Amounts reclassified from AOCI(1)
Tax expense

Other comprehensive income (loss)

Balance at December 31, 2016

Other comprehensive income (loss)
before reclassifications
Amounts reclassified from AOCI(1)
Tax benefit (expense)

Other comprehensive (loss) income

Balance at December 31, 2017

(15)
2

(6)
(1)

7
(1)

7
6

(26)

8
3

(15)
(9) $

(12)

1
4

(7)
(15)

(1)

2
(1)

—
(15)

8
(3)

6
(9) $

(11)

(15)
—
(26)
(32)

(4)
—
—
(4)
(36)

2
—
—
2
(34 ) $

(9)

(16)

(29)
6

(39)
(48)

(4)

9
(2)

3
(45)

(23)

16
—

(7)
(52)

(1) See Note 7, Derivative Instruments regarding timing of reclassifications on forward interest rate swaps.

Note 15 Segment Information & Geographic Data
The segment information reflects the operating results of the Company’s business segments. In January 2018, The Company
changed the names of the reportable segments to better reflect business operations. The Company has two reportable segments;
Asset Intelligence & Tracking (“AIT”), formerly Legacy Zebra and Enterprise Visibility & Mobility (“EVM”), formerly
Enterprise.

• The AIT segment consists of barcode and card printing, location solutions, supplies, and services
• The EVM segment consists of mobile computing, data capture, and RFID

The operating segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the
chief operating decision maker) to assess segment performance and allocate resources between the Company’s segments. The
chief operating decision maker uses adjusted operating income to evaluate segment profitability.

The accounting policies of the segments are in accordance with Note 2, Summary of Significant Accounting Policies. The chief
operating decision maker does not use total assets by segment to make decisions regarding resources, therefore the total asset
disclosure by segment has not been included.

F-35

Financial information by segment is presented as follows (in millions):

Net sales:
AIT
EVM
Total segment net sales
Corporate, eliminations(1)
Total net sales

Operating income:
AIT
EVM
Total segment operating income
Corporate, eliminations(2)

Total operating income

Year Ended December 31,
2016

2015

2017

1,311 $
2,414
3,725

(3)

3,722

260 $
315
575
(253)
322

1,247 $
2,337
3,584
(10)
3,574 $

240 $
286
526
(446)

80 $

1,286
2,380
3,666
(16)
3,650

258
236
494
(457)
37

(1) Amounts included in Corporate, eliminations consist of purchase accounting adjustments related to the Acquisition.
(2) Amounts included in Corporate, eliminations consist of purchase accounting adjustments not reported in segments;

amortization of intangible assets, acquisition/integration costs, impairment of goodwill and other intangibles, and exit and
restructuring costs.

Information regarding the Company’s operations by geographic area is contained in the following table. These amounts are
reported in the geographic area of the destination of the final sale. We manage our business based on regions rather than by
individual countries.

Geographic data for net sales is as follows (in millions):

Europe, Middle East, and Africa
Latin America
Asia-Pacific

Total International

North America

Total net sales

Year Ended December 31,
2016

2015

2017

1,221

235
468

1,924
1,798
3,722

1,138 $
214
483
1,835
1,739
3,574 $

1,194
219
463
1,876
1,774
3,650

Geographic data for long-lived assets, defined as property, plant and equipment is as follows (in millions):

Europe, Middle East, and Africa
Latin America
Asia-Pacific

Total International

North America

Total long-lived assets

Year Ended December 31,
2016

2015

2017

3
9
26
238
264

13 $
3
9
25
267
292 $

10
3
10
23
275
298

Net sales by country that are greater than 10% of total net sales are as follows (in millions):

F-36

United States
United Kingdom
Singapore
Other

Total net sales

Year Ended December 31,

2017

2016

2015

1,984
1,196
454
88

3,722

1,950
1,065
362
197
3,574

2,045
1,102
175
328
3,650

Net sales by country are determined by the country from where the products are invoiced when they leave the Company’s
warehouses. Generally, our United States sales company serves North America and Latin America; United Kingdom sales
company serves Europe, Middle East, and Africa; and our Singapore sales company serves Asia-Pacific.

Our net sales to significant customers as a percentage of the total Company’s net sales by segment were as follows:

2017

2016

2015

Year Ended December 31,

AIT

EVM

Total

AIT

EVM

Total

AIT

EVM

Total

Customer A
Customer B
Customer C

6.3%
5.3%
6.2%

15.0%
8.9%
7.0%

21.3%
14.2%
13.2%

5.9%
5.0%
5.3%

14.2%
8.2%
7.1%

20.1%
13.2%
12.4%

5.5%
4.6%
5.2%

13.9%
8.1%
6.4%

19.4%
12.7%
11.6%

All three of the above customers are distributors and not end-users. No other customer accounted for 10% or more of total net
sales during the years presented.

There are three customers at December 31, 2017 and December 31, 2016 that each accounted for more than 10% of outstanding
accounts receivable. In 2017, the three largest customers accounted for 19.5%, 14.0%, and 11.7%, respectively of accounts
receivable while in 2016, the three largest customers accounted for 19.9%, 14.0% and 12.9%, respectively.

Note 16 Supplementary Financial Information
The components of Accounts receivable, net are as follows (in millions):

Accounts receivable
Allowance for doubtful accounts
Accounts receivable, net

Prepaid expenses and other current assets consist of the following (in millions):

Foreign Exchange Contracts
Other
Prepaid expenses and other current assets

December 31,

2017

2016

482 $
(3)
479 $

December 31,

2017

2016

— $
24
24 $

628
(3)
625

23
41
64

F-37

The components of Accrued liabilities are as follows (in millions):

Accrued incentive compensation
Customer reserves
Accrued payroll
Interest payable
Accrued other expenses
Accrued liabilities

Summary of Quarterly Results of Operations (unaudited)
(In millions):

December 31,

2017

2016

101 $
41
50
15
130
337 $

52
50
51
20
150
323

2017

Total Net sales
Gross profit
Net income (loss)

Net earnings per common share:
Basic earnings (loss) per share:
Diluted earnings (loss) per share:

Total Net sales
Gross profit
Net (loss) income

Net earnings per common share:
Basic (loss) earnings per share:
Diluted (loss) earnings per share:

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total Year

865 $
401
8

896 $
411
17

935 $
429
(12)

1,026 $
469
4

3,722
1,710
17

0.16 $
0.16

0.33 $
0.32

(0.23) $
(0.23)

0.07 $
0.07

0.33
0.32

2016

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total Year

849 $
390
(26)

879 $
406
(45)

904 $
414
(83)

942 $
432
17

3,574
1,642
(137)

(0.50) $
(0.50)

(0.88) $
(0.88)

(1.61) $
(1.61)

0.34 $
0.34

(2.65)
(2.65)

F-38

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
(In millions)

Description

Valuation account for accounts receivable:
Year ended December 31, 2017
Year ended December 31, 2016
Year ended December 31, 2015
Valuation account for deferred tax assets:
Year ended December 31, 2017
Year ended December 31, 2016
Year ended December 31, 2015

Balance at
Beginning
of Period

Charged to
Costs and
Expenses

Deductions

Balance at
End of
Period

3 $
6
1

47 $
48
57

1 $

—
5

91 $
18
5

1 $
3
—

4 $
19
14

3
3
6

134
47
48

See accompanying report of independent registered public accounting firm.

F-39

Exhibits to this document are available in the electronic version of the 10-K in the SEC Filings
section of Zebra Technologies’ website located at investors.zebra.com/financial-reports/sec-filings.

Index to Exhibits

F-40

• Retail shoppers want more convenience and flexibility in how they purchase and receive goods

• Transportation companies need to deliver in hours, rather than days

• Patients demand a higher quality of care at a lower cost

• Manufacturers are increasing efficiencies across their value chains

To Our Investors

• We continued to extend our market leadership and deliver innovative solutions that have resonated with our partners and

− Additions and refreshes to the industry’s broadest and most mature offering of enterprise-grade Android™-powered mobile

computing devices

− Expansion of our leading portfolio of next-generation 2D data capture devices

− Being first in the industry to offer a full portfolio of smart, connected printers with unrivaled manageability though our Link-OS

operating system

− New innovative solutions, such as SmartLens™ for Retail, and SmartPack™ Trailer, that further our vision and aspire to transform

workflows in key vertical markets that we serve

• Strong profitable growth, combined with disciplined working capital management, generated the cash necessary to pay

• Second, we are committing our focus and resources to drive growth in attractive adjacent markets that leverage the strength of

our core. We continually evaluate opportunities where we are underpenetrated, as well as other emerging areas.

• Third, we are advancing our EAI vision by leveraging Zebra’s deep knowledge of workflows, and capitalizing on key technology

trends in mobility, cloud computing, and the proliferation of smart tools.

• Our fourth area of focus is to further enhance Zebra’s financial strength by increasing cash flow and optimizing our capital structure.

Sincerely,

Anders Gustafsson

Board of Directors

Michael A. Smith, Chairman 1,2,3
Chairman and Chief Executive Officer
FireVision, LLC

Richard L. Keyser 2,3
Chairman Emeritus (Retired)
W. W. Grainger, Inc.

Anders Gustafsson
Chief Executive Officer
Zebra Technologies Corporation

Chirantan J. Desai 2
Chief Product Officer
ServiceNow

Andrew K. Ludwick 1
Chief Executive Officer
Bay Networks (Retired)

Ross W. Manire 1,3
Chief Executive Officer
ExteNet Systems, Inc.

Frank B. Modruson 1
Chief Information Officer (Retired)
Accenture

Janice M. Roberts 2
Partner
Benhamou Global Ventures

1 - Member of Audit Committee
2 - Member of Compensation Committee
3 - Member of Nominating and Governance Committee

Executive Officers

Anders Gustafsson
Chief Executive Officer

Olivier C. Leonetti
Chief Financial Officer

William J. Burns
Senior Vice President,
Enterprise Visibility and Mobility

Michael Cho
Senior Vice President,
Corporate Development

Hugh K. Gagnier
Senior Vice President,
Asset Intelligence and Tracking

Jeffrey F. Schmitz
Senior Vice President,
Chief Marketing Officer

Joachim Heel
Senior Vice President,
Global Sales

Michael H. Terzich
Senior Vice President,
Chief Administrative Officer

Jim L. Kaput
Senior Vice President, General Counsel
and Corporate Secretary

Colleen M. O’Sullivan
Vice President,
Chief Accounting Officer

Stockholder Information

Global Corporate Headquarters
Zebra Technologies Corporation
Three Overlook Point
Lincolnshire, Illinois 60069
U. S. A. Phone: +1 847 634-6700
Fax +1 847 913-8766

Annual Meeting
Zebra’s Annual Meeting of Stockholders
will be held on May 17, 2018, at 10:30 a.m.
(Central Time) in Lincolnshire, Illinois.

Independent Auditors
Ernst & Young LLP Chicago, Illinois

Investor Relations
Investors are invited to learn more
about Zebra Technologies Corporation
by accessing the company’s website at
investors.zebra.com

Transfer Agent and Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233-5000

Overnight Delivery:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202

Telephone:
+1 800 522-6645 or +1 201 680-6578

TDD for hearing impaired:
+1 800 231-5469 or +1 201 680-6610

Website:
www.computershare.com/investor

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Annual Report 2017

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zebra.com

NA and Corporate Headquarters
+1 847 634 6700

Asia-Pacific Headquarters
+65 6858 0722

EMEA Headquarters
+44 1628 556000

Latin America Headquarters
+1 754 260 2100

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